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In response to concerns raised by the Director of National Intelligence, Admiral Mike McConnell, that the Foreign Intelligence Surveillance Act (FISA), 50 U.S.C. §§ 1801 et seq ., required modernization to meet the current intelligence needs of the nation, a number of bills were introduced in the Senate and the House of Representatives. Intense legislative activity with respect to proposed amendments to FISA in both bodies resulted in the enactment of the Protect America Act of 2007, P.L. 110-55 on August 5, 2007. The measure was introduced as S. 1927 by Senator McConnell, for himself and Senator Bond, on August 1, 2007. The bill was considered in the Senate on August 3, in conjunction with S. 2011 , entitled The Protect America Act of 2007, introduced by Senator Levin, for himself and Senator Rockefeller. The Senate agreed by unanimous consent to an amendment to S. 1927 offered by Senator McConnell, for himself and Senator Bond, providing that sections 2, 3, 4, and 5 of the bill would sunset 180 days after its enactment. As amended, S. 1927 passed the Senate the same day. S. 2011 did not receive the requisite 60 votes, and was placed on the Senate calendar under general orders. That evening, the House considered H.R. 3356 , the Improving Foreign Intelligence Surveillance to Defend the Nation and the Constitution Act of 2007, introduced by Representative Reyes for himself, Representative Conyers, Representative Schiff, and Representative Flake. After a motion to suspend the rules and pass H.R. 3356 fell short of the required two-thirds vote of the Members on Friday night, the House took up S. 1927 the following day. At 10:19 p.m. Saturday night, August 4, the House passed S. 1927 . It was signed by the President on August 5, 2007. On January 29, 2008, both the House and the Senate passed H.R. 5104 , a 15-day extension to the sunset for the Protect America Act, to allow further time to consider, pass, and go to conference on proposed legislation to amend FISA, while ensuring that the intelligence community would have the authority it needed in the intervening period. The President signed the measure into law on January 31, 2008, as P.L. 110-182 . On February 13, 2008, the House rejected H.R. 5349 , which would have extended the sunset provision for an additional 21 days. Bills have been introduced in the Senate to extend the sunset from 180 to 210 days ( S. 2541 , S. 2556 , and S. 2615 ), or to extend it to July 1, 2009 ( S. 2557 ). This report discusses the provisions of P.L. 110-55 and their impact on or relationship with the prior provisions of FISA. Sec. 1 of S. 1927 states that the short title of the law is the Protect America Act of 2007. Section 2 of the law contains its first substantive provisions. They are summarized in order below. New Section 105A of FISA, as added by Section 2 of P.L. 110-55 , states: Nothing in the definition of electronic surveillance under section 101(f) shall be construed to encompass surveillance directed at a person reasonably believed to be located outside of the United States. Section 101(f) of FISA, 50 U.S.C. § 1801(f), sets forth the definition of "electronic surveillance" under the statute. It provides: (f) "Electronic surveillance" means— (1) the acquisition by an electronic, mechanical, or other surveillance device of the contents of any wire or radio communication sent by or intended to be received by a particular, known United States person who is in the United States, if the contents are acquired by intentionally targeting that United States person, under circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes; (2) the acquisition by an electronic, mechanical, or other surveillance device of the contents of any wire communication to or from a person in the United States, without the consent of any party thereto, if such acquisition occurs in the United States, but does not include the acquisition of those communications of computer trespassers that would be permissible under section 2511(2)(i) of Title 18; (3) the intentional acquisition by an electronic, mechanical, or other surveillance device of the contents of any radio communication, under circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes, and if both the sender and all intended recipients are located within the United States; or (4) the installation or use of an electronic, mechanical, or other surveillance device in the United States for monitoring to acquire information, other than from a wire or radio communication, under circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes. Absent the interpretation required by section 105A, two of the four definitions of "electronic surveillance" under section 101(f) of FISA, by their terms, appear to be broad enough to encompass electronic surveillance directed at a person abroad where the communications involved transcend U.S. borders. Subsections 101(f)(2) and (f)(4) of FISA, on their face, appear to have the potential of reaching electronic surveillance of such communications targeted at a person outside the United States. In addition, it might be argued that the language of subsection 101(f)(4) might encompass the possibility of reaching some foreign to foreign communications in limited circumstances. This would suggest that, under FISA prior to the passage of section 105A of P.L. 110-55 , some interceptions directed at a person abroad covered by the language of these subsections might have been regarded by the FISC as requiring court authorization. In pertinent part, "electronic surveillance," as defined by subsection 101(f)(2), covers acquisition of the contents of wire communications to or from a person in the United States where the acquisition occurs within the United States and no party to the communication has consented to the interception. Unlike subsection 101(f)(1), there is no express requirement that the person in the United States be known, that he or she be United States person, or that he or she be intentionally targeted by the electronic surveillance. To the extent that an electronic surveillance under subsection 101(f)(2) intercepts communications between persons in the United States, it would not be impacted by section 105A of FISA, as added by P.L. 110-55 , nor would section 105A affect electronic surveillance targeted at a person within the United States. However, to the extent that the language in subsection 101(f)(2) might encompass interception of communications between a person in the United States and one or more parties outside the United States, where the surveillance is targeted at a person outside the United States, section 105A would seem to restrict the previous reach of the definition of "electronic surveillance" in section 101(f)(2). Subsection 101(f)(4) defines "electronic surveillance" under FISA to include "the installation or use of an electronic, mechanical, or other surveillance device in the United States for monitoring to acquire information, other than from a wire or radio communication, under circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes." This subsection does not explicitly address the location of the parties to the communication or the location of the acquisition of the information involved. Thus, by its terms, it could conceivably be interpreted to cover some communications between parties in the United States, between a party in the United States and a party outside the United States, or between parties abroad, if the other requirements of the subsection were satisfied. The restrictions in this section are two-fold: the information must be acquired other than from a wire or radio communication; and the circumstances of the acquisition must be such that a person would have a reasonable expectation of privacy and a warrant would be required for law enforcement purposes. To the extent that "electronic surveillance" under subsection 101(f)(4) of FISA could have been or has been directed at a person or persons abroad, prior to the enactment of P.L. 110-55 , new section 105A may also have the effect of limiting the scope of this subsection of the definition of "electronic surveillance" as it was previously interpreted. New section 105B(a) of FISA permits the Attorney General and the Director of National Intelligence, for periods of up to one year, to authorize acquisition of foreign intelligence information concerning persons reasonably believed to be outside the United States, if the Attorney General and the DNI determine, based on the information provided to them, that five criteria have been met. Under these criteria, the Attorney General and the DNI must certify that: (1) there are reasonable procedures in place for determining that the acquisition of foreign intelligence information under this section concerns persons reasonably believed to be located outside the United States, and such procedures will be subject to review of the Court pursuant to section 105C of this Act; (2) the acquisition does not constitute electronic surveillance; (3) the acquisition involves obtaining the foreign intelligence information from or with the assistance of a communications service provider, custodian, or other person (including any officer, employee, agent, or other specified person of such service provider, custodian, or other person) who has access to communications, either as they are transmitted or while they are stored, or equipment that is being or may be used to transmit or store such communications; (4) a significant purpose of the acquisition is to obtain foreign intelligence information; and (5) the minimization procedures to be used with respect to such acquisition activity meet the definition of minimization procedures under section 101(h). Except in circumstances where immediate government action is required and there is not sufficient time to prepare a certification, the determination by the Attorney General and the DNI that these criteria have been satisfied must be in the form of a certification, under oath, supported by affidavit of appropriate officials in the national security field appointed by the President, by and with the advice and consent of the Senate, or the Head of any agency of the Intelligence Community. Where imminent government action is required, the determination must be reduced to a certification as soon as possible within 72 hours after the determination is made. The certification need not identify specific facilities, places, premises, or property at which the acquisition will be directed. A copy of a certification made under section 105B(a) must be transmitted under seal to the FISC as soon as practicable, there to be maintained under security measures established by the Chief Justice of the United States and the Attorney General, in consultation with the DNI. The copy of the certification must remain sealed unless needed to determine the legality of the acquisition involved. Where a certification has been prepared, an acquisition under section 105B of FISA must be conducted in accordance with that certification and minimization procedures adopted by the Attorney General. If a certification has not yet been prepared because of inadequate time, the acquisition must comply with the oral instructions of the DNI and the Attorney General and the applicable minimization procedures. Section 105B(d) requires the DNI and the Attorney General must report their assessments of compliance with "such procedures" to the House Permanent Select Committee on Intelligence and the Senate Select Committee on Intelligence under section 108(a) of FISA, 50 U.S.C. § 1808(a). In connection with an acquisition authorized under section 105B, the DNI and the Attorney General may issue a directive to a person to immediately provide the government with all information , facilities, and assistance needed to accomplish the acquisition in a manner which will protect the secrecy of the acquisition and minimize interference with the services provided by that person to the target of the acquisition. The government must compensate the person furnishing such aid at the prevailing rate. Any records that person wishes to keep relating to the acquisition or the aid provided must be maintained under security procedures approved by the DNI and the Attorney General. P.L. 110-55 bars any cause of action in any court against any person for providing information, facilities or assistance in accordance with a directive under this section. If a person receiving such a directive fails to comply therewith, the FISC, at the Attorney General's request, shall issue an order to compel such compliance if the court finds that the directive was issued in accordance with section 105B(e) and is otherwise lawful. A person receiving a directive under section 105B(e) may challenge its legality by filing a petition before the petition review pool of the FISC. Under subsection 105B(h)(1)(B) as written, the presiding judge of the Foreign Intelligence Surveillance Court of Review (Court of Review) shall assign a petition filed with the petition review pool to one of the FISC judges in the pool. The assigned judge must conduct an initial review of the directive within 48 hours after the assignment. If he or she determines that the petition is frivolous, the petition is immediately denied and the directive or that portion of the directive that is the subject of the petition is affirmed. If the judge does not find the petition frivolous, he or she has 72 hours in which to consider the petition and provide a written statement for the record of the reasons for any determination made. A petition to modify or set aside a directive may only be granted if the judge finds that the directive does not meet the requirements of section 105B or is otherwise unlawful. Otherwise the judge must immediately affirm the directive and order its recipient to comply with it. A directive not explicitly modified or set aside remains in full effect. Within seven days of the assigned judge's decision, the government or a recipient of the directive may petition the Foreign Intelligence Surveillance Court of Review for review of that decision. The Court of Review must provide a written statement on the record of the reasons for its decision. The government or any recipient of the directive may seek review of the decision of the Court of Review by petition for a writ of certiorari to the U.S. Supreme Court. All judicial proceedings under this section are to be concluded as expeditiously as possible. All petitions under this section are filed under seal. Upon request of the government in any proceeding under this section, the court shall review ex parte and in camera any government submission or portion of a submission which may contain classified information. The record of all proceedings, including petitions filed, orders granted, and statements of reasons for decision, must be maintained under security measures established by the Chief Justice of the United States in consultation with the Attorney General and the DNI. A directive made or an order granted under this section must be retained for at least ten years. Section 105B is a new section added to title I of FISA, 50 U.S.C. §§ 1801 et seq . It differs from the other provisions of title I of FISA in that it does not deal with electronic surveillance, but rather with acquisitions that do not constitute electronic surveillance. Because section 105B does not specify where such acquisitions may occur or from whom, it appears that such foreign intelligence information concerning persons reasonably believed to be outside the United States may be acquired, at least in part, from persons, including U.S. persons, who are located within the United States. Similar to electronic surveillance under section 102 of FISA, 50 U.S.C. § 1802, which may be authorized for up to one year by the President, through the Attorney General, without a court order if the Attorney General certifies in writing under oath that certain requirements are satisfied, acquisitions under section 105B of FISA, may be authorized by the DNI and the Attorney General without a court order if they certify in writing under oath that certain criteria are met. However, section 105B has no parallel to section 102(a)(1)(B)'s requirement that "there is no substantial likelihood that the surveillance will acquire the contents of any communication to which a United States person is a party." Similar to section 105B(d)'s reporting requirements, section 102(a)(2) requires electronic surveillance under that section to be carried out in accordance with the Attorney General's certification and applicable minimization requirements, and directs the Attorney General to assess compliance with "such procedures" and report his assessments to the House and Senate intelligence committees under the provisions of section 108(a) of FISA. Section 102(a)(4), which permits the Attorney General to direct a specified communication common carrier to provide information, facilities, or technical assistance to the government needed to carry out the electronic surveillance involved and to compensate that communication common carrier at the prevailing rate for its aid, is structurally similar to section 105B(e) and (f). However, subsections 105B(e) and (g)-(i) permit the Attorney General and the DNI to direct "a person," rather than a "specified communication common carrier," to "immediately" furnish such aid; provide authority for the Attorney General to seek the aid of the FISC to compel compliance with such a directive; give the recipient of the directive a right to challenge the legality of the directive before the petition review pool of the same court; and permit both the government and the recipient of the directive to appeal that court's decision. The authority to challenge the legality of such a directive and to appeal the decision appears modeled, to some degree, after the process set forth in section 501(f) of FISA, 50 U.S.C. § 1861(f), dealing with challenges to the legality of production and nondisclosure orders. Unlike electronic surveillance pursuant to a court order sought under section 104 of FISA, 50 U.S.C. § 1804, and authorized under section 105 of FISA, 50 U.S.C. § 1805, where the government provides the FISC with specific categories of substantive information about the electronic surveillance involved upon which the court can base its determinations; the government submits certain procedures for review to the FISC, but does not provide the court with substantive information about the acquisitions themselves. Section 3 of the act creates a new section 105C of FISA, creating a review process for the procedures under which the government determines that acquisitions of foreign intelligence information from persons reasonably believed to be located outside the United States do not constitute electronic surveillance. Subsection 105C(a) requires the Attorney General, within 120 days of enactment of the act, to submit to the FISC the procedures by which the government determines that acquisitions conducted pursuant to section 105B of the act do not constitute electronic surveillance. The procedures are to be updated and submitted to the FISC annually. Within 180 days after enactment, the FISC must assess whether the government's determination under section 105B(1) of FISA that the procedures are "reasonably designed to ensure that acquisitions conducted pursuant to section 105B do not constitute electronic surveillance" is clearly erroneous. If the FISC deems the government's determination not clearly erroneous, the court must enter an order approving the continued use of the procedures. On the other hand, if the government's determination is found to be clearly erroneous, new procedures must be submitted with 30 days or any acquisitions under section 105B implicated by the FISC order must cease. Any order issued by the FISC under subsection 105C(c) may be appealed by the government to the Foreign Intelligence Surveillance Court of Review. If the Court of Review finds the FISC order was properly entered, the government may seek U.S. Supreme Court review through a petition for a writ of certiorari. Any acquisitions affected by the FISC order at issue may continue throughout the review process. The section 105C procedure review process is new and does not appear to have a parallel in the other provisions of FISA. The Terrorist Surveillance Program has been characterized as involving "intercepts of contents of communications where one . . . party to the communication is outside the United States" and the government has "a reasonable basis to conclude that one party to the communication is a member of al Qaeda, affiliated with al Qaeda, or a member of an organization affiliated with al Qaeda, or working in support of al Qaeda." In a letter from the Attorney General to Senator Leahy and Senator Specter on January 17, 2007, the Attorney General indicated that, based upon classified orders issued by a judge of the Foreign Intelligence Surveillance Court (FISC), electronic surveillances previously carried out under the Terrorist Surveillance Program would thereafter be under the court's supervision. His letter stated, in part: I am writing to inform you that on January 10, 2007, a Judge of the Foreign Intelligence Surveillance Court issued orders authorizing the Government to target for collection international communications into or out of the United States where there is probable cause to believe that one of the communicants is a member or agent of al Qaeda or an associated terrorist organization. As a result of these orders, any electronic surveillance that was occurring as part of the Terrorist Surveillance Program will now be conducted subject to the approval of the Foreign Intelligence Surveillance Court.... A question may arise as to whether new section 105A's interpretation of the definition of "electronic surveillance" under FISA, might impact the FISC's jurisdiction over some or all of the interceptions to which the Attorney General referred. Under section 103(a) of FISA, 50 U.S.C. § 1803(a): The Chief Justice of the United States shall publicly designate 11 district court judges from seven of the United States judicial circuits of whom no fewer than 3 shall reside within 20 miles of the District of Columbia who shall constitute a court which shall have jurisdiction to hear applications for and grant orders approving electronic surveillance anywhere within the United States under the procedures set forth in this chapter, except that no judge designated under this subsection shall hear the same application for electronic surveillance under this chapter which has been denied previously by another judge designated under this subsection.... Section 102(b) of FISA, 50 U.S.C. § 1802(b), provides that: Applications for a court order under [title I of FISA, 50 U.S.C. §§ 1801 et seq .] are authorized if the President has, by written authorization, empowered the Attorney General to approve applications to the court having jurisdiction under section 1803 of this title, and a judge to whom an application is made may, notwithstanding any other law, grant an order, in conformity with section 1805 of this title, approving electronic surveillance of a foreign power or an agent of a foreign power for the purpose of obtaining foreign intelligence information, except that the court shall not have jurisdiction to grant any order approving electronic surveillance directed solely as described in paragraph (1)(A) of subsection (a) of this section unless such surveillance may involve the acquisition of communications of any United States person. The answer to the jurisdictional question raised above would seem to depend on whether those interceptions were directed at the communications of a person reasonably believed to be located outside the United States. If so, then, by virtue of section 105A, such interceptions would not be construed to fall within the definition of "electronic surveillance" under FISA, and therefore a review of the underpinnings of such interceptions would not be within the FISC's jurisdiction in connection with an application to authorize electronic surveillance. If treated instead as acquisitions under new section 105B of FISA, then the FISC would seem to be limited to reviewing, under a clearly erroneous standard, the general procedures under which the Director of National Intelligence (DNI) and the Attorney General would make determinations that acquisitions did not constitute electronic surveillance; and judges of the FISC petition review pool would have jurisdiction to consider petitions challenging the legality of directives to persons to furnish aid to the government to accomplish those acquisitions. Implicit in the previous discussion is the question what impact, if any, any possible narrowing of the interpretation of the definition of "electronic surveillance" under FISA might have upon the scope of "acquisitions" under new section 105B of FISA. In other words, if an interception of communications directed toward a person reasonably believed to be located outside the United States does not constitute "electronic surveillance" for purposes of FISA, regardless of where the other parties to the communication may be located or whether some or all of those other parties may be U.S. persons, could some or all such interceptions be deemed "acquisitions" under the provisions of section 105B? For this to be the case, it would appear that the interception would have to be authorized by the DNI and the Attorney General under section 105B of FISA to acquire foreign intelligence information concerning persons reasonably believed to be outside the United States, and would have to satisfy the five criteria set forth in section 105B(a), including the use of minimization procedures. If these requirements are met, then it appears that some communications to which U.S. persons located within the United States might be parties could be intercepted for periods of up to one year without a court order under section 105B. This contrasts markedly with the detailed information to be provided by the government to the FISC in an application for a court order for electronic surveillance under section 104 of FISA, 50 U.S.C. § 1804, and the level of FISC review provided for such applications. To the extent that new section 105A circumscribes the previous interpretation of "electronic surveillance" as defined under section 101(f) of FISA, 50 U.S.C. § 1801(f), it could be argued that this might significantly diminish the degree of judicial review to which such interceptions might have heretofore been entitled. On the other hand, if the interpretation of the definition of "electronic surveillance" contemplated in new section 105A of FISA is consistent with prior practice, then this concern with respect to section 105A's impact would appear to be eliminated. A somewhat closer parallel might be drawn between the statutory structure for acquisitions contemplated in section 105B and that for electronic surveillance under section 102 of FISA, 50 U.S.C. § 1802. The latter section permits the President, through the Attorney General, to authorize electronic surveillance for up to one year without a court order, if the Attorney General certifies in writing under oath that the electronic surveillance is solely directed at the acquisition of the contents of communications transmitted by means of communications used exclusively between or among foreign powers, as defined in section 1801(a)(1), (2), or (3) of this title; or the acquisition of technical intelligence, other than the spoken communications of individuals, from property or premises under the open and exclusive control of such a foreign power. In addition, the Attorney General must certify that there is no substantial likelihood that the surveillance will acquire the contents of any communication to which a United States person is a party; and that the proposed minimization procedures with respect to such surveillance meet the definition of minimization procedures under section 1801(h) of this title; and he must comply with reporting requirements regarding those minimization procedures. Subsection 102(b) of FISA denies the FISC jurisdiction to grant any order approving electronic surveillance directed solely at the acquisition of communications used exclusively between or among such foreign powers or the acquisition of such technical intelligence from property or premises under the exclusive and open control of such foreign powers, unless such surveillance may involve the acquisition of communications of any United States person. Section 105B provides the FISC no similar jurisdiction if an acquisition involves the communications of a United States person. Again, if the interpretation of the definition of "electronic surveillance" contemplated in new section 105A of FISA is consistent with prior practice, then this concern regarding section 105A's effect would appear to be eliminated. To the extent that any intentional interceptions of communications which were previously deemed to be covered by the definition of "electronic surveillance" under FISA are now excluded from that definition, another question which may arise is whether any of those interceptions may now be found to fall within the general prohibition against intentional interception of wire, oral, or electronic communications under Title III of the Omnibus Crime Control and Safe Streets Act of 1968, as amended, 18 U.S.C. § 2511. Under 18 U.S.C. § 2511(2)(f), "electronic surveillance," as defined in section 101 of the Foreign Intelligence Surveillance Act, is an exception to this general prohibition. If such interceptions were deemed to violate 18 U.S.C. § 2511, then the intentional use or disclosure of the contents of such communications, knowing that the information was obtained through the interception of a wire, oral, or electronic communication in violation of 18 U.S.C. § 2511 would also be prohibited under that section. Section 4 of P.L. 110-55 requires the Attorney General to inform the Senate Select Committee on Intelligence, the House Permanent Select Committee on Intelligence, the Senate Judiciary Committee and the House Judiciary Committee semi-annually concerning acquisitions "under this section" during the previous six-month period. Each report is to include descriptions of any incidents of non-compliance with a directive issued by the DNI and the Attorney General under section 105B, including noncompliance by an element of the Intelligence Community with guidelines or procedures for determining that "the acquisition of foreign intelligence authorized by the Attorney General and the [DNI] concerns persons reasonably to be outside the United States," and incidents of noncompliance by a specified person to whom a directive is issued under section 105B. The report is also required to include the number of certifications and directives issued during the reporting period. Section 5(a)(1) and (a)(2) make technical amendments to section 103(e)(1) and (2) of FISA, 50 U.S.C. § 1803(e)(1) and (2), to reflect the jurisdiction of the FISC petition review pool over petitions under section 105B(h) of FISA, dealing with challenges to the legality of directives issued under section 105B(e) of FISA to a person by the Attorney General and the DNI, and over petitions under section 501(f) of FISA, 50 U.S.C. § 1861, dealing with challenges to production orders or nondisclosure orders issued by the FISC under section 501(c) of FISA, 50 U.S.C. § 1861(c). Section 5(b) makes conforming amendments to the table of contents of the first "section" of FISA, 50 U.S.C. § 1801 et seq ., to reflect the additions of new sections 105A, 105B, and 105C of FISA. Under Section 6(a) of P.L. 110-55 , the amendments to FISA made in the act are to take effect immediately after its enactment except as otherwise provided. Section 6(b) of P.L. 110-55 provides that any order issued under FISA in effect on the date of enactment of P.L. 110-55 (August 5, 2007) shall remain in effect until the date of expiration of the order, and, at the request of the applicant for the order, the FISC shall reauthorize the order as long as the facts and circumstances continue to justify its issuance under FISA as in effect the day before the applicable effective date of P.L. 110-55 . This appears to refer to orders and applications for orders under FISA authorizing electronic surveillance, physical searches, pen registers or trap and trace devices, or production of tangible things and related nondisclosure orders. Section 6(b) provides further that the government may also file new applications and the FISC shall enter orders granting such applications pursuant to FISA, as long as the application meets the requirements set forth in FISA as in effect on the day before the applicable effective date of P.L. 110-55 . This seems to indicate that pre-existing authorities under FISA remain available in the wake of P.L. 110-55 's enactment. At the applicant's request, the FISC shall extinguish any extant authorizations to conduct electronic surveillance or physical searches pursuant to FISA. Any surveillance conducted pursuant to an order entered under subsection 6(b) of P.L. 110-55 is to be subject to the provisions of FISA as in effect before the effective date of P.L. 110-55 . Under Section 6(c) of P.L. 110-55 , sections 2, 3, 4, and 5 of that act were to sunset 180 days after the date of enactment of the act, except as provided in section 6(d). Under section 6(d), any authorizations for acquisition of foreign intelligence information or directives issued pursuant to those authorizations issued under section 105B shall remain in effect until their expiration. Section 6(d) also provides that such acquisitions shall be governed by the applicable amendments made to FISA by P.L. 110-55 , and shall not be deemed to constitute electronic surveillance as that term is defined in section 101(f) of FISA. On January 29, 2008, both the House and the Senate passed H.R. 5104 , a 15-day extension to the sunset for the Protect America Act, to allow further time to consider, pass, and go to conference on proposed legislation to amend FISA, while ensuring that the intelligence community would have the authority it needed in the intervening period. It was signed into law on January 31, 2008, as P.L. 110-182 . On February 13, 2008, the House rejected H.R. 5349 , which would have extended the sunset provision for an additional 21 days. Bills have been introduced in the Senate to extend the sunset from 180 to 210 days ( S. 2541 , S. 2556 , and S. 2615 ), or to extend it to July 1, 2009 ( S. 2557 ). The President has indicated that he will not agree to a further extension of the sunset provision.

On August 5, 2007, P.L. 110-55, the Protect America Act of 2007, was signed into law by President Bush, after having been passed by the Senate on August 3 and the House of Representatives on August 4. The measure, introduced by Senator McConnell as S. 1927 on August 1, makes a number of additions and modifications to the Foreign Intelligence Surveillance Act of 1978 (FISA), as amended, 50 U.S.C. §§ 1801 et seq., and adds additional reporting requirements. As originally passed, the law was to sunset in 180 days, on February 1, 2008. On January 29, 2008, both the House and the Senate passed H.R. 5104, a 15-day extension to the sunset for the Protect America Act, to allow further time to consider, pass, and go to conference on proposed legislation to amend FISA, while ensuring that the intelligence community would have the authority it needed in the intervening period. Signed into law on January 31, it became P.L. 110-182. On February 13, 2008, the House rejected H.R. 5349, which would have extended the sunset provision an additional 21 days. Bills have been introduced in the Senate to extend the sunset from 180 to 210 days (S. 2541, S. 2556, and S. 2615) or to extend it to July 1, 2009 (S. 2557). The Foreign Intelligence Surveillance Act of 1978 was enacted in response both to the Committee to Study Government Operations with Respect to Intelligence Activities (Church Committee) revelations with regard to past abuses of electronic surveillance for national security purposes and to the somewhat uncertain state of the law on the subject. In creating a statutory framework for the use of electronic surveillance to obtain foreign intelligence information, the Congress sought to strike a balance between national security interests and civil liberties. Critical to an understanding of the FISA structure are its definitions of terms such as "electronic surveillance" and "foreign intelligence information." P.L. 110-55 limits the construction of the term "electronic surveillance" so that it does not cover surveillance directed at a person reasonably believed to be located outside the United States. It also creates a mechanism for acquisition, without a court order under a certification by the Director of National Intelligence (DNI) and the Attorney General, of foreign intelligence information concerning a person reasonably believed to be outside the United States. The Protect America Act provides for review by the Foreign Intelligence Surveillance Court (FISC) of the procedures by which the DNI and the Attorney General determine that such acquisitions do not constitute electronic surveillance. In addition, P.L. 110-55 authorizes the Attorney General and the DNI to direct a person with access to the communications involved to furnish aid to the government to facilitate such acquisitions, and provides a means by which the legality of such a directive may be reviewed by the FISC petition review pool. A decision by a judge of the FISC petition review pool may be appealed to the Foreign Intelligence Surveillance Court of Review, and review by the U.S. Supreme Court may be sought by petition for writ of certiorari. This report describes the provisions of P.L. 110-55, discusses its possible impact on and parallels to existing law, summarizes the legislative activity with respect to S. 1927, H.R. 3356, and S. 2011, and touches on recent legislative developments. It will be updated as needed.

The German automotive manufacturer Volkswagen Automotive Group (VW) has admitted to installing a software algorithm in several of its diesel-fueled vehicle engines that acts as a "defeat device": the software detects wh en the vehicle is undergoing official compliance testing and activates certain pollution control devices to reduce tailpipe emissions. During normal driving situations, however, the control devices are turned off, resulting in higher emissions of nitrogen oxides (NO x ) and other air pollutants than claimed by the company. Such software could allow higher on-road performance and fuel economy than otherwise attainable with fully active emissions systems. Federal and California regulators examined the use of this software—reportedly installed in 11 million vehicles worldwide from model years (MY) 2009 to 2016—and announced a $14.7 billion partial settlement in June 2016. The European Union (EU) is also examining the use of the software. On September 18, 2015, the U.S. Environmental Protection Agency (EPA) issued a notice of violation (NOV) to VW, contending that Volkswagen and Audi vehicles with 2.0 liter diesel engines (MY2009-MY2015) include software that circumvents EPA emissions standards for nitrogen oxide (NO x ) emissions. EPA stated that when the emissions equipment is disabled, NO x emissions are up to 40 times greater than the standard. The California Air Resources Board (CARB) also initiated an investigation into VW's use of this "defeat device." These allegations cover roughly 499,000 diesel passenger cars sold in the United States. Following the September 18 notice to VW, EPA initiated testing of all U.S. 2015 and 2016 light-duty diesel models to detect potential defeat devices. On November 2, 2015, EPA issued a second NOV alleging that VW installed defeat devices in light-duty diesel vehicles equipped with 3.0 liter engines for MY2014-MY2016, resulting in NO x emissions nine times the EPA standard. This notice affects 85,000 vehicles sold since MY2009. The U.S. Department of Justice (DOJ) filed a civil complaint on behalf of EPA in federal court on January 4, 2016. DOJ alleged that nearly 600,000 diesel vehicles had illegal defeat devices installed, thereby impairing emissions controls and causing harmful air pollution in excess of EPA standards. The complaint also alleged that VW violated the Clean Air Act (CAA) by selling vehicles that are designed differently from what it stated in applications for certification to EPA and CARB. DOJ sought injunctive relief and the assessment of unspecified civil penalties; other legal remedies may be pursued as well, such as criminal charges. Parties have settled regarding some of these legal remedies, while others remain unresolved. EPA and CARB were alerted to the emissions violations by researchers at West Virginia University (WVU) working under a contract with the International Council on Clean Transportation (ICCT), a nonprofit environmental research organization. As part of a study of on-road emissions from diesel vehicles, the WVU researchers found emissions levels for some vehicles far exceeded U.S. certification standards. The study was part of a larger investigation by ICCT motivated by reports that some European-made diesel vehicles had passed emissions tests but had much higher real-world NO x emissions. (EU emissions standards apply only at the time a vehicle is produced; surveillance testing, mandatory emissions system warranties, and other features of U.S. rules are not incorporated in EU regulations.) According to the EPA notice, VW initially indicated that the excess emissions resulted from a software problem that could be addressed by a voluntary recall. Ultimately, EPA found that software installed in the vehicles' computers sensed when the vehicles were being tested and activated a lower-emissions mode. Thus, nonstandard testing was necessary to reveal VW's actions. Such software could circumvent the "diesel dilemma," discussed below, and allow higher on-road performance and fuel economy than otherwise attainable with fully active emissions systems. WVU's testing indicated a BMW diesel vehicle was able to meet emissions targets. Thus, emissions compliance does not appear to be one of technical feasibility. It should also be noted that while ICCT has found other diesel vehicles that exceed European or U.S. NO x standards in real-world use, VW is so far the only automobile manufacturer accused of using defeat devices. Diesel engines are internal combustion engines that use heat generated by fuel compression to ignite the diesel fuel. Gasoline-powered engines use spark plugs and other components to ignite the fuel, fire the pistons, and drive the car. Otherwise, gasoline and diesel engines are similar. Diesel fuel—which is of a different chemical composition and contains more energy per unit of volume than gasoline—combined with compression ignition is potentially a more energy-efficient process and in general delivers more power than gasoline. The 2015 EPA Fuel Economy Guide notes that Diesel engines are inherently more energy-efficient, and diesel fuel contains roughly 10%–15% more energy per gallon than gasoline. In addition, new advances in diesel engine technology have improved performance, reduced engine noise and fuel odor, and decreased emissions of harmful air pollutants. Ultra-low sulfur diesel fuels also help reduce emissions from these vehicles. Diesel engines generally last longer than gasoline engines and retain a higher resale value. However, diesel engines are more expensive to manufacture than gasoline engines and retail for more. They generally emit greater quantities of NO x and particulate matter (PM) that require pollution control devices not found on gasoline vehicles. Diesel engine technology has changed in recent years as automakers have sought to find new ways to raise fuel economy and reduce emissions so they can meet new federal (and EU) greenhouse gas standards. Providing direct injection of fuel into the engine combustion chamber and turbocharging the air used to burn the fuel are two ways in which the goals of higher fuel efficiency and lower emissions can be met. VW's technology is called Turbocharged Direct Injection (TDI). Similar technology is found on other diesel-fueled passenger cars. The motor vehicles that had defeat devices installed were all diesels manufactured in Europe or the United States. It has been estimated that about 584,000 diesel passenger cars sold in the United States since MY2009 are equipped with a defeat device. See Table 1 for affected vehicles. EPA did not grant certificates of conformity for VW's MY2016 diesel vehicles, thus halting sales of these vehicles in the United States. Volkswagen is a German company established in 1933, with manufacturing operations around the world. In 2015, VW was the world's second-largest automaker after Toyota. In the United States, VW manufactures passenger vehicles at its Chattanooga, TN, plant, which opened in 2011. This is VW's second U.S. manufacturing facility: a Pennsylvania plant operated from 1978 until 1987, when it was closed because of decreasing sales. The Passat, reconfigured from the original European model as a larger vehicle for the U.S. market, has been manufactured with both gasoline and diesel engines at the Tennessee plant. The resumption of U.S. manufacturing is part of VW's strategy to significantly increase U.S. sales. In 2014, the VW Group sold nearly 600,000 vehicles in the United States, of which 48% were produced in the United States and Mexico. VW Group's total U.S. market share in 2014 was almost 4%. Figure 1 shows how the total U.S. sales of VW's light vehicles (gasoline and diesel-powered), including the Volkswagen, Audi, Bentley, Porsche, and Lamborghini brands, compared with those of other automakers in 2014. Diesel-fueled vehicles manufactured by other automotive companies have not been implicated, but EPA has announced it will expand its testing protocols to sample these vehicles to assess their compliance with CAA standards. In the civil complaint filed on January 4, 2016, DOJ alleged that VW violated several provisions of CAA Section 203 (42 U.S.C. §7522). In general, the CAA outlines a schedule by which EPA is to establish and update emissions standards for pollutants that affect public health or welfare. Under Section 202, as amended, the EPA Administrator is required to set emissions standards for new motor vehicles: The Administrator shall by regulation prescribe (and from time to time revise) in accordance with the provisions of this section, standards applicable to the emission of any air pollutant from any class or classes of new motor vehicles or new motor vehicle engines, which in his judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare. Section 203, as amended, specifies the prohibited acts with respect to the emissions standards. DOJ alleged that VW violated Section 203(a)(1) regarding the sale of vehicles not covered by a certificate of conformity; Section 203(a)(3)(B) regarding the installation of defeat devices; and Section 203(a)(3)(A) regarding tampering with emission control devices. Emissions standards for new motor vehicles have been strengthened numerous times since the first federal rulemaking took effect in 1968. The most recent revisions, referred to as the "Tier 2" standards, were promulgated in February 2000. Tier 2 required vehicle manufacturers to reduce tailpipe emissions of several common pollutants, including carbon monoxide (CO), formaldehyde (HCHO), NO x , non-methane organic gases (NMOG, a class of volatile organic compounds (VOCs)), and particulate matter (PM). Relative to the prior Tier 1 standards, the fleet-average standard for NO x required vehicle manufacturers to reduce overall tailpipe emissions by 88% to 95% (based upon the vehicle type). Emissions from diesel fuel combustion contribute to air pollution, including nitrogen dioxide (NO 2 ), ground-level ozone (O 3 ), and fine particulate matter (PM 2.5 ). Exposure to these pollutants can lead to serious health effects, including increased asthma attacks and other respiratory illnesses. Exposure to O 3 and PM 2.5 has also been tied to premature death stemming from respiratory and cardiovascular failure. Children, the elderly, and people with respiratory diseases may be especially vulnerable to these pollutants. Diesel engines offer the possibility of combining very high efficiency with a high energy content fuel, resulting in greater fuel economy and lower carbon dioxide emissions. The main problem areas for diesel-fueled engines—compared to gasoline-powered engines—are emissions of NO x and PM. Engine design often involves a tradeoff, accepting greater emissions of one of these two pollutants in return for tighter control of the other. This trade-off is often referred to as the "diesel dilemma." As summarized by researchers at the University of California—Davis, "the challenge for engine manufacturers is to reduce both NO x and particulates, and retain diesel's superior fuel efficiency." Under earlier U.S. standards, diesel vehicles were permitted higher NO x emissions, as is the case in the EU and elsewhere. However, in 1999, under EPA's "Tier 1" standards, the agency adopted a "fuel neutral" approach to emissions controls, requiring vehicles to attain the same standards regardless of the fuel they used. At the time, there was controversy over the ability of diesel cars to meet the new standards. It is theoretically possible to run a diesel engine with near-zero emissions of both NO x and PM, but in practice cost-effective reductions are achieved through a combination of efficient combustion processes and tailpipe emissions controls. The specific processes depend on the engine design, and involve lubrication, fuel delivery and injection systems, turbochargers, and various "aftertreatment" technologies. One potential NO x control technology is selective catalytic reduction (SCR), which adds urea and water to the exhaust to break down NO x into nitrogen and carbon dioxide. Applying this solution on diesel vehicles sold in the United States requires additional equipment, including a urea tank, pump, and delivery system. Other parts of the vehicle would have to be designed to leave room for the SCR components. Another potential control technology is a nitrogen oxide trap. Such a trap, or "adsorber," chemically binds nitrogen oxides during lean engine operation. After the adsorber is saturated to capacity, the system is regenerated with an injection of diesel fuel, and the released NO x is catalytically reduced to nitrogen. This solution requires the use of additional fuel that is not dedicated to powering the engine, and thus, the vehicle's performance and fuel economy are compromised. It is alleged that VW used the defeat devices to circumvent adsorber technology in the noncompliant vehicles under investigation. To receive a "certificate of conformity" (COC) and sell vehicles in the United States, automakers must certify that their vehicles will meet emissions standards. In addition to initial testing and certification, automakers must test vehicles after production through the In-Use Verification Program (IUVP). According to EPA, if the IUVP reveals problems, "EPA would work with the manufacturer to fix them, either through voluntary manufacturer action or, if necessary, through an ordered emissions recall." In addition to the manufacturer-controlled IUVP, EPA also conducts limited "surveillance testing" at its laboratory in Ann Arbor, MI. EPA selects vehicles for such testing from IUVP data, EPA certification data, consumer complaints, and random selection. Each year EPA tests a few dozen vehicles. In the wake of the VW allegations, EPA issued guidance to manufacturers on September 25, 2015, that it may require additional testing to investigate potential defeat devices. VW has not stated why the defeat devices were installed. Experts in automotive technology have said that disengaging the pollution controls on a diesel-fueled car can yield better performance, including increased torque and acceleration. Further, several types of emissions control technologies require fuel to run; thus, disengaging them would return better fuel economy for the vehicle. In the case of VW, such modifications may have been intended to allow vehicles designed for the European Union market to meet more stringent U.S. NO x regulations, avoiding additional investment for the comparatively small U.S. diesel vehicle market. Consumer Reports concluded that VW may have used the defeat devices to increase fuel economy and vehicle performance. It tested MY2011 and MY2015 VW TDI diesel vehicles with and without the defeat device engaged and found a "noticeable decline in fuel economy for both models" when the defeat device was not engaged. On January 4, 2016, DOJ filed a civil complaint against VW in the U.S. District Court for the Eastern District of Michigan based on the allegations regarding installation of defeat devices in 2.0L diesel vehicles, as described in this report. The complaint made four claims for relief: that Volkswagen sold, offered for sale, introduced into commerce, delivered for introduction into commerce, or imported vehicles that did not conform in all material respects with the specifications in the COCs purported to cover them, in violation of Section 203(a)(1) of the CAA; that Volkswagen manufactured, sold, offered for sale, or installed parts or components in certain vehicles intended for use with motor vehicles where a principal effect of the part or component is to bypass, defeat, or render inoperative a device or element of design installed in compliance with CAA regulations, in violation of Section 203(a)(3)(B) of the CAA; that certain auxiliary emission control devices installed by Volkswagen had the effect of removing or rendering inoperative devices or elements of the emissions control system installed in new vehicles in compliance with CAA regulations, in violation of Section 203(a)(3)(A) of the CAA; and that Volkswagen failed to disclose the existence of the auxiliary emission control devices in the COC applications for test groups for new vehicles, in violation of the reporting requirements found in Section 203(a)(2) of the CAA. Part A of Title II of the CAA, which deals with emissions standards for moving sources, does not provide for criminal penalties. It is possible, however, that VW or its officials could face criminal charges based on other statutes. For example, DOJ could pursue charges under federal mail fraud or wire fraud prohibitions if VW has used either medium to convey false information in service of a "scheme or artifice to defraud." In addition, CAA violations like those described in the January 2016 Complaint can trigger civil penalties. Section 205 of the CAA sets forth civil penalties for these violations. The January 4, 2016, complaint provided further details regarding the potential penalties applicable to Volkswagen: For violations of the COC requirements found in Section 203(a)(1) of the CAA, the complaint stated that failure to comply with the requirements is a separate offense for each motor vehicle, and that pursuant to Section 205(a) of the CAA, VW could be liable for civil penalties of up to $32,500 per vehicle for each violation occurring before January 13, 2009, and for civil penalties of up to $37,500 for each violation occurring on or after January 13, 2009. For violations of the prohibition on installation of a "defeat device" found in Section 203(a)(3)(B) of the CAA, the complaint again stated that failure to comply with the requirements is a separate offense for each motor vehicle, and that pursuant to Section 205(a) of the CAA, VW could be liable for civil penalties of up to $2,750 per part or component installed vehicles prior to January 13, 2009, and for civil penalties of up to $3,750 per part or component installed on or after January 13, 2009. For violations of the prohibition on tampering found in Section 203(a)(3)(A) of the CAA, the complaint stated that each vehicle equipped with an auxiliary emission control device that removed or rendered inoperative devices or elements of the emissions control system installed in new vehicles constitutes a separate violation, and that pursuant to Section 205(a) of the CAA, VW could be liable for civil penalties of up to $32,500 per vehicle for each violation occurring before January 13, 2009, and for civil penalties of up to $37,500 for each violation occurring on or after January 13, 2009. For violations of the reporting requirements of Section 203(a)(2) of the CAA, the complaint stated that each failure to provide reports or information constitutes a separate violation, and that pursuant to Section 205(a) of the CAA, VW could be liable for civil penalties of up to $32,500 per day of violation occurring before January 13, 2009 and up to $37,500 per day of violation occurring on or after January 13, 2009. VW also faces the possibility of injunctive relief for each of the alleged violations pursuant to Section 204(a) of the CAA. This allows the court to take action to restrain VW from continued violations of the listed provisions. It should be noted that the potential penalties outlined above are not generally imposed, as automakers charged with such violations generally negotiate a lower penalty with EPA to settle the case. For example, DOJ sued Toyota for $58 billion in environmental violations more than a decade ago, but Toyota settled with the government, resulting in, among other things, a $34 million penalty. This appears to have been the avenue chosen by VW and DOJ in this instance, as discussed below. In addition, it should be noted that Section 205 of the Clean Air Act specifically requires courts to consider a violator's ability to pay a penalty and remain in business when assessing a civil penalty. Section 205 states the following: In determining the amount of any civil penalty to be assessed under this subsection, the court shall take into account the gravity of the violation, the economic benefit or savings (if any) resulting from the violation, the size of the violator's business, the violator's history of compliance with this title, action taken to remedy the violation, the effect of the penalty on the violator's ability to continue in business, and such other matters as justice may require. For more information on enforcement actions and settlements for noncompliance with federal pollution control requirements, see CRS Report RL34384, Federal Pollution Control Laws: How Are They Enforced? . On January 15, 2016, DOJ's litigation, which had been initiated in the Eastern District of Michigan, was transferred to the U.S. District Court for the Northern District of California in order to consolidate it with an ongoing litigation in which a number of private parties have filed claims based on VW's alleged wrongdoing. Subsequently, VW reached a series of settlements that may resolve many of its liability issues related to the installation of defeat devices in 2.0L diesel vehicles. In addition to filed settlements related to alleged violations of Federal Trade Commission (FTC) regulations and private liability claims, a Proposed Partial Consent Decree filed on June 28, 2016, appears to resolve VW's potential liability for the violations of CAA requirements described above. The consent decree also appears to resolve VW's potential liability for violations of the California Health and Safety Code and the California Code of Regulations. According to the Notice of Lodging of Proposed Partial Consent Decree issued by DOJ on July 6, 2016, "[t]he three settlements resolve separate claims but offer coordinated relief." This coordinated relief provided for in the three settlements includes the following: VW must offer all eligible owners and lessees of eligible vehicles the option to have VW buy back their cars or to terminate their leases at no cost. VW may submit for EPA and CARB review and approval a proposal for modifying these 2.0 liter vehicles to reduce emissions. If EPA and CARB approve an emissions modification for any category of the 2.0 liter vehicles, VW may offer all eligible owners and lessees the additional option of receiving an emissions modification in lieu of a buyback. VW must fund a trust over three years in the total amount of $2.7 billion, which states, Puerto Rico, the District of Columbia, and Indian tribes can use to perform specified NO x mitigation projects. VW must achieve a recall rate (through the buyback, lease termination, scrapped vehicles, and the emissions modification option, if approved) of 85% by June 30, 2019. If it fails to do so, VW must augment the mitigation trust fund discussed below by $85 million for each 1% that it falls short of the 85% rate. VW must also achieve a separate 85% recall rate for vehicles in California, and must pay $13.5 million to the mitigation trust (solely for mitigation projects in California) for each 1% that it falls short of this target. In connection with the buyback, VW must pay eligible owners no less than the cost of the retail purchase of a comparable replacement vehicle of similar value, condition, and mileage as of September 17, 2015, the day before the existence of the defeat devices was made known to the public. The Decree acknowledges that VW may satisfy this obligation through offering the payments required by the FTC Order and the Class Action Settlement, which are at least equal to the retail replacement value. The buyback/lease termination program under the Decree remains open for two years after the Decree is entered by the court. (See Decree Section IV.A and Appendix A.) If EPA and CARB approve an emissions modification, VW must offer it to consumers indefinitely. VW must invest $2 billion over a 10-year period to support the increased use of zero emission vehicle (ZEV) technology in the United States, including the development and maintenance of ZEV charging stations and infrastructure. Note that the proposed consent decree, the FTC settlement, or the private settlement would not absolve VW of potential civil penalties claimed by the federal government in the January 2016 Complaint, or of any potential criminal charges related to this matter. What I s the Next Step in the Federal Proceedings ? The publication of notice of the Proposed Consent Decree triggered a 30-day public comment period, which concluded on August 6, 2016. If the Proposed Consent Decree is approved and adopted by the U.S. District Court for the Northern District of California following review of the public comments, it will become binding on the parties, and DOJ's claims for injunctive relief will be dismissed. It is not clear how the outstanding DOJ claims for civil penalties will be addressed going forward. Since the 1970s, EPA has repeatedly found manufacturers using defeat devices in violation of the CAA. When it determines that defeat devices have been installed, EPA begins enforcement proceedings. In response, automakers often voluntarily recall the vehicles and/or settle with EPA and DOJ. For example, in 1998 Honda and Ford agreed to pay $267 million and $7.8 million, respectively, for fines and pollution mitigation. Other cases where EPA has accused manufacturers of installing defeat devices include automakers VW (1973), Chrysler (1973), and General Motors (1995); heavy-duty engine manufacturers Caterpillar, Cummins, Detroit Diesel, Mack, Navistar, Renault and Volvo (1998); parts manufacturers Casper's Electronics (2013); Edge Products (2013); and Harley-Davidson (2016). For a selected list of cases involving defeat devices, see Table 2 . Congress' initial role was to establish the anti-defeat device provisions in the 1970 amendments to the CAA. On October 8, 2015, representatives of VW and EPA testified on the VW anti-defeat devices before the House Energy and Commerce Committee's Subcommittee on Oversight and Investigations. Given the extensive reporting about and high visibility of VW's use of defeat devices, Congress may wish to conduct further oversight. Potential issues include whether EPA has sufficient resources to monitor vehicle emissions, whether the current penalty structure is sufficient, why EPA failed to detect VW's defeat device when there have been similar cases in the past, and whether VW's response to the emissions problem and efforts to provide restitution to U.S. customers have been adequate. Congress may also look to provide more oversight of EPA rulemaking for motor vehicle emissions standards. The problems with VW's diesel emissions controls also are relevant to the proposed Transatlantic Trade and Investment Partnership (TTIP), now under negotiation between the United States and the European Union. Among many other topics, the negotiators are discussing harmonization of U.S. and EU vehicle regulations to make it simpler to sell U.S.-made vehicles in the EU and vice versa. Harmonization of environmental regulations and testing procedures are among the issues under discussion.

The German automotive manufacturer Volkswagen Automotive Group (VW) has admitted to installing a software algorithm in several of its diesel-fueled vehicle engines that acts as a "defeat device": the software detects when the vehicle is undergoing compliance testing and activates certain pollution control devices to reduce tailpipe emissions. During normal driving situations, however, the control devices are turned off, resulting in higher emissions of nitrogen oxide (NOx) and other air pollutants than claimed by the company. Federal and California regulators and the European Union (EU) have examined the use of this software, which was reportedly installed in 11 million vehicles worldwide. A summary of federal and state actions includes the following: September 18, 2015: the U.S. Environmental Protection Agency (EPA) issued a notice of violation (NOV) of the Clean Air Act (CAA) to VW, contending that 2.0 liter Volkswagen and Audi diesel cars (model years 2009-2015) include software that circumvents EPA standards for NOx, allowing emissions up to 40 times the standard. November 2, 2015: EPA issued a second NOV alleging that VW installed defeat devices in light-duty diesel vehicles equipped with 3.0 liter engines for model years 2014-2016, resulting in NOx emissions increases nine times the EPA standard. January 4, 2016: the U.S Department of Justice (DOJ) filed a civil complaint against VW on behalf of EPA in federal court alleging that nearly 600,000 diesel vehicles had illegal defeat devices installed, thereby impairing emissions controls and causing harmful air pollution in excess of EPA standards. EPA stated that it will not grant a certificate of conformity for VW's model year 2016 diesel vehicles, thus halting sales of these vehicles in the United States. The California Air Resources Board initiated an investigation into VW's use of this "defeat device," and, on January 12, 2016, issued a NOV to VW, alleging that "approximately 75,688 California vehicles do not conform to State law." June 28, 2016: EPA, the state of California and the Federal Trade Commission (FTC) announced a settlement with VW with regard to its 2.0 liter vehicles, including a $10 billion buyback of affected cars from consumers, and $4.7 billion to mitigate pollution and support zero emission vehicle technology. This report is organized as a series of frequently asked questions. It focuses on a description of modern diesel technologies, their market and emissions profiles, and some potential reasons that could underlie the use of defeat devices. It summarizes the specific allegations filed against VW under the CAA, the current status of federal and state investigations, and the civil and potential criminal penalties that may result. Further, the report introduces several outstanding issues currently under debate, including whether EPA has sufficient resources to monitor vehicle emissions, whether the current penalty structure is sufficient, why EPA failed to detect VW's defeat device when there have been similar cases in the past, and whether VW's response to the emissions problem and efforts to provide restitution to U.S. customers have been adequate.

Charter schools are public schools of choice that are created in accordance with state laws and are publicly funded and tuition free. They are operated according to the terms of charters or contracts granted by public chartering agencies, such as local educational agencies (LEAs) or state boards of education. The terms of charters typically provide charter school operators with increased autonomy over the operation of schools, often including exemption from, or flexibility in the application of, many of the state or local regulations otherwise applicable to public schools. This increased autonomy is often granted in exchange for the expectation of increased accountability for results or outcomes. Depending on the specific state law, charter schools may operate as their own LEA or as part of a traditional LEA. Funding for charter schools is normally provided on a per-pupil basis. As opposed to having neighborhood school catchment areas, enrollment in charter schools is normally open to applicants on an LEA-wide or even statewide basis, and parents must actively choose to enroll their children in charter schools. If more students apply for admission to a charter school than can be accommodated, students are normally admitted on the basis of a lottery. The first charter school opened its doors in Minnesota in 1992, following the enactment of the first state charter school law in 1991. Other states followed suit with California, Colorado, Georgia, Massachusetts, Michigan, and New Mexico enacting charter school laws in 1992 and 1993. By 1999, 36 states and the District of Columbia had charter school laws. Currently, 42 states and the District of Columbia have charter school laws permitting the authorization of charter schools. The growth in the number of charter schools and the number of students attending charter schools has been commensurate with the increase in the number of charter school state laws. For example, during the 2000-2001 school year, 1,941 charter schools were in operation, serving about 459,000 students. Five years later, 3,689 charter schools were in operation, serving just over 1 million students. During the 2012-2013 school year, there were 6,004 charter schools in operation, accounting for 6.3% of all public schools. These schools served approximately 2.3 million students, accounting for 4.6% of all public school students. Under Title V-B-1 and V-B-2 of the Elementary and Secondary Education Act (ESEA), federal support is provided to assist with the opening of new charter schools and for the funding of charter school facilities. Title V-B-1 authorizes the Charter Schools Program, the Per-Pupil Facilities Aid program (more commonly referred to as the State Charter School Facilities Incentive Grants Program), and national activities. Title V-B-2 authorizes the Credit Enhancement Initiatives to Assist Charter School Facility Acquisition, Construction, and Renovation program (more commonly known as the Credit Enhancement program). During the 112 th and 113 th Congresses, Congress has actively pursued both a comprehensive reauthorization of the ESEA, which would include amending and reauthorizing the Title V-B charter school programs, and stand alone legislation to amend and reauthorize the Title V-B programs independent of a comprehensive ESEA reauthorization. Most recently, the House Education and Workforce Committee ordered reported the Success and Opportunity through Quality Charter Schools Act ( H.R. 10 ) by a vote of 36-3 on April 8, 2014. The bill would amend and reauthorize the Title V-B charter school programs. This report is divided into three main parts. The first part examines the federal programs authorized under Title V-B of the ESEA that provide support to public charter schools. Each of the aforementioned programs is considered as is the national activities component of the Charter Schools Program. The second part of the report provides data on program appropriations. The third part of the report provides an overview of recent congressional efforts to reauthorize the charter school programs. The Appendix provides a brief legislative history of the federal charter school programs. Congress enacted the first federal charter school program in the mid-1990s, three years after the passage of the first state charter school law. The Charter Schools Program was initially authorized in 1994 under Title X, Part C of the ESEA with the enactment of the Improving America's Schools Act (IASA; P.L. 103-382 ). The No Child Left Behind Act (NCLB; P.L. 107-110 ) subsequently created the two charter school facilities support programs included in current law—State Charter School Facilities Incentive Grants and Credit Enhancement for Charter School Facilities Program. (The Appendix provides a more detailed legislative history of the charter school programs authorized under the ESEA.) The charter school programs are authorized under Title V-B-1 and Title V-B-2 of the ESEA. Title V-B-1 authorizes the Charter Schools Program, national activities, and State Charter School Facilities Incentive Grants. Title V-B-2 authorizes the Credit Enhancement Program. The statutory purpose of Title V-B-1 is to increase national understanding of charter schools by providing funding for the planning, program design, and initial implementation of charter schools; evaluating the effects of such schools, including the effects of charter schools on students, student academic achievement, parents, and staff; expanding the number of "high-quality" charter schools; and encouraging states to provide support to charter schools for facilities financing in an amount that is similar to the amount provided to traditional public schools. The statutory purpose of Title V-B-2 is to provide grants to eligible entities to enable them to demonstrate "innovative credit enhancement initiatives" that will assist charter schools in acquiring, constructing, and renovating facilities. This part of the report provides an overview of each of the three charter school programs included in Title V-B of the ESEA. It also discusses national activities that are authorized under Title V-B-1. It concludes with a discussion of substantive changes that have been made to these programs through annual appropriations acts since FY2010. Several charter school programs and activities are authorized under Title V-B-1. The Charter Schools Program, which provides grants to state educational agencies (SEAs) or, if a state's SEA chooses not to apply for a grant, charter school developers, to support the planning, program design, and initial implementation of public charter schools. Funds may also be used to provide dissemination grants to successful charter schools. The Secretary of Education is authorized to reserve funds for national activities, such as evaluation, technical assistance, and dissemination of best practices. Under the Per-Pupil Facilities Aid Program (more commonly referred to as the State Charter School Facilities Incentive Grants Program), the Secretary provides competitive grants to states to pay the federal share of establishing or enhancing, and administering, a program which will provide facilities assistance to charter schools on a per-pupil basis. Funding for Title V-B-1 programs and activities is provided through an overall appropriation for the Charter Schools Program. The first $200 million appropriated for the Charter Schools Program is reserved for grants to states and eligible applicants for the planning, design, and initial implementation of public charter schools; for the dissemination of information about charter schools; for state revolving loan funds; and for national activities. The next $100 million appropriated is reserved for the State Charter School Facilities Incentive Grants Program, in which competitive grants are awarded to states for the purpose of establishing and administering programs dedicated to funding charter school facilities, in whole or in part, on a per-pupil basis. Fifty percent of funds appropriated in excess of $300 million are reserved for each of the two programs. In addition, the Secretary is permitted to reserve the greater of 5% or $5 million of the annual amount appropriated for Title V-B-1 for national activities, except that the Secretary is prohibited from reserving more than $8 million. However, recent appropriations acts have altered how funds provided for the Charter Schools Programs are shared among other Title V-B programs. For more information on these changes, see the subsequent section on "Substantive Changes to Program Authorizing Legislation Made through Annual Appropriations Acts." The Charter Schools Program authorized by Title V-B-1 provides competitive grants to support the planning, program design, and initial implementation of charter schools, and the dissemination of information on charter schools. For the purposes of the program, Section 5210 defines a charter school as a public school that is exempt from significant state and local rules that inhibit autonomy; is created by a developer as a public school or converted from a traditional public school, and is operated under public direction; operates in pursuit of a specific set of educational objectives established by the school and agreed to by the chartering agency; provides elementary and/or secondary education; is nonsectarian; does not charge tuition; complies with various federal laws, including the Individuals with Disabilities Education Act (IDEA) and civil rights laws; uses a lottery to admit students if oversubscribed; agrees to comply with federal and state audit requirements that apply to other public schools; meets federal, state, and local health and safety requirements; operates in accordance with state law; and has a written performance contract that addresses student performance and state assessments. Under this program, state educational agencies (SEAs) in states with charter school laws may apply for grants. SEAs subsequently make competitive grants to new charter schools. If the SEA in a state that has a charter school law does not opt to apply for a grant, a charter school developer may apply directly to the U.S. Department of Education (ED) for a grant. The Secretary is required to give priority to SEA applications from states (1) where the state provides for periodic review and evaluation of each charter school by the chartering agency at least once every five years to determine whether the charter school is meeting the terms of the school's charter and is meeting or exceeding the student academic achievement requirements and goals established for charter schools under state law or by the school's charter and (2) that meet one or more of the following criteria: The state has demonstrated progress in increasing the number of high-quality charter schools held accountable under the terms of their charter for meeting educational objectives. The state provides for one chartering agency that is not a LEA and allows for an appeals process if only LEAs function as chartering agencies. The state ensures each charter school has a "high degree of autonomy" over its budget and expenditures. The five-year review must determine whether the charter school is meeting the terms of its charter and is meeting or exceeding the student academic achievement requirements and goals for charter schools as set forth under state law or the school's charter. Further, in determining the grant amount to be awarded, the Secretary of Education (hereafter referred to as the Secretary) must take into account the number of public charter schools operating or approved to operate in the state. Under the definition of a charter school, in order to be eligible to receive charter school program funds, a school must conduct a lottery if there are more applicants than can be admitted. Non-regulatory guidance issued by ED addresses various issues related to the use of a lottery. In general, a charter may only exempt students from a lottery if they are "deemed to have been admitted to the charter school already" and, thus, do not need to reapply. There are five categories of applicants who may be exempted on this basis: 1. Students who are enrolled in a public school at the time it is converted to a public charter school; 2. Students who are eligible to attend and are living in the attendance area of a public school at the time it is converted to a traditional public school; 3. Siblings of students already admitted to or attending the same charter school; 4. Children of a charter school's founders, teachers, and staff, provided the total number of students admitted under this exemption "constitutes only a small percentage of the school's total enrollment;" and 5. Children of employees in a work-site charter school, provided the total number of students admitted under this exemption "constitutes only a small percentage of the school's total enrollment. In addition, ED has also provided guidance on the use of weighted lotteries to admit students to a charter school. First, under certain circumstances, a school may conduct a weighted lottery whereby additional weight is given to individual students who are identified as part of a specified set of students provided the charter school does not reserve or set aside seats for individual or sets of students. A charter school is permitted to weight its lottery to give a "slightly better chance for admission" to students exercising their public school choice options under ESEA Title I-A in order to provide greater choice to students covered by those provisions. In addition, a charter school may also weight its lottery to give "slightly better chances for admission" to all or a subset of disadvantaged students if permitted by state law. The non-regulatory guidance defines educationally disadvantaged students as students who are economically disadvantaged, students with disabilities, migrant students, limited English proficient students, neglected or delinquent students, and homeless students. However, weighted lotteries cannot be used to create schools to serve only a particular subset of students. An SEA must use the funds received to award subgrants to one or more charter schools. In addition, the SEA may not reserve more than 10% of the overall grant amount for dissemination grants, more than 5% for administrative expenses, or more than 10% for the establishment of a revolving loan fund. The latter may be used to make loans to eligible applicants that have received a subgrant under terms to be determined by the SEA for the initial operation of the charter school until such time as the recipient begins to receive ongoing operational support from state and local sources. SEAs provide subgrants to charter schools in the form of three-year planning and implementation grants. The charter school may not use funds provided under the grant for more than 18 months for planning and program design and not for more than two years for initial implementation of a charter school. If an SEA chooses to award dissemination grants, they may only be awarded to charter schools that have been in operation for at least three consecutive years and have demonstrated overall success including success in improving student achievement, high levels of parent satisfaction, and the management and leadership to overcome start-up problems and establish a financially viable charter school. Under current law, a charter school may not receive more than one planning and implementation grant nor more than one dissemination grant. With respect to federal education funding provided under Title I-A of the ESEA and any other funds that ED allocates to states on a formula basis, SEAs (and the Secretary) are required to take measures to ensure that new charter schools receive federal funding for which they are eligible within five months of opening. They are required to ensure that similar measures are taken to ensure that charter schools that expand their enrollment receive the federal funds for which they are eligible within five months of the expansion. Charter schools receiving a planning and implementation grant may only use funds for post-award planning and design of the school's program and initial implementation. According to non-regulatory guidance issued by ED, planning activities may include "refinement of the desired educational results and the methods for measuring progress toward achieving those results" and professional development for staff who will work at the charter school. The non-regulatory guidance also provides examples of initial implementation activities which may include informing the community about the charter school, acquiring equipment and educational materials and supplies, acquiring or developing curricular materials, and "other initial operational costs that cannot be met from State or local sources." More specifically, initial implementation costs may include costs associated with establishing and implementing office functions, costs associated with the installation of technology (e.g., installation of computers and telephones), and personnel expenses incurred before or after the school's opening. With respect to the latter, the expenses must be associated with initial implementation activities and should not be part of ongoing operations. The grant funds may also be used for rental or occupancy costs for a "reasonable period of time" in preparation for the school's opening. It should be noted that grant funds may not be used for construction but may be used for "necessary maintenance, repair, or upkeep of buildings and equipment that neither add to the permanent value of the property nor appreciably prolong its life, but merely keep it in an efficient operating condition." As previously noted, an SEA may use up to 10% of its Charter Schools Program grant to award dissemination subgrants to successful charter schools (referred to as "assisting charter schools") to assist other charter schools in adapting all or part of the charter school's program or to disseminate information about the charter school. Dissemination activities may include assisting other individuals with the planning and start-up of one or more traditional public schools or public charter schools that are independent of the assisting charter school and its developers, and that agree to be held to at least as high a level of accountability as the assisting charter school; developing partnerships with traditional public schools or public charter schools that are designed to approve student academic achievement in each of the schools participating in the partnership; developing curriculum materials, assessments, and other materials that promote student achievement and are based on the successful practices of the assisting charter school; and conducting evaluations and developing materials that document the successful practices of the assisting charter school and that are designed to improve student performance in other schools. Funds reserved for national activities are to be used to carry out several activities. Funds are to be used to provide charter schools with information about federal funds that they are eligible to receive as well as other federal programs in which they may participate. The Secretary is also to use funds to assist charter schools in applying for federal education funds that are allocated by formula. The Secretary may choose to work directly with charter schools to provide this information and assistance or may choose to work indirectly through SEAs. The Secretary is to conduct evaluations and studies that include the evaluation of the effect of charter schools on student academic achievement. These studies should provide information about students attending charter schools, the professional qualifications of charter school teachers, and the turnover of the teaching force. Using funds provided for national activities, the Secretary is to provide information to applicants for Title V-B-1 programs, assistance to applicants in completing their applications, assistance in the planning and startup of charter schools, and training and technical assistance to existing charter schools. Funds are also to be used to disseminate information to other public schools about best or promising practices in charter schools. The Secretary is also to use funds to collect data on the financial resources available to charter schools and to disseminate information to charter schools about financial resources and descriptions of successful programs. Funds are to be used to provide technical assistance, carry out evaluations, or disseminate information related to the State Charter School Facilities Incentive Grants. Recent appropriations acts have altered how funds provided for national activities are to be used. For more information on these changes, see the subsequent section on "Substantive Changes to Program Authorizing Legislation Made through Annual Appropriations Acts." The State Charter School Facilities Incentive Grants Program (also known as the Per-Pupil Facilities Grant Program) is a competitive grant program that provides matching funds to states to establish or enhance and administer per-pupil facilities allowances to help charter schools obtain facilities. The grants are designed to provide an incentive for states to share in the costs of funding charter school facilities. Only SEAs that have enacted a state law authorizing per-pupil annual facilities aid for charter schools may apply. The program is authorized under national activities (Section 5205(b)). To date, California, the District of Columbia, Indiana, Minnesota, and Utah have received funding under this program. In awarding grants, the Secretary must use the same priority criteria established for the Charter Schools Program. Funds must be used to establish new per-pupil facilities aid programs, increase the funding level for existing per-pupil facilities aid programs, and administer per-pupil facilities aid programs. Charter schools receiving funds under the program may use the funds to pay rent, purchase a school building, purchase land, construct a building, renovate an existing school facility, make leasehold improvements, or pay debt service on a school facility. Competitive grants are awarded to SEAs for a period of up to five years. As previously discussed, the authorizing legislation specifies when grants can be made under this program. The federal share of the cost of the program cannot be more than 90% during the first year of the program, 80% during the second year, 60% during the third year, 40% during the fourth year, and 20% during the fifth year. Since FY2008, annual Labor, Health and Human Services, and Education and Related Agencies (L-HHS-ED) appropriations bills have specified a certain amount of funding that the Secretary may use or is required to use for this program specifically or for this program in conjunction with the Credit Enhancement for Charter School Facilities program (see Table 1 for appropriations data). Under this program, funding is authorized for grants to public or private entities (or a combination of the two) for the development of credit enhancement initiatives to assist charter schools in acquiring, constructing, or renovating facilities. Award recipients are required to deposit their grant funds into a reserve account to be used for one or more of the following purposes: Guaranteeing, insuring, and reinsuring bonds, notes, loans, or other types of debt that will be used to assist charter schools to acquire, renovate, and construct school facilities needed to begin or continue the operation of these schools. Guaranteeing or insuring leases of personal or real property that are needed to begin or continue the operation of the charter schools. Facilitating financing by potential lenders, encouraging private lending, and other similar activities that directly promote lending to or for the benefit of charter schools. Facilitating the issuance of bonds by charter schools or other public entities for the benefit of charter schools, by providing technical, administrative, and other appropriate assistance designed to obtain or attract investors (such as retaining bond counsel and underwriters and consolidating multiple charter school projects into a single bond issue). According to ED, reserve account funds are not intended to pay directly for charter schools' facility costs or be the primary source for the repayment of loans. The program is designed to enhance the credit of charter schools and to leverage non-federal funds to pay facility costs and repay loans. Funds from the reserve account should only be used to pay creditors and lenders in "rare instances." In addition, reserve account funds are not intended to be a primary source of funding to make lease payments. Reserve account funds may not be used for down payments on facilities or to make loans. The grantee may use up to 0.25% of the original grant for administrative costs. Funds reserved for administration are not deposited into the reserve account. In terms of grant awards, according to ED, some of the program grantees have been community development financial institutions (CFDIs). CFDIs tend to focus their efforts on project financing and economic development in low-income communities. Other grantees have included nonprofit organizations, state public finance authorities, and one local public finance authority. Substantive changes have been made to the charter school programs through the annual Labor, Health and Human Services, and Education and Related Agencies (L-HHS-ED) appropriations acts since FY2008. While these changes have not amended Title V-B, they have altered how the funds provided for the charter school programs can be used. Since FY2008, the annual appropriations acts have either permitted or required the Secretary to use a certain amount of funding provided for the Charter Schools Program for the State Charter School Facilities Grants and the Credit Enhancement for Charter School Facilities Program. Beginning in FY2010, the acts have also permitted or required to the Secretary to use funds to make multiple awards to nonprofit charter management organizations (CMOs) and other nonprofit entities for the replication and expansion of successful charter school models. In addition, the appropriations acts have authorized the Secretary to exceed the cap established on funding for national activities. Concurrent with the increase in funding for national activities, the Secretary is also required to use these funds, in part, for improving quality and oversight of charter schools and for providing technical assistance and grants to authorized public chartering agencies in order to increase the number of high-performing charter schools. The FY2014 annual appropriations bill also permits Title V-B charter school program funds to be used to support preschool education. Table 1 summarizes the differences between program authorizing legislation requirements related to appropriations for the charter school programs authorized under Title V-B and the general changes to these requirements that have been made through appropriations bills since FY2008. In addition to making changes to funding provisions and the use of funds, since FY2010, the annual appropriations acts have also added requirements related to SEA applications for funds under the Charter Schools Program. First, these applications must describe a plan to monitor and hold accountable authorized public chartering agencies through various activities such as technical assistance or professional development to improve the capacity of these agencies to authorize, monitor, and hold accountable charter schools. Second, each SEA application must include assurances that state law, regulations or policies require that each charter school (1) operates under a legally binding charter or performance contract between the school and the school's authorized public chartering agency that describes the rights and responsibilities of both the school and the chartering agency, (2) conducts annual, timely, and independent audits of the school's financial statement that are filed with the school's chartering agency, and (3) demonstrates improved student academic achievement. Third, the SEA application must include an assurance that state law, regulations, or policies require authorized public chartering agencies to use increases in student academic achievement for all students and student subgroups as the most important factor when determining whether to renew or revoke a school's charter. Table 2 details appropriations for the charter school programs authorized under Title V-B of the ESEA. Appropriations for the State Charter School Facilities Incentive Grants were included in the overall appropriation for the Charter Schools Program (Title V-B-1) through FY2007. Appropriations for the Credit Enhancement for Charter School Facilities Program were provided as a separate line item in appropriations bills from FY2003 through FY2007. Beginning in FY2008, appropriations bills have permitted or required the Secretary to use a certain amount of funding from the appropriation for the Charter Schools Program to support the State Charter School Facilities Incentive Grant Program and the Credit Enhancement for Charter School Facilities Program. Table 3 specifies how much funding was provided for Charter Schools Program grants to SEAs and non-SEAs (in instances where ED has reported these data separately), Grants to Charter Management Organizations as permitted through appropriations acts since FY2010, State Charter School Facilities Incentive Grants, peer review of new applications for Title V-B-1 programs and activities, national activities, and Credit Enhancement Grants for Charter School Facilities. These data reflect what ED provided (or anticipates providing) to each activity based on the parameters established by the ESEA and appropriations acts. During the 112 th Congress, the House Education and Workforce Committee and the Senate Health, Education, Labor, and Pensions (HELP) Committee ordered reported bills that would have provided for a comprehensive reauthorization of the ESEA. The Elementary and Secondary Education Reauthorization Act of 2011 ( S. 3578 ; S.Rept. 112-221 ) would have amended and reauthorized the charter school programs as part of a comprehensive ESEA reauthorization bill. The Encouraging Innovation and Effective Teachers Act ( H.R. 3990 ; H.Rept. 112-459 Part 1), one of two bills that would have collectively provided for a comprehensive reauthorization of the ESEA, expressed the sense of the House of Representatives that the charter school programs should be amended as they would have been amended under H.R. 2218 (Empowering Parents through Quality Charter Schools Act). H.R. 2218 would have amended and reauthorized the charter school programs without providing for a comprehensive reauthorization of the ESEA. The bill received bipartisan support and was passed on the House floor on September 13, 2011, by a vote of 365-54. During the 113 th Congress, both the House and Senate have considered legislation to reauthorize the ESEA. On June 12, 2013, the HELP Committee considered and ordered reported the Strengthening America's Schools Act ( S. 1094 ) by a strictly partisan vote of 12-10. The House Education and Workforce Committee also considered and ordered reported a bill that would reauthorize the ESEA. On June 19, 2013, on a strictly partisan vote of 23-16, the Success for All Students Act ( H.R. 5 ) was ordered reported. H.R. 5 was subsequently considered and amended on the House floor. The amended version of H.R. 5 was passed on July 19, 2013, by a vote of 221-207. It is unclear whether S. 1094 will be considered on the Senate floor. Both H.R. 5 and S. 1094 would amend and reauthorize the Charter Schools Program as part of a comprehensive ESEA reauthorization bill. Similar to the 112 th Congress, the House Education and Workforce Committee has also acted in the 113 th Congress to move a stand-alone bill to amend and reauthorize the charter school programs. On April 1, 2014, Representatives Kline and Miller introduced the Success and Opportunity through Quality Charter Schools Act ( H.R. 10 ). H.R. 10 was considered by the House Education and Workforce Committee on April 8, 2014. The bill was ordered reported by a vote of 36-3. H.R. 10 would make several changes to current law provisions, while incorporating provisions that are somewhat similar to those that have been included in recent appropriations bills. Key changes include the following. Structurally, H.R. 10 would put all provisions related to the charter school programs under Title V-B-1 of the ESEA rather than having provisions in both Title V-B-1 and V-B-2. More specifically, all provisions related specifically to the Charter Schools Program would be included in Section 5203. All provisions related specifically to the two charter school facilities programs would be included in Section 5204. Section 5205 would continue to include provisions related to national programs. H.R. 10 would modify the authorization of appropriations. There would be a single authorization of appropriations for all programs. For FY2015 through FY2020, the authorization level would be $300 million. Overall appropriations for charter school programs have not exceeded $257 million annually since the enactment of the programs. The bill would also specify the percentage of funds provided through the annual appropriations process that should be used for each program and national activities. The bill would alter the purposes of the charter school programs including, for example, a new focus on improving student services to increase opportunities for students with disabilities, limited English proficient students, and other traditionally underserved students to attend charter schools; supporting efforts to strengthen the charter school authorizing process; and supporting quality accountability and transparency in the operational performance of authorized public chartering agencies. While the Charter Schools Program would continue to support the planning and initial implementation of charter schools, the program would focus specifically on supporting (1) new charter schools; (2) replicated, high-quality charter school models; and (3) expanded, high-quality charter schools. The focus on replication and expansion is not included in current law, but as previously discussed, it has been allowed under national activities by recent annual appropriations acts. It would also allow eligible entities to provide technical assistance to eligible applicants and authorized chartering agencies to carry out the aforementioned activities and to work with authorized public charter agencies to improve authorizing quality. Unlike current law, authorized state recipients of funds under the Charter Schools Program would not be limited to SEAs. Rather, H.R. 10 would define "state entity" to include SEAs, a state charter school board, a governor, or a charter school support organization . In addition, under the Charter Schools Program, developers interested in receiving funds to start charter schools in states that did not apply for or did not receive a Charter Schools Program grant would no longer be able to apply directly to the Secretary for a grant under this program. However, new provisions included in H.R. 10 under national activities would allow an eligible applicant in a state that did not apply for or receive funds under the Charter Schools Program to apply directly to the Secretary for a grant. While current law requires a charter school to use a lottery if more students apply than can be accommodated, H.R. 10 would incorporate new guidance from ED, allowing charter schools to use weighted lotteries to admit students. Under H.R. 10 , grants awarded to state entities would be for a period of not more than five years. Similarly, subgrants awarded by a state entity would be for a period of not more than five years, of which an eligible applicant would not be permitted to use more than 18 months for planning and program design. A state entity would be prohibited from receiving more than one grant in a five-year period. An eligible applicant would be prohibited from receiving more than one subgrant per individual charter school for a five-year period, unless the eligible applicant demonstrates not less than three years of improved educational results in specified areas, such as student academic achievement. H.R. 10 would make substantial changes to the state entity application process with respect to what must be included in the application. For example, in its application, the state entity would be required to describe how it will support new charter schools; replicated, high-quality charter school models; or expanded, high-quality charter schools and the proposed number of each to be opened under the state entity's program. State entities would be required to provide additional information about how they will help the charter schools supported by eligible applicants and the students attending the charter school participate in federal programs for which they are eligible, receive their commensurate share of federal funds, and meet the needs of students served under such programs. The state entity would need to have plans and procedures to assist students enrolled in a charter school that closes or loses its charter to enroll in other high-quality schools. In addition, the state entity would have to explain how it would support charter schools in LEAs with large numbers of schools identified for improvement; work with charter schools to promote the inclusion of all students to promote retention; ensure that charter schools do not have policies or procedures that create barriers to student enrollment; and share best practices in core academic subjects and science, technology, engineering, and mathematics, including computer science. H.R. 10 would also include new requirements specific to non-SEA state entity applicants. The bill would require state entities to describe the extent to which the state entity is working to develop or strengthen a cohesive statewide system to support the opening of new charter schools; replicated, high-quality charter school models; or expanded, high-quality charter schools. H.R. 10 would also require a state entity to describe how it will conduct its subgrant competition, including descriptions of roles and responsibilities of various organizations involved with the school, including for-profit management companies; detailed information about quality controls agreed to between the eligible applicant and the relevant authorized public chartering agency; how school performance in the state's academic accountability system will be the primary factor upon which charter renewal or revocation decisions will be based, how charters may be revoked or not renewed due to financial, structural, or operational factors involving school management; the roles and responsibilities of any outside partners; how the state entity will help the charter school consider students' transportation needs; and how the state entity will support diverse charter school models. H.R. 10 would not retain provisions in current law detailing the contents of the eligible applicant application or the selection criteria for eligible applicants. The bill would also add new assurances that state entities must provide in order to receive a grant. These new assurances would address topics such as the recruitment, enrollment, and retention of traditionally underserved students; promotion of quality authorizing, the inclusion of public charter schools in decision-making about the state's public school system; and information disclosure requirements for each charter school. H.R. 10 retains many of the same selection criteria included in current law (e.g., those related to flexibility, ambitiousness, assessing, and the likelihood that subgrantees will meet objectives). The bill also adds several new criteria. For example, the Secretary would be required to take into consideration the state entity's plan to (1) monitor subgrantees; (2) work with the authorized public charter agencies to avoid duplication of work for the charter schools and authorized public chartering agencies; and (3) provide "adequate" technical assistance for charter schools receiving funds and quality authorizing efforts. The bill would build on many existing priority criteria for making awards and add several new criteria. For example, H.R. 10 would give priority in awards to states that do not have caps on the number or percentage of charter schools; provide equitable financing; use best practices to improve struggling schools and LEAs; partner with an organization that has a track record of success in developing management organizations (nonprofit or for-profit) to support the development of charter schools; support charter schools that support at-risk students; and take steps to ensure all authorized public chartering agencies implement best practices for authorizing schools. With respect to local uses of funds, H.R. 10 makes substantial changes to current law provisions. Under H.R. 10 , eligible applicants receiving funds would be required to use the funds to open and prepare to operate a new charter school; a replicated, high-quality charter school model; or an expanded, high-quality charter school. The bill notes that this may include activities such as preparing teachers and school leaders (e.g., professional development); acquiring equipment, educational materials, and supplies; and necessary renovations and minor facilities repairs. Unlike current law, under H.R. 10 , the state entity would not be permitted to establish a revolving loan fund or award dissemination grants to charter schools. H.R. 10 would add reporting requirements for each state entity receiving a grant. The state entity would be required to submit a report to the Secretary at the end of the third year of the five-year grant period and at the end of the grant period. The report would be required to contain information such as the number of students served by each subgrant, the number of subgrants awarded for each of the aforementioned purposes (i.e., new charter school, replication, or expansion), how the state entity worked with authorized public chartering agencies, how the state entity complied with required assurances and ensured that eligible applicants did the same, and the progress the state entity made in meeting the priority criteria used by the Secretary to award grants. The bill would reserve not more than 10% of the appropriation for charter school programs for national activities, of which at least 75% must be used to make direct grants to charter management organizations or to eligible applicants in states that did not apply for or did not receive a Charter School Program grant. The Secretary would be required to give priority in awarding these grants to eligible applicants that meet various criteria, including having a high proportion of high-quality charter schools in their network; demonstrating success serving educationally disadvantaged students and working with schools identified for improvement by the state; not having a "significant" proportion of charter schools that have been closed, had their charter revoked for compliance issues, or had their affiliation with such eligible applicant revoked; and having procedures for the timely closing of a charter school and plans for the students to attend other high-quality schools. Remaining funds would be used to provide technical assistance, disseminate best practices, and evaluate the impact of the charter school program, including its impact on student achievement. With respect to State Charter School Facilities Incentive Grants (also known as the Per-Pupil Facilities Aid program), H.R. 10 would make three substantial changes. First, the bill would allow a state that is required by state law to provide charter schools with access to "adequate facility space" but which does not have a per-pupil facilities aid program specified in law to apply for a grant if the state agrees to use the funds consistent with the requirements of State Charter School Facilities Incentive Grant Program. Second, H.R. 10 would permit a state to receive more than one grant under this program, provided the amount of such funds provided to charter schools increases with each successive grant. Third, the bill would allow a state to partner with one or more organizations to provide up to 50% of the state share of the cost of the program. The bill would also make three substantive changes to the Credit Enhancement for Charter School Facilities program. First, in the application process, H.R. 10 would require the eligible entity to describe how it will offer a combination of rates and terms that are more favorable than the rates and terms that a charter school could receive without assistance from the eligible entity. It would also eliminate the Secretary's ability to require additional information to be provided on the application. Second, with respect to the program objectives, the bill would add a third objective related to predevelopment costs associated with the acquisition of an interest in improved or real property; the construction of new facilities; or the renovation, repair, or alteration of existing facilities that are necessary to start or continue charter school operations. Third, H.R. 10 would alter the reporting requirements associated with the program to require that the report include data on the amount of funds used by each school, the type of project facilitated by the grant, and the type of assistance provided to the charter schools. While H.R. 10 would retain many of the provisions included in the definition of a "charter school," it would add several new requirements. The bill would require charter school compliance with additional federal laws including the Americans with Disabilities Act (ADA) and the Family Education Rights and Privacy Act (FERPA). It would allow students attending a charter school that is affiliated with another charter school to be automatically enrolled in the next grade level at the affiliated charter school without going through a lottery process. H.R. 10 would modify the definition to specify that charter schools may also serve prekindergarten and postsecondary students. H.R. 10 would also add five new definitions: (1) "charter management organization," (2) "charter school support organization," (3) "expanded, high-quality charter school," (4) "high-quality charter school," and (5) "replicated, high-quality charter school model." This section provides a summary of the initial authorization of the Charter Schools program in 1994. This was followed by substantial amendments to the program in 1998 and 2002, as well as the enactment of two additional programs related to charter schools. Initial Program Authorization The Charter Schools Program was initially authorized in 1994 in Title X, Part C of the ESEA with the enactment of the Improving America's Schools Act (IASA; P.L. 103-382 ). Under the Charter Schools program, the Secretary of Education (hereafter referred to as the Secretary) was authorized to make grants of up to three years to state educational agencies (SEAs) for implementation of charter school grant programs for local educational agencies (LEAs). Charter schools were defined as public schools that, under the terms of state statutes, were exempted from significant state or local rules and were committed to the achievement of specific educational objectives. These schools either had to be a newly created public school or be converted from an existing traditional public school by an individual or group of individuals, such as teachers, administrators, parents, or community members. Among other requirements, charter schools were required to be nonsectarian, were not permitted to charge tuition, had to comply with specified civil rights statutes, and had to admit students through lotteries if the number of applicants exceeds enrollment capacity. The schools had to receive their charters from an SEA, LEA, or other public entity so authorized under state law and approved by the Secretary as being a chartering agency. Charter School Expansion Act of 1998 The Charter Schools Program was subsequently amended by the Charter School Expansion Act of 1998 ( P.L. 105-278 ). P.L. 105-278 only amended the Charter Schools program and did not provide for a comprehensive reauthorization of the ESEA. Among other changes, P.L. 105-278 established a priority to award grants to states that (1) provide charter schools with financial autonomy; (2) have increased their number of charter schools; (3) either authorize multiple agencies to grant charters or allow charter applicants to appeal rejections of their applications; and (4) periodically review the performance of charter schools. P.L. 105-278 also expanded technical assistance to charter schools, especially regarding their eligibility for federal aid programs, and required that charter schools receive the federal aid for which they are eligible beginning in their first year of operation. No Child Left Behind Act The Charter Schools Program was next amended by the No Child Left Behind Act (NCLB; P.L. 107-110 ) in 2002, which provided for a comprehensive reauthorization of the ESEA. This act largely left intact changes that had been made to the Charter Schools Program through P.L. 105-278 and moved the program from Title X-C of the ESEA to Title V-B-1. In addition, two new programs related to charter school facilities were enacted under NCLB. The first program, Per-Pupil Facilities Aid program (more commonly known as State Charter Schools Facilities Incentive Grants; Section 5205(b)), provides competitive grants to states to help establish or enhance, and administer, a per-pupil facilities aid program for charter schools. The second program, Credit Enhancement Initiatives to Assist Charter School Facility Acquisition, Construction, and Renovation (more commonly known as the Credit Enhancement for Charter School Facilities Program; Title V-B-2), authorizes ED to make grants to three or more entities to help charter schools improve their credit in order to obtain private sector capital to acquire, lease, renovate, or construct appropriate facilities. Substantive Changes to the Charter School Programs Made through Appropriations Acts Substantive changes have been made to the charter school programs through the annual Labor, Health and Human Services, and Education and Related Agencies (L-HHS-ED) appropriations acts since FY2010. These changes have affected program funding, the uses of funds by the Secretary and charter schools, and the SEA application process for grants under the Charter Schools Program. However, these changes have not amended the law authorizing the charter school programs. A more detailed discussion of these changes is included in the main body of this report in the section on "Substantive Changes to Program Authorizing Legislation Made Through Annual Appropriations Acts."

Charter schools are public schools of choice that are created in accordance with state laws and are publicly funded and tuition free. They are operated according to the terms of charters or contracts granted by public chartering agencies. The terms of charters typically provide charter school operators with increased autonomy over the operation of schools, often including exemptions from, or flexibility in the application of, many of the state or local regulations otherwise applicable to public schools. Enrollment in charter schools is normally open to applicants on a local educational agency (LEA)-wide or even statewide basis, and parents must actively choose to enroll their children in charter schools. Under Title V-B-1 and V-B-2 of the Elementary and Secondary Education Act (ESEA), federal support is provided to assist with the opening of new charter schools and for the funding of charter school facilities. ESEA Title V-B-1 authorizes the Charter Schools Program, which provides grants to state educational agencies (SEAs), or charter school developers if a state's SEA chooses not to apply for a grant, to support the planning, program design, and initial implementation of public charter schools. Funds may also be used to provide dissemination grants to successful charter schools. ESEA Title V-B-1 authorizes the Secretary of Education to reserve funds for national activities, such as evaluation, technical assistance, and dissemination of best practices. ESEA Title V-B-1 authorizes the Per-Pupil Facilities Aid Program (more commonly referred to as the State Charter School Facilities Incentive Grants Program). Under this program, the Secretary provides competitive grants to states to pay the federal share of establishing or enhancing, and administering, a program that will provide facilities assistance to charter schools on a per-pupil basis. ESEA Title V-B-2 authorizes the Credit Enhancement Initiatives to Assist Charter School Facility Acquisition, Construction, and Renovation program (more commonly known as the Credit Enhancement program). Under this program, ED awards competitive grants to public or private nonprofit entities to demonstrate innovative ways to help charter schools acquire appropriate facilities. While the charter school programs have not been reauthorized since the enactment of the No Child Left Behind Act (NCLB; P.L. 107-110) in 2002, they continue to receive funding through the annual appropriations process. In addition, since FY2010, substantive changes have been made to the programs through annual appropriations acts, including allowing or requiring the Secretary to make grants to nonprofit charter management organizations (CMOs) and other nonprofit entities for the replication and expansion of successful charter school models. During the 112th and 113th Congresses, Congress has actively pursued both a comprehensive reauthorization of the ESEA, which would include amending and reauthorizing the Title V-B charter school programs, and stand alone legislation to reauthorize and amend the Title V-B programs independent of a comprehensive ESEA reauthorization. Most recently, the House Education and Workforce Committee ordered reported the Success and Opportunity through Quality Charter Schools Act (H.R. 10) by a vote of 36-3 on April 8, 2014. The bill would provide for a reauthorization of the Title V-B charter school programs and make numerous changes to the current programs. While a brief discussion of the changes that H.R. 10 would make to the charter school programs is included, it is generally beyond the scope of this report to discuss amendments that would be made to the charter school programs by these reauthorization bills.

During the Cold War, the focus of U.S. nuclear policy was deterring or retaliating in responseto a Soviet nuclear attack. U.S. nuclear forces were designed and sized for that contingency. Othercontingencies in which the United States might have used nuclear weapons were much more remote,and would have required far fewer nuclear weapons, than responding to a Soviet attack. Defenseplanners dealt with them, but as "lesser included cases" not requiring new weapons. The end of the Cold War led to a reduction of the U.S. nuclear weapons development effort. The first Bush Administration halted nuclear testing except for safety and reliability of the nuclearstockpile, canceled weapons that were under development, and withdrew most U.S. battlefieldnuclear weapons. Numbers of personnel in the nuclear weapons complex -- the facilities managedby the Department of Energy (DOE) to develop, test, manufacture, and maintain nuclear weapons-- dropped sharply. At congressional direction, the United States began a moratorium on nucleartesting in October 1992 that is still in effect and worked to negotiate the Comprehensive Test BanTreaty (CTBT), a ban on all nuclear explosions. Before the moratorium, the United States conductednuclear tests on an ongoing basis; with the end of testing, the Clinton Administration changed thetest readiness posture to 24 to 36 months. The George W. Bush Administration came into office with a different stance on nuclear weapons policy, which the September 11 attacks stiffened. It delivered a Nuclear Posture Review(NPR) to Congress in December 2001. (3) Thisclassified study, mandated by legislation, (4) spelledoutthe Administration's views on the role of nuclear weapons. A strategic relationship with Russiabased on the threat of mutual annihilation had become "very inappropriate," (5) according to J.D.Crouch, Assistant Secretary of Defense for International Security Policy, and the threat had becomemore diffuse. The NPR focused on nuclear capabilities deemed needed for various contingenciesrather than mainly to counter the Soviet nuclear threat. That is, the Administration perceived a widerrange of possible uses for nuclear weapons quite different than the U.S.-Soviet nuclear war scenariosthat dominated Cold War strategy. Crouch said, "The capabilities-based approach argues that theremay be multiple contingencies and new threats that we have to deal with. We're focusing on howwe will fight ... not who or when." (6) To support thisapproach, the NPR envisioned a "new triad" --strike forces (nuclear and nonnuclear); defenses; and an infrastructure better able to respond tomilitary needs -- tied together by command and control, intelligence, and planning. The goal wasto "assure allies and friends" that the United States had "credible non-nuclear and nuclear responseoptions," "dissuade competitors" through a "diverse portfolio of capabilities [that] denies payofffrom competition," "deter aggressors," and "defeat enemies." (7) The NPR called for retaining the capability to deter or respond to a variety of contingencies, and for retaining Cold War-era nuclear weapons, at lower levels, to do so. With the demise of the SovietUnion and the September 11 attacks, a subset of targets -- terrorist-related facilities, some of whichhad existed for decades -- assumed greater prominence. One example is hardened and deeplyburied facilities. Rogue (and many other) states have built such facilities, which might house leadersand key communications facilities. Another example is facilities -- some deeply buried, others not-- for producing or storing weapons of mass destruction (WMD). The end of the Cold War also led to changed constraints on use of nuclear weapons. In anuclear war with the Soviet Union, assuring the immediate destruction of thousands of targets of allsorts would have been critical to national survival. Reducing fallout and "collateral damage," ordamage to people and things that were not the intended targets, was secondary in importance toachieving required probabilities of damage on targets. Warheads were typically designed to achievethat primary goal. Now, nuclear weapons to hold at risk specific, limited targets in rogue states ina credible manner are judged to need several characteristics: They would need to be able to counter threats that rogue states might pose, such as hard and deeply buried facilities or production facilities for WMD. Weapons to attack buriedfacilities would have different characteristics than weapons to defeat chemical and biologicalagents. They would be better able to minimize ( not eliminate) collateral damage consistent with military objectives. While this has long been a goal of U.S. nuclear policy, earthpenetration and increased accuracy sharply reduce the yield needed to destroy a target, making itmore feasible to attain that goal. They would need to be available readily, if not immediately, because thespecific threat might become known with little warning. They could be few in number. While an all-out nuclear attack on the Soviet Union would have struck thousands of targets, the option of an attack on a rogue state might involvea handful of targets. According to the National Nuclear Security Administration (NNSA), (8) "The Administrationbelieves the broader range of capabilities of a nuclear stockpile with these weapons will serve as amore credible, and hence more effective, deterrent than the Cold War stockpile we have today. Thismore effective deterrent will make the use of nuclear weapons less likely." (9) Some critics believe that the only use for nuclear weapons should be to deter and, if necessary, respond to the use of nuclear weapons against the United States. (10) They oppose attempts to developnuclear weapons with lower yield and reduced collateral damage as blurring the distinction betweenconventional and nuclear weapons. Even U.S. use of a low-yield atomic bomb, they assert, wouldresult in a firestorm of protest and worldwide opprobrium. Further, they believe that the U.S. nuclear arsenal has long been sufficient against a range of threats. Hardened and deeply buried targets (HDBTs), for example, have existed for decades, yetthe first Bush Administration halted work on nuclear weapons then under development and haltednuclear testing except for safety and reliability, effectively bringing work on new weapon types toa close. Presumably that administration would not have taken these steps had it envisioned a needfor new weapon types. The United States needs the active support of the entire international community in the war against terrorism, many observers believe. Assistance may take many forms: providing informationto the CIA on suspicious individuals, safeguarding shipping containers, securing radioactivematerial, or closing bank accounts of suspected terrorists. Other nations will be more likely tocooperate on issues important to the United States, it is argued, if the United States cooperates withother nations on issues important to them. One such issue is nuclear nonproliferation. The UnitedStates pledged in the Nuclear Nonproliferation Treaty (Article VI) "to pursue negotiations in goodfaith on effective measures relating to cessation of the nuclear arms race at an early date and tonuclear disarmament." In addition, as an inducement in securing international support for extendingthe treaty indefinitely, the United States and other nuclear weapon states pledged in 1995 to supportthe CTBT. (11) They made a similar statement atthe 2000 NPT review conference. (12) Critics maintain that the Administration's nuclear initiatives are at odds with these pledges. They argue that developing new or modified weapons runs counter to the NPT pledge and that suchweapons will ultimately require nuclear testing to ensure that they work. Reducing the time toconduct a nuclear test supports a future decision to test and, to the critics, implies an intent to test. These positions may harm U.S. security by undermining efforts to make worldwide cooperation onnonproliferation of nuclear and other WMD more effective. Even if some steps might be innocuousby themselves, critics believe that many around the world will see the confluence of them as piecesof a single policy and will infer that the United States is now much more willing to consider usingnuclear weapons. As an example of international concern over the new U.S. policies, the foreignministers of the New Agenda Coalition (Brazil, Egypt, Ireland, Mexico, New Zealand, South Africa,and Sweden) issued a statement that said in part, 4. The Ministers stressed that each article of the NPT is binding on the respective States parties, at all times and in all circumstances... 7. The Ministers reiterated their deep concern at emerging approaches to the broader role of nuclear weapons as part of security strategies, includingrationalizations for the use of, and the development of new types of nuclearweapons. (13) These positions may undermine U.S. security, critics fear, by spurring nations that might be targets of a U.S. nuclear attack to step up their efforts to acquire nuclear weapons. Of the three"Axis of Evil" nations, Iraq, the first target of a U.S. attack, did not have nuclear weapons as far asis currently known. Having nuclear weapons to deter the United States may be a consideration forNorth Korea and Iran, both of which apparently have active programs to produce fissile material. North Korea has stated that it has several nuclear weapons; while Iran has declared that its nuclearprogram is for peaceful purposes, few in the United States believe that assertion. Even in military terms, critics argue, nuclear use would offer marginal to negative value. Deeply buried targets could be defeated (not necessarily destroyed) with conventional weapons,destruction of entrances and air shafts, or demolition by special forces. The effectiveness oflow-yield nuclear weapons for destroying biological or chemical agents is uncertain, as discussedbelow, and intelligence might be unable to locate targets in underground complexes, as recent effortsto find Iraqi WMD showed, rendering nuclear weapons of any yield of little use. Nations couldcounter earth penetrators by burying facilities more deeply. Even low-yield or earth penetratingweapons would throw a large amount of radioactive debris into the atmosphere. Substitutingradioactive materials for biological or chemical agents may offer little advantage to the localpopulation or U.S. troops. A provision in the FY1994 National Defense Authorization Act barred R&D that could lead to production by the United States of a nuclear weapon of less than 5 kilotons (kt) (14) that had notentered production by November 1993. In its FY2004 legislative proposals, the Administrationasked Congress to rescind this provision on grounds that it undercut U.S. ability both to exploretechnical options that could deter or respond to emerging threats, and to revitalize the nuclearweapons enterprise. This provision is often referred to as the Spratt-Furse provision, after itslegislative authors, Representatives John Spratt, Jr., and Elizabeth Furse, or as the PLYWDprovision, for Precision Low-Yield Weapon Design. The Armed Services Committees consideredthe proposed rescission; the Appropriations Committees did not do so because it involved no money. The FY2004 NDAA, Section 3116, repealed the Spratt-Furse provision but (1) made clear that therepeal did not "authoriz[e] the testing, acquisition, or deployment of a low-yield nuclear weapon"and (2) barred the Secretary of Energy from beginning engineering development or subsequentphases of work on a low-yield weapon without specific congressional authorization. With theprovision lifted, there is no parallel request for FY2005. Military Utility of 5-kt Weapons. The debate over the Spratt-Furse provision treated 5 kt as critical because that was the threshold in the law. Those who would lift the ban argued that the ban made it difficult to train weapon designers andimpossible to develop essential new weapons; their opponents were concerned that lifting the banwould signal U.S. interest in developing capabilities that would make the use of nuclear weaponsmore likely. Yet the threshold was of only slight relevance to the military or the weapons labsbecause very low yield nuclear weapons have uncertain military utility. Substantial advances wouldbe needed in the understanding of low-yield weapon effects to assess the military utility andcollateral damage of such weapons. Military utility derives from nuclear-weapon effects that are prompt and that can be measured with reasonable precision. Damage from the blast wave falls into this category; fallout andsecondary fires (e.g., fuel set afire) do not. For a 500-kt weapon, the blast effects are highlypredictable: almost anything on the Earth's surface over a large, known area will be destroyed. (Forcomparison, the Hiroshima bomb had a yield of 15 kt.) At the other end of the scale, the blast effectsof a 500-pound conventional bomb are strongly influenced by accuracy, height of burst, localfeatures, etc. For example, a hill or building can block or redirect the blast wave. Such factors alsoshape the effects of a low-yield nuclear weapon, and their influence increases as yield decreases. Modeling such factors is more complicated than for high-yield weapons, has been done to a muchlesser extent, and depends more on unknown details such as a building's construction. It may bethat detailed engineering studies and computer models of the prompt effects of existing low-yieldnuclear weapons could provide as much military value as designing new low-yield weapons. A 1979 report by the Office of Technology Assessment elaborated on the problem of uncertain weapon effects in discussing a 1-kt terrorist nuclear weapon detonated at ground level in a city: the highly built-up urban structure in which the weapon is placed will significantly modify the resulting nuclear environment. This occurs when the lethalrange of effects shrink to such an extent that they are comparable to the size of urban structures. Itis indeed reasonable to expect that the blast effects of a small weapon ... will be severely influencedby nearby structures having comparable dimensions. Preliminary calculations have confirmed this.... In summary, the ranges of nuclear effects from a low-yield explosion in the confined space of anurban environment will differ significantly from large yield effects, but in ways that are very difficultto estimate. (15) If the Warsaw Pact had invaded Western Europe during the Cold War, such uncertainties of low-yield weapons would have been immaterial for some missions (an atomic demolition munitioncould destroy a bridge, and an artillery-fired atomic projectile could destroy troop concentrations,more reliably than conventional munitions) and in some situations (as a last resort to keep front-linetroops from being overrun). Now, though, extreme accuracy may enable conventional weapons todestroy small targets, and massive conventional bombing can attack troop concentrations. At thesame time, this same accuracy may give low-yield nuclear weapons new military missions byenabling them to destroy targets that in the past would have required much larger weapons. On theother hand, low-yield weapons face uncertainties that render them of questionable value in goingafter key targets, such as buried facilities for which details of the structure and its overlying earth androck are poorly known. This uncertainty increases as yield drops. For reasons such as these, GeorgeMiller, formerly Associate Director for Defense and Nuclear Technologies at Lawrence LivermoreNational Laboratory, observed, "The vast majority of the 'low yield' concepts that would providesubstantial reductions in collateral damage have yields greater than 5 kt. Concepts in the less than5 kt regime are at an early R&D stage." (16) The United States has had many low-yield weapons in the stockpile for decades. (17) In the wakeof the 1991 Persian Gulf War, the U.S. military became more interested in them for attackingunderground structures. One news report stated that "[p]enetrating Saddam's hardened bunkersproved to be one of the most daunting tasks that faced the Air Force." (18) In late 1991, the Air Forcereportedly asked Los Alamos National Laboratory to study a very low yield warhead that coulddestroy underground bunkers. (19) A 1992 LawrenceLivermore National Laboratory journal stated,"Several possibilities for new types of weapons are being evaluated for prototype development. These include ... low-yield earth-penetrating warheads for attacking underground command postswith minimum collateral damage..." (20) DOE begana concept definition study for an AircraftDelivered Precision Low-Yield Weapon in FY1992, which it planned to continue in FY1993 andFY1994. (21) At the same time, many in Congress and elsewhere sought to restrain U.S. nuclear weapons development. Legislation mandated a U.S. nuclear testing moratorium, which started in October1992 and continues to the present, and directed the President to provide a plan for achieving amultilateral CTBT by September 30, 1996. (22) Preparations were underway in the U.N. in 1993 tobegin CTBT negotiations in 1994. The NPT review and extension conference, which would decidewhether to extend the treaty indefinitely, was planned for April 1995. Some saw testing, andweapons development that could lead to testing, as unhelpful to these efforts. In 1993, the House Armed Services Committee, concerned over efforts by DOE to study low-yield nuclear weapons, included a provision barring R&D on these weapons in its version of theFY1994 National Defense Authorization Act, H.R. 2401 . The committee's reportstated: The committee is aware of recent efforts by the department [of Energy] to perform concept and feasibility studies for designing very low yieldnuclear weapons. The committee opposes these efforts. Very low yield nuclear warheads threatento blur the distinction between conventional and nuclear conflict, and could thus increase the chancesof nuclear weapons use by another nation. In addition, the committee believes that the developmentof very low yield nuclear weapons undermines U.S. efforts to discourage nuclear weaponsdevelopment by other nations, and would undercut U.S. efforts to negotiate an extension of theNon-Proliferation Treaty or a Comprehensive Test Ban. Finally, the utility of very low yield nuclearweapons is questionable given the increasing effectiveness and availability of precision guidedconventional munitions. The committee therefore recommends a provision (sec. 3105 (e)) that would direct the Secretary of Energy to discontinue the ongoing concept design workwithin the department's nuclear weapons laboratories and to refrain from any future feasibility,engineering, development, or production work associated with very low yield nuclear weapons. Thecommittee further directs the Secretary to work with the President, and other interested agencies indiscouraging the development of similar weapons in othercountries. (23) The conference report summarized the House position, noted that the Senate bill had no similar provision, and stated: The Senate recedes with an amendment that would clarify that the prohibition applies to activities that could lead to production of new low-yieldweapons. While the conferees agree that the provision is intended to prohibit research anddevelopment geared toward the production of any low-yield nuclear weapons by the United States,the conferees recognize that there are instances where the Department of Energy may need toconduct research on these types of weapons for other purposes. This would include research, in theinterest of counter-proliferation, on the designs of low-yield weapons as a way to: (1) understandothers' activities, including potential terrorist threats; (2) provide information for export controlactivities; and (3) understand the potential damage that could be inflicted by the use of these typesof weapons. In addition, the conferees agree that nothing in this section would prohibit theDepartment of Energy from performing the research and development necessary for modificationsto existing weapons in order to address safety or reliabilityproblems. The conferees direct the Secretary to work with the President and interested agencies in discouraging the development of similar weapons in other countries. (24) The final legislation ( P.L. 103-160 , November 30, 1993, 107 stat 1946) follows: SEC. 3136. PROHIBITION ON RESEARCH AND DEVELOPMENT OF LOW-YIELD NUCLEAR WEAPONS. (a) UNITED STATES POLICY- It shall be the policy of the United States not to conduct research and development which could lead to the production by the United Statesof a new low-yield nuclear weapon, including a precision low-yield warhead. (b) LIMITATION- The Secretary of Energy may not conduct, or provide for the conduct of, research and development which could lead to the production by the UnitedStates of a low-yield nuclear weapon which, as of the date of the enactment of this act, hasnot entered production. (c) EFFECT ON OTHER RESEARCH AND DEVELOPMENT- Nothing in this section shall prohibit the Secretary of Energy from conducting, or providing for theconduct of, research and development necessary -- (1) to design a testing device that has a yield of less than five kilotons; (2) to modify an existing weapon for the purpose of addressing safety and reliability concerns; or (3) to address proliferation concerns. (d) DEFINITION- In this section, the term `low-yield nuclear weapon' means a nuclear weapon that has a yield of less than five kilotons. Several years later, the Office of Defense Programs asked DOE's General Counsel about the legal meaning of this prohibition. In a memorandum of March 1999, she concluded as follows: Section 3136 would appear to prohibit the Department from taking or supporting any action that could result in producing a weapon with a yield of less than5 kilotons, unless one of the following four exemptions applies: (1) the activities are related to aweapon that entered production prior to December , 1993; (2) the activities are supporting designof a testing device; (3) the activities are directed to modifying an existing weapon to address safetyand reliability concerns; or (4) the activities are supporting counterproliferationwork. As you can see, the question of legality on any course of action involving low-yield nuclear weapons is highly factdependent. (25) In its report on the FY2001 defense authorization bill, S. 2549 , the Senate Armed Services Committee made clear the issue prompting DOE's request to the General Counsel andsought to redress that issue legislatively: The committee recommends a provision that would require the Secretaries of Defense and Energy to assess requirements and options for defeatinghardened and deeply buried targets. The provision would expressly authorize the Department ofEnergy (DOE) to conduct any limited research and development that may be necessary to completesuch assessments. The committee notes that a recent legal interpretation of existing law raised questions regarding whether DOE could participate in or otherwise supportcertain Department of Defense (DOD) studies and options assessments for defeating hardened anddeeply buried targets. This provision removes any uncertainty and expressly allows DOE to assistthe DOD with a review of these targets and the options for defeating such targets. The committeebelieves that DOE should provide information and all other assistance required to help DOD makeinformed decisions on whether: (1) to proceed with a new method of defeating hardened and deeplyburied targets and; (2) to seek any necessary modifications to existinglaw. The committee is concerned that the ability to defeat hardened and deeply buried targets will continue to be a significant challenge for the foreseeablefuture. (26) Although the House bill did not include a similar provision, the conference bill, H.R. 4205 , did. Section 1044, "Report on the defeat of hardened and deeply buriedtargets," required the Secretary of Defense, in conjunction with the Secretary of Energy, to conducta study on this topic, due by July 1, 2001. (27) Thatsection directed that the study review U.S.requirements to defeat such targets "and stockpiles of chemical and biological agents and relatedcapabilities," review plans to meet the requirements and determine the adequacy of the plans,"identify potential future hardened and deeply buried targets," determine what is needed to defeatthem and to defeat stockpiles of chemical and biological agents, assess options to defeat such targets,and "determine the capability and cost of each option..." Section 1044 gave the Secretaries authorityto "conduct any limited research and development that may be necessary to perform thoseassessments." Further, "The conferees believe that DOE should provide information and otherassistance required to help DOD make informed decisions on whether: (1) to proceed with a newmethod of defeating hardened and deeply buried targets; and (2) to seek any necessary modificationsto existing law." (28) The DOD-DOE report required by Section 1044, dated July 2001, contained a rationale for low-yield nuclear earth penetrator weapons. (29) It stressed the problem that hardened and deeplyburied targets (HDBTs) posed to the United States: Our potential adversary's weapons of mass destruction (WMD), long-range missiles, modern air defenses, most sophisticated command and controlsystems, national leadership in wartime, and a variety of tactical arms are increasingly concealed andprotected by networks of hard and deeply buried facilities. If the United States does not have themeans to defeat these facilities and the threatening assets they protect, adversaries may perceive thatthey have a sanctuary from which to coerce or attack the United States, its allies, or its coalitionpartners with threats much more powerful than in past conflicts. (p.3) It discussed the potential problem posed by buried facilities containing chemical or biological weapons (CBW): Ordnance employing fragmentation and blast effects will not accomplish this objective [destroying agents within munitions or containers] and may furtherworsen the situation by releasing agents into the atmosphere and surrounding environment. In somesituations, there may be a need for multiple types of payloads to accomplish several objectives. Forexample, in the case of CBW located within a hardened facility, the goals might be in situ neutralization of the agents plus access-denial that prevents adversaries from recovering and usingagents or production equipment not destroyed. This class of problems is the most vexing challengeto defeat of HDBTs. (p. 14) While the DOD-DOE report focused on conventional weapons, special operations forces, intelligence, etc., for defeating HDBTs, it also discussed the potential value of nuclear weapons forthis mission, especially low-yield penetrators: DoD and DOE have completed initial studies on how existing nuclear weapons can be modified to defeat those HDBTs that cannot be held at risk withconventional high-explosive weapons or current nuclear weapons. (p.4) ... we also must prepare for those unique and emerging strategic threats that are critical and well protected ... This will require additional investment inintelligence, special weapons, and counter-WMD capabilities, including nuclear weapons. (p. 6) Nuclear weapons have a unique ability to destroy bothagent containers and CBW agents. Lethality is optimized if the fireball is proximate to the target. This requires high accuracy; for buried targets, it also may require a penetrating weapon system. Given improved accuracy and the ability to penetrate the material layers overlying a facility, it ispossible to employ a much lower-yield weapon to achieve the needed neutralization. The ability touse a lower yield would reduce weapon-produced collateral effects. The current nuclear weaponsstockpile, while possessing some limited ground penetration capability and lower yield options (notyet certified), was not developed with this mission in mind. (p.19) Despite the above, the DOD-DOE report ended by noting, "DoD has not defined a requirement for a nuclear weapon for WMD Agent Defeat missions." (p. 24) The FY2002 National Defense Authorization Act, and its predecessor versions in House and Senate, did not address the issue of low-yield nuclear weapons or nuclear earth penetrators. As noted, the Administration completed its congressionally-mandated Nuclear Posture Review (NPR) in December 2001. A text purported to consist of leaked excerpts of the NPR surfaced inMarch 2002 and was widely quoted in the press. (30) Among other things, this text stated that,compared to a surface-burst nuclear weapon of a given yield, a nuclear earth penetrator weaponcould destroy many buried facilities with much lower yield and thereby reduce fallout by a factor of10 to 20. (31) In action on the FY2003 National Defense Authorization Act, Representative Weldon initially offered an amendment on the House floor that, among other things, would have repealed theSpratt-Furse provision upon presidential certification that another nation conducted a nuclear testfor new or improved nuclear weapons, or that another nation was developing, in undergroundfacilities, WMD that could pose an imminent risk to the United States, or that the repeal "is in thenational security interest of the United States." (32) Before the amendment was debated,Representatives Spratt and Weldon subsequently modified it. While the 1993 provision barred"research and development which could lead to the production by the United States of a newlow-yield nuclear weapon," the modification barred such development but not research, and clarified"development" as follows: "The term 'development' does not include concept definition studies,feasibility studies, or detailed engineering design work." (33) The amendment passed, 362-53. TheSenate bill did not have a similar provision and the House provision was dropped in conference. A description of the "phases" of weapon development is needed to understand the subsequent discussion of legislation on low-yield R&D and the other three nuclear initiatives. The developmentof new nuclear weapons proceeds through a series of defined "phases." DOD and the AtomicEnergy Commission, a predecessor of DOE, entered an agreement on March 21, 1953, defining thesephases as follows: Phase 1, weapon conception; phase 2, program study; phase 2a, design definitionand cost study; phase 3, development engineering; phase 4, production engineering; phase 5, firstproduction; phase 6, quantity production and stockpile; and phase 7, retirement. (34) (Note that phase2 involves some prototype and subsystem testing as well as paper and computer studies.) The keydividing line is between phase 2a (design definition) and phase 3 (full-scale development). In phase2a, Los Alamos and Lawrence Livermore National Laboratories, the two laboratories that design thenuclear explosive components of nuclear weapons, would generate one or more designs each for aparticular warhead; personnel from Sandia National Laboratories, which design nonnuclearcomponents of a warhead, would participate in the two design teams. At the end of phase 2a, oneoption and laboratory would be selected. (No new warhead has been designed since the 1980s.) Inphases 3 and 4, which now would occur concurrently, the phase 2a design would be turned into adetailed design for a producible weapon through computer simulation, nuclear and nonnucleartesting, etc. For alterations and modifications of existing weapons, those in phase 6, the phasestructure above is repeated as the "X" in "phase 6.X," though with some different names: phase 6.1,concept assessment; phase 6.2, feasibility study and option down-select; phase 6.2a, design definitionand cost study; phase 3, development engineering; phase 4, production engineering; phase 6.5, firstproduction; and phase 6.6, full-scale production. (35) With that as background, Section 3143 of P.L. 107-314 , FY2003 National Defense Authorization Act, "Requirements for Specific Request for New or Modified Nuclear Weapons,"required DOE (1) to have a single line item for all funds requested for R&D that could lead to U.S.production of a new nuclear weapon in phase 1, 2, or 2a, or a modified nuclear weapon in phase 6.1,6.2, or 6.2a, or concept work occurring before phase 1 or 6.1; and (2) to request funds for eachweapon activity in phase 3 or 6.3 or higher as a separate line item. Further, the legislation provideda clear definition of a key term: (3) The term "new nuclear weapon" means a nuclear weapon that contains a pit or canned subassembly, either of which is neither -- (A) in the nuclear weapons stockpile on the date of the enactment of this act; nor (B) in production as of that date. (36) While the move from phase 2a or 6.2a to phase 3 or 6.3 typically involves a large increase in cost, requiring each weapon in phase 3 or 6.3 to have its own line item enhances the visibility ofthese programs and prevents them from being lumped with other programs, aiding congressionaloversight and control of the process. The explanatory language of this section of the conference report referenced the Spratt-Furse provision: "The conferees agree that nothing in this section may be construed to modify, repeal, orin any way affect the provisions of section 3136 of the National Defense Authorization Act for FiscalYear 1994 ...." (37) The Administration, in DOD legislative proposals for FY2004, requests repeal of the Spratt-Furse provision restricting low-yield nuclear weapon R&D. Its draft language states simply,"Section 3136 of the National Defense Authorization Act for Fiscal Year 1994 ( P.L. 103-160 ; 107Stat. 1946) is repealed." (38) The Administrationoffered the following rationale: Section 3136, the so-called PLYWD legislation, prohibits the Secretary of Energy from conducting any research and development which couldpotentially lead to the production by the United States of a new low-yield nuclear weapon, includinga precision low yield warhead. This legislation has negatively affected U.S. Government efforts to support the national strategy to counter WMD and undercuts efforts that couldstrengthen our ability to deter, or respond to, new or emergingthreats. A revitalized nuclear weapons advanced concepts effort is essential to: (1) train the next generation of nuclear weapons scientists and engineers; and (2)restore a nuclear weapons enterprise able to respond rapidly and decisively to changes in theinternational security environment or unforeseen technical problems in the stockpile. PLYWD hashad a "chilling effect" on this effort by impeding the ability of our scientists and engineers to explorethe full range of technical options. It does not simply prohibit research on new, low-yield warheads,but prohibits any activities "which could potentially lead to production by the United States" of sucha warhead. It is prudent national security policy not to foreclose exploration of technical options that could strengthen our ability to deter, or respond to, new oremerging threats. In this regard, the Congressionally-mandated Nuclear Posture Review urgedexploration of weapons concepts that could offer greater capabilities for precision, earth penetration(to hold at risk deeply buried and hardened bunkers), defeat of chemical and biological agents, andreduced collateral damage. The PLYWD legislation impedes this effort. Repeal of PLYWD, however, falls far short of committing the United States to developing,producing, and deploying new, low-yield warheads. Such warhead concepts could not proceed tofull-scale development, much less production and deployment, unless Congress authorizes andappropriates the substantial funds required to do this. (39) The Senate bill, S. 1050 , as reported from the Armed Services Committee, contained this repeal (Section 3131) and added that nothing in the repeal "shall be construed asauthorizing the testing, acquisition, or deployment of a low-yield nuclear weapon." On May 20, theSenate considered an amendment by Senators Feinstein and Kennedy to rescind Section 3131. (40) Thedebate, in which more than 20 Senators participated, aroused considerable interest. SenatorFeinstein argued that repealing the low-yield ban "will ... begin a new era of nuclear proliferation." (41) Senator Durbin said, "This bill is about to discard 50 years of American foreign policy and 50 yearsof American nuclear policy." (42) Senator Kyl said,"The reason low-yield weapons research is beingsought is because the world has changed since the time we developed these huge megaton nuclearweapons ... the United States would prefer, if it had to, to use a much smaller weapon, a low-yieldweapon." (43) The amendment was tabled, 51-43. (44) When that amendment failed, Senator Jack Reedoffered an amendment to modify Section 3131 by replacing "research and development" with"development engineering." Thus, the amendment would have barred development engineering thatcould lead to U.S. production of a new nuclear warhead. Senator Warner offered an amendment tothe Reed amendment, replacing the latter with the original committee amendment and adding asection, "The Secretary of Energy may not commence the engineering development phase or anysubsequent phase of a low-yield nuclear weapon unless specifically authorized by Congress." (45) Thedifference between the two amendments was summed up as follows: Mr. Reed. Essentially, the functional difference between my amendment and your second degree is, at this point, under my amendment theadministration would have to come and lift the prohibition; under your amendment, they would haveto come and get an authorization. I think that is the functionaldifference. Mr. Warner. I think the Senator is correct. (46) On May 21, the Senate agreed to the Warner amendment, 59-38, and agreed to the Reed amendment, as amended by the Warner amendment, 96-0. Subsequently, on May 22, the Senatepassed S. 1050 , as amended, 98-1, and on June 4 passed H.R. 1588 , theHouse version of the National Defense Authorization Act for FY2004, striking all after the enactingclause and inserting the text of S. 1050 . The House Armed Services Committee tackled the same subject. As reported by the committee, Section 3111 of H.R. 1588 modified the low-yield provision substantiallyfrom the language the Administration had requested, adopting by voice vote an amendment byRepresentative Spratt. (47) The FY1994 provisionis as follows: (b) LIMITATION- The Secretary of Energy may not conduct, or provide for the conduct of, research and development which could lead to the production by the United States ofa low-yield nuclear weapon which, as of the date of the enactment of this act, has notentered production. Section 3111 would revise that provision: (b) LIMITATION- The Secretary of Energy may not develop, produce, or provide for the development or production of a low-yield nuclear weapon which, as of November 30,1993, has not entered production. ... (d) Effect on Studies and Design Work -- Nothing in this section shall prohibit the Secretary of Energy from conducting, or providing for the conduct of, concept definitionstudies, feasibility studies, or detailed engineering design work. The amendment apparently drew the line separating permitted from prohibited activities between phase 2a/6.2a and phase 3/6.3. The explanatory statement of the committee was somewhatclearer on this point: "The amendment would maintain the prohibition on development of newnuclear weapons with yields less than five kilotons, but would allow research on such weapons,including concept definition studies, feasibility studies, and detailed engineering design." (48) Astatement of additional views by Representative Spratt and 24 other Democrats, in the committee'sreport on the bill, elaborated: "the amendment permits research of such [sub-5-kt] weapons, itprohibits development engineering (referred to as Phase 6.3 activities by the Department of Energy)and later stages of development." (49) The amendment is more permissive than the original provision but less so than the one the Administration had proposed, apparently permitting work through phase 2a/6.2a but barringsubsequent development. It also narrows the potentially broad applicability of the phrase "whichcould lead to the production." That phrase raises the prospect that a paper study, a computer model,or a metallurgical experiment might be illegal if it could somehow be construed as leading toproduction. With the new language, that possibility would no longer be enough to block such work;rather, the test would be whether the development or production is of an actual low-yield weapon.The rule for H.R. 1588 did not provide for amendments to this provision. The Housepassed the bill, as amended, on May 22, 361-68. Several aspects of the low-yield ban were potentially at issue in conference. Both bills sought to define which activities were permitted and which were barred in order to remove an ambiguityof the original legislation: the issue of R&D that "could lead to the production by the United Statesof a new low-yield nuclear weapon, including a precision low-yield warhead." They approached theproblem differently, though. The Senate would have rescinded the low-yield R&D provision whilebarring "engineering development" or subsequent phases of a low-yield weapon withoutcongressional approval; the House would have retained the low-yield ban while modifying itsubstantially. The Senate bill, as amended, clearly drew the line separating permitted activity andactivity requiring explicit congressional authorization between phase 2a (or 6.2a) and phase 3 (or6.3). The House language appeared to do the same thing, but it was not completely clear that"develop" and "detailed engineering design work" referred to that same line. It was unclear whetherthere were a difference between the Senate's requirement for "explicit authorization" of engineeringdevelopment or beyond and the requirement in Section 3143 of P.L. 107-314 for DOE to include aline-item request for each new or modified nuclear weapon in phase 3 or 6.3 or beyond. A seniorNNSA staff member held that while committee or conference report language would typicallycomment on weapons in phase 3 or 6.3 or beyond, NNSA would view authorization andappropriations of funds for such weapons, typically hundreds of millions of dollars, as constitutingthe "explicit authorization" that the Senate's bill required, but that in any event it would be up toCongress to define what form of authorization sufficed. (50) The House agreed to the conference report, (51) 362-40, on November 7, 2003. The Senate agreedto the conference report, 95-3, on November 12. The President signed the measure into law ( P.L.108-136 ) on November 24. The conference bill, section 3116, adopted the Senate provision. Section 3116 repealed the Spratt-Furse provision, stated that the repeal shall not "be construed as authorizing the testing,acquisition, or deployment of a low-yield nuclear weapon," and barred the Secretary of Energy frombeginning engineering development, or subsequent phases, of work on a low-yield weapon withoutspecific congressional authorization. The bill further required a report by the Secretaries of State,Defense, and Energy assessing whether or not the repeal of Spratt-Furse "will affect the ability ofthe United States to achieve its nonproliferation objectives and whether or not any changes inprograms and activities would be required to achieve those objectives." The legislation thus clearly delineates what R&D on low-yield nuclear weapons is prohibited, eliminating a point of confusion in the original provision, and sets the requirement (congressionalapproval) for overriding that prohibition. At the same time, the requirement for an assessment of"any changes in programs and activities" needed to achieve U.S. nonproliferation objectives isunclear both in terms of what those objectives are and how broadly the phrase "any changes" is tobe interpreted. Such changes could range from developing new low-yield nuclear weapons, totraining more specialists in Arabic, to strengthening the International Atomic Energy Agency. Andwhat definition of nonproliferation objectives is the report to use? (52) It appears that low-yield R&D will be a much less salient issue in the FY2005 cycle than in the previous one. Lifting the Spratt-Furse provision was a policy issue that was resolved last year, andnot a budget issue. Some critics expressed concern that NNSA would use the lifting of the provisionto develop new weapons. In an interview of December 2003, however, NNSA Administrator LintonBrooks stated, "there is no list of low-yield weapons we're thirsting to develop -- that's amisconception." (53) An NNSA manager withresponsibilities in this area elaborated in March 2004: We have no requirements from DoD for low yield weapon research. ... We definitely do not have funds identified specifically for that area of research.... We may get other requests between now and the start of FY2005. One or more could be forconcepts that would delve into the low yield area. So I can't and won't claim that none will be donein FY2005, just that as of today, we aren't planning any. (54) Would lifting the ban lead to acquisition and use of nuclear weapons? Supporters of the ban argue that new weapons would make acquisitionand use of nuclear weapons more likely. Any new weapon would broaden the President's range ofoptions. A President might find options made available by current nuclear weapons to beunacceptable, but a new weapon might offer a tradeoff between costs and benefits that tilts in favorof nuclear use. Critics further believe that the Administration is seeking to lift the ban with theintention of building low-yield weapons. Senator Feinstein asked Secretary of Defense DonaldRumsfeld about it, "and he said it's just a study .... They did the same thing with the nuclear posturereview: Oh, it's just an intellectual exercise. I don't believe either of those, not one whit, and I thinkthere's a very clear march on to develop these weapons." (55) Critics further argue that even researchon low-yield weapons would lead down a slippery slope to testing, production, deployment, and use. Senator Feinstein said, "The repeal of Spratt-Furse opens the door for America to begin to developnuclear weapons again." (56) Senator Biden saidthat many supporters of the ban are concerned because"we believe very much that if one of these weapons ... is developed, it will ultimately be fielded,"and that low-yield weapons send a "dangerous signal ... to other countries, whether intentional or not,that we intend to fight a nuclear war." (57) SenatorKennedy said, "a mini-nuke is still a nuke. ... If webuild it, we will use it. ... it is a one-way street that can lead only to nuclear war." (58) Critics preferto stop the momentum in this direction at the earliest opportunity. Those who would lift the ban see "lowering the nuclear threshold" and a "slippery slope to nuclear use" as a misreading of U.S. policy and practice. Congress will decide if a weapon is tomove to phase 3/6.3 through the authorization and appropriations process; approval would be farfrom automatic. The provision repealing Spratt-Furse in the Senate Armed Services Committee'sbill ( S. 1050 , Sec. 3131) stated explicitly, "Nothing in the repeal ... shall be construedas authorizing the testing, acquisition, or deployment of low-yield nuclear weapons." Senator Kylstated, "this is not an authorization. All we are doing is removing a self-imposed restriction onthinking about this, on doing research." (59) Further, they note, use of nuclear weapons has always been a presidential decision, and one that Presidents treat as arguably the most weighty decision that they can make. Having more weapons,or low-yield weapons, does not mean that the United States will use them. As Senator Warnerobserved, the threshold for using nuclear weapons remains very high indeed. ... the United States had a large number of low-yield nuclear weapons in our inventoryduring the '50s, '60s, and '70s which have now been removed from the inventory. During each ofthese decades there were significant national security challenges to the United States. None of thosechallenges came close to reaching the nuclear threshold ... (60) Would low-yield weapons make nuclear proliferation more likely? Those who would retain the ban assert that resuming low-yield R&D couldspur nuclear proliferation. If the world's only superpower requires for its security new types ofnuclear weapons in addition to the ones it already has, then this implies that other nations neednuclear weapons for their security as well. Building weapons that might be used against rogue stateswill not deter these states from building nuclear weapons, it is argued, but will instead lead themto develop such weapons of their own to deter U.S. attack. They maintain that althoughnonproliferation efforts have not been 100 percent successful, they have served as an importantrestraint. Resuming low-yield R&D could lead to nuclear testing, critics argue, likely leading to resumed nuclear testing by others. The head of the nuclear directorate of Russia's defense ministry reportedlystated in January 2002, "if any of the five countries officially possessing nuclear weapons startstesting nuclear munitions again, and we consider our nuclear stockpile to be in a critical state, wetoo will carry out nuclear tests." (61) Beyond that,the NPT is the cornerstone of the nuclearnonproliferation regime, which incorporates other agreements, treaties, groups, and arrangementsas well. (62) The NPT faced a key decision in 1995:states party had to decide whether or not to extendthe treaty indefinitely. They decided to do so, but this extension was linked to a set ofnonproliferation objectives, one of which was completing negotiations on a CTBT no later than1996. Accordingly, as Sidney Drell and others argue, "A decision to resume [nuclear] testing tobuild low-yield nuclear weapons could deal the [nonproliferation] regime a fatal blow ..." (63) Those opposed to the ban reject the argument that studying low-yield weapons would lead to nuclear proliferation. No other nation has such a prohibition, so lifting it would simply move theUnited States to a position of parity in that regard, they assert. Nations will act in their own interestson decisions involving their security or ambitions. The United States signed the CTBT in 1996, yetIndia and Pakistan tested nuclear weapons in 1998. These critics question the NPT's utility. NorthKorea and (apparently) Iran made substantial progress on their nuclear programs even while beingparty to that treaty. Nuclear programs in all four nations were underway decades ago, long beforethe U.S. ban on low-yield R&D. The ban's opponents argue that U.S. actions -- especially onsomething as remote as preliminary studies of possible weapons -- will not make other nations morelikely to develop WMD. To the contrary, they believe, U.S. ability to respond to WMD proliferationefforts by rogue states may dissuade them from undertaking such actions in the first place. AsSenator Domenici said, "to permit [weapons scientists] to work in this area [low-yield weapons] ispart of the deterrent." (64) The ban's opponents reject the contention that R&D on new weapons will lead to nuclear testing. As C. Paul Robinson, Director of Sandia National Laboratories, said, "I can categoricallystate that no one is proposing returning to nuclear testing." (65) The United States has decades ofexperience with low-yield nuclear weapons, including those with altered radiation outputs, such asthe neutron bomb of the 1970s. Use of existing, tested designs, perhaps with modifications notrequiring testing, would provide high confidence. A better understanding of the effects of low-yieldweapons is crucial for understanding their utility, yet key variables are how a blast wave wouldinteract with structures; computer models and engineering studies would arguably provide theneeded data. Would low-yield weapons offer military value? Some supporting the ban argue there is little meaningful use for low-yield weapons. They note astatement by Linton Brooks, at the time Acting Administrator of NNSA: "we have no requirementto actually develop any new weapons at this time." (66) As the Afghanistan and Iraq Wars showed, itis often difficult to know what to target. Al Qaeda presents few if any targets that would be suitablefor nuclear weapons. Another lesson of these wars is that if targets can be located, they can oftenbe defeated with conventional weapons. Deep burial, large tunnel complexes with multiple barriers,deception, etc., might make targets in rogue states difficult to destroy with nuclear weapons even ifthey can be located. Many potential targets are in cities, but detonating a low-yield nuclear weaponin or even near a city could cause much collateral damage. By one estimate, a 5-kiloton weapondetonated near and upwind from Damascus, Syria, at a depth of 30 feet would cause 230,000fatalities and another 280,000 casualties within two years. (67) Use of a low-yield earth penetratoragainst the bunkers thought to house Saddam in Baghdad, a city of nearly 5 million people, couldhave caused casualties on a similar scale. The ban's opponents claim that low-yield weapons may offer important military capabilities, such as for destroying biological munitions (discussed under ACI, below) or attacking undergroundbunkers. There is military interest in low-yield weapons. Admiral James Ellis, Commander, U.S.Strategic Command, wrote that "US Strategic Command is interested in conducting rigorous studiesof all new technologies, and examining the merits of precision, increased penetration, and reducedyields for our nuclear weapons." (68) At present,in the view of those who would lift the ban onlow-yield R&D, the ban makes it impossible to assess the value of the capabilities sub-5-kt weaponsmight bring to the stockpile, or how they might be designed for specific missions. The ban, theyassert, imposes broader constraints on nuclear weapons designers as they seek to stay well away fromany activities that could be construed as violating the Spratt-Furse provision. Senator Sessionsconcluded, "it would be irrational to prohibit research that could inform future decisions as towhether such weapons would enhance the national security of our country." (69) Senator Domenicinoted that the ban increases the leadtime to develop a low-yield weapon should the need arise. (70) For FY2004, the Administration requested $21.0 million for the Advanced Concepts Initiative (ACI). Of this amount, $15.0 million was for the Robust Nuclear Earth Penetrator (RNEP) weapon,discussed in the next section, and $6.0 million ($2.0 million for each of the three weapons labs) wasfor other advanced weapon concepts, discussed here. This latter program involves studies throughphase 2a/6.2a by small groups of weapons personnel at Los Alamos, Livermore, and Sandia, as wellas liaison with DOD commands. A Los Alamos publication stated: The ACI program will conduct new weapon studies and will explore concepts for new warhead designs and modifications to meet DoD needs that are notmet by the current stockpile. The ACI is a program for developing and exercising capability and forapplying that capability to examine options. (71) In its FY2004 legislative proposals, the Administration argued for ACI: A revitalized nuclear weapons advanced concepts effort is essential to: (1) train the next generation of nuclear weapons scientists and engineers; and (2)restore a nuclear weapons enterprise able to respond rapidly and decisively to changes in theinternational security environment or unforeseen technical problems in thestockpile. (72) The FY2004 NDAA and EWDAA both provided $6.0 million, as requested, but conferees on the latter made $4.0 million available for authorization only after delivery of a DOE-DOD report onthe nuclear stockpile and a 90-day congressional review period. As of early March 2004, the reporthad not been delivered, and NNSA could offer no indication as to when that might occur. As aresult, ACI may be limited to a budget of $2 million for much if not all of FY2004. The FY2005request for ACI is $9.0 million. During much of the Cold War, the three weapons laboratories had teams of scientists and engineers studying advanced weapons concepts. Studies ranged from modifications of existingweapons, to improvements for next-generation weapons, to exploration of new weapons technologiesand weapons for new missions. Tools used included laboratory experiments, computer modeling,data from past and ongoing nuclear tests, and data from experiments the teams added to nuclear tests. These teams were small, perhaps a half-dozen full-time professional staff, but during the Cold Warthey drew on the large advanced and exploratory R&D program that was a major part of the corenuclear weapons programs at the laboratories. Team members, new staff as well as experienceddesigners, would typically work on advanced concepts for a year or two. Team members would alsointeract with DOE headquarters, DOD elements, contractors, and others. With the end of the Cold War and the end of nuclear weapons development, the laboratories wound down their advanced concepts programs in the middle 1990s. Since then, there have beenstatements emphasizing the value of the type of work that advanced concepts programs performed,and subsequent calls for an ACI to reestablish advanced concepts programs at the labs. ACI wouldrecreate the small teams, but would not reorient the bulk of the nuclear weapons program, which isfocused on sustaining current weapons through the Stockpile Stewardship Program. The Chilesreport of 1999 stated, "DOE should also encourage the laboratories to continue their decades oldpractice of exploratory development programs since these programs have allowed experiencedengineers and scientists to maintain their systems engineering skills and train new employees." (73) TheFoster panel's FY1999 report stated: "The nuclear weapons complex should work on a range ofdesign and development tasks that exercise and sustain the capability to produce new weapondesigns. This provides both a broader set of technical options to meet future needs, and a programfor training new generations of stewards." (74) The purportedly leaked version of the Nuclear Posture Review stated: There are several nuclear weapon options that might provide important advantages for enhancing the nation's deterrence posture: possible modificationsto existing weapons to provide additional yield flexibility in the stockpile; improved earthpenetrating weapons (EPWs) to counter the increased use by potential adversaries of hardened anddeeply buried facilities; and warheads that reduce collateraldamage. To further assess these and other nuclear weapons options in connection with meeting new or emerging military requirements, the NNSA willreestablish advanced warhead concepts teams at each of the national laboratories and at headquartersin Washington. This will provide unique opportunities to train our next generation of weapondesigners and engineers. DoD and NNSA will also jointly review potential programs to providenuclear capabilities, and identify opportunities for further study, including assessments of whethernuclear testing would be required to field such warheads. (75) The Administration now proposes to re-create these teams. In July 2003, NNSA provided details on the FY2004 studies that the non-RNEP part of ACI would conduct. (76) Perhaps $200,000 would gofor participation by the weapons labs in an Air Forceconcept study of enhancing and modernizing a current warhead, such as examining if any additionalmilitary characteristics are useful and feasible. The balance would go for other laboratory studies. Specifically, Los Alamos would spend its funds on enhancing computer modeling and simulationcapability and for mechanical testing. Sandia would continue a study of "mission end-to-endcommand and control," which would enable military personnel to know where a warhead was at alltimes. This would be applicable to conventional as well as nuclear weapons. For example, if alaser-guided bomb lost track of its laser signal because of fog or smoke, end-to-end command andcontrol would indicate its location. Livermore would undertake an early study on "design to effect"(i.e. designing nuclear weapons to obtain desired output characteristics). These projects may or maynot support research directly on low-yield nuclear weapons. For FY2004, the Senate Armed Services Committee recommended authorizing the full $21.0 million requested for Advanced Concepts. (77) TheHouse Armed Services Committee stated that ACIhad several important purposes, such as exercising the weapons design process, training the nextgeneration of nuclear weapons scientists and engineers, and understanding what adversaries mightdo in the area of nuclear weapon design. Accordingly, the committee expressed its "[belief] thatNNSA should consider more significant future investment in these [Advanced Concepts] activities"and "recommends that NNSA proceed with its advanced concepts initiative forthwith." (78) Noamendments were offered on non-RNEP ACI in the Senate. The House rejected an amendment byRepresentative Tauscher to transfer all funds from ACI (including funds for RNEP) to conventionalprograms to defeat hardened and deeply buried targets, as discussed under RNEP, below. As aresult, non-RNEP ACI was not at issue in the conference. In its report on H.R. 2754 , the FY2004 Energy and Water Development Appropriations Bill, the House Appropriations Committee delivered a scathing criticism of thenuclear weapons program. The committee found that a flawed budget process raised questions aboutthe legitimacy of nuclear weapon requests: Unfortunately, the country possesses neither a modern stockpile nor a modern nuclear weapons complex. Instead, both are largely carryovers from the ColdWar era. After careful consideration, the Committee has concluded that much of the current situationresults from a flawed budget process. ... the weapons activities portion of the NNSA budget iseffectively insulated from any such [intra-agency] tradeoffs -- DoD sets requirements that anotheragency has to fund, and DOE treats the weapons activities budget as untouchable because DoD setthe requirements. There needs to be a serious debate about whether the approximately $6 billion spent annually on DOE's nuclear weapons complex is a sound nationalsecurity investment. Until that debate occurs and the DOE weapons budget request is subject tomeaningful budget trade-offs, this Committee will not assume that all of the proposed nuclearweapons requests are legitimate requirements. (79) This disconnect, the committee stated, led to new weapon-related initiatives, such as ACI, RNEP, and enhanced test readiness, that overstretched NNSA's management abilities. It appears to the Committee the Department [of Energy] is proposing to rebuild, restart, and redo and otherwise exercise every capability that was used overthe past forty years of the Cold War and at the same time prepare for a future with an expandedmission for nuclear weapons. Nothing in the past performance of the NNSA convinces thisCommittee that the successful implementation of Stockpile Stewardship program is a foregoneconclusion, which makes the pursuit of a broad range of new initiatives premature. Until the NNSAhas demonstrated to the Congress that it can successfully meet its primary mission of maintainingthe safety, security, and viability of the existing stockpile by executing the Stockpile Life ExtensionProgram and Science-based Stewardship activities on time and within budget, this Committee willnot support redirecting the management resources and attention to a series of newinitiatives. (80) For these reasons, it recommended eliminating the $6.0 million requested for ACI. The House passed H.R. 2754 on May 18, 2003, 377-26; no amendments were offered on ACI,RNEP, test readiness, or any other Weapons Activities provisions. (Weapons Activities is the partof NNSA's budget that funds stockpile stewardship.) The Senate Appropriations Committee recommended providing the full amount requested for ACI. (81) The Senate considered severalamendments on ACI on September 16. It tabled, 53-41, anamendment by Senator Feinstein to eliminate the full $21.0 million for RNEP and other ACI, andfor other purposes. (82) It adopted on voice vote anamendment by Senator Jack Reed that barred useof funds provided by H.R. 2754 for phase 3 or 6.3 or beyond for advanced nuclearweapon concepts including RNEP. (83) SenatorReed stated that his amendment "would assure that theappropriations bill is consistent with the language [on RNEP by Senator Nelson of Florida] that isincluded in the FY2004 Defense authorization bill." (84) The Senate agreed to various amendments enbloc, including one by Senator Bingaman that barred spending funds provided by the bill onadditional and exploratory studies (a category that excludes RNEP) under ACI until 30 days afterNNSA gives Congress a detailed report on activities planned in that category for FY2004. (85) TheSenate passed the bill, H.R. 2754 , on September 16, 92-0. Non-RNEP ACI was not expected to be at issue in the defense authorization conference because each House provided the same amount for it. Senate conferees could, however, have consideredwhether to endorse the House language regarding the program's future budget and proceeding,modify it, or be silent on it. Because of congressional interest in nuclear weapon programs,conferees could also have considered directing DOE to specify in detail the projects that future-yearACI requests will support. Non-RNEP ACI was at issue in the energy and water conference. A point of possible contention was whether conferees could arrive at a compromise somewhere between the House andSenate figures, or if the funding request was so small relative to other NNSA projects that a cut of,say, 50 percent would prevent one or two of the three labs from performing its planned study. Alsoat issue were the two amendments the Senate passed. An issue that implicitly faced energy and water conferees was the gulf between the House Appropriations Committee report, which argued that "pursuit of a broad range of new [nuclear]initiatives [was] premature," and the House Armed Services Committee report, which urged NNSAto "consider more significant future investment" in ACI (including RNEP). (86) Further, theauthorization bill as passed by the House included the $6.0 million requested, while theappropriations bill as passed by the House eliminated those funds. The section on the low-yield R&D ban, above, gave details on final passage of the NDAA. Regarding the EWDAA, the House agreed to the conference report, 387-36, on November 18, andthe Senate agreed to it on the same day by unanimous consent. The President signed the measureinto law ( P.L. 108-137 ) on December 1. The NDAA provided the amount requested for non-RNEP ACI, $6.0 million. It was not at issue in conference, and the conference report did not comment on it. The EWDAA provided $6.0 million for Advanced Concepts (excluding RNEP), but the conferees made $4.0 million available for obligation only after the Secretaries of Energy and Defensedeliver to Congress a revised Nuclear Weapons Stockpile plan detailing a plan and schedule forachieving the President's proposed adjustments to the strategic weapons stockpile (including areduction in operationally deployed weapons to 1,700-2,200 by 2012), and 90 days elapse for reviewby the Armed Services and Appropriations Committees. (87) The DOE-DOD report was due with thesubmission of the FY2005 budget request in early February 2004, but the two departments had notsubmitted it a month later. (88) This provisiontherefore limits ACI funds to $2.0 million until thereport is submitted. Further, conferees included as section 313 the amendment by Senator Bingamanbarring spending on ACI until 30 days after NNSA submits a report detailing certain planned ACIactivities. NNSA submitted the report on March 3, 2004, so the activities are suspended until April2. (89) While the EWDAA provided the Senate amount for ACI and not the House amount, the conferees' language requiring a DOE-DOD report on the link between the stockpile plan and thePresident's planned nuclear force structure addressed a central concern expressed in the HouseAppropriations Committee's report: While the conventional forces in the Defense Department go through a 21st-Century transformation to meet the challenges of a new era, the NNSAis forced, through inertia and indecision, to maintain all contingencies regardless of how unlikely thethreat. The Department of Defense needs to determine the composition of the stockpile required tosupport the President's announced stockpile reductions, and then coordinate with DOE to establishthe nuclear weapons complex requirements based on deliberate, timely, well-justified decisionssupported by Congress. (90) Regarding the amendment by Senator Reed on RNEP, the conference report contained thefollowing language: "The conferees remind the Administration that none of the funds provided maybe used for activities at the engineering development phases, phase 3 or 6.3, or beyond, in supportof advanced nuclear weapons concepts, including the Robust Nuclear Earth Penetrator." (91) The FY2005 request is $9.0 million. ACI activities include developing advanced concepts which could be applied to the stockpile of the future, code development for system-specific nuclear effects, phenomenology,and exercise of design skills; conducting pre-conceptual, conceptual, feasibility, design and costingstudies of options. (92) NNSA Administrator Brooks said that ideas for ACI include the ability to destroy biological agents, improved safety and security, and more capable or robust weapon designs that might bedeveloped without testing. He felt that the effort probably "will be focused on safety, securityflexibility, greater margins than on fundamental new capabilities." (93) NNSA's FY2005 budget request document includes, for the first time, budgets for out years (in this case FY2006-FY2009) as well as for the current year. The requests projected for ACI are:FY2006: $14.4 million; FY2007, $14.9 million; FY2008, $14.6 million; and FY2009, $29.5million. (94) The Administration, DOD, NNSA, the nuclear weapons laboratories, the Foster panel, and others see many benefits for ACI. Many are fine-grained in their detail. The labs in particular havea detailed sense of what they would undertake through ACI; many of the arguments for ACIpresented here are based on discussions with weapons lab personnel. Whether because of therelatively small amount of money involved, uncertainty over which projects ACI would undertake,or the attention drawn to RNEP, test readiness, and the ban on low-yield R&D, opponents of thosethree issues made few comments on ACI as a whole. Consequently, due to the paucity of publicdiscourse on ACI, some counterarguments come from critics of the program, but others are presentedas they might be made by the critics. Does deterrence require new types of nuclear weapons? A key aspect of the debate over ACI -- and over low-yield weapons andRNEP as well -- is the relationship between deterrence and new weapons. George Miller ofLivermore states: Deterrence is a dynamic concept -- it has to continually evolve and be able to respond to changes that our adversaries will make in order to be relevant andeffective. That's what happened in the Cold War. The real question that is being debated is whethernuclear weapons will be allowed to develop in response to the changing world situation. If they areto evolve, modifications to the Cold War arsenal will be required if for no other reason than to limitcollateral damage. If they are not to evolve, the nuclear arsenal will become irrelevant and will dieaway. Standing still is not stable. (95) Critics assert that the only role of nuclear weapons is to deter other nations from using nuclear weapons against the United States, or perhaps against its friends and allies. For this purpose,existing weapons are more than sufficient and their use is fully credible. In this view, there wouldbe no need for new weapons. With the threat of a U.S.-Russian nuclear war very low, the Administration is seeking something from nuclear weapons beyond deterrence. A goal set forth in the Quadrennial DefenseReview is that "[w]ell targeted strategy and policy can ... dissuade other countries from initiatingfuture military competitions." (96) The NuclearPosture Review, amplifying on this point, stated thata "[d]iverse portfolio of capabilities denies payoff from competition." (97) The Administration furtherargues that preemption may be needed to counter threats of WMD, and that the United States mayuse "all of our options" in responding to an attack using WMD. While these two statements do not state that the United States would use nuclear weapons preemptively, neither do they rule out suchuse. Another goal of the current Administration involves having potential adversaries take certain actions, such as having Iran open its nuclear facilities to inspection, having North Korea verifiablyhalt all work related to nuclear weapons, or (until recently) having Iraq cooperate fully withinspectors. Ideally, these goals would be achieved through diplomatic, economic, or similar means,but if those means do not suffice, preemptive force might be threatened or, as in Iraq, used. Coercion-- the threat to use force against states if they do not take certain actions -- goes beyond deterrence,which threatens to use force against states if they do take certain actions. Coercion works earlier inthe threat chain, with the intention of eliminating (through diplomacy, threat, or force) activities thatcould create threats rather than forestalling the use of existing capabilities, one argument being thatit is hard to know what is needed to deter a rogue state. A shift from deterrence to something more, whatever form that may take, could lead to a change in weapons desired to implement the new policy. Conventional or nuclear forces credible fordeterrence might not be credible under the new approach. Would any regime believe a U.S. threatto use nuclear weapons? New nuclear weapons -- especially lower-yield weapons tailored todestroy specific targets -- render such threats more credible, supporters argue. ACI's supporters believe that the ability to respond to potential threats, as ACI is intended to do, would promote U.S. security. John Gordon, former NNSA Administrator, said, "a demonstratedability to design, develop, and produce new warheads, including small builds of special purposeweapons, could be an important element in our overall deterrent posture. Such capabilities couldact to convince an adversary that it could not expect to negate U.S. nuclear forces, for example, byseeking to house vital command and control functions in hard, deeply-buried installations." (98) U.S.nuclear weapons able to hold at risk such targets could be used not only for deterrence but also forcoercion and preemption. In the view of critics, deterrence and something more come from threat of regime change, and that threat comes from conventional, forces, not nuclear forces. New weapons, in this assessment,might not enhance deterrence even if tailored for specific missions, as ACI might do, because roguestates would see use of new weapons as no more credible than use of current weapons. Critics citea 1992 letter by the first Bush Administration setting forth a presidential decision "to modify U.S.nuclear testing policy immediately, to impose limits on the number, purpose and yield of our tests. The purpose of all U.S. nuclear tests of our weapons will henceforth be for the safety and reliabilityof our deterrent forces." (99) Omitted from thisstatement was weapons development as a purpose fortesting. As developing new weapons typically required testing, critics interpret the statement asindicating that there was no need for new nuclear weapons. If existing weapons were sufficient forU.S. security in 1992, they assert, these same weapons should suffice now. At that time, U.S.nuclear weapons addressed as lesser included cases targets that are of current concern, such as deeplyburied targets and biological weapon storage sites. Additionally, critics oppose the Administration'spolicy of preemption and see concurrent requests for buttressing U.S. nuclear capabilities as adangerous part of it. Do ACI programs offer significant military value? There have been several suggestions for new types of nuclear weapons in addition to earth penetratorweapons (EPWs). General Richard Myers, Chairman, Joint Chiefs of Staff, stated, "In terms ofanthrax, it's said that gamma rays can, you know, destroy the anthrax spores, which is something weneed to look at." (100) Kathleen Bailey, formerAssistant Director for Nonproliferation, Arms Controland Disarmament Agency and Robert Barker, former Assistant to the Secretary of Defense forAtomic Energy, suggest several new warheads: "[w]arheads with suppressed electromagnetic pulsefor more effective missile defense; [r]educed residual radiation warheads for low collateral damage;and [r]obust warheads for longer shelf-life." (101) Another possibility would be warheads forintercepting missiles armed with chemical or biological agents. (102) If these ideas are of mutualinterest to DOE and DOD, projects of this sort would appear to fall within the purview of ACI. Critics question the value or feasibility of such weapons. Peter Zimmerman, a physicist, consultant to the Senate Foreign Relations Committee, and formerly science adviser for arms controlat the State Department, writes: "Reduced residual radiation weapons would be similar to the'neutron' bombs, made in the 1970s, with very low fission yield. For classified reasons they cannotbe readily made today without compromise to higher priority programs. Suppressingelectromagnetic pulse is very difficult because that would require capturing the many high-energyelectrons liberated by a nuclear explosion. Ultra-robust warheads could have been developed andtested decades ago, but weren't, perhaps because the nuclear weapons community feared that thatcould have ended the need to test." (103) TheAdministration and Congress appear to have little if anyinterest in nuclear-armed interceptors, as noted earlier. In a 1989 report, DOE explained its low interest in more robust warheads. It stated that the nuclear weapon laboratories were studying the feasibility of such warheads, which would havereduced sensitivity to aging, to material properties that might change slightly during remanufacture,to tolerances of manufacture, etc. "We cannot predict the success of this research program," DOEsaid, and noted that "such warheads would be less operationally efficient than the optimizedwarheads in current use and have some size and weight penalties with attendant cost andperformance penalties to weapon delivery systems." (104) Now, though, such penalties are arguably lessimportant than they were during the Cold War -- and ultra-robust warheads accordingly moredesirable -- because the United States plans to reduce the number of warheads carried byoperationally deployed ballistic missiles, (105) and bombers can be loaded with fewer bombs andmissiles, making extra carrying capacity available on these systems. Is it technically feasible to use nuclear weapons to destroy stored bioweapon stockpiles? If so, is such use advisable? One concept that ACI mightexplore would be nuclear weapons for destroying chemical or biological warfare agents. ACIsupporters advance it as a main reason for studying new or modified weapons, yet there is much lessunderstanding of this topic than of RNEP. This section deals with attacks on biological warfare(BW) agents because some of them, such as anthrax spores, are more lethal than the most toxicchemical warfare agents on a weight-for-weight basis. It first addresses the technical feasibility ofsuch attacks, drawing heavily on the work of Hans Kruger (106) and Jonathan B. Tucker. (107) Kruger isa physicist and an authority on the effects of nuclear weapons on chemical and biological agents. He led Livermore's weapons effects group from around 1973 to 1999, when he retired, and iscurrently working at Livermore on these issues. Tucker is a Senior Researcher at the Center forNonproliferation Studies, Monterey Institute of International Studies. He has written extensively onBW and was a U.N. biological weapons inspector in Iraq. (108) After considering feasibility, thissection addresses the advisability of such attacks, taking into account political, intelligence, andcollateral-damage issues, and then offers several concluding observations. Feasibility. In calculating the effects of nuclear weapons on BW agent, Kruger makes several assumptions about the target. (109) The agent would bestacked in steel barrels or larger containers in various configurations, stored in the open or in atypical warehouse. It would be in the form of a water slurry, (110) for which he used water as asurrogate for the purpose of computer modeling. (111) He stated that "[b]iological agent is typicallystored in barrels or larger storage containers." (112) He further stated that BW agent in a water slurryis a conservative assumption because less radiation would reach the bottom of a stack of barrelsfilled with water slurry than with, e.g., dry anthrax powder. (113) While there may be various ways to neutralize BW agent without the cooperation of the country possessing such agent, Kruger argues that using a nuclear weapon to neutralize BW agents requiresapplying a lethal dose of radiation to all parts of the storage site. Nuclear weapons produce variousforms of radiation. X-rays are stopped near the top of the material because they do not have enoughenergy to penetrate further. Gamma rays (electromagnetic radiation of higher energy than x-rays)penetrate more deeply. One study finds gamma rays of limited value: In two cases studied (attackingBW agent in an underground bunker, one case with a nuclear explosion inside the bunker and theother with the explosion in the ground but outside the bunker), "the amount of bio-agents effectivelyirradiated by this process [gamma rays] will in all likelihood be a small fraction of the total." (114) Neutrons are the most effective mechanism. They are more penetrating than gammas. In addition,neutrons generate gamma rays when they strike the target material; gammas generated far down inthe stack of stored agent can penetrate to the bottom of the stack. The key to calculating the effectsof a nuclear weapon on BW agents, then, according to this argument, is the number of neutrons andtheir energy level; a dose of neutrons and gamma rays sufficient to kill BW agent at the bottom ofthe stack would expose the rest of the stack to a much greater dose. The fireball of a nuclear explosion would probably incinerate BW agents, but radiation is a more useful kill mechanism from a military point of view because it can be calculated much moreprecisely if one knows the conditions under which the agent is stored. Currently-deployed nuclearweapons, which use a combination of fission and fusion to produce an explosion, must be detonatedclose to the ground -- creating much fallout -- in order to kill BW agents; for a greater height ofburst, the number and energy level of neutrons produced would be insufficient for this task. (115) Nuclear weapons can be made, however, that generate more neutrons. Such a weapon is a reducedblast/enhanced radiation weapon, such as the "neutron bomb" of the 1970s. (Neutron bombs werecontroversial and are discussed further below.) For a given yield, these weapons produce an orderof magnitude more neutrons than do standard low-yield nuclear weapons, and the neutrons have ahigher energy level. Kruger calculates that a 10-kt weapon of this type burst at a height of 10 meterswould neutralize BW agents to a radius of about 50 meters, vs. 10 meters for a 10-kt fission weaponat the same height of burst. (116) (For comparison,the Hiroshima bomb had a yield of 15 kt.) He notesseveral consequences of the increased neutron flux: a fusion warhead [e.g., a neutron bomb] has a larger sterilization area than a fission warhead of equal yield. Another (to me: significant) consequenceis that I can detonate a fusion warhead at an altitude above the ground (higher than the "optimum"altitude) sufficiently high that the fireball does not touch the ground, and still produce a sterilizingdose at the very bottom of the barrel stack over a militarily significant area. Avoiding fireballcontact with the ground eliminates most of the local fallout. This is not feasible for a fissionwarhead. (117) If an adversary stored BW agent in an underground bunker, the surrounding earth, steel, and reinforced concrete would significantly attenuate the neutrons from a weapon that burst far enoughfrom the bunker (vertically or horizontally) that the fireball did not enter it. To destroy the agent,an earth penetrator weapon (EPW) would have to place the fireball inside the bunker. The chief killmechanism would be the heat of the fireball, the effectiveness of which would be increased becausethe fireball would (at first) be concentrated within the structure. The delayed radiation resulting fromthe fission debris would expose any remaining agent to a further radiation dose. (118) Critics question Kruger's postulated target as optimized for destruction by a nuclear weapon. The next few paragraphs focus on anthrax because it is one of the tougher BW agents to kill and isalso one of the most militarily useful agents. Would a nation make anthrax in aqueous form? It is easier to make anthrax as a water-based slurry than a fine powder. According to Tucker, "It appears that at the time of the1991 Gulf War, Iraq only had the capability to produce wet anthrax. Iraqi BW scientists appear tohave worked during the 1990's to acquire the know-how to produce dry, powdered anthrax, usinga closely related bacterium (the biopesticide Bt) as a model system. If a country had the capabilityto produce dried, powdered anthrax, it would presumably store it in that form because of its muchlonger shelf-life and the fact that dry, powdered anthrax is much easier to disseminate as an aerosolfrom an aircraft sprayer system or a missile warhead." An Office of Technology Assessment (OTA)report of 1993 provides further information: "when anthrax bacteria are incubated under particularconditions, they transform themselves into the rugged spore form, which has a long shelf-life ... Thisspore-forming ability makes anthrax particularly well suited for delivery by missiles or bombs. Thespores are stable when suspended in air, can survive explosive dissemination from a bomb or shell,and ... will live for several days if direct sunlight is avoided." (119) Would a nation need huge quantities of anthrax? The OTA report states that "a gram of anthrax [in spore form] theoretically contains some 10 million lethal doses." (120) Theability of a single envelope with a small quantity of powdered anthrax to shut down the Capitolcomplex in October 2001 is a case in point. Tucker states, "A bioterrorist attack in a confined space,such as a subway station, would require a few ounces of dry anthrax. Military applications orstrategic attacks against cities would require much more material, perhaps hundreds of pounds toattack a large city. As a rough rule of thumb, about a kilogram of dry, concentrated anthrax sporeswould be required to infect 50 percent of the people in a square kilometer, assuming efficient aerosoldissemination under optimal conditions. A kilo of dry anthrax is equivalent to a much larger volumeof wet slurry." Would a nation make and store anthrax long before it intended to use it? According to Tucker, "A nation would probably not make anthrax far in advance of use unless it hadmastered the technology to produce dry powdered anthrax, which has a shelf life of several years.A wet slurry of anthrax will tend to coagulate after several months, rendering it unusable as aweapon. Thus, a country that possessed only wet-anthrax technology would probably produce theagent shortly before use." Would a nation store large quantities of anthrax aboveground? Attacking anthrax stored in shallow underground bunkers would require the use of EPWs to explode in thebunker; otherwise, the ground would shield the bunker from neutrons. An EPW would create muchfallout and could cause other problems, as detailed in the section on RNEP, below. Storing anthraxin a bunker at a depth considerably greater than that which EPWs could reach would preventneutrons, heat, and delayed radiation (from radioactive material left by the nuclear explosion) fromreaching the bunker. Tucker states that "[s]ince anthrax spores are quite rugged and are in a stateof suspended animation, it's reasonable to assume that [ground] shock alone would be unlikely tokill them reliably." The statement from the OTA report that anthrax spores can survive explosivedissemination, cited above, supports this point. For further protection from neutrons, an adversarycould shield anthrax with material that reflects neutrons (e.g., beryllium) or that absorbs them (e.g.,polyethylene mixed with boron). Alternatively, dry powdered anthrax could be hidden anywhere insmall lots, in which case its destruction would depend mainly on locating the agent; once that isdone, various types of weapons and tactics might be used to neutralize it. Advisability. Critics point to a number of intelligence hurdles. A successful attack would require detailed knowledge of the target, such as storageconfiguration. Knowing the target's precise location would be crucial because of the very shortrange at which even an enhanced radiation weapon would sterilize BW agent. Yet as Tucker notes,"During the 1991 Gulf War, many suspect BW production and storage facilities were targeted inerror, and several real facilities such as the al-Hakam factory -- which UNSCOM (121) later determinedwas Iraq's largest anthrax production facility -- were totally unknown to U.S. intelligence." Itwould be important to know the type of agent because, as Kruger states, "the neutralizing dose [ofradiation] for different bio agents varies by a couple of factors of two." Compensating foruncertainty as to which agent was being attacked by using a weapon able to neutralize the mostradiation-resistant agent could result in using a weapon with a yield several times larger than needed. Critics also note political problems with nuclear weapon development and use. An attack that sought to minimize fallout would have to use reduced blast/enhanced radiation weapons. Neutronbombs, which the United States developed in the 1970s, received intense domestic and foreigncriticism as the "capitalist bomb" that spared property while killing people. Similar criticism woulddoubtless reemerge if the United States began a program to develop such weapons, especially if theintended targets were perceived to be rogue states in the Third World. The development programcould require nuclear testing, fueling further criticism. Critics assert that there are nonnuclear approaches to destroying BW agents. According to one report, the Defense Department is working on nonnuclear weapons for destroying chemical orbiological agents. Destroying the actual chemical or biological material [in Iraq] is a task that may fall to agent defeat weapons being developed by the U.S. Navy andLockheed Martin under a program originally dubbed Vulcan Fire and now spearheaded by thesecretive U.S. Defense Threat Reduction Agency. The HTI-J-1000, as it is called, would be the fillinside the penetrating warhead used on the massive 2,000-pound GBU-24 laser-guided bomb andBLU-109 Joint Direct Attack Munition (JDAM) used to attack undergroundbunkers. (122) That report states that the chemical reactions would generate intense heat that would destroy the biological and chemical agents, and would generate other chemicals that would neutralize theseagents. (123) Michael Levi, director of the Strategic Studies Project at the Federation of American Scientists, suggested another approach to defeating a hypothetical underground anthrax storage bunker in Iraq: U.S. planners may not want to directly attack the bunker. Instead, a watch could be placed on the facility using satellite imagery coupled with armedunmanned aerial vehicles. Anyone or anything attempting to enter or leave the bunker would bedestroyed, making the anthrax inside unusable. (124) Kruger rejects the idea of using conventional high explosives to neutralize BW agents for two reasons. First, he calculates that it would take a huge quantity of these explosives, perhaps hundredsof 500-pound bombs, to raise the temperature of the quantity of agent in a typical storage sitesufficiently, assuming the agent was in a water slurry. Similarly, if acid were used instead ofexplosives to kill BW agent, it would take a very large quantity of acid. Second, he argues thatattacking a BW storage site with conventional weapons would cause much more collateral damagethan would an attack with nuclear weapons, even standard low-yield weapons: Conventional weapons are likely to only kill a small fraction of the agent while dispersing a significant fraction of the remaining live agent. My pastdispersal calculations for a generic target in a country of current interest have shown collateraldamage areas from dispersed bio agent that were very many orders-of-magnitude larger than thefallout area for the ground burst of a low-yield fission warhead. (125) It might be possible to deploy reduced blast/enhanced radiation weapons without testing them, such as by adapting designs made and tested several decades ago. Optimizing these weapons fordefeating specific BW agents, however, could involve changes that would eventually lead totesting. (126) An attempt to seal off a facility encounters at least two problems. First, a U.S. attack on a rogue state with no warning would be unlikely. With warning, that state could easily move materials andequipment to other sites before the attack. Indeed, leaders who believed that their nation was at riskfrom a U.S. attack would probably make plans well in advance to do just that. Second, some nations,such as Afghanistan and North Korea, have extensive tunnel networks that might provide undetectedaccess, at a distance, to military facilities connected to such networks. Conclusion. It appears that, under certain specific circumstances, a nuclear blast is technically capable of sterilizing BW agents. One example wouldbe a large quantity of agent in aqueous solution stored at or near the Earth's surface, with the locationpinpointed within meters and with accurate intelligence as to the agent present and how it is stored. (The agent would have to be stored long enough that intelligence assets could locate it, but not solong that it would deteriorate significantly.) Another example would be a depot with a ton ofpowdered anthrax, in which case a relatively small amount (as compared with hundreds of barrels)of agent could do immense harm and it would be imperative to minimize the risk of anthraxescaping. Few would suggest, though, that nuclear weapons would automatically be the means offirst choice for attacking BW agent. Nuclear-weapon use entails clear political disadvantages, theeffectiveness of nuclear weapons in particular situations may be uncertain, and nonnuclear meansmay be available. Whatever the case, it appears likely that Congress would examine closely anyrequest to proceed to development engineering or production of nuclear weapons intended to destroyBW agents. Such examination might include the following questions: How probable is the military scenario put forth to justify development and acquisition of these weapons? How plausible is the scenario? What are its flaws? How broad or narrow are the circumstances under which the scenario exists? Would nuclear use be the only option in that scenario, or could nonnuclear means suffice? What is the state of progress on nonnuclear alternatives? What are the military and political pros and cons of developing and acquiring these weapons? Can ACI help in the fight against nuclear proliferation? According to the FY2003 report of the Foster Panel, A second requirement defined in the NPR is for advanced concept exploration. Work must proceed on future concepts and technologies to avoidtechnical surprises, to attract and train future stockpile stewards, and to assess intelligenceinformation on the continuing development and proliferation of WMD and their delivery methods. The Panel emphasizes that it is essential for Congress to be kept apprised of developments in foreignweapons programs and their potential implications for U.S.security. (127) ACI could improve U.S. understanding of potential terrorist nuclear weapons, which could improve U.S. ability to interpret fragments of intelligence, to detect evidence of nations or groupsworking to develop nuclear weapons, to detect the transport of such weapons and attempts to bringthem into the United States, and to disable such weapons. It could also help avoid technical surpriseby improving U.S. ability to understand foreign weapon developments. For example, creatingnuclear weapon designs consistent with the Chinese or North Korean weapons program may helpthe United States interpret intelligence clues to gain insight into the pace of the program, itstechnological successes and failures, and warhead characteristics. ACI's supporters reject the claim that the program will encourage nuclear proliferation. They argue that nations will decide to go nuclear for reasons far larger than ACI. Even if ACI encouragedproliferation, that would not necessarily mean that the United States should halt the program. It islikely, supporters claim, that North Korea and Iran are pursuing nuclear weapons out of fear of U.S.conventional forces. Does this mean, supporters ask, that the United States should halt militarymodernization and shrink its conventional forces to keep those nations from going nuclear? At thesame time, it is argued, India and Pakistan are pursuing nuclear weapons not because of U.S.conventional or nuclear forces but because of threats that each sees from the other, and that Indiasees from China; these dynamics have nothing to do with ACI. ACI's critics maintain that designing new nuclear weapons tailored for use against targets in nonnuclear weapon states would undercut U.S. nuclear nonproliferation efforts by in effect tellingthe world to do what we say, not what we do. These critics assert that the program is scarcely needed to improve U.S. ability to understand nuclear weapons developments made by rogue states or terrorists. U.S. nuclear weapons experienceaccumulated over the past six decades provides ample information for interpreting intelligence cluesconnected with the design and fabrication of such weapons. Nor is ACI needed to improve U.S.ability to understand Russian or Chinese nuclear weapons programs. The Stockpile StewardshipProgram has greatly increased U.S. weapons knowledge, arguably placing this nation in a betterposition now to interpret intelligence data on Russian and Chinese nuclear programs than it was adecade ago. Another argument is that rogue states want nuclear weapons to deter U.S. nuclear forces. A North Korean statement of August 2003 makes this point: The Bush administration openly disclosed its attempt to use nuclear weapons after listing the DPRK as part of 'an axis of evil' and a target of a'preemptive nuclear attack.' This prompted us to judge that the Bush administration is going to stifle our system by force and decide to build a strong deterrent force to cope with it. ... Our deterrent force ... is a means for self-defence to protect oursovereignty. (128) Thus, it is argued, nuclear weapons designed to threaten key targets in rogue states will only accelerate development of nuclear weapons by those states. Does ACI offer unique value for the nuclear weapons enterprise? ACI's proponents believe that the United States must retain weaponsdesign capability because new weapons might be needed in the future, such as to attack specifictargets or to replace current weapons that deteriorate beyond the point of repair. To that end, it isfurther argued, the United States should avoid a situation in which it needs a new weapon yet no oneat the labs has had the experience of designing one. Supporters see ACI as complementing the Stockpile Stewardship Program. Maintaining existing weapons involves predicting, detecting, and fixing problems with existing weapons. Designing newweapons, however, arguably involves different skills and thought processes, just as editing differsfrom writing. A designer might be given a target and required warhead characteristics (yield, weight,compatibility with a specific delivery vehicle, etc.) and be tasked to design a warhead that producesthe required military effectiveness while minimizing collateral damage. Experienced weapondesigners from all three labs have stated to NNSA headquarters that the current StockpileStewardship Program (maintenance of the enduring stockpile) is not sufficient to provide the rangeof opportunities necessary to train and mentor the next generation of designers. (129) ACI, it is argued, will provide such training. The purportedly leaked NPR stated that ACI "will provide unique opportunities to train our next generation of weapon designers and engineers." (130) LosAlamos Director John Browne stated that ACI articulates a strategy for ... transferring nuclear warhead design knowledge, and exercising design skills. This initiative provides an outstanding opportunityfor the nuclear weapons complex to ensure that existing expertise is transferred to a future generationof stockpile stewards, and to extend the front-line weapons lifetimes beyond that of the designerswho designed and tested them. (131) ACI will also develop new links between the weapons community and DOD agencies. It is helpful, proponents believe, for some members of the weapons community to have personal contactswith members of the U.S. Strategic Command and the Defense Threat Reduction Agency, amongothers, to gain an understanding of what weapons might be of value to DOD, and to give DOD asense of what weapons technologies may be available. The harshest critics of nuclear weapons believe that there is no need to keep alive the skills to design new weapons. Current weapons, they argue, are more than sufficient, and their designs havebeen proven. Until nuclear weapons are abolished, these critics would maintain the existingstockpile; in their view, the multibillion-dollar stockpile stewardship program is excessive for thispurpose. This school of thought would reject ACI completely. Some critics of ACI see a value in maintaining design skills so as to improve U.S. ability to understand warhead problems that may emerge, to understand how changes made duringrefurbishment may affect weapon performance, and to design replacement weapons should that benecessary. Such skills can be maintained, they would argue, by designing weapons similar to currentones rather than designing new types of weapons. That approach would not require ACI. Critics would question training as a justification for ACI. The number of people trained by ACIis very small, and there are already training programs for junior staff. In October 1998, Sandiastarted an Intern Program, a two-year course for new employees on the nuclear weapons programand Sandia's role in it. In October 1996, Los Alamos started the Theoretical Institute forThermonuclear and Nuclear Studies on nuclear weapons design for new personnel in that field. (132) Some question whether ACI, as proposed for FY2004, offers a useful plan for maintaining weapon design capabilities. For example, Raymond Jeanloz, Professor of Earth and PlanetaryScience at University of California, Berkeley, and a member of the University of CaliforniaPresident's Council, (133) argues that repackagingan existing bomb with no work on the nuclearexplosive component (RNEP), working on low-yield designs (an area extensively studied in the past,including with underground tests), or other ideas proposed for ACI amount more to reworking oldground than to significantly exercising design activity. (134) There is no need for new links between DOD and the nuclear weapons establishment, in the critics' view, because several DOD-DOE groups have been in existence for many years. Theseinclude the Nuclear Weapons Council, program officer groups, and the Stockpile Assessment Teamof Strategic Command's Strategic Advisory Group. For FY2004, the Administration requested $15.0 million to continue a study, which began in May 2003, of the Robust Nuclear Earth Penetrator, or RNEP. The NDAA provided the amountrequested, while the EWDAA provided $7.5 million. The FY2005 request is $27.6 million. The RNEP study, part of the Advanced Concepts Initiative, is examining the desirability and feasibility of modifying an existing B61 or B83 bomb to enable it to penetrate into the ground beforedetonating. By so doing, a weapon of specified yield would have a much greater effect againsthardened and deeply buried targets -- such as are used in some rogue states to protect key assets --than would a nuclear weapon of the same yield burst on the Earth's surface. Modification wouldmainly involve strengthening the weapon's case, rather than changing the nuclear explosive package. In the 1990s, DOE conducted a similar modification, converting some B61 bombs into B61-11 earthpenetrators, a modification that did not require nuclear testing. If NNSA converts B61s or B83s intoRNEPs, current plans envision that the conversion would not require nuclear testing. While the histories of earth penetrator weapons and the Spratt-Furse ban on low-yield R&D are intertwined, repeal of that ban does not necessarily open the door to RNEP. The ban applied onlyto weapons under 5 kt; RNEP, if it proceeds, would be a modification of the B61 bomb or the B83bomb, both of which are available in a number of yields, with the maximum said to be far above 5kt. Further, both have been in the stockpile for many years. Even if they had yields only below 5kt, the ban applied only to weapons that had not entered production by November 30, 1993. (135) Structures can be hardened and deeply buried in an attempt to withstand an attack by conventional munitions. Such structures may be used to protect leadership, biological agentproduction facilities, nuclear weapon storage sites, and other strategic targets. Reports referencesuch facilities in Iraq, North Korea, and Iran. (136) A DOD-DOE report indicates that thousands of suchstructures exist worldwide, many in nations that do not pose a threat to the United States. (137) While special operations forces or precision-guided conventional bombs might defeat deeply buried structures by attacking power supplies, ventilation systems, and exits, these structures wouldprobably have backup power supplies, escape tunnels, etc. Accordingly, destruction would be a surermeans of completely eliminating the threat they pose. Facilities at shallow depths, perhaps 10meters, are vulnerable to destruction by conventional munitions that penetrate the ground. Destruction of facilities buried at greater depths may require a nuclear weapon. During the ColdWar, the United States deployed the B53 nuclear bomb, a weapon said to have a yield of somemegatons (thousands of kilotons), for such missions. A weapon of such high yield would create blastand fallout that would destroy surface structures and kill inhabitants out to many miles; in the currentenvironment, a President would be unlikely to order its use against a target in a rogue state so as toavoid killing very large numbers of civilians. As C. Paul Robinson, President of Sandia NationalLaboratories, said, we would be self-deterred from using high-yield weapons. (138) At issue, insofar as the nuclear option is concerned, is how to destroy hardened and deeplyburied facilities with lower-yield weapons. Much of the energy of a ground-burst weapon isreflected back into the air. Scientists on both sides of the larger debate agree that a nuclear weaponthat penetrates even a short distance into the ground will transfer much more of its energy intoground shock, which can destroy buried targets. For example, Sandia reports that a 1-megaton(1,000-kiloton) weapon burst on the Earth's surface has about the same effect on buried targets asa 33-kiloton weapon detonated at 5 meters depth. Most of the payoff comes from burying theweapon several meters in the ground, especially for lower-yield weapons; burial beyond severalmeters produces diminishing returns. (139) Figure1 illustrates these points. Robert Nelson reportssimilar data. (140) Thus a lower-yield earthpenetrator weapon (EPW) can have the same effect onburied targets as a much higher-yield surface-burst weapon. This large reduction in yield, in turn,reduces fallout and blast damage. A common misconception is that detonating a weapon a fewmeters underground reduces fallout; in fact, a weapon of specified yield detonated at shallow depthin wet soil will create more fallout than if it were detonated on the surface. The reduction in falloutfrom lower yield, though, can offset the increase in fallout from a shallow subsurface burst. Continuing the example just noted, fallout with a specific intensity (150 rads in 24 hours for anunsheltered person) would, by one calculation, be generated over 2,700 square kilometers by a1-megaton surface-burst weapon, or over 150 square kilometers by a 33-kiloton weapon detonatedat a depth of 5 meters. (141) Figure 2 illustratesthese points (though it assumes individuals would besheltered). Lower-yield weapons, even EPWs, may not suffice to destroy all buried targets. StephenYounger, then Associate Laboratory Director for Nuclear Weapons, Los Alamos NationalLaboratory, wrote, "Some very hard targets require high yield to destroy them. No application ofconventional explosives or even lower-yield nuclear explosives will destroy such targets, whichmight include hardened structures buried beneath hundreds of feet of earth or rock." Indeed,"Superhard targets, such as those found under certain Russian mountains, may not be able to bedefeated reliably by even high-yield nuclear weapons." (142) Similarly, Robert Nelson wrote, "Alow-yield nuclear EPW would still only be able to destroy facilities relatively close to the surface ...Very large yield (>~100 kt) weapons are still required to destroy facilities buried under theequivalent of 100 m of concrete." (143) Even low-yield EPWs would generate much fallout. For example, photographs of two nuclear tests show the fallout cloud generated by low-yield weapons buried hundreds of feet with theemplacement hole sealed. A test named "Des Moines,"a 2.9-kiloton test conducted June 13, 1962,at the Nevada Test Site, was buried in a mountain. Pictures show a huge cloud of radioactive dust,with cars and pickups of spectators rushing away from it. Another test, "Baneberry," with a yieldof 10 kt, was conducted December 18, 1970, in a vertical shaft some 900 feet deep at the NevadaTest Site. (144) The fallout cloud rose about10,000 feet into the air, (145) and was tracked tothe Canadianborder. (146) According to DOE, "FollowingBaneberry, new containment procedures were adopted toprevent a similar occurrence." (147) The minimumdepth of burial for even the smallest test is 600feet. (148) An EPW, in contrast, would be buriedperhaps a few tens of feet and the path by which itpenetrated the earth would not be sealed. Fallout from such weapons would not be contained at all,and standard-yield EPWs under consideration would produce more fallout than low-yield EPWs. Improvements in accuracy also permit a reduction in warhead yield for attacking buried targets. Four Los Alamos scientists calculate that a moderately hard structure buried at shallow depth couldbe destroyed by a 15-kiloton weapon with an accuracy of 100 meters, or by a 0.5-kiloton weaponwith an accuracy of 5 meters, with both weapons burst on the surface. Earth penetration furtherreduces the yield needed. The combination of improved accuracy and earth penetration, they argue,sharply reduces the yield required and the collateral damage. (149) While the foregoing discussion has focused on technical aspects of nuclear weapon effects, it must be kept in mind that even low-yield earth penetrator weapons could, depending on thecircumstances, kill large numbers of people. The calculation for such a weapon burst nearDamascus, cited above, illustrates this point. Interest in destroying buried targets traces back to the early days of the Cold War when the Soviet Union first built underground command posts and missile silos. Current interest in EPWs foruse against HDBTs traces back to the Persian Gulf War, as is detailed in the earlier section onlow-yield R&D. This latter experience led to the development of the current EPW, the B61 mod 11, or B61-11. (B61 is the basic weapon, while the mod number indicates a modification, converting the bomb toa specific purpose, delivery by a particular aircraft, etc.) The modification involved a strong caseand some internal strengthening. Because it entailed only minimal changes to the nuclear explosivepackage, DOE did not conduct nuclear tests of the weapon. (150) DOE converted a small number ofolder B61-7 bombs to B61-11s in the mid- to late 1990s. The B61-11, however, has its limitations. The Nuclear Posture Review stated, according to purportedly leaked excerpts, that the weapon "hasa very limited ground penetration capability" and "cannot survive penetration into many types ofterrain in which hardened underground facilities are located." (151) The growth in number of buried targets and the weaknesses of the B61-11 led DOD and DOE to study RNEP. According to a U.S. Strategic Command officer, Our current arsenal, developed in the Cold War, was not designed to address this growing worldwide threat [of buried targets]. There are facilities todaywhich we either cannot defeat, even with existing nuclear weapons, or must hold at risk using a largenumber of weapons. As a result, both the Department of Defense and the Department of Energy,through the Nuclear Weapons Council, have approved a study of how to effectively counter thisthreat. This study of a Robust Nuclear Earth Penetrator (RNEP) will evaluate modifications toexisting nuclear weapons that do not require nuclear testing. (152) Linton Brooks, then Acting Administrator of NNSA, provided further details on the study: this study will examine whether or not two existing warheads in the stockpile -- the B61 and the B83 -- can be sufficiently hardened through casemodifications and other work to allow the weapons to survive penetration into various geologiesbefore detonating. This would enhance the Nation's ability to hold hard and deeply buried targetsat risk. (153) Thus RNEP would not necessarily be a low-yield weapon. John Gordon, then Director of the National Nuclear Security Administration, stated in 2002 that the emphasis is on "a more standardyield system called an enhanced penetrator ... There's no design work going on low-yield nuclearweapons." (154) The cited advantage of the higheryield is that while EPWs can destroy a number ofburied targets with less yield than a surface-burst weapon, increasing yield increases the radius ofdamage to buried targets, some of which may be too hard, or too deep, to destroy with a low-yieldweapon. In July 2003, NNSA provided further detail on this topic. The ongoing RNEP study willselect one of the two candidate bombs. The study aims to retain all existing capabilities. It is notpart of the study to create new, lower yields. (155) NNSA had planned to begin the RNEP study in FY2002 by redirecting $10 million from Directed Stockpile Work Research and Development, a program within stockpile stewardship. (156) As discussed below, however, FY2003 legislation had the effect of delaying this study into FY2003. For FY2003, the Administration requested funds to begin this RNEP study. The planned budget forthe study was $15.0 million a year for FY2003-FY2005, inclusive. Brooks said, "The RNEPfeasibility and cost study is currently scheduled for completion in 2006; however, we are looking atopportunities to reduce study time." (157) The House Armed Services Committee supported the FY2003 request. It included a provision calling for a National Academy of Sciences study on the short- and long-term effects on civilians andmilitary forces of an EPW, an above-ground nuclear explosion to destroy buried targets, and use ofconventional weapons to destroy WMD storage or production facilities. (158) Representative Markeyoffered an amendment on the House floor to bar permanently the use of funds to develop or test anuclear EPW, and to bar FY2003 funds for conducting a feasibility study of that weapon. Theamendment was defeated, 172-243, on May 9, 2002. (159) The Senate Armed Services Committee recommended eliminating funds for RNEP and requiring the Secretaries of Defense and Energy to report on RNEP, including military requirements,employment policy, targets, and ability of conventional weapons to "address" types of targets thatRNEP would hold at risk. (160) The conferencebill included the House provision for a NationalAcademy of Sciences study; as of August 2003, it appears that the study will be completed aroundApril 2004. (161) The conference bill fully fundedRNEP but barred obligation of FY2003 funds forit until 30 days after the report called for by the Senate Armed Services Committee had beensubmitted to the Armed Services Committees. DOD submitted that report in classified form onMarch 19, 2003; the study began on May 1, 2003, with a meeting of NNSA, DOD, and nuclearweapons laboratory personnel in Washington. The FY2003 Energy and Water DevelopmentAppropriations Act included the amount requested for Stockpile R&D, the category within DirectedStockpile Work that includes RNEP. (162) NNSAindicated that this measure provided the full $15.0million requested for RNEP. (163) For FY2004, the Armed Services Committees and their respective Houses included the full $15.0 million request in the defense authorization bills. The House rejected, 199-226, an amendmentby Representative Tauscher to transfer all $15.0 million from RNEP (and $6.0 million from ACI)to conventional technology for use against hard and deeply buried targets. The Senate tabled, 56-41,an amendment by Senator Dorgan to bar use of funds for RNEP, and adopted an amendment bySenator Nelson (FL) to require congressional authorization to start engineering development orsubsequent phases of RNEP. In action on the FY2004 energy and water development appropriations bill, the House Appropriations Committee recommended reducing RNEP funds to $5.0 million, for reasons notedearlier in the "Legislative Actions in the FY2004 Budget Cycle" section under ACI. The HouseAppropriations Committee recommended having RNEP funds support penetration by conventionalas well as nuclear weapons: The Committee directs that funding provided for the Robust Nuclear Earth Penetrator (RNEP) be used for research on the problem of deep earthpenetration through hard or hardened surfaces, including modeling and simulation of the use ofadvanced materials, and varied trajectories and speeds. The Committee further directs that theNational Nuclear Security Administration (NNSA) coordinate the RNEP research program withongoing programs at the Department of Defense relating to research on earth penetration tomaximize the dual-use applicability for both conventional and nuclearweapons. (164) The House agreed to this bill without amending the Weapons Activities account, which includes RNEP. The Senate Appropriations Committee recommended providing $15 million for RNEP. On September 16, as detailed under ACI, the Senate tabled an amendment by Senator Feinstein toeliminate all FY2004 funds requested for RNEP and adopted an amendment by Senator Jack Reedthat barred use of funds provided by H.R. 2754 for phase 3 or 6.3 or beyond foradvanced nuclear weapon concepts including RNEP. RNEP was at issue in the Energy and Water Development Appropriations Act conference. Action on it was of concern to many because, of the four initiatives, RNEP is the one closest todeploying a weapon in response to NPR guidance. Non-RNEP ACI studies are in early stages, andenhanced test readiness and rescinding the low-yield ban are not weapons programs. In contrast,RNEP, if it proceeds, would involve conversion of an existing weapon. Conversion, under thecurrent plan, would not involve nuclear testing, and would require a much smaller production effortthan would production of complete new weapons. Even if the conference decided to proceed withthe RNEP study, and if Congress later decided to proceed with the actual modification, deploymentwould not likely be quick; it took six years to develop the B61-11 and certify it for acceptance intothe nuclear stockpile, (165) though lessons learnedfrom that process might expedite deployment ofRNEP. The NDAA provided the funds requested for RNEP; conferees did not comment on it. THE EWDAA provided $7.5 million. Further, The conferees remind the Administration that none of the funds provided may be used for activities at the engineering development phases, phase 3 or 6.3,or beyond, in support of advanced nuclear weapons concepts, including the Robust Nuclear EarthPenetrator. (166) The FY2005 request document seems to cast serious doubt on assertions that RNEP is only a study. Beginning with the FY2005 budget cycle, NNSA presented a detailed four-year projectionalong with the current request; for RNEP, the figures are: FY2005, $27.6 million; FY2006, $95.0million; FY2007, $145.4 million; FY2008, $128.4 million; and FY2009, $88.4 million, for a five-year total of $484.7 million. (167) Further,the document states the performance targets for RNEPas follows: FY2005: "Complete 56% of scheduled RNEP Phase 6.2/6.2A activity." Further, "In FY2005, subsystem tests and a full system test of the proposed design will becompleted." FY2006: "Complete 100% of scheduled RNEP Phase 6.2/6.2A activity." FY2007: "Report results of RNEP Phase 6.2/6.2A to Nuclear Weapons Council [a joint DOD-DOE agency that coordinates nuclear weapon requirements, productionschedules, etc.] Obtain, if applicable, RNEP Phase 6.3 appropriate authorization. Complete initial25% of scheduled RNEP Phase 6.3 activity (if authorized)." FY2008: "Complete 65% of RNEP Phase 6.3 activity (if appropriately authorized)." FY2009: "Complete 100% of scheduled RNEP Phase 6.3 activity (if authorized). Complete 15% of scheduled RNEP Phase 6.4 activity (if appropriatelyauthorized)." (168) An NNSA manager responsible for the program maintained that the budget increase beyond FY2005 is an artifact of the budget process. He stated that the money was inserted in the out yearsas a "placeholder" to protect the option of proceeding with RNEP. Were this not done, it is arguedthat NNSA would face two choices that it deems unsatisfactory: (1) By the time the budget for onefiscal year is submitted, the budget for the next fiscal year is largely fixed; without the placeholder,a decision to proceed with RNEP could therefore not be implemented until the second fiscal year. (2) Alternatively, without the placeholder, a decision to proceed with RNEP could be implementedpromptly only by taking the needed funds out of other programs. Similarly, the move to Phases 6.3and 6.4 reflects how the program might be expected to advance if it proceeds. The official, however,indicated that no decision has been made on whether or not to proceed with RNEP pendingcompletion of the study. (169) The RNEP study was initially projected to cost $45 million -- $15 million a year for FY2003-FY2005. The numbers, however, have changed for each year. For FY2003, delay insubmission of a DOD study required by the FY2003 National Defense Authorization Act ( P.L.107-314 , Sec. 3146) delayed the start of NNSA's RNEP study; as a result, $6.0 million was spentof the $15.0 million appropriated. For FY2004, Congress cut the RNEP appropriation to $7.5million. For FY2005, the request is $27.6 million, vs. the $15.0 million originally planned. Finally,FY2006, not FY2005, will be the last year of the RNEP study; NNSA estimates the FY2006 requestat $30 million. The four-year total is about $71 million. Owing to the uncertainties of the program,NNSA could not, as of early March 2004, project an RNEP budget for FY2007-FY2009. According to NNSA, the study's cost has grown for a number of reasons. The $45 million did not take into account participation in the study by Y-12 Plant, which would make components ofRNEP, or of Pantex Plant, which would convert existing weapons into RNEPs; their participationadds some $2 million. DOE has imposed additional project management requirements that add $2million. The rest of the increase comes from a better definition of the requirements of the study,refinement of cost estimates, and an increase in surety (safety, security, and use control) of theproposed weapon. On the latter point, DOE requires that any modifications of a nuclear weaponlook for ways to increase its surety. (170) NNSAsays it has found ways to increase RNEP surety, andplans to do so. Critics are likely to view the outyear plan in the FY2005 budget request document as indicating an intent to proceed with RNEP. They may also question how the cost of the RNEP study grewsome 58%. Congress, the media, and others, however, have not generally had access to theinformation presented here on the RNEP budget. This report will add views of critics and otherswhen they become available. Would RNEP promote deterrence? In the post-9/11 world, a new set of threats has come to the fore, including threats from rogue statesseeking WMD. To deter rogue states, RNEP supporters maintain that the United States must holdat risk those assets that the leaders value most, and that in some instances RNEP may be the onlyway to do so. Everet Beckner, NNSA Deputy Administrator for Defense Programs, reportedlyopined: "If we've got serious enemies in the world, I would like them to be deterred as much aspossible by our military capabilities. ... I want them to be afraid of us." (171) Similarly, the HousePolicy Committee argued: Credible deterrence requires that the President be able to hold at risk the things most important to an adversary who would seek to attack America. Deepunderground facilities, including hardened bunkers and hard-rock tunnels, provide effective havenfrom attack. ... The President should have options -- the options of conventional forces, of precision conventional weapons, and of nuclear weapons that are capable ofholding all targets at risk. (172) Critics question whether it is correct to apply the Cold War model of deterrence to rogue states, whose leaders might not be overly concerned about a U.S. nuclear attack on a few facilities in theirnation or about the casualties it would cause. They might even expect to benefit from worldwidecondemnation of the United States that an attack would likely generate. Furthermore, some RNEPcritics argue that the use of any nuclear weapon would not be credible because of the massivedamage and casualties that would result, and thus would not enhance deterrence. Would RNEP provide added military value? RNEP's supporters note that the Nuclear Weapons Council, a DOD-DOE organization chaired byDOD to coordinate nuclear weapons activities between the two agencies, approved the conduct ofthe RNEP study, and that DOD developed an Operational Requirements Document for RNEP thatgives the desired specifications and capabilities. (173) They assert that RNEP is not redundant with theB61-11 because of the latter weapon's limitations. Critics assert that nuclear EPWs are not needed. They note Brooks's statement, "we have no requirement to actually develop any new weapons at this time." (174) Representative Skelton stated,"the key to defeating hard deeply buried targets lies more in accuracy and penetration rather than theinherent explosive capability." (175) Manyconventional options are available for defeating suchtargets. (176) U.S. forces demonstrated the abilityof ground troops to attack tunnel complexes inAfghanistan and the ability of precision conventional ordnance to destroy underground bunkers inIraq. It would be better, in this view, to spend funds on improving the ability to destroy these targetswith conventional means rather than on nuclear weapons. Would fallout from RNEP bar use of the weapon? Critics of RNEP point to at least one claim by EPW supporters that low-yield EPWs would limitcollateral damage sufficiently to contemplate their use. (177) (RNEP could well have significantlyhigher yields.) Critics challenge this view. They argue that no EPW could penetrate deeply enoughto be fully contained, so that "the goal of a benign earth-penetrating nuclear weapon is physicallyimpossible," (178) as the descriptions of nucleartests Des Moines and Baneberry make clear. Forexample, Nelson calculates A one kiloton earth-penetrating "mininuke" used in a typical third-world urban environment would spread a lethal dose of radioactive fallout over severalsquare kilometers, resulting in tens of thousands of civilianfatalities. (179) Under these conditions, it is argued, RNEP would be unusable: the vast resulting collateral damage to noncombatant populations would presumably limit employment of the weapon to retaliatory, or "intra-war"preemptive use in scenarios of all-out warfare, involving another nuclear weapon-state with theresources to both construct such deeply buried targets and threaten the survival of the U.S. as anation-state -- that is, China and Russia. ... the weapon is strategically, legally, and morallyunsuitable for preemptive or retaliatory counter-proliferationwarfare. (180) Similarly, Representative Frank stated: ... we have said in Afghanistan, in Iraq, we are these days likely to be ... in an effort to rescue a people from an oppressive government. How welcomewill our wagon be when it comes to nuclear arms? Do we tell the people of Afghanistan, do notworry, we will free you from the Taliban by using nuclear weapons within your country. ... I thinkyou undercut the whole notion that America can be coming to the rescue of the victims ofoppression. (181) The argument over the extent of fallout RNEP would cause is, in the view of RNEP supporters,secondary to the key point, which, they contend, is that circumstances might call for the use of thisweapon. A President always has various military options, and no President since 1945 has chosento use nuclear weapons. Nonetheless, nuclear weapons might at some point be the only way toachieve a critical military objective, supporters argue. In that case, EPWs would be preferable in thisview because they could achieve the desired result at a lower yield, and with less fallout, thansurface-burst weapons. For some such uses, the B61-11 might suffice, but RNEP may be neededfor others. Would RNEP have an adverse effect on nuclear nonproliferation? On the issue of whether the United States should avoidresearching EPWs in order to lead the rest of the world by example, Representative Thornberryargued: It is an interesting line of argument to say that we make the world safer when we tie our hands behind our back, that the problem is with the United States,and that if we would just set a good example, the Saddam Husseins and the Kim Jong Ils and eventhe Putins would fall right in line ... The problem is not American strength. ... Peace comes whenAmerica is strong and when America has additional options. (182) The United States, in the view of RNEP's supporters, will not cause other nations to abandon WMD programs by abandoning RNEP. Nor, they suspect, would study, development, and deployment ofRNEP cause nations to pursue WMD programs; they assert that deployment of the B61-11 had nosuch effect, so they doubt that a second EPW would, either. Critics see grave proliferation risks arising from RNEP. They ask how the United States can preach to rogue states to restrain their nuclear programs while this nation is exploring new nuclearweapon capabilities. They see RNEP as tailored for use against rogue states, and fear that thatimplies a U.S. willingness to use the weapon for that purpose. They foresee serious consequencesfrom such use. As Representative Markey said, using one nuclear weapon "will destroy our moraland political credibility to end the spread of weapons of mass destruction, especially nuclearweapons." (183) In this view, it is inconsistentfor the United States to fight Iraq because of WMD andthen to develop WMD itself. Even studying RNEP, critics contend, would imply that the UnitedStates is considering its use, which could make nonnuclear weapon states accelerate their efforts toobtain nuclear weapons to deter U.S. attack on them, or to build new underground facilities at muchgreater depth. Will Targets Be Available for RNEP? Fewer nations hold potential future targets for RNEP in early 2004 than was the case a year earlier. Anygovernment that emerges in Iraq would in all probability be unable and unwilling to develop WMDfor many years. Libya is in the process of giving up its WMD; indeed, President Bush praisedColonel Muammar Ghadafi of Libya for making "the right decision" in ending its WMD programs. (184) Moving from the strategic to the tactical level, a successful attack on a deeply buried facility by an earth penetrator weapon would require precise targeting information. Yet events of the lastyear raise troubling questions on this score. Judging from press reports, U.S. intelligence failed todetect entire WMD programs in Libya, Iran, and North Korea, and detected chemical, biological, andnuclear weapon programs in Iraq that apparently did not exist. Given that record, critics may wellquestion whether intelligence can be sufficiently precise and reliable to pinpoint undergroundbunkers to attack. RNEP's supporters would note that Iran and North Korea pose a much more serious nuclear threat than did Iraq and Libya. Iran agreed in December 2003, under pressure from Britain, France,Germany, and Russia, to permit more intrusive inspections by the International Atomic EnergyAgency (IAEA). It did so in order "to prove that the Iranian nuclear program is for civilianpurposes," Gholam Reza Aghazadeh, Iran's Vice President, was quoted as saying. (185) Theinspections, however, discovered equipment and materials that could be linked to nuclearweapons. (186) Shortly after these discoveries,Iran appeared to begin pulling back from full disclosure. A senior Iranian official reportedly said that his country "has given enough answers to the [IAEA's]questions. ... We have other research projects which we haven't announced to the agency and wedon't think it is necessary to announce to the agency." (187) North Korea's statements have beencontradictory and confusing for some time, but press reports have presented evidence that that nationhas a program to produce highly enriched uranium, plutonium, and nuclear weapons, and that itreceived aid from Pakistan. (188) Regarding the ability of tactical intelligence to provide the basis for nuclear weapon use, RNEP supporters would note that the bar against such use is extremely high, but that many intelligenceassets, whether satellite imagery, communication intercepts, or information from defectors, wouldbe brought to bear to ensure that the target was in fact connected with WMD. During the Cold War, when the United States conducted nuclear tests on an ongoing basis, it took 18-24 months to prepare a typical test. With the end of the Cold War and the start of amoratorium on nuclear tests, the Clinton Administration required a U.S. ability to conduct a nucleartest in at most 24 to 36 months of a presidential order to conduct the test. DOD and NNSA,however, found that it would take close to 36 months to test, and they are uncertain as to theircontinued ability to test within even this length of time. Accordingly, they recommended "enhancedtest readiness," or moving to and maintaining a posture in which tests could be conducted in lesstime. They supported an 18-month test readiness posture. For FY2004, the Administration requested $24.9 million to maintain the existing posture and transition to the 18-month posture. (189) Thisfigure is in addition to funds to maintain the Nevada TestSite, where NNSA would conduct any nuclear tests. NNSA indicated that it has tightly integratedthe test readiness and enhanced test readiness programs into one program called "test readiness," sothat it would be difficult to split them into the two components. Of the requested $24.9 million,however, it would take at least $15.0 million to maintain the current 24- to 36-month posture. (190) TheNDAA provided the amount requested for test readiness; the EWDAA did as well, but confereesstated their expectation that NNSA would focus on restoring a 24-month posture before requesting"significant additional funds to pursue" an 18-month posture. Consistent with the legislation, NNSA plans to move toward a 24-month readiness posture in FY2004 and achieve it in early FY2005. It plans to reach an 18-month posture later in FY2005, andrequests $30.0 million for FY2005 for test readiness. Between 1951 and 1992, the United States conducted nuclear tests on a routine basis, with the numbers ranging from 96 in 1962, to 0 in 1959 and 1960 due to a moratorium, to 6 in 1992, the mostrecent year of U.S. testing, for a total of 1,030 tests. (191) As a result, the United States was alwaysprepared to test, although "18 months was a minimal time to design and prepare most tests." (192) AllU.S. tests since 1963 have been held underground, almost all at the Nevada Test Site. In October 1992, the United States began a moratorium on nuclear testing that continues to the present. Ambassador Linton Brooks, NNSA Administrator, said in December 2003, "The policy ofthe United States is that there is not now a need for testing." He further stated that he did not see areason to resume testing in the next two or three years. (193) During the era of testing, DOE and its predecessors conducted several types of nuclear tests, each with its own goals, schedules, and characteristics. Some are explained here; it is useful tounderstand the differences in order to place test readiness in context. Weapons modification and development. New-design warheads ( i.e. those with a new primary or secondary stage, typically required nuclear testing. Most U.S. nuclear testswere for weapons development. In addition, nuclear testing was occasionally used to understand aproblem in a stockpiled warhead, or to check a fix made to correct the problem, or for bothpurposes. (194) To conduct such tests, the labshad to design the test, fabricate a one-of-a-kind testdevice, fabricate the "diagnostics" (the elaborate set of instruments needed to gather the data), andemplace and seal the device and diagnostics in a shaft. These tests typically required 18 to 24months, (195) counting from when the test wasplaced on the test calendar until it was conducted. (196) Most tests used standard diagnostics; designing non-standard diagnostics added time. Developinga new warhead typically required several tests; some fixes required one test, others needed several. Most modification and development tests were conducted in vertical shafts in the ground; drillingthem typically took six to eight weeks. (197) Effects tests. Other tests examined how a nuclear explosion would affect military equipment, materials, electronics, nuclear warheads, etc., by exposing them to radiationfrom a nuclear explosion. These tests typically used a low-yield nuclear device designed to be areasonably predictable radiation source; in these cases, design and instrumentation of the deviceitself were not at issue. The experiments required elaborate preparation, such as creating a vacuumchamber to test how x-rays would affect satellites. Effects tests typically used horizontal tunnels andexperimental chambers bored into a mountain; excavation of the site for one such test, using threeshifts a day, might take a year. (198) Planning theexcavation, emplacing the experiments, and sealingthe tunnels took added time. Such tests were "inherently a two to three year process." (199) A smallfraction of U.S. tests were of this type. Stockpile confidence tests. Beginning in the 1970s, DOE would pull a warhead from the field (e.g., a bomb deployed at a bomber base), modify it minimally as needed to makecertain that its yield would not exceed the 150-kt ceiling of the Threshold Test Ban Treaty and tomake it compatible with testing procedures, and test it. The purpose was to assure that weaponsproduced in quantity and then deployed -- as distinct from one-of-a-kind devices built for weaponsdevelopment tests -- had the expected yield and met other basic performance criteria. These teststypically used diagnostics comparable to weapon development tests but less complex than for effectstests. They required less time for preparation than weapon development tests, typically about a year. They were conducted in vertical shafts, a little less than once a year. (200) Tests intended as political statements. When the Soviet Union terminated the 1958-1961 nuclear test moratorium in September 1961, the United States responded with a seriesof tests beginning two weeks later, (201) eventhough, by one analysis, "The United States was notprepared to conduct major experiments!" (202) All these tests had yields below 20 kt. (203) Suchtestsmight be done in the future to respond to a nuclear test by Russia or China. They would surely useexisting instruments and nuclear devices, and would probably involve experiments planned inadvance to maximize their technical value. NNSA finds that it may be feasible to conduct a test ofthis sort in as little as six months, though that posture would entail added costs compared to an18-month posture, would divert personnel from other tasks, and would require considerable advancepreparation. (204) At present, the only nuclear-related tests that NNSA is conducting are "subcritical experiments" (SCEs). CRS offers the following definition based on documents and on discussionswith DOE and laboratory staff: "Subcritical experiments involve chemical high explosives and fissilematerials in configurations and quantities such that no self-sustaining nuclear fission chain reactioncan result. In these experiments, the chemical high explosives are used to generate high pressuresthat are applied to the fissile materials." Twenty SCEs were held between July 1997 and September2003. SCEs study the behavior of plutonium. (205) One common purpose is to determine if materialchanges induced by radioactive decay of aged plutonium would degrade weapon performance. Allhave been held in a tunnel complex about 1,000 feet underground at Nevada Test Site. The UnitedStates sees them as consistent with the moratorium because they produce no fission chain reaction. They are also of value for maintaining the test site and exercising test-related skills. NNSA plans to conduct three SCEs in FY2004 and two or more in FY2005. (206) One of theFY2004 experiments, named "Armando," and two FY2005 tests, "Unicorn" and "Krakatau," willbe more complex than many of the earlier experiments. Unicorn, for example, will be the firstconducted in a vertical shaft dug from the surface. According to NNSA, Initial site preparation for this experiment is underway. This activity, and the means for emplacement of the experimental hardware into the vertical hole,will appear visually similar to those employed in underground nuclear tests conducted prior to the1992 moratorium. ... In addition to providing important information for stockpile stewardship, theUnicorn subcritical experiment will exercise key NTS capabilities not otherwise exercised inexperiments carried out at the U1a complex. (207) Some of the smaller, simpler SCEs held at the U1a complex may be replaced by the JointActinide Shock Physics Experimental Research Facility, a gas gun that accelerates a projectile tohigh speed and sends it into a mass of plutonium. (208) As a result, the schedule of subcriticalexperiments for FY2005 and beyond is uncertain. (209) In the future, the most probable type of nuclear test (as distinct from SCEs) would be to resolve a defect that emerged in a stockpiled weapon to remedy a safety or reliability problem. Such testswould probably be similar in form to weapon modification or development tests. Regardless ofpurpose, any future tests would be the first done in conjunction with the stockpile stewardshipprogram, which came into existence after the moratorium began. Preparation for testing wouldinvolve three parallel tracks: (1): Technical work involving the nuclear explosive. To fix a warhead problem, NNSA would "assess the problem, develop and implement a solution, and plan and executea test that would provide the precise information needed to certify the 'fix.'" (210) NNSA estimates thatit would take around 18 months to prepare this type of test. (211) As discussed below, some questionthis estimate. Technical preparation for other types of tests would take different lengths of time. Tests to make a political statement could be done in less than 18 months if the needed supportactivities were in place, and effects tests would take more than 18 months. (2): Support activities that can be done in advance to prepare for a generic test, such as conducting analyses of test safety, training personnel who can prepare the diagnosticequipment for a test, updating test-related agreements with federal and state agencies to ensurecompliance with federal regulations, and obtaining or locating heavy equipment needed to preparefor a test. (212) (3): Support activities for a specific test, such as designing and building instruments to acquire the needed data, and analyzing the safety of the particular test in itsemplacement site. Test readiness involves bringing the generic steps to the point where completing them and support activities for a specific test would take a specified length of time. An NNSA source indicatedthat the need to spend 18 months to complete the first track is what led NNSA to select 18 monthsas the test readiness goal. (213) When the 1992 moratorium started, it was unclear how long it would last. The legislation creating the moratorium permitted it to end no sooner than July 1, 1993, but President Clintoncontinued it several times in the next several years. At the same time, he considered the possibilityof a return to testing. His decision in August 1995 to press for a true zero-yield CTBT (as opposedto a treaty permitting nuclear tests of very low yield) was conditioned on several "safeguards,"actions that the United States would take consistent with the treaty in order to protect U.S. interestsdespite the loss of testing. Safeguard F was: The understanding that if the President of the United States is informed by the Secretary of Defense and the Secretary of Energy ... that a high level ofconfidence in the safety or reliability of a nuclear weapon type which the two Secretaries considerto be critical to our nuclear deterrent could no longer be certified, the President, in consultation withCongress, would be prepared to withdraw from the CTBT under the standard "supreme nationalinterests" clause in order to conduct whatever testing might berequired. (214) As a result, it was unclear how ready the nuclear weapons laboratories and the Nevada Test Site should be to conduct a nuclear test. Maintaining readiness to conduct a test promptly would increasecost at the test site and the labs, and require personnel to spend time on readiness rather than onongoing tasks. In a November 1993 Presidential Decision Directive, President Clinton decided tomaintain the ability to conduct a nuclear test in 24 to 36 months of a presidential order to test. Thisso-called test readiness posture was first established in FY1996. (215) Congress, the Administration, and others have expressed concern over the length of time needed to test. In January 1996, the Senate passed, 87-4, the resolution of ratification of the START IITreaty. The resolution included a number of declarations expressing the sense of the Senate. Declaration 12(E) included the following language: "The United States is committed to maintainingthe Nevada Test Site at a level in which the United States will be able to resume testing within oneyear following a national decision to do so." (216) In its FY2001 report, the Foster panel argued thatthe current posture of 24 to 36 months was "excessive" and that the United States should not be ina position where increasing test readiness was viewed as indicating a major problem with the nucleararsenal. It noted some reluctance by NNSA and DOD to increasing test readiness because the testmoratorium seemed unlikely to end, so that funds spent on test readiness would not be available forother projects. It recommended a test readiness posture of 3-12 months, and having devices fornuclear testing available on short notice. (217) The purportedly leaked December 2001 Nuclear PostureReview asserted that "the current 2-3 year test readiness posture will not be sustainable as more andmore experienced test personnel retire" and "the 2-3 year posture may be too long to address anyserious defect that might be discovered." (218) There was some uncertainty over the state of test readiness. In October 1999, Secretary of Defense William Cohen, in a statement before the Senate Armed Services Committee, maintained,"We would be able to conduct a nuclear test within 18 months to two years of a decision to do so." (219) The next day, Secretary of Energy Bill Richardson testified, "The test site is up and running andready -- while we are capable of fielding a well instrumented test in 18 to 24 months, my scientiststell me we, if pressed, could conduct a simple test in less than one year." (220) DOD and NNSA conducted several studies between 1999 and 2003 to determine the time needed to conduct a nuclear test and what the optimum posture should be. Based on these studies, NNSA concluded that because of a loss of expertise and degradation of some specific capabilities, the U.S. would more likely require about 36 months to test,with less confidence in being able to achieve the 24-month end of the range. Furthermore, as timepasses without further action, the 36-month posture is viewed as increasingly atrisk. (221) While NNSA's Nevada Site Office, which manages the Nevada Test Site, received funds in 2001 and 2002 to buttress the 24- to 36-month test readiness posture, NNSA and DOD favoredenhancing test readiness. In 2002, they decided to plan to move to an 18-month posture. TheNuclear Weapons Council endorsed this transition in September 2002, and on March 13, 2003,NNSA provided Congress a notification of intent to make this transition. (222) Congress provided $15million, the requested amount for enhanced test readiness, in H.J.Res. 2 ( P.L. 108-7 ),the Consolidated Appropriations Resolution for FY2003. (223) In action on the FY2003 National Defense Authorization Act, P.L. 107-314 , a provision in the House bill required the Secretary of Energy to report, with the FY2004 budget submission, on a planand budget to enhance test readiness, specifically the time and budget for a one-year test readinessposture. The Senate bill had no similar provision. The conference bill contained a provision,Section 3142, as follows: SEC. 3142. Plans for Achieving Enhanced Readiness Posture for Resumption by the United States of Underground Nuclear Weapons Tests. (a) Plans Required. -- The Secretary of Energy, in consultation with the Administrator for Nuclear Security, shall prepare plans for achieving, not later than one year after the dateon which the plans are submitted under subsection (c), readiness postures of six months,12 months, 18 months, and 24 months for resumption by the United States of undergroundnuclear weapons tests. (b) Readiness Posture. -- For purposes of this section, a readiness posture of a specified number of months for resumption by the United States of underground nuclear weaponstests is achieved when the Department of Energy has the capability to resume such tests,if directed by the President to resume such tests, not later than the specified number ofmonths after the date on which the President so directs. (c) Report. -- The Secretary shall include with the budget justification materials submitted to Congress in support of the Department of Energy budget for FY2004 (as submitted withthe budget of the President under section 1105(a) of title 31, United States Code) a reporton the plans required by subsection (a). The report shall include -- (1) an assessment of the current readiness posture for resumption by the United States of underground nuclear weapons tests; (2) the plans required by subsection (a) and, for each such plan, the estimated cost for implementing such plan and an estimate of the annual cost ofmaintaining the readiness posture to which the plan relates; and (3) the recommendation of the Secretary, developed in consultation with the Secretary of Defense, as to the optimal readiness posture for resumption by theUnited States of underground nuclear weapons tests, including the basis for thatrecommendation. The conference report further "[encouraged] the Secretary of Energy to submit plans for achieving and the cost of achieving and maintaining the recommended test readiness posture with, or as partof, the report required by the provision." (224) The required report, with a cover date of April 2003, recommended a test readiness posture of 18 months; estimated that achieving this posture by the end of FY2005 would cost $83 million forthe three-year transition period and that sustaining it would cost $25-$30 million a year thereafterfor resources unique to nuclear testing, vs. about $15 million a year for this purpose for the currentposture; assessed that the erosion of expertise over time due to retirements and the long time sincethe last nuclear test make the 24-36 month posture more likely a 36-month posture, with even that"viewed as increasingly at risk"; and argued that a 6-12 month posture would require "a substantialdiversion of personnel and facilities at the laboratories and production plants," and at the shorter endof that posture "would represent a major redirection of the stockpile stewardship program." (225) NNSA also noted that it costs some $225 million a year to support general requirements at theNevada Test Site such as infrastructure, personnel, and equipment. In S. 1050 , Section 3132 required the Secretary of Energy to achieve an 18-month nuclear test readiness posture by October 1, 2006, and to maintain that posture thereafter. If as aresult of the review for the report required by P.L. 107-314 , Section 3142, the Secretary, inconsultation with the Administrator for Nuclear Security (the head of NNSA), determined that aposture other than 18 months was preferable, the Secretary "may, and is encouraged to, achieve andthereafter maintain" that posture, and shall submit a report stating the preferred posture and thereasons for it. NNSA's report on test readiness, however, indicated a preference for 18 months. In H.R. 1588 , Section 3116 permitted DOE to obligate not more than 40 percent ofFY2004 funds for nuclear test readiness until 30 days after DOE submitted the report required by P.L. 107-314 , Section 3142. NNSA submitted that report, dated April 2003. There were noamendments to these provisions, or any others on enhanced test readiness, in the House or Senate. The House Appropriations Committee recommended eliminating the $24.9 million requested for "enhanced test readiness" on grounds of inadequate budget justification and dubious programcredibility. It was "concerned with the open-ended commitment to increase significantly fundingfor the purpose of Enhanced Test Readiness without any budget analysis or program plan to evaluatethe efficiency or effectiveness of this funding increase." (226) It questioned NNSA's ability to maintainan 18-month readiness posture during a test moratorium when that was the minimum time to preparea test when testing was ongoing. It linked budget and program issues: "the Committee will not spendmoney on a perceived problem when the Department [of Energy] has not provided a rationale or aplan that addresses the underlying problems inherent in maintaining a testing capability during atesting moratorium." (227) The House passed H.R. 2754 as reported from the committeewithout amending the Weapons Activities section, which includes test readiness. The Senate Appropriations Committee recommended providing the full $24.9 million requested, but did not comment on the readiness program. On September 16, the Senate rejected anamendment by Senator Feinstein on various nuclear programs, as detailed under ACI. One provisionof the amendment would have barred use of funds in the bill for modifying the test readiness postureof the Nevada Test Site to a readiness posture of less than 24 months. With the House having eliminated the $24.9 million requested for test readiness and the Senate having provided the full request, the appropriation amount was at issue. Complicating a decision,the House eliminated $24.9 million for "enhanced test readiness," while the Administrationrequested $24.9 million for "test readiness." Some of the requested funds were to maintain the 24-to 36-month posture and some were to transition to an 18-month posture. Yet the HouseAppropriations Committee expressed concern over the latter even as it "supports the continuedmaintenance of the Nevada Test Site." (228) Eliminating the $24.9 million would have eliminated fundsfor both postures. If conferees decided to reduce funds for test readiness, would they have eliminatedthe full request, as the House voted to do, or eliminated only the funds for moving to an 18-monthposture (perhaps $9.9 million), or settled on some other amount? (Note that the Nevada Test Sitereceives other funds. For example, the budget category "Nevada Site Readiness," for which DOErequested $39.6 million for FY2004, "[i]ncludes activities required to maintain the Nevada Test Site(NTS) that are not unique to the test readiness mission, but do support the stockpile stewardshipmission." (229) ) DOE's submission of the test readiness report rendered moot the limit on obligations in the House defense authorization bill and the provision in the Senate defense authorization bill regardinga test readiness posture of other than 18 months. Those provisions were not at issue in conference. While not a matter in dispute between House and Senate, authorization conferees could haveconsidered whether an 18-month test readiness posture should be achieved by October 1, 2006, asper the Senate bill, or by the end of FY2005, the date to which DOD and NNSA agreed. They couldalso have followed the House Appropriations Committee's lead and required DOE to provide a morecomprehensive justification before endorsing any approach. The NDAA conference report did not address test readiness. The EWDAA conference report provided the full funds requested, but changed the test readiness posture: The conferees recognize that test readiness activities in Nevada were allowed to atrophy during the last decade under the current nuclear test moratorium... However, the conferees expect the NNSA to focus on restoring a rigorous test readiness programthat is capable of meeting the current 24-month requirement before requesting significant additionalfunds to pursue a more aggressive goal of an 18-month readiness posture. (230) Thus the conferees, by basing their decision on the need for NNSA to restore a 24-monthposture before proceeding to an 18-month posture, simultaneously avoided the issue of what aspectsof test readiness would have been cut by reducing funds below the request; expressed their supportfor reversing the "atrophy" of the test program; pressed NNSA to "restor[e] a rigorous test readinessprogram"; implied that it would be technically difficult to restore an 18-month posture; reflectedconcerns expressed by the House Appropriations Committee, Senator Feinstein, and others aboutmoving to an 18-month posture; and left the door open to moving to that posture later. The FY2005 request for test readiness is $30.0 million. (231) As noted, conferees on the FY2004energy and water development appropriations conference report "expect" NNSA to move to a24-month posture before requesting "significant additional funds" to move to an 18-month posture.NNSA indicates that that provision does not restrict its actions on test readiness. It anticipatesreaching a 24-month posture in early to mid FY2005, and hopes to achieve an 18-month posture bythe end of FY2005. (232) Unlike ACI and RNEP,the budget document does not provide out-yearbudgets for test readiness. NNSA estimates, however, that it can maintain an 18-month readinessposture for $25 million a year once it has established that posture, which the FY2005 request wouldenable it to do. Is an 18-month test readiness posture desirable? Some see the current 24- to 36-month posture as adequate. In this view, enhanced test readinesswould divert resources, as well as the time of experts, to a task that is unlikely to be carried out, tothe detriment of the ongoing stockpile stewardship program that has so far enabled the United Statesto maintain its nuclear stockpile without testing. They believe that the current test readiness programhas sufficient means to maintain skills, such as subcritical experiments, simulations, and exercises. They point to a National Academy of Sciences panel that stated: We judge that the United States has the technical capabilities to maintain confidence in the safety and reliability of its existing nuclear-weaponstockpile under the CTBT, provided that adequate resources are made available to the Departmentof Energy's (DOE) nuclear-weapon complex and are properly focused on this task. (233) Some fear that enhancing test readiness could have adverse international consequences. Oneadvocacy group was "alarmed that the Administration and Congress would take steps towardresuming nuclear testing, which would undo decades of arms control and set the stage for a new armsrace." (234) Further, "U.S. resumption of full-scalenuclear testing would threaten the viability of theNuclear Non-Proliferation Treaty." Representative Markey and 55 House colleagues wrote to theHouse Appropriations Committee that they "are concerned that the proposed enhanced test readinessprogram will renew interest in testing among other nations." (235) Stewardship may not require an 18-month readiness posture, in the view of those opposed to shortening the posture, because test readiness could be improved on an ad hoc basis if needed. Itwould in all likelihood take months to convince the President and Congress that a test was needed. The interval between discovery of a problem and a political decision to test could be used forpreliminary planning for the test, reducing the time between the decision to test and the conduct ofthe test. The other main purpose for testing beside stockpile stewardship is development of new weapons. Those favoring the current readiness posture see an 18-month posture as irrelevant for thatpurpose. The idea that the United States can only respond to a particular threat by testing a newweapon in 18 months, and then producing and using it, is not credible in this view, given the massiveU.S. conventional and nuclear forces in being. Those who would enhance test readiness argue that the current posture is simply too long. Secretary of Energy Spencer Abraham said, "Should our scientists decide we cannot certify thereliability of our nuclear stockpile, we must be capable of conducting a nuclear test in a much shortertime frame than the current three years." (236) NNSA says that the 24- to 36-month posture has becomecloser to a 36-month posture, and even that is at risk as people formerly involved in the test programretire. (237) It is difficult to maintain skills thatwould be needed for a resumption of testing under a 24-to 36-month posture, it is argued, because that posture implies that test-related activities would onlybe a minor part of the workload for staff who would be responsible for conducting nuclear tests. Amore active test readiness program would sharpen their skills and help recruit people with skillsneeded for testing. It may even prove infeasible to stabilize the posture at its present unsatisfactorylevel as skills will erode. In this view, the choice would be between continuing current trends andreversing them. They dismiss charges that enhancing test readiness would lead automatically totesting; a decision to test would be decided separately by the President and Congress. Those who would improve test readiness divide into two groups. NNSA claims that 18 months is the optimal time: An 18-month posture is appropriate because this is the minimum time we would expect it would take, once a problem was identified, to assess the problem,develop and implement a solution, and plan and execute a test that would provide the informationneeded to certify the 'fix.' An 18-month posture also reflects what is cost effective while continuingto support other stockpile stewardship missions. (238) Others feel that 18 months is too long. As noted, the Senate called for a one-year test readiness posture and the Foster panel recommended a 3-12 month posture. Still others believe that changing the test readiness posture would have little practical significance because technical considerations determine the time needed to conduct various typesof tests. A press report quotes Raymond Jeanloz, a member of the former NNSA AdvisoryCommittee, on this point: The committee was told by the national nuclear laboratories that "the nation would be able to perform a test in 3 to 6 months" if the goal was simplyto produce an explosion, he said. "From the labs' point of view, until they know why they wouldhave to have a test to address some hypothetical technical problem, they don't know how long itwould take them. So this whole business of a three-year, or a one-and-a-half year, or a half-yeardelay before they can test is incredibly artificial," he said. (239) Is an 18-month posture feasible for stockpile stewardship orweapons development tests? As discussed earlier, tests to meet a political needcould be conducted rapidly, while some complex tests, such as effects tests, would probably takelonger than 18 months even with enhanced test readiness. Judging from history, such tests wouldbe rare. At issue would be the time to conduct the most likely types of tests, notably those to remedya problem in an existing warhead discovered through the stockpile stewardship program, or thoseto design new warheads. NNSA claims that an 18-month posture should be feasible. At the time of an active underground test program, 18 months was a minimal time to design and prepare most tests, and is therefore a reasonable indicatorof the time that would be required to prepare a device for testing if the details of the planned test arenot known in advance. (240) Critics respond that this argument is illogical. If it took a minimum of 18 months to prepare a test when the test program was in full swing, they ask, how can the nuclear test program expect toestablish that as a maximum after more than a decade without testing? In the intervening years, testexpertise has eroded through disuse, many people formerly in the test program have shifted to otherareas or have retired or died, fewer new staff have been trained with these skills than have left thetest program, construction crews would have to be found and trained, new diagnostic instrumentswould have to be designed to replace technology from 1992. Further, NNSA would have to meetregulatory standards for environment, safety, and health added since 1992. (241) It may be possible toreach 18 months eventually, but given the uncertainties, costs, and personnel issues, it is uncertainwhen that could occur. Debate over the four nuclear initiatives will in all likelihood continue for some years. Thisreport concludes by discussing some substantive and logical aspects of the debate that cut across thefour initiatives. The topics below speak to the nature of the debate in 2003 and may bear on it infuture years. Four small issues, or one large one? Supporters of the four initiatives argue that opponents are reading too much into the initiatives. They are, in thisview, unexceptional elements of a nuclear weapons program, each with its own justification. Supporters argue: lifting the ban on low-yield R&D simply permits scientists to study the full rangeof weapon issues, as is the case for scientists in all other nuclear weapon states; ACI is forearly-stage studies; and RNEP is just a study that at most could lead merely to adding a second typeof earth penetrator weapon to the U.S. inventory. A three-year test readiness posture is much toolong, and testing may be needed for other purposes, such as to check on a fix to a warhead type thatdeveloped a defect. As Secretary of Energy Spencer Abraham said, We are not planning to resume testing; nor are we improving test readiness in order to develop new nuclear weapons. In fact, we are not planning todevelop any new nuclear weapons at all. Our goal is designed to explore the full range of weaponsconcepts that could offer a credible deterrence and response to new and emerging threats as well asallow us to continue to assess the reliability of our stockpile withouttesting. (242) Domestic and foreign critics see these measures as parts of a whole -- a military policy with a lowered threshold against nuclear use. They contend: lifting the low-yield ban will enable pursuitof more-usable weapons; and, ACI will present the military with new weapon options. In turn,military requirements for these new weapons will lead to testing, and enhanced test readiness willpermit expedited testing and deployment of these weapons. They view RNEP as redundant, sincethe United States has another nuclear penetrator (the B61-11), conventional penetrators, and othernonnuclear options, but believe RNEP will make nuclear use that much more likely by giving theUnited States yet another nuclear option. From this perspective, these initiatives are consistent withother policy decisions, such as the Administration's policy of preemption, its willingness to use "allof our options," its disregard for negative security assurances, and its refusal to pursue the CTBT. Critics see this policy as extremely insensitive to world opinion at best, and potentially dangerous. Nuclear preemption and use: ambiguities and uncertainties. The Administration's policy statements leave a crucial uncertainty. In September 2002, The National Security Strategy of the United States of America stated, "Toforestall or prevent ... [attacks with WMD] by our adversaries, the United States will, if necessary,act preemptively." (243) And in December 2002,the National Strategy to Combat Weapons of MassDestruction stated, "The United States will continue to make clear that it reserves the right torespond with overwhelming force -- including through resort to all of our options -- to the use ofWMD against the United States, our forces abroad, and friends and allies." (244) These two statementsdo not specifically declare that the United States will use nuclear weapons preemptively againstpossible WMD attacks. Nonetheless, critics take them together as a sign that the Administration iscontemplating just such a course. Is the Administration willing to rule out preemptive use of nuclearweapons? It may prefer ambiguity on this issue, whether because it has not reached a decision oras a tactic to extend deterrence. But by removing ambiguity, declaring that it would not use nuclearweapons preemptively, the Administration could reduce fears worldwide about possible nuclear war. At issue for the Administration is deciding whether the benefits of resolving this ambiguity outweighthe costs. Will the new weapons deter? The Administration, expressing concern about the terrorist WMD threat, discusses a purpose of new ormodified nuclear weapons as being to counter WMD facilities. The Administration may wish toclarify how the nuclear initiatives -- or any military means, for that matter -- could deter or retaliateagainst a terrorist WMD threat. If the perpetrator is unknown, or is known but has no knownaddress, what targets would be attacked, and would new weapons offer any advantage for suchattacks? Are any assets of sufficient value to terrorists that holding them at risk might deter terroristattacks? If so, would current U.S. nuclear and conventional forces suffice for that purpose? Couldthe United States perhaps deter terrorist use of WMD by threatening to overthrow (usingconventional forces) regimes that support terrorism, or by threatening to destroy (using nuclear orother forces) facilities that these regimes see as critical? There is a more fundamental deterrence issue. Deterrence depends on holding at risk assets of great value to the leadership. But while the United States was able to calculate what assets neededto be held at risk to deter the Soviet Union (and vice versa), the United States cannot simply assumethat what deterred the Soviet Union would deter rogue states. The leaders of a nuclear-armed roguestate might calculate that the United States would not use nuclear weapons against them because ofthe risk of international opprobrium, or that U.S. nuclear weapons would not have a decisive effecton the regime because it could hide or bury its own WMD and the facilities of highest value to theleaders. They might be willing to accept the use of several nuclear weapons against their country,especially if they follow the U.S. debates and come to believe that the United States would only usea few low-yield weapons of limited effectiveness. Will research lead to testing, acquisition, and use? A key concern of opponents of nuclear testing is the prospect that ACI, RNEP, and low-yieldweapons development could lead to nuclear tests. One could imagine various ways in which theseprograms could lead to tests. Lifting the ban on low-yield R&D, for example, might lead to ACIdeveloping new types of low-yield warheads: earth penetrators, chemical and biological agentneutralizers, warheads with reduced neutron or enhanced gamma radiation output, and warheads withreduced electromagnetic pulse. Future military interest in these warheads would, in this view, leadinexorably to testing. Yet there are plausible arguments that testing would not be needed. The B61-11 penetrator was converted from a B61-7 bomb without testing, and the RNEP conversion anticipates converting anexisting B61 or B83 without testing. Those warheads are available in a number of yields; it may bethat a lower-yield option exists that would eliminate the need to develop a new-design EPW. TheAdministration has enough confidence in nonnuclear interceptors to withdraw from the ABM Treatyin order to deploy a system using them. Nuclear weapons tailored to destroy chemical and biologicalagents may not be needed. The ability to destroy these agents is arguably much more dependent onprecise intelligence than on weapon characteristics, some doubt the efficacy of nuclear weapons todestroy such targets, and some doubt that the advantages of avoiding contamination by chemical orbiological agents outweigh the disadvantages of contaminating an area with radiation. Beyond that,whether enhancing nuclear test readiness will lead to testing depends on policy rather than technicaljudgments on future weapons R&D. Some critics of the Administration's nuclear initiatives fear that studying nuclear weapon concepts or new weapons will lead to their use, but that result is far from inevitable, supporters reply. Nuclear weapons are an option available to the United States, but so are conventional forces,diplomacy, and economic leverage. The United States has had low-yield nuclear weaponscontinuously since the 1950s, and might have benefitted tactically from using them in the KoreanWar, Cuba, and the Vietnam War. Yet despite these military benefits and options, Presidentsrefrained from using these weapons. It appears, then, that nuclear weapons would only be used asa last resort. On the other hand, any new weapon would provide a President with a wider range ofoptions for nuclear use. A President might find options made available by current nuclear weaponsto be unacceptable, but a new weapon might tilt the tradeoff between costs and benefits in favor ofnuclear use. Any new weapon has limits to its military value. The claim that EPWs may be the only way to destroy certain hardened and deeply buried targets doesnot mean that any nuclear EPW will destroy any such target. Rather, nuclear EPWs would make adifference only against some specified range of targets. A bunker hardened to a given level andburied to depth X could be destroyed by a conventional EPW, and buried more deeply at depth Ycould not be destroyed by a nuclear EPW of 5 kilotons yield. Only if the facility is buried betweendepths X and Y would that EPW make a difference. The United States could increase the weapon'syield, permitting it to destroy the bunker at greater depth, but the target nation could counter byincreasing the hardness of the bunker, burying it deeper, or camouflaging its location. Further, theU.S. intelligence may not know details of the geology above the bunker or of the layout of a tunnelcomplex, both of which may greatly affect the weapon's effectiveness. Thus the weapon addsmilitary value over only a specific range of targets.

The Bush Administration completed its congressionally-mandated Nuclear Posture Review in December 2001. The review led to major changes in U.S. nuclear policy. It found that the Cold Warrelationship with Russia was "very inappropriate" and that this nation must be able to deal with newthreats. It planned to retain Cold War-era nuclear weapons, which would suffice for manycontingencies, though at reduced numbers. To complement these weapons so as to improve U.S.ability to deal with new, more dispersed threats in various countries, the Administration sought toexplore additional nuclear capabilities. Accordingly, the FY2004 request included four nuclear weapon initiatives: (1) rescinding the ban that Congress imposed in 1993 on R&D on low-yield nuclear weapons; (2) $6 million for theAdvanced Concepts Initiative (ACI) to begin certain studies of weapon-related science andtechnology; (3) $15 million to continue a study of the Robust Nuclear Earth Penetrator (RNEP), inwhich an existing bomb would be converted into a weapon able to penetrate into the ground beforedetonating to improve its ability to destroy buried targets; and (4) $25 million to enable the UnitedStates to conduct a nuclear test within 18 months of a presidential order to test, and for relatedpurposes, as compared with the current 24-36 month time that was set shortly after the end of theCold War. Congress acted on these requests in the FY2004 National Defense Authorization Act( P.L. 108-136 ), and acted on the latter three in the FY2004 Energy and Water DevelopmentAppropriations Act ( P.L. 108-137 ). For FY2005, the Administration requests $9.0 million for ACI,$27.6 million for RNEP, and $30.0 million for improving nuclear test readiness. These initiatives are controversial. Supporters claim that the first three initiatives would enhance deterrence, thereby reducing the risk of war, and that some weapons that might result fromthe initiatives could enable the United States to destroy key targets in nations that may pose a threat. Critics are concerned that these initiatives would lead to nuclear testing, increase the risk of nuclearproliferation, and make U.S. use of nuclear weapons more likely. Regarding enhanced test readiness,the Administration argues that nuclear testing might be needed, for example, to check fixes toweapon types with defects, and that 24 to 36 months is too long to wait; critics are concerned thatshortening the time to test could signal a U.S. intent to test, and that renewed testing could lead toa renewed interest in testing by other nations. This report provides the policy context for the four initiatives. For each, it then presents a description, history, FY2004 legislative actions, the FY2005 request (for all but low-yield R&D),and issues for Congress. It is designed for those who want a detailed introduction to the debate,those seeking arguments and counterarguments, and those looking for answers to specific questions. It will track congressional and executive actions on these initiatives through updates as developmentswarrant.

Congress has been interested in detecting nuclear weapons and the special materials needed to make them for many years, especially since 9/11. Nuclear detection has many applications for countering nuclear terrorism and nuclear proliferation, such as securing nuclear weapons and materials in U.S., Russian, and other nuclear facilities, tracking materials at border crossings and choke points, screening maritime cargo containers, and examining actual or suspect nuclear sites. The United States currently uses several types of nuclear detection equipment. All have significant shortcomings. Some work only at very short range; some cannot identify the material emitting radiation, which can lead to false alarms and interrupt commerce; some depend on operator skill, and may be defeated by a clever smuggler or a sleepy operator; and some are easily defeated by shielding. In an effort to overcome such problems, Congress has funded a pipeline of advanced-technology research, development, and acquisition. This report seeks to help Congress understand this technology. It discusses the science of detecting nuclear weapons and materials, describes nine advanced U.S. technologies selected to illustrate the range of projects in the pipeline, and offers observations for Congress. The report does not compare technologies. The inclusion of the nine technologies should not be taken to mean that CRS judges them to be better than the hundreds of others not considered here. The report does not discuss the controversial Advanced Spectroscopic Portal because a detailed discussion of it could draw attention from the other technologies considered here. The scope of this report excludes the organization of the government for dealing with nuclear detection, the role of intelligence and law enforcement in detecting terrorist nuclear weapons, detection of radiological dispersal devices (such as "dirty bombs"), the role of nuclear forensics in attributing an attack to its perpetrator, response to a nuclear attack, and the architecture of a national nuclear detection system. Nor does it discuss possible means by which terrorists might acquire a bomb, or whether they could make a bomb on their own. Much has been written on these topics. While many who are concerned with nuclear detection focus on thwarting nuclear terrorism, this report focuses on technology per se. It avoids extensive discussion of means to counter detection to avoid classified information. Nuclear detection technology has a dual role in thwarting a terrorist nuclear attack—deterrence and defense. Deterrence means dissuasion from an action by threat of unacceptable consequences. Terrorists may be deterred from a nuclear strike by one of the few consequences unacceptable to them: failure. Detection systems would raise that risk. These systems could also make a terrorist nuclear strike too complex to succeed. But other factors would also have these effects: the difficulty of fabricating a bomb, the chance that law enforcement or intelligence would detect efforts to obtain a bomb, the possible inability to detonate a purloined bomb, and the risk that scientists recruited for the plot would defect. Such risks would disappear, however, if terrorists were given a bomb and operating instructions. They would then only need to mount a smuggling operation. In that case, the role of nuclear detection systems would change: they would become the main defense. As background for understanding the detection technologies in Chapter 2, this chapter outlines nuclear detection science. The Appendix provides more detail. Detection focuses on weapons and the nuclear materials that fuel them. Weapons can be small. In the Cold War, the United States built high-yield weapons several feet long, atomic demolition munitions that a soldier could carry, and nuclear artillery shells. A terrorist-made weapon would probably be larger. Nuclear weapons require fissile material, atoms of which can fission (split) when struck by fast or slow neutrons ; pieces of this material can support a nuclear chain reaction. The fissile materials used in nuclear weapons are uranium, isotope 235 (U-235), and plutonium, isotope 239 (Pu-239). The Atomic Energy Act of 1954 designates them as "special nuclear material" (SNM). Uranium in nature is 99.3% U-238 and 0.7% U-235; U-235 must be concentrated, or "enriched." Uranium enriched to 20% U-235 is termed highly enriched uranium, or HEU, but nuclear weapons typically use uranium enriched to 90% or so. In this report, HEU refers to this weapons-grade enrichment level. Weapons-grade plutonium, or WGPu, is also a mix of isotopes, at least 93% Pu-239. According to one account by five nuclear weapon scientists from Los Alamos National Laboratory, it would take 26 kg of HEU or 5 kg of WGPu to fuel a bomb, amounts that would fit into cubes 11 cm or 6 cm, respectively, on a side. Nuclear detection makes extensive use of photons, packets of energy with no rest mass and no electrical charge. Electromagnetic radiation consists of photons, and may be measured as wavelength, frequency, or energy; for consistency, this report uses only energy, expressed in units of electron volts (eV). Levels of energy commonly used in nuclear detection are thousands or millions of electron volts, keV and MeV, respectively. The electromagnetic spectrum ranges from radio waves (some of which have photon energies of 10 -9 eV), through visible light (a few eV), to higher-energy x-rays (10 keV and up) and gamma rays (mostly 100 keV and up). X-ray photons and gamma-ray photons of the same energy are identical. However, they are generated in different ways. Gamma rays originate in processes in an atom's nucleus. Each radioactive isotope that emits gamma rays does so in a unique energy spectrum, as in Figure 1 , which is the only way to identify an isotope outside a laboratory. A detector with a form of "identify" or "spectrum" in its name, such as Advanced Spectroscopic Portal or radioactive isotope identification device, identifies isotopes by their gamma-ray spectra. X-rays originate in interactions with an atom's electrons. Many detection systems use x-ray beams, which can have higher energies than gamma rays and thus are more penetrating. X-ray beams are often generated through the bremsstrahlung process, German for "braking radiation," which works as follows. An accelerator creates a magnetic field that accelerates charged particles, such as electrons, which slam into a target of heavy metal. When they slow or change direction as a result of interactions with atoms, they release energy as x-rays whose energy levels are distributed from near zero to the energy of the electron beam. They do not exhibit spectral peaks like gamma rays. For purposes of this report, a signature is a property by which a substance (in particular, SNM) may be detected or identified. This section presents several signatures. The Appendix and Chapter 2 discuss others. Atomic number, abbreviated "Z," is the number of protons in an atom's nucleus. It is a property of individual atoms. In contrast, density is a bulk property, expressed as mass per unit volume. In general, the densest materials are those of high Z. These properties may be used to detect uranium and plutonium. Uranium is the densest and highest-Z element found in nature (other than in trace quantities); plutonium has a slightly higher Z (94), and its density varies from slightly more to slightly less than that of uranium. Some detection methods discussed in Chapter 2, such as effective Z, make use of Z, and some, such as radiography and muon tomography, make use of Z and density combined. An object's opacity to a photon beam depends on its Z and density, the amount of material in the path of the beam, and the energy of the photons. Gamma rays and x-rays can penetrate more matter than can lower-energy photons, but dense, high-Z material absorbs or scatters them. Thus a way to detect an object, such as a bomb, in a container is to beam in x-rays or gamma rays to create a radiograph (an opacity map) like a medical x-ray. Radioactive atoms are unstable and give off various types of radiation; the types of use for nuclear detection are gamma rays and neutrons. Gamma rays . Gamma-ray spectra are well characterized for each isotope. Figure 1 and Figure 2 show spectra for HEU and WGPu. Each point on the spectrum shows the number of photons emitted (vertical axis) at each energy level (horizontal axis). Background gamma radiation is ubiquitous. Since many materials, including SNM, emit gamma radiation, elevated levels of gamma radiation may or may not indicate the presence of SNM, but careful analysis of the total gamma-ray spectrum, as discussed in Chapter 2 under GADRAS, may reveal the presence of SNM. Of particular interest, uranium that has been through a nuclear reactor picks up a very small amount of uranium-232, which decays through intermediate steps to thallium-208. The latter has a half-life of 3 minutes, and its decay produces a gamma ray of 2.614 MeV (as shown in Figure 1 ), one of the highest-energy gamma rays. As a result, it is distinctive as well as highly penetrating, facilitating detection. Neutrons . Atoms of some heavy elements fission. Of the naturally occurring elements, only U-238 spontaneously fissions at an appreciable rate. Fission releases neutrons. U-235 emits few neutrons, but because U-238, the other main component of HEU, emits some, 1 kg of HEU emits 3 neutrons per second, so it provides a weak signature. Plutonium emits on the order of 60,000 neutrons per kg per second depending on the mix of plutonium isotopes. Unlike gamma rays, neutrons do not have a characteristic energy spectrum by which an isotope can be identified. Detection involves using detector elements to obtain data, converting data to usable information through algorithms, and acting on that information through concept of operations, or CONOPS. Detectors, algorithms, and CONOPS are the eyes and ears, brains, and hands of nuclear detection: effective detection requires all three. Since photons and neutrons have no electrical charge, their energy is converted to electrical pulses that can be measured. This is the task of detectors, discussed next. The pulses are fed to algorithms. An algorithm, such as a computer program, is a finite set of logical steps for solving a problem. For nuclear detection, an algorithm must process data into usable information fast enough to be of use to an operator. It receives data from a detector's hardware, such as pulses representing the time and energy of each photon arriving at the detector. It converts the pulses to a format that a user can understand, such as displaying a gamma ray spectrum or flashing "alarm." Every detector uses one or more algorithms. Improvements to algorithms can contribute as much as hardware improvements to detector capability. CONOPS may be divided into two parts. One specifies how a detection unit is to be operated to obtain data. Elements include: How many containers must the unit scan per hour? How close would a detector be to a container? Shall the unit screen cargo in a single pass, or shall it be used for primary screening, with suspicious cargo sent for a more detailed secondary screening? A second part details how the data are to be used. Elements include: What happens if the equipment detects a possible threat? Which alarms are to be resolved on-site and which are to be referred to off-site experts? Under what circumstances would a port or border crossing be closed? More generally, how is the flow of data managed, in both directions? What types of intelligence information do inspectors receive, and how do data from detection systems flow to federal, state, and local officials for analysis or action? While this report does not focus on CONOPS because it is not a technology, it is an essential part of nuclear detection. Detectors require a signal-to-noise ratio high enough to permit detection. That is, they must extract the true signal (such as a gamma-ray spectrum) from noise (such as spurious signals caused by background radiation). Two concepts are central to gamma-ray detector sensitivity: detection efficiency and spectral resolution. Efficiency refers to the amount of signal a detector records. Radiation intensity (e.g., number of photons per unit of area) diminishes with distance. Since a lump of SNM emits radiation in all directions, using a detector that is larger, or that is closer to the SNM, increases the fraction of radiation from the source that impinges on the detector and thereby increases efficiency. Another aspect is the fraction of the radiation striking the detector that creates a detectable signal. A more efficient detector collects data faster, reducing the time to screen a cargo container. Spectral resolution refers to the sharpness of peaks in a gamma-ray spectrum. A perfect detector would record a spectrum as vertical "needles" because each radioactive isotope releases gamma rays only at specific energies. Since detectors are not perfect, each energy peak is recorded as a bell curve. The narrower the curve, the more useful the data. Polyvinyl toluene (PVT), a plastic used in radiation detectors that can be fielded in large sheets at low cost, is efficient but has poor resolution. It can detect radiation, but peaks from gamma rays of different energies blur together, which can make it impossible to identify an isotope. Figure 3 shows the spectra of 90% U-235 and background radiation as recorded by a PVT detector. In contrast, high-purity germanium (HPGe) produces sharp peaks, permitting clear identification of specific isotopes. These detectors are expensive, heavy, have a small detector area, and must be cooled to extremely low temperatures with liquid nitrogen or a mechanical system, making them less than ideal for use in the field. Figure 4 shows the spectrum of Pu-239 as recorded by detectors with better resolution than PVT. Sensitivity can be improved. (1) One type of detector is cadmium-zinc-telluride (CZT) crystals. Better crystals and better ways to overcome their limitations have improved sensitivity. The peak on the right of each spectrum in Figure 5 shows the cesium-137 spectrum taken with CZT detectors that, for the years indicated, were at the high end of sensitivity. (2) Detectors build radiography images or gamma-ray spectra over time. With more time, a detector can collect more data, in the form of gamma rays or neutrons. More data improve separation of signal from noise and reduce false alarms. Longer scan times improve accuracy but impede the flow of commerce, costing money, so a balance is sought between these two opposed goals. (3) Increasing the spatial resolution of a detector improves sensitivity: This is easily demonstrated in the example of a shielded versus unshielded radiation detector. Unshielded detectors are sensitive to radiation impinging on it in all directions, which is characteristic of the nature of naturally-occurring background radiation. By adding shielding, a detector's field-of-view can be controlled, and background radiation levels reduced, increasing the signal-to-noise ratio for the detector in the direction the detector is aimed. Nuclear detection uses neutrons and photons in various ways. Because either neutrons or photons can readily penetrate most materials, they are the main forms of radiation used to detect radioactive material passively, such as by sensing radiation coming out of a cargo container. Gamma rays and x-rays can be used in an active mode to probe a container for dense material through radiography, which creates an x-ray-type image. Neutrons of any energy level, and photons above about 5.6 MeV, can be beamed into a container to induce fission in SNM. Fission results in the emission of neutrons and gamma rays, which can be detected. Gamma rays do not have an electrical charge, but an electrical signal is needed to measure them. There are two main ways to turn a gamma ray into electrical energy. One is with a scintillator material, such as PVT. When a gamma ray interacts with this material, it emits many lower-energy photons of visible light. A photomultiplier tube converts them to electrons, then multiplies the electrons to generate a measurable pulse of electricity whose voltage is proportional to the number of lower-energy photons, which in turn is proportional to the energy deposited by the gamma ray. An electronic device called a multi-channel analyzer sorts the pulse into a "bin" depending on its energy and increases the number of counts in that bin by one. A software package draws a histogram with energy on the horizontal axis and counts on the vertical axis. The histogram is the gamma-ray spectrum for that isotope. In contrast, a semiconductor material, such as HPGe, turns gamma rays directly into an electrical signal proportional to the gamma-ray energy deposited. A voltage is applied across the material, with one side of the material the positive electrode and the other the negative electrode. When a gamma ray interacts with the material, it knocks electrons loose from the semiconductor's crystal lattice. The voltage sweeps them to the positive electrode. Their motion produces an electric current whose voltage is proportional to the energy of each gamma ray. Each pulse of current is then sorted into a bin depending on its voltage and the spectrum is computed as described above. A common neutron detector is a tube of helium-3 gas linked to a power supply, with positively and negatively charged plates or wires in the tube. In its rest state, current cannot pass through the helium because it acts as an insulator. When a low-energy neutron passes through the tube, a helium-3 atom absorbs it, producing energetic charged particles that lose their energy by knocking electrons off other helium-3 atoms. Positively charged particles move to the negative plate; electrons move to the positive plate. Since electric current is the movement of charged particles, these particles generate a tiny electric current that is counted. Neutron count is an important way to identify SNM because SNM and U-238 emit neutrons spontaneously in significant numbers. Few other sources do. Neutron spectra are of little value for identifying isotopes. They do not have lines representing discrete energies, and neutrons lose energy as they collide with low-Z material, blurring their spectra. However, helium-3 has become extremely scarce, and neutron detection systems for homeland security would require so much of it that alternatives are being sought, such as boron-10. Photons of high enough energy can penetrate solid objects, but are scattered or absorbed by dense objects (or a sufficient thickness of less-dense material). This is the basis for radiography. For cargo scanning, x-rays or gamma rays are beamed through a container, and a detector on the other side records the number of photons received in each pixel. An algorithm then creates an opacity map of the contents. While a bomb would present a sizable image, dense objects in a container might mask a piece of SNM. An enemy could use various means in an effort to defeat detection systems. One such means is shielding. Gamma rays may travel many feet through such low-Z material as wood, food, and plastic, but high-Z material absorbs and deflects them. Conversely, low-Z material absorbs and scatters neutrons, but they pass more readily through higher-Z material. Different amounts of material are needed to attenuate gamma rays depending on their quantity and energy level. Gamma rays from WGPu are sufficiently energetic and plentiful that they are difficult to shield, while a layer of lead would shield gamma rays from HEU, especially if it had not been through a reactor and, in consequence, had not picked up uranium-232, as discussed above. This distinction is of practical significance. Press reports indicate that Iran is using centrifuges to enrich uranium from chemical forms derived from uranium ore, which have not been through a reactor. Sources of radiation other than SNM complicate detection. Background radiation from naturally occurring radioactive material, such as thorium and uranium, is present everywhere, often in trace amounts. Cosmic rays generate low levels of neutrons. Some commercial goods contain radioactive material, such as ceramics (which may contain uranium) and kitty litter (which may contain thorium and uranium). Other radioactive isotopes are widely used in medicine and industry. Enemy attempts to defeat one type of detection system may complicate a plot or make it more detectable. (1) It is harder to defeat systems that detect multiple phenomena than a system detecting one phenomenon only. For example, shielding a bomb with lead to attenuate gamma rays would create a large, opaque image on a radiograph. For this reason, Congress mandated that U.S.-bound containers loaded in foreign ports be "scanned by nonintrusive imaging equipment and radiation detection equipment at a foreign port before it was loaded on a vessel." (2) An enemy could attempt salvage fuzing, which would detonate a weapon that sensed attempts to detect it, such as with photon beams, or to open it. However, salvage fuzing could detonate a weapon by accident; if it were scanned overseas; or in a U.S. port, where it would do much less damage than in a city center. (3) Attempts to smuggle HEU into the United States to avoid detection of a complete bomb would require fabricating the weapon inside this nation, which could require such activities as smuggling in other weapon components and purchasing specialized equipment, and could run the risk of accidents, any of which could provide clues to law enforcement personnel. The United States deploys various technologies, such as the following, to detect nuclear weapons or SNM. They are available but have important drawbacks. These devices, about the size and shape of a pager, can detect radiation at close distance to alert individuals to the presence of elevated levels of radiation. They may use any of several types of detector material. They are lightweight and inexpensive, but cannot identify the material causing an alarm. Many of these devices use large sheets of plastic scintillator material, such as PVT, to detect radiation coming from a vehicle. RPMs were deployed soon after 9/11 because they were available at moderate cost. However, PVT cannot identify the source of radiation. Yet many items in everyday commerce contain radioactive material. As a result, some RPMs produce many false alarms, which may require considerable effort to resolve, delaying the flow of commerce. Newer versions have some isotope identification capability. These devices are typically hand-held. They have software that can identify a radioisotope by its gamma-ray spectrum. The most capable of these devices use a crystal of high-purity germanium, a semiconductor material, and are considered the "gold standard" of all identification devices. Such devices are heavy and delicate, and must be cooled with liquid nitrogen or by mechanical means, limiting their usability in the field. They have a relatively short range for detecting radiation sources with low radioactivity, notably shielded HEU, making them unsuitable as the primary method of screening cargo containers. These devices send high-energy photons through cargo containers to create a radiographic image of the contents. The radiograph is scanned, either automatically or by an operator, to search for nuclear weapons, contraband, stowaways, and other illicit cargo. While a nuclear weapon would show up as a white (or black) image on the radiograph and would be clearly visible if hidden in a shipment of low-Z material like food or paper, an operator might overlook it if it were in a shipment of other large, dense objects or jumbled items of various sizes and densities. A small piece of SNM might also be overlooked. Many nuclear detection technology projects are under way in the United States and elsewhere. This section discusses nine U.S. technologies selected to include different (1) agencies sponsoring projects (the Defense Threat Reduction Agency (DTRA), an agency of the Department of Defense (DOD); the Domestic Nuclear Detection Office (DNDO), an agency of the Department of Homeland Security (DHS); and the National Nuclear Security Administration (NNSA), an agency of the Department of Energy (DOE)), (2) organizations performing the work (national laboratories, industry, universities, and collaborations between them), (3) types of technology (materials, algorithms, simulation, systems), (4) physical principles (muon tomography, radiography, stimulated emission of radiation, nuclear resonance fluorescence), (5) distances between the detector and the object being scanned (near and far), and (6) levels of maturity (in use for many years but constantly updated, near deployment, and anticipated to be available for deployment in several years). This section does not consider technologies in the earliest stages of development because it is too soon to tell how they will pan out. The discussion of each technology includes several categories: The problem that the technology addresses Technology background Description of the technology Potential benefits that the technology offers Status, schedule, and funding Scientific, engineering, cost and schedule, and operational risks Potential gains by increased funding Potential synergisms The last three categories require some explanation. Risks: The discussion presents potential benefits of the technologies. It does not present "cons." That would be premature because development programs address problems. Instead, each section discusses risk. There are several categories of risk. Scientific problems may thwart a technology. Even if it is scientifically sound, it may be hard to engineer into a workable system. Even if it can be engineered, it may be unaffordable, or take too long to develop. Even if it can surmount these hurdles, problems encountered in field use may render it unattractive. Potential gains by increased funding: In preliminary discussions, project managers asserted they would, if given more funds, use the added funds to solve problems or exploit opportunities. CRS therefore asked managers of all nine technologies considered in this report how they would spend more money as a way to probe for problems and opportunities with their projects. Would they pursue several promising routes to a technology instead of pursuing only one at the outset? Would they buy more equipment so they could speed up the work? Would they hire more staff? This analysis applies only to the nine technologies discussed in this report. It is not intended to focus authorization or appropriation consideration solely on them. Other technologies not considered here might realize larger (or smaller or no) gains through increased funding. Potential synergisms: As the technology descriptions show, many systems have common elements, such as certain types of detectors or algorithms, and work on one technology may contribute to others or have applications beyond current plans. This report now discusses each of the nine technologies using the above format. As of January 2010, DTRA and DNDO terminated the nanocomposite scintillator project. This section, therefore, will not be updated further, but continues in this report because it contains valuable information on nuclear detection. Two small parts of the project, both described below, are continuing as separate projects: the development of application-specific integrated circuits for detecting "thermal" (very low energy) neutrons and identifying gamma-ray spectra simultaneously, and an effort to use nanocomposite scintillator material for neutron detection. Scintillator materials are used to detect, and in some cases identify, gamma rays. Higher-performance scintillators are more expensive, harder to manufacture, and fragile; scintillators that are less costly, easier to manufacture, and more rugged offer lower performance. At issue: can the desirable qualities of each type be combined to achieve better performance at lower cost? Scintillators are materials that, when struck by photons of higher energy, such as gamma rays, capture this energy and release it as photons of lower energy, usually visible light. The material should capture as much of the energy of each photon striking it as possible in order to build an accurate photon energy spectrum and thus identify the material emitting the photons. Ideally, a photon should deposit its full energy in the scintillator material, a so-called full energy interaction. It is also important that the deposited energy be efficiently converted into photons of visible light, which are then counted to determine energy. There are two main types of scintillators. Inorganic scintillators (those not containing carbon) are typically single crystals, such as sodium iodide (NaI) with a small amount of thallium added. The probability of full energy interaction increases sharply with atomic number (Z) of the scintillator material, and is high for inorganic crystals. The more energy from each photon a scintillator absorbs and then gives off, the better the correlation between energy input and output, and the more precise the spectrum that can be constructed. As a result, a device using an inorganic crystal has a good ability to identify the radioactive material producing a gamma-ray spectrum. There are several drawbacks. The area of a detector that is sensitive to gamma rays is small (limited to the size of a crystal), so the detector must be close to the object to be searched or must scan for longer time so it can receive more gamma rays. They are fragile; dropping one can destroy it. Many inorganic crystals absorb water and are sensitive to light, so they must be protected from environmental conditions. NaI crystals are easy to grow, but cost about $3 per cubic centimeter (cc) of crystal. Other, higher-resolution scintillators are harder to grow, are more costly, and are sensitive to moisture. For NaI, light output varies strongly with temperature, so the temperature must be stabilized or the data corrected. Organic scintillators have the opposite set of properties. They can be made of plastic, such as PVT. As such, they are easy and cheap to make, and are much less fragile than crystals. They can be produced in bulk, making them suitable for deployment in large sheets, such as for radiation portal monitors. On the other hand, since they are composed mostly of hydrogen and carbon, both very low Z elements, they are very inefficient at absorbing the total energy of gamma rays. As a result, as Figure 3 shows, peaks in PVT-produced gamma ray spectra are indistinct at best, making such spectra of little or no value for identifying radioisotopes. A research project under way at Los Alamos National Laboratory, the Nanocomposite Scintillator Project, seeks to combine the advantages of both types of scintillator materials to overcome the disadvantages of each. The principle is that "nanocrystals," crystals 2 to 5 nanometers in diameter (1 nanometer = 1 billionth of a meter), of certain inorganic scintillator materials can capture most of the energy from photons, thus offering nearly the performance of single large crystals, if packed densely enough in plastic. The resulting mixture also has the desirable features of plastic. The crystals are lanthanum bromide mixed with cerium, or cerium bromide. The modified polystyrene plastic is a scintillator material, so it increases the amount of energy converted to a detectable signal. In operation, when a gamma-ray photon strikes this material, its energy is absorbed by nanocrystals and the plastic, raising some atoms to a higher energy level. These atoms give off this energy as photons in the visible and near-visible regions of the electromagnetic spectrum ("optical photons"). A photodetector, an electronic component that generates many electrons for each photon it receives, amplifies the signal and converts it from an optical signal to an electronic signal that can be counted. The number of optical photons generated corresponds to the energy level of the photon striking the material. A multi-channel analyzer counts the optical photons, determines the energy level of the photon striking the material, and increases the count of photons of that energy level by one, by this process creating a gamma-ray spectrum. Edward McKigney, the principal investigator, believes that nanocomposite scintillator material will be able to discriminate between neutrons and gamma rays. He asserts that simulations support this case. The project has obtained data from experiments using the plastic without nanocrystals and nanocrystals without the plastic, and from the literature, and has used these data in simulations. Basic physics calculations also support this case. Neutrons generate protons when they strike the plastic, and gamma rays generate electrons. The plastic responds differently to protons and to electrons; the same is true of the nanocrystals. However, as of August 2008 the project had not conducted experiments demonstrating the ability of the material to detect neutrons and to differentiate between them and gamma rays. McKigney states that because the crystals are tiny, growing them is not difficult and is much less costly than growing large whole crystals of these materials. The material can be fabricated at an industrial scale, he says, further reducing cost. He estimates that this material potentially offers the performance of $300/cc material (e.g., lanthanum bromide) at a cost of 50 cents/cc. Because the material acts as a plastic, it is rugged and flexible, and can be made in large sheets, according to McKigney, increasing the sensitivity of a detector using it. It would operate at ambient temperatures. The project has several components. The largest is to develop nanocomposite scintillator material. There are several smaller components: process scale-up; electronics development; detector design; and basic research for a more advanced material. The budget for the entire project is as follows. Early research started in 2004. Los Alamos provided $65,000 in initial funds in FY2005. The laboratory and DNDO provided $1.2 million for FY2006 and $1.6 million for FY2007. Los Alamos, DNDO, and DTRA provided $4.6 million for FY2008 and are projected to provide $5.5 million for FY2009. The project seeks to deliver a small cylinder (1 inch in diameter and 1 inch high) of the material, and to characterize its performance, by December 2008. Anticipated costs are $4 million for FY2009 for the nanocomposite scintillator component. The goal for the end of FY2009 is to have a pilot-scale demonstration of the scintillator material and to start transferring its technology to industry. This material would be optimized for gamma-ray detection. As of July 2009, the schedule for this demonstration had slipped by 6 to 12 months. Fabrication of this material requires finding chemicals that can coat the surface of the nanocrystals so they can disperse properly in the plastic while optimizing other properties. The nanocrystals must be packed densely in the plastic to increase sensitivity and resolution. As of May 2008, researchers had reached a packing level of 6% (by volume), with a goal of 50%. It remains to be seen if they can meet this goal. Packing crystals densely in plastic will change some properties of the plastic, so care must be taken to minimize this problem. Another source of risk is that, as of August 2008, the project had not reached high enough packing levels to allow for measurements to determine the sharpness of gamma-ray peaks in spectra generated by this material. The project plans to conduct experiments on this point by December 2008. Such measurements are expected to reduce scientific risk. However, unexpected nanoscale physics could impair energy resolution. In that case, the particle structure would have to be engineered to mitigate the effects; at worst, these effects might degrade performance. (1) When developing the plastic-crystal composite, attention must be paid to ensuring that the material can be made with industrial processes used to manufacture other plastics. (2) The chemical reaction that occurs in manufacturing plastic gives off heat, potentially creating hot spots that would impair the performance of the material. This is not a problem for very small quantities. At the other end of the scale, for industrial production, the problem is well understood and chemical engineering solutions have been implemented for decades. A concern is whether a solution can be devised for pilot-scale production. The project is not mature enough to provide a firm estimate of the cost of the material produced on an industrial scale. The cost estimate cited above is based on the cost of procuring the raw materials and assumes that the energy cost for processing is low. Inflation in energy would not be expected to increase cost sharply, but cost of the product is sensitive to the cost of cerium, a rare earth element. The manufacturing processes are similar to those used for such consumer goods as fabric softeners and disposable plastic water bottles, so unit cost arguably should not be high. However, the cost estimate excludes the cost of fixed infrastructure; how much that would add to unit cost depends on infrastructure cost and the number of units produced. Transferring the technology to a commercial partner by the end of FY2009 depends on resolving potential scientific and engineering problems in a timely manner and finding the right partner. The project is not far enough along to make a firm estimate of schedule beyond FY2009. In any project, it is possible to develop a product only to have it fail in everyday use. This project is trying to minimize this risk. It is trying to design robustness into the material, such as by (1) using a plastic that is soft and rubbery rather than brittle, (2) ensuring that the material will be effective across the temperature range to which it will be exposed, and (3) ensuring that the detector and packaging are compatible so that, for example, the detector material will not expand so much as to crack its casing. The project's total budget is about $5.5 million per year. McKigney states that he could "usefully employ a total budget of up to $12M/year to reduce the time to deployment of these technologies" in several ways. (1) The project is pursuing, with about one-third of its total funding, a separate basic research project to develop a scintillator material approaching the resolution of high-purity germanium detectors with the cost and processing characteristics of plastic. More funds could accelerate this project, according to McKigney. He cautions that this project might take a decade or more and has much greater scientific risk than the current nanocomposite scintillator project. (2) The project uses equipment available at Los Alamos, but he states that staff could save time if they had their own equipment. (3) It would be difficult to fabricate a single large panel (e.g., 50 cm wide by 20 cm thick by 90 cm long) of detector material. Further, a panel segmented into tens to thousands of tiny panels produces the optimum tradeoff between cost and effectiveness and can provide data on the position of a radioactive source. Each panel element would need its own electronics channel, so application-specific integrated circuits must be custom-designed, which could take two or three years. With more funding, he asserts, the project could develop these chips and the scintillator material concurrently, saving time. Recognizing this leverage, DTRA provided about $150,000 for this purpose spread over 2½ years beginning in May 2008. McKigney states that additional funding would accelerate this schedule. (4) Hiring more chemists, electrical engineers, and others would accelerate these projects, according to McKigney. (1) This material offers the greatest benefit in detectors that use large panels of scintillator material, such as some under development as discussed below. (2) By offering greater sensitivity and greater resolution, this material could provide better data for algorithms to process, permitting the development of simpler, more capable algorithms. (3) Nanocomposite scintillator material may be able to measure neutron and gamma ray energies. As such, it might be possible to use it in a detection system instead of separate means of detecting each particle type. (4) Some companies are considering systems that use tubes filled with helium-3 gas to detect neutrons. However, helium-3 is scarce, and there may not be enough to support large-scale use of these tubes. Nanocomposite scintillator material might be an alternative for neutron detection. In a carefully controlled laboratory environment, a radioisotope can be readily identified by matching its gamma ray spectrum to one in a library of spectra. At a port or border crossing, a spectrum would be complicated by radiation from many sources and by attenuation caused by cargo and other materials. At issue: How can the signal from SNM be extracted from a gamma ray spectrum, and how can this capability be improved? Nuclear detection hardware receives much attention, but data from the hardware—e.g., pulses of various energies from gamma rays—are unintelligible until processed by software. Indeed, software in the form of algorithms is the "brains" of a detector. An algorithm, such as a computer program, is a finite set of logical steps for solving a problem. For nuclear detection, an algorithm must process data into usable information fast enough to be of use to an operator. Algorithms are designed to assure a low rate of false positives, which impede commerce, and a near-zero rate of false negatives, which could let a terrorist weapon into the United States. For gamma-ray identification, an algorithm creates equations to model "radiation transport," the movement of radiation through material. A detector will record gamma rays from all sources—background radiation, items in ordinary commerce, radioisotopes that terrorists might include in a shipment to confuse analysis, and a nuclear weapon or SNM. Many uncertainties affect an algorithm. Gamma rays lose energy as they interact with matter, altering their spectra depending on the type and thickness of the materials they pass through, and the initial energy of a gamma ray. Random fluctuations in the number of counts in each gamma-ray energy bin create statistical uncertainties, especially if the number of counts is low. The composition and thickness of materials between the radiation source and the detector (cargo, shielding, container wall, air, etc.) is not known. The equations may not exactly represent the detector dimensions or the shielding configuration because approximations are made to reduce complex environments to a set of equations that can be more readily computed. Dean Mitchell of Sandia National Laboratories has developed an applications package, "Gamma Detector Response and Analysis Software," or GADRAS. Development of GADRAS started in 1985 for use in the Remote Atmospheric Monitoring Project (RAMP), which used low-resolution detectors to analyze airborne radionuclides. Beginning in 1996, automated isotope identification was developed within GADRAS to process spectroscopic data collected at border crossings to support interdiction of radioactive materials. Work on the current version of GADRAS started in 2001. In earlier versions, it was seen as acceptable to spend a month analyzing an individual spectrum; in the wake of 9/11, in order to be of value for screening commerce, GADRAS had to be modified to process data quickly while minimizing false positives and false negatives. As of April 2010, the GADRAS application included six radiation analysis algorithms, gamma ray and neutron detector response functions, and support for radiation transport calculations. To identify radioactive sources creating a gamma-ray spectrum, GADRAS matches an entire gamma ray spectrum against one or more known spectra. Figure 6 illustrates this approach. Many other algorithms focus on peaks in gamma ray spectra because they are the most obvious features. In contrast, GADRAS analyzes the full spectrum for several reasons. (1) Peaks may overlap, making source identification ambiguous. (2) Most counts in a gamma-ray spectrum are often outside the peaks, in which case using only peak data would ignore most of the data. For example, less than 3% of the counts in a spectrum for U-238 occur in the 1.001-MeV peak, the most prominent feature of its spectrum. (3) Counts outside the peaks help characterize the composition and thickness of intervening material. Since gamma rays interact with these materials, characterizing the materials improves the accuracy with which the gamma-ray spectrum as read by a detector can be linked back to the gamma-ray source. Arriving at a solution consistent with all the data increases confidence in the result. (4) The absence of counts in a region of a spectrum can be a clue to the identity of radioactive materials. (5) Using the entire spectrum helps analyze data from scintillators having low energy resolution because low resolution often precludes identification of peaks in the spectrum, and helps analyze spectra of weak sources. GADRAS also uses neutron flux data. Since neutrons pass more readily through high-Z material and gamma rays pass more readily through low-Z material, different materials, such as in a container, will affect the total radiation output differently. As a result, using both gamma ray and neutron data improves the analysis. GADRAS has been in use since 1986. Since 9/11, more operators have used it in a wider range of applications. In response, the software is continually upgraded to support new types of radiation sensors, provide new capabilities, and meet new performance requirements. According to Mitchell, "One of the new features is the ability to support the analysis of data that is collected with neutron multiplicity counters. This capability enables inclusion all of the data collected by gamma-ray detectors and various types of neutron detectors into a unified analysis algorithm." One goal is to make GADRAS more automated so that less skill is required to operate it. Another goal is to make it faster. A current effort focuses on improving sensitivity to SNM and reducing the false alarm rate. In the past, some sacrifices were made to fidelity of the analysis in order to gain speed; now, with faster computers, it should be possible to improve the analysis while increasing speed; this approach is being investigated. Another approach to reducing false alarms is to examine radiation sensor data collected in 2005 on cars entering the Lincoln Tunnel between New York City and New Jersey. According to Mitchell, the data included 50 to 60 false alarms. Mitchell and other researchers at Sandia are trying to determine what caused the false alarms in order to modify GADRAS to correct for these problems. The main application of GADRAS is to support "Triage/Reachback" analysis. A radiation detection operator in the field, such as a Customs and Border Protection (CBP) officer, who finds a vehicle or cargo container that presents a suspicious radiation signature that cannot be easily resolved, can send the detection data (such as a gamma ray spectrum) to the Laboratories and Scientific Services section of CBP for a more detailed analysis. That analysis uses GADRAS. Similarly, if that service is unable to resolve the matter, it can send the data to a secondary Reachback at the nuclear weapons laboratories, which also use GADRAS. By analyzing a complete gamma ray spectrum, GADRAS increases the accuracy of determining whether a cargo container or other item is carrying SNM, reducing the risk of false positives and false negatives. Using neutron count data in addition to gamma ray spectra further improves capability. GADRAS has been used for cargo inspection since 1998. Software upgrades are released every two months or so. There is no line item for GADRAS development. Mitchell estimates that Sandia is spending perhaps $600,000 in FY2010 to continue to develop GADRAS. DTRA stated in 2008, "The DTRA in concert with NNSA is currently proposing development of the next generation of GADRAS as part of a potential [memorandum of understanding] between the organizations. The effort would emphasize the revision algorithms, update to Vista compliant software, and increasing portability for field use." Since upgrades are ongoing, developers face such scientific problems as how to improve equations to characterize the response of detector material to radiation. Such problems are not a major risk to continued development of GADRAS, Mitchell states. Another risk is that the gamma-ray signal from shielded HEU may be so low that even a high-quality algorithm cannot identify the HEU. The major risk to GADRAS development comes from the programming language that is used for the graphical user interface (GUI). The GUI for the current version of GADRAS is written in a Microsoft language called Visual Basic Version 6 (VB6). VB6 functions under current versions of Windows, including the most recent, Vista. Microsoft, however, no longer maintains VB6, so it is not necessarily compatible with new compilers, often leaving no effective upgrade path for large application programs like GADRAS. User feedback indicates that some GADRAS components do not function properly in Vista. While minor changes may resolve the latter problem, the current GUI may not run under a future version of Windows. GADRAS is a large program, and current funding does not support the effort that would be required to update it. Since upgrading GADRAS is a low-budget activity, it entails little cost risk. No near-term requirements impose significant schedule risks. However, it would take one to two years to revise the GUI. Making this revision in advance of a change of operating systems would enable users to use GADRAS without interruption when they switch to the new operating system. Since GADRAS has been in existence for many years, and since it is used mainly by scientists and technicians rather than by operators in the field, there is little risk that it will fail in everyday use. The risk that an upgrade will cause a problem is reduced by careful testing. Other risks are the possibility that GADRAS would not run on future versions of Windows operating systems, and that conversion would not be made before an operating system that would not run GADRAS is introduced. Some have said that GADRAS is a complicated program to use; accordingly, the CONOPS for GADRAS is that it is used mainly for Reachback rather than in the field. Mitchell states that perhaps $600,000 a year for two years would allow Sandia to hire a few programmers who could convert GADRAS to use current compilers in order to avoid potential disruptions associated with new operating systems. A related task is documentation of the Application Programs Interface. This documentation would enable other users, such as at other laboratories, to develop new applications that can access capabilities that are incorporated into the Dynamic Link Library, which performs most of the computations in GADRAS. This increased access would reduce the cost and development time for new applications. (1) GADRAS might improve the performance of systems that induce fission and detect the resulting radiation. (2) By gaining more information from the gamma ray spectrum, it might reduce the gamma ray or neutron flux needed to induce fission and the dose resulting from fission, thereby increasing worker safety. (3) More computation power would permit more sophisticated iterations of GADRAS to be developed, or would permit GADRAS to run faster, or both. (4) Increased computation power, especially smaller and more capable computers, might enable GADRAS to be modified for use in the field with radiation detection equipment, permitting quicker resolution of suspicious containers and vehicles. Reachback would then be used only for the hardest-to-resolve cases. (5) GADRAS could be modified to improve the performance of radioisotope identification devices (RIIDs). DTRA states that it "is currently funding development of a more portable version of GADRAS ... that is intended to be resident on certain RIID systems, such as handheld HPGe system produced by Ortec." (6) Improved scintillator materials can be expected to provide better data inputs to GADRAS, enabling a further reduction in false negatives and false positives. Universities, companies, and government laboratories are working to develop such materials. Developing equipment to detect terrorist nuclear weapons and SNM requires many choices. It would be of great value to evaluate how they affect cost and performance before committing to a system. However, many combinations and tradeoffs are possible, and it would be prohibitively expensive and time-consuming to run enough trials for each to make a valid comparison among them. When faced with similar choices, such as in designing a car, corporations typically run huge numbers of simulated trials using computer models that take significant investment to develop and maintain. At issue: How can computer modeling contribute to the development of nuclear detectors, and what are its limitations? A detector should maximize the probability of detecting an actual threat (a true positive) while minimizing the probability of detecting a nonexistent threat (a false alarm, or false positive). For a given technology, these objectives cannot be achieved simultaneously—an improvement in either one comes only at the expense of the other. A receiver operator characteristic (ROC) curve, such as Figure 7 , illustrates this relationship. By relating the true positive and false positive rates, the curve defines the performance of a receiver (in signal processing, where the term "ROC" originated) or of nuclear detection equipment. ROC curves show that the probability of a true positive and a false positive go up together. This is logical; one could eliminate false alarms by turning off the detector, or could be sure of detecting every threat by having the detector alarm whenever the slightest trace of radiation is detected, which, given omnipresent background radiation, would be all the time. The peril of failing to detect an actual threat is clear. At the same time, law enforcement and commercial interests are intolerant of false alarms because these alarms require a major effort, diverting officers to the scene and possibly unloading a cargo container or closing a border crossing. Further, in the real world, numerous false alarms may cause operators to ignore all alarms or set the detector to be less sensitive, reducing the false alarm rate but also increasing the likelihood of missing an actual threat. This tradeoff is shown in Figure 7 by moving from point C, with a high probability of detection but a high false alarm rate, to point B, with intermediate values for both, to point A, with a low false alarm rate but a low probability of detection. Figure 8 shows three ROC curves to illustrate several concepts. (1) Moving from curve A to curve B to curve C shows the performance of a hypothetical detector improving over time, perhaps as a different detector material is used or an algorithm is modified. The improvement can be visualized by moving upward (line 1), which shows an increase in the true positive rate for a given false positive rate, or by moving from right to left (line 2), which shows a reduction in the false positive rate for a given true positive rate. (A diagonal line from lower right to upper left would show improvement in both.) (2) A, B, and C could represent differences in performance of one detector under different conditions, such as changes in the background, different operating conditions (e.g., scan time), or different benign materials in a container. (3) The curves could characterize the performance of three competing detectors. Note that actual ROC curves have more complex shapes than the notional curves shown. They may even cross over each other, indicating that one option is not uniformly better than another, requiring consideration of further tradeoffs. Many variables affect detector performance. Some are operational, such as scan time, the detector's target (containers, cars, trucks, trains), the distance between detector and target, and environmental conditions (background radiation, season, temperature). The detector is to detect SNM or nuclear weapons, yet the signatures on which it will focus may be accompanied by radiation from innocent sources and background radiation, and may be shielded inadvertently or deliberately. There are choices for the active elements of a detector, the algorithm used, and specific subroutines. These choices affect detector performance. Many combinations of these variables are possible. To gain enough data to make a ROC curve statistically valid, many trials would need to be performed for each combination of controllable variables (operating setup, detector, and algorithm) against many targets, each generating its own radiation signature. Each event in which a vehicle or container passes through the detection system is called an "encounter." It would be prohibitively expensive and time-consuming to run many encounters for each of thousands of combination of controllable variables, but it would be of great value to have the resulting data in order to compare, improve, or choose between detection systems and their components. Computer modeling can help. Modeling creates mathematical representations of the real world, varies the inputs, and calculates the outputs. In the case of nuclear detection, the real world consists of controllable variables (operational scenario, detector, and algorithm) and uncontrolled variables (signals from radioactive material). The performance of a modeled detector can be illustrated using ROC curves as described above. Running the model to simulate many encounters for each combination of controllable variables provides enough observation points to generate a statistically significant ROC curve. This process is repeated for many combinations of variables. The resulting data show the user how change to variables affects performance, and permit comparing one detector against another. Computer-generated "data" for nuclear detection encounters are always imperfect, as discussed below. As a result, the adequacy with which the models represent reality is always at issue, and model developers devote great effort to improving that representation. Modeling can also be used to evaluate requirements for elements of a detection system. For example, a model was used to study the spectral resolution (see "Principles of detection," above) required of a detector material to distinguish the gamma-ray spectra of threat sources from non-threat sources. According to a report on this project, "To capture the range of gamma-ray sources and shielding configurations found in commerce, we generated simulated populations of 1000 or more spectra, each with 3000 energy channels." Clearly, it would have been costly and time-consuming to generate the data experimentally. DNDO has established an ongoing program, Detection Modeling and Operational Analysis (DMOA), that the national laboratories and private sector contractors carry out. It builds models that characterize the variables noted above, i.e., the operational scenario, the radiation signals, the detector, and the signal-processing algorithm. Creating mathematical representations of the first three takes an immense amount of work because each is so complex. Alternative algorithms are simulated as part of the overall detection performance modeling. (Algorithm development requires a great deal of work, but is not within the scope of DMOA, which focuses on simulations.) For example, modeling a gamma-ray spectrum requires taking into account various sources of radiation and types of shielding. A DMOA study of real-world data found that the spectra from cargo differed between spring-summer and fall-winter; the study speculated that a different mix of products shipped in the two periods caused the difference. The model processes data on the operational scenario, radiation signals, and the detector to create a gamma-ray spectrum that is sent to the algorithm. The algorithm does not "know" the difference between a spectrum generated in the real world or by computer, and processes both in the same way. Since the difference is the source of the data, the key to simulation is generating the gamma-ray spectrum (signal plus noise) that goes to the algorithm. The greater the fidelity with which the model mimics real-world inputs, the better it represents system performance. Modeled performance, as measured by detection probability and false alarm rate, can be summarized in a ROC curve in the same way as empirically measured performance. The modeling effort also includes assessing the sensitivity of detector performance to changes in operational scenarios, detector hardware, and algorithms. One DMOA effort in 2006 focused on four main areas to improve its models. This effort illustrates the work undertaken to improve the fidelity of models and how this work requires detailed knowledge of the components being modeled. Evaluation benchmarks. Providing a basis for comparing systems requires a reference set of threat objects and shielding. Previously, this set included plutonium, HEU, and other threats, as well as different levels of shielding. In 2006, DMOA added new threats and shieldings to the reference set. It also developed a reference set of objects for detection by radiography. Background and nuisance source modeling. According to DMOA, "Background radiation and nuisance source population characteristics generally dictate detection threshold settings through their impact on innocent alarm rates. Characterization of these factors is critical to evaluating the performance of radiation detection systems." DMOA used real-world data to develop a model of the distribution of naturally occurring radioactive material. Data from the model were then compared with another set of real-world data to check the validity of the model. Operational analysis. DMOA used real-world data to compare the performance of several algorithms. One result was to "highlight the sensitivity of system performance to the detection algorithm used." Detector resolution study. DMOA studied the resolution needed to distinguish threats from other sources of radiation. The analysis, though preliminary, found that there is a benefit by having better resolution than that offered by sodium iodide, but that improving resolution beyond a certain point would offer marginal benefit. Modeling offers advantages compared to obtaining data from the real world . (1) A model permits construction of statistically significant ROC curves. It is not uncommon to require a false alarm rate of one in ten thousand or lower; statistical validation of performance at this level would require hundreds of thousands or millions of experiments. It would be costly and time-consuming to conduct field trials using a single combination of variables in order to build one statistically significant ROC curve, let alone conducting field trials for thousands of combinations of variables that represent the range of conditions. A model permits running many thousands of simulated encounters in less than a day to explore the range of encounters a detector may face. Once the model has been constructed, validated, and implemented, the cost of these computer runs is very low. (2) A model and a test program are complementary. The test program generates data for the model, and the model can steer the test program by indicating what tests would be of greatest value for improving the predictive power of the model. (3) A model permits exploration of encounters that might occur in the real world but that could not be conducted because of cost, safety, or difficulty. For example, it would be unthinkable to place a nuclear weapon in commercial traffic to test detectors, but the only facilities where such testing could be done, notably the Nevada Test Site, have characteristics very different than those of ports or border crossings. As another example, it might be desirable to see whether a protracted period of heat or high humidity would impair how a detector would function, but it would be much easier to replicate such conditions through modeling. (4) A model permits comparison of components of an encounter, such as which algorithm better processes the data for a given gamma-ray spectrum. (5) A model permits analysis of alternatives and clarification of tradeoffs before committing to a specific design, helping to inform billion-dollar decisions. DMOA is an ongoing program. When DNDO was established, DMOA became an explicit element within the System Architecture program. It has been funded within that program at approximately $2 million per year. The amount funded by all DNDO offices on related detection modeling is on the order of five times that of the Architecture program. Other detection modeling is done for other purposes by other offices within DNDO, as well as by DOE and DOD. However, since modeling activities are inherently cross-cutting and support many technology development and assessment projects, it is difficult to estimate total spending on modeling in the federal budget. While no model can be perfect, the key risk is that the model's output (for example, gamma ray spectra that the model generates) might differ significantly from data that would have been obtained from actual field trials. Part of this risk concerns modeling the underlying science. Some aspects are known in detail, such as the radiation spectrum of U-235. But there are uncertainties. HEU is not pure U-235, so the spectrum will be somewhat different from that of U-235. Some shielding can be modeled precisely, such as a centimeter of lead. But the defense (the modeling design team) does not know what shielding, if any, the attacker might use. A cargo container can hold many types of cargo, each of which interferes with radiation transport differently. Different arrangements of the cargo place different amounts and types of material between source and detector, affecting gamma ray spectra. Any model makes approximations and simplifications, sometimes to allow the simulations to run faster, or simply because more fidelity for certain phenomena are judged unnecessary or unwarranted. This creates further risk that the model might not sufficiently represent reality. There are other risks. Items included in the model may not be selected accurately. Systematic errors may arise, such as differences between spring-summer and fall-winter cargo. Adding detailed radiation sources with additional shielding, types of cargo, and detector details may increase the realism of the model, but also add complexity, opening the door to additional errors. Models are complex mathematical approximations of reality. Yet real-world data are often limited, perhaps covering too narrow a range of conditions. DMOA uses statistical methods to transform a real-world data set into data for different detectors and conditions. As a DMOA report states, "LLNL [Lawrence Livermore National Laboratory] has developed a procedure for generating a statistical model of a nuisance source population ... based on measured data. ... The statistical model developed provides a basis for simulating an unlimited number of random samples in nuisance sources for a population assumed to be similar to that underlying the measured data." A difficulty is in validating the model. Various isotopes cause background radiation, and DMOA observes that "there is no simple standard procedure to compare multivariate populations." Models may also manipulate data by adding in, or "injecting," spectra from well-characterized radiation sources like HEU or WGPu to computed spectra of cargo typical of normal commerce to see how well an algorithm can detect threat material in cargo. However, that approach may be an inadequate representation of reality. It is arguably unlikely that terrorists would include a nuclear weapon or SNM in a random cargo container if they chose that vector; rather, they might arrange the cargo to help evade detection. Simulation developers have not modeled such deliberate arrangements of cargo because that would require thinking about how to model adversary behavior, something outside their expertise. It might be desirable to have terrorism experts modify some injections to reflect adversary behavior. Most funds spent on DMOA are for staff salaries, so the likelihood of unanticipated cost increases appears low. However, this assumes that computing hardware required to run the models quickly is already paid for. If terrorists planned to bring a nuclear weapon or SNM into the United States, they would presumably try to evade detection, leading to an offense-defense competition. It would be essential for this nation to stay ahead. That task involves much effort by many entities. For modeling, the task would be to upgrade means of evasion included in the model in time to stay ahead of the threat. This would depend in part on inputs from intelligence services, such as data on specific threats, but also on advances in characterizing background radiation, developing algorithms, developing statistical means of transforming or validating data, and the like. The program is paced by resources available. The risk is that progress in nuclear detection, including modeling, will not be fast enough to defeat the threat. Law enforcement and commercial interests are intolerant of false alarms. The false alarm rate often drives detector settings and choice of detection systems, and increasing the true positive rate also increases the false positive (false alarm) rate. While a model can explore the tradeoff and optimum balance between true and false positive rates, a risk is that systematic errors, incorrect data transformations, and incomplete accounting for background radiation would cause the model to generate a setting that is less than optimal. In some cases, this problem can be overcome by making adjustments in the field, but in other cases, such as the choice of detector material, adjustments may not be possible. At present, the DMOA efforts at the national laboratories and private sector contractors are distributed throughout their organizations. Most staff members who work on detection modeling do so only part time. Some modeling tools (simulation codes, databases, and algorithms) tend to be somewhat informal, developed by various groups for specific needs. According to Richard Wheeler, Lead for Homeland Security Analysis, Global Security Directorate, Lawrence Livermore National Laboratory, added funding in this area could enable the designation of full-time staff, development of standardized modeling tools, acquisition of dedicated computing resources, establishment of rigorous peer review of the models, formal coordination of related efforts sponsored by DOE, DOD, and other agencies, and generation of new databases essential for model validation. While analysis of detector performance against realistic threats is sensitive or classified, many advances in modeling and modeling tools could be made in an open environment, including the academic community. Wheeler states that more funds could support a more substantial engagement of university researchers. Simulation does not detect anything by itself, but is by its nature synergistic with other aspects of nuclear detection. It has as its purposes improving many elements of detection systems, whether deployed or under development; helping to integrate hardware and software into a system; optimizing systems and CONOPS; and informing decisions on the most cost-effective mix of systems to acquire. Current radiography systems have important limitations in their ability to detect SNM in cargo containers. A small amount of dense material may be inconspicuous if shipped in a container filled with dense or random objects. SNM could also be placed inside dense objects for camouflage. Another difficulty of detecting SNM in containers is that an operator may fail to see a threat. At issue: Can radiography take advantage of different characteristics of SNM to detect it in cargo? And can a system evaluate radiographic images automatically to reduce dependence on operator judgment? In an effort to overcome these limitations, DNDO is conducting R&D on advanced radiography systems under the Cargo Advanced Automated Radiography System (CAARS) program. CAARS involves three technical approaches to radiography, each with a different contractor. (As noted below, DNDO terminated the contract for the American Science and Engineering, Inc., system in March 2009.) This section and the next two discuss these systems. It must be emphasized at the outset that these systems are under development. As a result, no deployable CAARS systems exist, so diagrams and performance specifications presented in these sections must be viewed as goals that are yet to be demonstrated in commercially available equipment. Customs and Border Protection (CBP) raises several concerns about CAARS, as described under "operational risks and concerns," below. CBP, a component of the Department of Homeland Security, is a front-line agency whose officers perform such missions as operating border crossings and inspecting cargo entering the United States at seaports, airports, and land crossings. Two types of commercially available equipment for scanning cargo containers have been widely used since 2002. One type, radiation portal monitors, passively detects radiation coming from a container. Another type, radiography equipment, creates x-ray-type images of a container; examples include the Rapiscan Classic Eagle and the SAIC VACIS. This type is more relevant to CAARS. Radiography equipment works as follows. A cargo container is driven between two components of the equipment, or the equipment moves over a stationary container. One component produces gamma rays from a highly radioactive substance like cobalt-60 or cesium-137, or x-rays from a linear accelerator. These photons emerge in a thin vertical fan-shaped beam and pass through the side of the container. On the other side of the container, an array of detector material records photon intensity levels, which correlate to opacity, pixel by pixel. A computer assembles the pixels into a radiograph. A black or white spot indicates an area that is opaque to photons of the energy used. Key limitations of such systems are that they cannot differentiate between different types of material and cannot pick out threats from clutter. While a complete nuclear weapon might or might not be noticed, detection probability decreases as the threat object becomes smaller, so it would be difficult for current radiography systems to detect a small piece of HEU. A different physical principle enables a radiography system to search for materials with high atomic number (Z). Both the L-3 and SAIC CAARS systems utilize this principle. They use one or two linear accelerators to generate 6-MeV electrons and x-rays with energies from 0 to 6 MeV and, in the same manner, x-rays with energies from 0 to 9 MeV (abbreviated in this section as 6-MeV x-rays and 9-MeV x-rays). The former have the greatest number of photons at around 2 MeV; the latter, at about 3 MeV. (The third CAARS system utilizes a different principle.) Photons of these two energies interact with matter differently. Six-MeV x-rays scatter when they strike electrons. The amount of scattering is a function of the electron density of the material, so it increases with Z. As a result, high-Z material is more opaque to 6-MeV x-rays than is low-Z material, and creates a bright or dark spot on a radiograph. Figure 9 , top panel, is a radiograph taken with 6-MeV x-rays. Nine-MeV x-rays interact more strongly with an atom's nucleus. When a nucleus absorbs a photon, it releases energy in the form of an electron-positron pair. This effect is proportional to Z squared. Thus high-Z material is much more opaque to 9-MeV x-rays (many fewer get through the material being interrogated because they are absorbed) than to 6-MeV x-rays. The L-3 and SAIC CAARS exploit this difference to create a so-called dual-energy radiograph, in which each pixel represents the ratio of opacity of that pixel to 9-MeV and 6-MeV x-rays. To create the radiograph, an algorithm assigns different colors to different ratios; in the middle panel of Figure 9 , higher-ratio pixels are darker. Pixels with ratios above a certain value indicate high-Z material. While there is no absolute physical threshold between medium- and high-Z material, CAARS uses Z>72 as the threshold for high-Z material; elements with Z>72 include tungsten, gold, lead, uranium, and plutonium. Pixels of such material could be presented in a separate radiograph, as in the bottom panel of Figure 9 . However, these data by themselves are not sufficient to trigger an alarm. A typical cargo container has many overlapping objects, so another algorithm is needed to separate them from each other. Still another algorithm utilizes the foregoing data to calculate the size and Z of individual objects, and on that basis determines whether to trigger an alarm. High-energy x-rays could also exploit a characteristic of U-235 and Pu-239 (as well as of U-238 and thorium-232, non-threat materials that are relatively uncommon in commerce): they fission when struck by photons with an energy above approximately 5.6 MeV. As discussed in the Appendix , the resulting fission products decay over many seconds, producing prompt and delayed neutrons and gamma rays. High-energy x-rays may thus be used to detect high-Z material in general and SNM in particular. However, CAARS does not utilize this characteristic. This section focuses on the least complex and lowest-risk CAARS system, which is being developed by L-3 Communications Corporation. As Figure 10 shows, it would use a concrete enclosure to minimize the radiation exclusion zone. The enclosure is 160 ft long in order to process two trucks at a time in 3 minutes so as to meet the CAARS throughput requirement of 40 containers per hour. The system would use one linear accelerator to generate 6-MeV electrons and (through the bremsstrahlung process) x-rays with energies from 0 to 6 MeV and, in the same manner, another accelerator to generate x-rays with energies from 0 to 9 MeV. A container would remain stationary as the beam is moved on a gantry over the truck. On the other side of the container are two detector arrays, one particularly sensitive to 6-MeV x-rays and the other to 9-MeV x-rays. Each array would record successive vertical slices of an opacity map of the container. The slices would be combined into a dual-energy radiograph as described above. If CAARS works as DNDO anticipates, it could automatically detect high-Z materials while providing standard radiographs so that it would have potentially little or no impact on CBP operations, such as efforts to identify "traditional" contraband (drugs, guns, explosives). As such, CAARS could, if successful, integrate the SNM detection mission with CBP's historical mission of detecting other illegal materials. DNDO anticipates that the automated detection of high-Z materials would not slow down the pace of screening, which could continue to be determined by the rate at which operators can examine radiographic images for detection of normal contraband, though CBP expresses concerns on this point, as discussed below. CAARS technology is being designed to scan at least 40 40-foot containers an hour. DNDO anticipates that it would have a 90% probability of detecting 100 cc of high-Z material (such as a cube 4.6 cm, or 1.8 inches, on a side), and a false alarm probability less than 3 percent, both with 95% confidence. DNDO does not count detection of high-Z material as a false alarm because such material may be used to shield SNM. Another possible benefit of the CAARS program is that it is developing novel technologies and advancing the state of the art; even if no CAARS systems were to be deployed, scientific and technical advances made through this program could be of value to future detection systems. Comparing the L-3 and SAIC systems, the latter takes up less space, an important consideration for CBP at seaports where space is limited, but the latter has finer resolution, an important consideration for CBP in searching for traditional contraband. In September 2008, Vayl Oxford, Director of DNDO, described developments with the CAARS program as follows: Consistent with any rigorous development and acquisition program, DNDO conducted system requirement reviews in November 2006 and preliminary design reviews in late May and June 2007 to assess the maturity of the CAARS technology. As a result, DNDO found that the technology was more difficult to implement than originally anticipated and determined that the technology should be demonstrated so that its full performance capability could be established prior to acquisition. It was also determined that the CAARS units, as currently designed, are too large and complex to be operationally effective. Finally, since 2006, there have been several technical advances in currently-deployed or soon-to-be-deployed NII systems that might provide some, but not all, of the desired capability. Accordingly, DNDO undertook a "course correction" in April 2008 and modified the three CAARS contracts to remove the "acquisition" component of the contracts, yet retain the demonstration and the test and evaluation (T&E) components of the contracts to allow collection of the required performance data. According to Joel Rynes, Program Manager, CAARS Program, DNDO, the L-3 CAARS project completed its Critical Design Review (CDR) milestone in July 2008. The CDR marks the point at which the design has been completed and DNDO can give the contractor approval to begin fabrication of the prototype. As of February 2009, the prototype was being assembled in Las Vegas. It produced its first image in May 2009. The plan called for L-3 to collect data with the system for four or five months to develop the algorithm for discriminating between high-Z and lower-Z material. DNDO conducted Technology Demonstration and Characterization (TD&C) in February and March 2010 to characterize the performance of the prototype. The other CAARS programs are discussed in their respective sections below. Part of the course correction was establishment of the Joint Integrated Non-Intrusive Inspection (JINII) Program—"joint" because the project is a collaboration between DNDO, CBP, and the DHS Directorate for Science and Technology, and "integrated" because it seeks to detect both traditional contraband and high-Z material. It is "non-intrusive inspection" (NII) in the sense CBP uses the term, namely, CBP personnel could clear containers, without physically having to open them, with high confidence that they do not contain contraband or SNM. JINII has two main components. One is CAARS. The other is a test campaign by DNDO to examine the ability of existing, commercially available radiography systems to detect high-Z material by means of operators visually inspecting radiographs. This is distinct from CAARS, which is intended to highlight suspicious areas automatically. In addition, systems have been developed outside of the CAARS program that have a limited capability—which DNDO anticipates would be less than that of CAARS—to detect high-Z objects in cargo automatically. One of these systems, the Rapiscan Eagle Portal, completed TD&C in September 2009. DNDO states that if tests demonstrate this limited capability with commercial off-the-shelf systems, deploying such systems could place capability in the field sooner than would be the case by using only CAARS systems. CBP already deploys the Rapiscan Eagle, which uses an accelerator (6 MeV in some versions, 4 MeV in others) to generate a radiographic image of a cargo container. The version that was tested through JINII has an added algorithm, "Auto-Z," that is designed to detect high-Z material in cargo and indicate the location of such material on a radiograph automatically. In contrast to either CAARS candidate, it would cost less, would use the current supporting infrastructure, and would require little added operator training. According to Rynes, the algorithm should be able to detect a 400-cc cube of high-Z material (7.37 cm, or 2.9 inches, on a side) nearly as well as CAARS candidates, but could not detect a 100-cc cube of high-Z material (4.65 cm, or 1.8 inches, on a side) as well as they could. In March 2010, DNDO completed its Technology Demonstration and Characterization (TD&C) testing for the L-3, Rapiscan, and SAIC systems and put the CAARS follow-on program on hold. DNDO expects the TD&C to provide data to quantify the performance and cost of these three systems so that it can perform a cost-benefit analysis that would consider both high-Z and traditional contraband detection, helping it decide how to proceed. DNDO could recommend future development, operational testing, acquisition, or some combination, of the various systems. If DNDO, CBP, and Congress judge the L-3 or SAIC systems to be more cost-effective than existing systems, one or more systems with CAARS-level capability could be further developed or acquired through a competitive process yet to be determined. With TD&C completed, the status of the test equipment as of May 2010 was as follows, according to Rynes,: Significant portions of the AS&E CAARS material have been distributed to other DNDO projects. The SAIC CAARS system is being dismantled and significant portions of the material are being distributed to other DNDO projects. The L-3 CAARS system is being dismantled and stored for potential installation at a later date. This would be [done] outside of the CAARS program. The Rapiscan Eagle remains installed at Moffett Field [CA]. It has funding to stay there through FY11. The budget for the entire CAARS program is: FY2006, $16.3 million; FY2007, $26.4 million; FY2008, $31.8 million; and FY2009, $26.1 million. The CAARS program per se ended in FY2009, to be replaced by a followon DNDO-CBP program to advance CAARS technology so that it can be deployed in the field. FY2010 funding for this program is $15.2 million. The L-3 system is intended to be the least complex and lowest-risk CAARS system. The scientific risk to its hardware is low because it uses commercially available accelerators and detectors. The software risk is potentially higher because algorithms to sort high-Z and low-Z materials on a radiograph automatically have not been fully developed and have only been modeled in a simulated environment, not tested in an actual operational one. The other two CAARS technologies are more complicated, so their scientific risk may be greater. The concept has been demonstrated in the laboratory, but it remains to be shown that it can be scaled up to the size CBP needs to scan containers. For example, can the algorithm to sort pixels into high-Z and lower-Z bins handle large enough quantities of data in a timely manner? At high enough energy levels, an accelerator can produce neutrons that require a large amount of shielding. The x-rays generated by the accelerator can also scatter from interactions with the cargo, also requiring shielding. A large footprint for shielding could preclude deployment of detection systems at some ports. At issue: Can radiation be kept low enough that the footprint does not become excessively large? Slipping the CAARS schedule through the "course correction" to permit more time for R&D could make it easier to meet the new schedule, reducing schedule risk. More R&D could also reduce cost risk. On the other hand, scientific risk could result in cost and schedule risk. Another cost and schedule risk is that work on three projects would reduce effort devoted to any one system, delaying each system (as compared to the schedule possible if the full funding had been applied to only one system) and increasing the cost of the total program. For example, it could be argued that a more efficient use of funds would be to focus only on the L-3 system because its development is furthest along. On the other hand, a multi-pronged approach may offer countervailing advantages. The simpler technology could (presumably) be deployed quickly, adding capability quickly and providing a hedge against failure of more advanced systems. More-capable systems could be deployed later, reducing the time pressure to develop them. Conversely, pursuing several approaches hedges against the prospect that the simpler system might encounter unanticipated problems that delay it to the point where it and a more advanced system could be deployed at about the same time. Whether these advantages justify the higher cost is always a matter of debate. CBP notes that other companies are developing systems to detect high-Z material outside of the CAARS program, and argues that, because of the operational concerns discussed next, the money spent on CAARS could be better spent on such systems. DNDO points out that the JINII program is developing and evaluating some of these systems. (1) A 3% false alarm rate, if achieved, would place a large burden on CBP CONOPS, as it would require responding to many false alarms. Alternatively, as discussed in the section on computer modeling, a high false alarm rate could lead operators to ignore alarms or to raise the threshold for alarms, increasing the likelihood of missing an actual threat. (2) Joel Rynes, Program Manager, CAARS Program, DNDO, states that an operator could clear some false alarms without intrusive inspection, such as by inspection of radiography images, reducing the rate of alarms requiring intrusive inspections to well below 3%. At issue is whether there is enough confidence in operator judgment with these methods to avoid intrusive inspections. (3) The system does not differentiate between SNM and other high-Z material; adding non-SNM high-Z alarms to false alarms boosts the non-SNM alarm rate and, presumably, the rate of alarms requiring intrusive inspections. Without a way to differentiate between SNM and other high-Z material, can CAARS meet its goal of having "little or no impact on CBP operations"? On the other hand, is any high-Z material suspicious and worthy of inspection, so that non-SNM high-Z alarms should not be counted as false alarms? (4) A CAARS program goal is automated detection of small amounts (100 cc) of high-Z material through 10 inches of steel, with a follow-on goal of penetrating 16 inches of steel. Is that a reasonable goal? If not, what is the maximum thickness of steel commonly found in cargo containers and what energy level of photons would be required to penetrate it? How would the added shielding required by equipment that generates photons greater than 9 MeV affect deployment at ports, where space is at a premium? Or would no practical energy level suffice to penetrate that much steel? Alternatively, would a simple "Bucky collimator," as described under "Background" in this section, make radiography much more effective? (5) The radiation produced by CAARS, or other high energy imaging systems, even at low levels, may cause interference with radiation portal monitors that have already been installed. It is important to minimize this interference, though it can readily be eliminated by turning off the accelerator when portal monitors are in use. CBP raises other operational concerns. The first concern applies to the L-3 and AS&E CAARS systems; the others apply to all three. (1) Because of an apparent miscommunication between DNDO and CBP, DNDO thought that the dimensions of a one-of-a-kind CBP radiography system, 60 x 160 ft, were acceptable to CBP for large-scale acquisition, some 300 to 500 units nationwide. The L-3 and AS&E CAARS systems would use a concrete enclosure of that size (see Figure 10 ) for radiation containment. However, CBP states that no unit that size would fit in U.S. seaports, and that only four or five ports of entry on the U.S.-Mexican border could accommodate the units. (2) CBP expresses concerns that the radiation emitted by radiography equipment such as CAARS could require a large exclusion zone to protect workers. In contrast, radiation portal monitors emit no radiation, but passively sense radiation emitted by radioactive material. (3) CBP is concerned that total scan time would create an immense delay for container traffic entering the United States from seaports or land border crossings. While DNDO's goal is to have CAARS scan a container in 15 seconds, CBP notes that the time when the scanning unit is on is only a small part of the total time a scan requires. It points to the following sequence: a driver would pull a truck with a container into the scanning enclosure (depicted in Figure 10 ); the driver would leave the truck and go to a radiation-protected facility; the scanning equipment would move over the stationary container at a precisely controlled speed; the truck and container would be scanned; and the driver would reenter the truck and drive it out of the enclosure. This sequence, CBP estimates, could take 5 minutes. Thomas Winkowski, Assistant Commissioner, Office of Field Operations, CBP, provided was emphatic on the need to minimize delays. Not referring specifically to CAARS, he said that rebooting and reinstalling software on some systems "can take seven or eight minutes. That's the kiss of death in my business from the standpoint of delays." Regarding CAARS, he said that CBP was "at the table" with DNDO in discussing requirements. But what our concern was was that the footprint was too big ... and the throughput, you know, for all your trucks to go through a car wash type system, as I call it, and the driver comes out, and you do your scan—that realistically presents a tremendous amount of problems from cycle time. So our position was that we really needed a different technology that was more flexible and that didn't have such a big footprint and require so much handling. Rynes stated that concerns such as the foregoing raised by CBP were among the reasons for the CAARS course correction and the establishment of the JINII program. Rynes states that added funds could improve CAARS in several ways: (1) Further development could reduce the size of CAARS systems so they would be more readily deployable at ports. (2) Money spent (by CAARS or another project) to improve detector efficiency could permit a less-powerful electron source to suffice, further reducing the requirements for shielding. (3) Added funds could improve algorithms to automate the processing of radiographs. (4) JINII is just beginning to develop algorithms to detect contraband automatically to increase the rate at which containers are inspected. Added funds would accelerate this development. (5) Added funds could expedite better integration and data fusion of CAARS with already-deployed radiation portal monitors. The preceding paragraph discussed synergisms by which technology developments could improve CAARS capabilities. Another synergism concerns the use of neutrons or high-energy photons to induce fission to discriminate SNM from other high-Z material. DNDO issued a broad agency announcement in March 2008 to develop this capability. The CAARS candidates do not include technology for this purpose. For example, they do not count neutrons or gamma rays that would be generated by photofission even though 9-MeV photons can cause that effect. However, CAARS might possibly draw on such work in the future. The "problem" and "background" information for the L-3 system, as described above, are the same as for the SAIC system. Science Applications International Corporation (SAIC) developed a system (unnamed) as part of the CAARS program. That program completed Technology Demonstration and Characterization of the competing systems in March 2010, and as of April 2010 the future of CAARS was unclear. However, SAIC is competing to apply the technology it developed under CAARS to another DHS program as described below. SAIC's basic CAARS system uses an electron accelerator developed by Accuray Corporation. The accelerator is "interleaved"—a single unit produces pulses of electron beams alternating between 6 and 9 MeV. Each pulse lasts 3 microseconds, with 2.5 milliseconds between pulses. These beams strike a copper target and generate photons with a spectrum of energies up to the highest energy of the electron beam, though lower-energy photons are filtered out. During a scan, the photons pass through a cargo container in a vertical fan-like beam. On the other side of the container is a detector array composed of multiple detector elements arranged in thin vertical bands. Each element records an opacity image of a narrow horizontal "stripe" of the container. An algorithm combines the stripes into a dual-energy radiograph, as described in the L-3 section. The system automatically flags for further inspection areas of high-Z material and areas with too much dense material for the photons to penetrate. Figure 11 illustrates the configuration of a unit. One key to this system is that the proprietary detector operates at a photon flux (number of photons per unit time) one-hundredth that of conventional cargo imaging systems. A lower flux enables the accelerator to be much more compact. Accelerators with high photon flux require a high-Z material, typically tungsten, for the bremsstrahlung target because it can withstand the high heat from the electron beam. Such accelerators also use high-Z material to shield the photon beam. However, photons with energies greater than approximately 6 MeV produce photoneutrons (neutrons knocked off atoms by high-energy photons) when they strike high-Z materials, with the number of such neutrons increasing as energy increases. The heat generated by the beam with lower photon flux is low enough that copper can be used instead of tungsten. Copper is one of a few metals with a threshold greater than 9 MeV for producing photoneutrons. As a result, SAIC states, its system produces virtually no photoneutrons, eliminating the need for large concrete structures for neutron shielding. Further, since the system has a low beam flux, SAIC states that the need for shielding from x-rays that scatter in the cargo is greatly reduced. Another key to the system is the dual-energy interleaved accelerator. Three aspects are especially consequential. First is the ability to construct this type of accelerator; previous efforts by Varian Medical Systems, funded by SAIC in 2004, had poor X-ray beam stability. Second, this accelerator uses a lower beam flux, with the advantages just discussed. Third, the number of photons per pulse ("dose repeatability") varies by a very small amount, less than 0.4%, far below the required variance of less than 5 %. While the goal of CAARS is to find high-Z material while not interfering with efforts by CBP inspectors to find traditional contraband (drugs, guns, money, etc.), the better-than-expected dose repeatability enabled the system to differentiate approximately 15 bands of Z from carbon (Z=6) to uranium (Z=92), an atomic number resolution of about six (e.g., the difference between oxygen, Z=8, and silicon, Z=14). This contrasts with the ability to find only materials with Z greater than 72, as in Figure 9 . On a radiograph in various shades of gray, the difference may not be apparent at all, but if each Z band is represented by a different color, different materials display much more clearly, as Figure 12 shows. Colors are assigned to Z bands arbitrarily, producing a "false color" or "pseudocolor" radiograph, so called because the colors bear no relationship to the color of materials being radiographed. How does reducing the variance increase the number of Z-bands? Dual-energy radiography finds the thickness, as measured by each of the two beams, of the material recorded for each pixel. For example, it finds the number of photons (in this case, x-rays) transmitted through a cargo container, and then received at the detector that measures the number of photons at each pixel. An algorithm calculates the ratio of the two thicknesses and displays this ratio as an image in colors or grayscale, pixel by pixel. Thickness ratios are calibrated before each scan. Because the number of x-rays varies from pulse to pulse, the output end of the accelerator has an x-ray dose meter to correct for this variance. However, this correction can introduce large errors in the ratios measured at some pixels because the correction applies only to the beam output and not to the beam as received at different points. If there were no variance at all in the output (number of x-rays per 6-MeV beam and per 9-MeV beam), this correction would not be needed, eliminating this error source and increasing the number of Z bands that can be displayed. At the same time, even with zero variance, the number of Z-bands that can be displayed is limited, and can be reduced, by such factors as the size and thickness of objects being radiographed, and by the mix of objects of different Z numbers that a beam might pass through for a given pixel. Two of CBP's concerns with equipment to detect possible terrorist nuclear weapons or fissile material are that that mission is added on top of the mission of detecting traditional contraband, adding to the workload of CBP front-line operators, and that the equipment does not help detect contraband. Yet in contrast to nuclear weapons or material, contraband is a constant threat, with criminals attempting to smuggle in many tons of it every day, and often succeeding. The ability to separate pixels into many bands by Z would address these concerns, as it would help an operator find typical contraband hidden in a cargo container as well as high-Z material. Such contraband has a Z of less than 72, so the ability to find high-Z material does not contribute to finding contraband. In contrast, dividing pixels into many Z-bands facilitates the detection of anomalies, such as guns (Z~26) hidden in a shipment of water (Z~10). Further, the current software enables the operator to choose colors with which to tag different Z-bands in order to make shapes stand out. Algorithms to highlight suspicious shapes could also be developed. Greatly reducing neutron flux offers several potential advantages. (1) Worker exposure to neutrons is reduced. (2) Lower flux requires less shielding, thereby reducing cost and footprint. (3) If the basic system is augmented by the capability to detect neutrons and gamma rays resulting from photofission, neutron detectors in this system would be able to detect neutrons when the beam is on because of the low neutron background. SAIC claims that its CAARS system is the only one with this capability. Since most neutrons released by fission of SNM are "prompt" (released immediately), the prompt neutron signal is much larger, and thus easier to detect, than that of delayed neutrons. Fission of SNM generates high-energy neutrons; by adding detectors that can discriminate between neutrons on the basis of their energies, SAIC expects that its system will be able to determine if a high-Z object is SNM. (4) The accelerator is very compact, 80 cm in length, also reducing footprint. (5) The system is designed to flag high-Z material automatically, reducing the burden on operators and the risk of operator error. Another benefit of the system is that it occupies considerably less space than do the L-3 and AS&E systems, an important factor for locations, such as seaports, where space is at a premium. SAIC is developing its basic system under contract to DNDO. According to Rynes, the SAIC system has been making substantial progress since its Critical Design Review in April 2008, as follows. The system has been built and has been collecting images. (Images are what an operator sees.) As of February 2009, it was collecting data for developing the data-processing algorithm. As of July 2009, a test unit had been built and SAIC was refining its algorithms. Technology Demonstration and Characterization was completed in December 2009. The Accuray interleaved x-ray source is the key to making the overall system smaller, a major criterion for CBP. Rex Richardson, Vice President and Principal Scientist, SAIC, said in May 2009, "We have resolved all of the initial start-up issues related to the Accuray compact X-ray source and the source is now performing beyond expectation. Hence I think I am confident in saying that the 'higher risk' aspect of the SAIC program has now been resolved and we are collecting the 'higher benefit.'" He stated in February 2009 that SAIC is "at the near-production prototype stage and can produce pilot test units for deployment at ports and border crossings in a few months" and that SAIC is "now imaging full cargo loads at our design speed of 33 inches per second." In February 2009, SAIC estimated unit price of its system at $4 million to $7 million, depending on terms of procurement such as number of units ordered, delivery schedule, and warranty agreements. In September 2008, DNDO did not elect to fund SAIC's proposal for an advanced technology demonstration of the add-on capability to its CAARS system discussed earlier, to detect shielded SNM by detecting radiation released by fission of SNM induced by high-energy x-rays. As of April 2010, the status of the SAIC program was as follows. Without funds to continue its program, SAIC disassembled its CAARS test unit and was disposing of the government-owned material under DNDO supervision. Meanwhile, SAIC was adapting its technology to a truck-mounted design in response to Broad Agency Announcement 10, Non-Intrusive Inspection and Automated Target Recognition Technologies, or "CanScan," issued by the DHS Directorate for Science and Technology. One element of CanScan supports development of a next-generation mobile cargo imaging system for CBP operators to use at seaports and border points of entry. If it is awarded a contract under CanScan, SAIC anticipates that it would develop a prototype that would integrate its CAARS dual-energy technology with such techniques as neutron active interrogation for materials identification, and that it would deliver a production-ready prototype truck platform to CBP within three years of contract award. This system required completing the interleaved accelerator, yet its development was challenging. As a result, it involved more scientific risk than the L-3 system, which uses two separate accelerators, one for each energy level. An earlier attempt to develop an interleaved accelerator encountered a problem with the stability of the electron beam, with energies varying by a factor of two. The SAIC CAARS system requires that the Accuray accelerator demonstrate that it can repeatedly generate electrons of two energy levels, each within a narrow energy band. As of May 2009, the accelerator was operating beyond expectations, greatly reducing if not eliminating its development as a source of technical risk. As noted, accelerator continued to operate beyond expectations, which among other things enabled the system to complete Technology Demonstration and Characterization in December 2009. Typical cargo imaging systems have a resolution of 3 mm to 5 mm (i.e., they can display details that are 0.12 to 0.20 inch in any dimension). The design of the SAIC system results in resolution of 7 mm to 9 mm. DNDO has set a standard of detecting 100 cc of SNM (e.g., a cube 4.6 cm on a side), so the significance of this loss of resolution is not clear for SNM detection, though it would probably reduce the system's ability to detect other contraband. CBP prefers finer resolution to help spot contraband. SAIC responds that it can achieve 5-mm resolution by using more detectors, albeit at higher cost; that such fine resolution is not absolutely required for scanning cargo containers; and that false-color imaging would have great value for discerning contraband. Another concern is the extent to which different thicknesses of materials or different materials together in a container would reduce the number of Z-bands that the system can display. (1) CBP insists that scanning should interfere with the flow of commerce as little as possible. In response, DNDO requires the system to scan containers at a rate of 2.7 ft per second, the speed needed to scan a 40.5-ft container in 15 seconds. (This time refers to the actual time when a container is being scanned, as distinct from the requirement to process 40 containers per hour, which includes time for a container to move to and from the scanning equipment.) The 15-second requirement imposes a burden on the system. Improving the performance of the system at a given scan speed and photon output would require a significant redesign and additional cost. On the other hand, some ask, since radiographs of containers must still be scanned visually by operators to search for contraband, which may take more than 15 seconds, is a 15-second scan time needed, or could that requirement be relaxed? (2) The system uses an interleaved accelerator that has proven to be technically feasible, but there is as yet no assurance that it will be available at the quantity, schedule, and cost needed to make the system competitive. (3) At a unit price of perhaps $5 million or more, some ask, is the system too costly to deploy in large numbers? Uncertainties about the final configuration of the deployed system could affect operations. Space is at a premium in many U.S. and foreign ports. If a more powerful accelerator is needed in order to obtain finer resolution, it could require more space, more shielding, and more standoff distance, and might increase concern among port workers about radiation exposure. An alternate means of obtaining finer resolution would be to add more detectors, which would increase cost but not radiation. SAIC states that with added funds it could (1) integrate detection of photofission with CAARS radiography, (2) hire more software engineers to speed development of algorithms to improve the system's ability to differentiate between materials; and (3) pursue application of the system to detect contraband. Added funding would also allow SAIC to apply its CAARS technology to the CanScan program. SAIC believes that there is significant potential for its dual-energy radiography technology to help detect contraband and explosives because it can differentiate between organic materials, which have a low Z, and most metals. Improved scintillator material being developed by several teams of scientists might be of use to the SAIC system. Similarly, algorithms being developed for other gamma-ray detectors or radiography units might have elements similar to those being developed by SAIC. This system addresses the same problem as the L-3 and SAIC CAARS. Note: On March 10, 2009, DNDO terminated the contract with American Science and Engineering, Inc. (AS&E) to continue developing this system. DNDO views the technology incorporated in this system as holding some promise, but states that development of this technology requires additional basic research. Accordingly, this section will not be updated further. AS&E is developing a CAARS system that would utilize a different physical principle than the L-3 and SAIC systems. Its core technology is "EZ-3D TM ," developed by Passport Systems, Inc. The term is an abbreviation for "effective" (i.e., average or approximate) Z (atomic number) of the material being detected, located in three dimensions. It is intended to exploit the principle that when x-rays are beamed at an object, the number of x-ray photons that scatter backwards (in the opposite direction from the beam) is strongly proportional to the object's Z. When x-rays strike high-Z material, they knock pairs of electrons and positrons off atoms. (Positrons are electrons with a positive charge.) These electrons and positrons travel in all directions. When they strike other atoms, they create bremsstrahlung photons (x-rays) that also travel in all directions. By arranging photon detectors so that they detect x-rays scattered at a backwards angle (>90 degrees) from the beam, they could detect these x-rays and not x-rays from the beam. The number of these backscattered x-rays and their energy distribution (as shown in Figure 13 ) is an indicator of Z. In an ideal situation—for pure chemical elements, and with no intervening material—the number of x-rays is approximately proportional to Z to the fourth power, so that number is enormously higher for high-Z material than for medium-Z material. In the real world, most goods shipped (e.g., wood, steel, plastic, electronics) are not pure elements and differ in size and shape, and a container may hold mixed types of cargo. As a result, experiments have shown, the effect is somewhat less. The effect of Z on number and energy of backscattered x-rays is the key to EZ-3D; Figure 13 shows, for five elements, the difference in backscattered spectra as Z increases. This graph shows the number of backscattered photons (vertical scale) at each energy level (horizontal scale) recorded by a detector. The vertical scale is logarithmic, so vertical increments are larger than they appear. The plots are for five elements, from top to bottom, with Z: U, uranium, 92; Pb, lead, 82; Sn, tin, 50; Fe, iron, 26; Al, aluminum, 13. "Normalized 511" means that the graphs are "normalized" at 511 keV. That is, for each element, the number of counts at 511 keV is multiplied by the factor needed to set the count to a specified number (the same number is used for all elements in a scan) and counts at each other energy level for that element are multiplied by the same factor. This facilitates comparison across elements. For the region between roughly 600 keV and 1300 keV, the graph shows a difference between uranium and lead, and a larger difference between lead and tin. The distribution of points in the graph depends on the energy of the electron beam used to generate the x-rays via the bremsstrahlung process. For this graph, the beam has an energy of 2.8 MeV. Since almost all the x-rays have energies far below that level, with the peak number of x-ray photons at 300 keV, the number of counts diminishes at higher energy levels. For this graph, beyond about 1300-1800 keV, depending on the element, the number of background counts exceeds the number of backscattered counts, so that counts at and beyond those levels provide no useful data. Stephen Korbly, Director of Science at Passport Systems, Inc., describes the proposed design and operation as follows. A truck would pull a cargo container through the inspection unit at slow speed, 2.5 feet per second (1.7 mph). The container would first pass through a radiography unit to identify areas of dense cargo for the EZ-3D beam to examine in more detail. The container next would pass through the EZ-3D unit. There, a Rhodotron would generate a 9-MeV electron beam. This beam would travel through a series of electromagnets so as to steer the beam downward toward the container. The beam is designed to move back and forth transversely across the top of the cargo container to interrogate a "slice" of the container, as shown in Figure 14 . If the system were to detect a volume of dense cargo, the beam could dwell on that volume longer to gather more data. The electron beam would strike a water-cooled metal target, producing a spray of x-rays through the bremsstrahlung process. The x-rays would pass through a metal sheet that filters low-energy x-rays from the beam because they are of little value for detection but would increase radiation dose to the cargo. The remaining x-rays pass through a collimator, a slab of heavy metal with vertical holes drilled in it, so that only those x-ray photons traveling in the desired direction, downward, can pass through, forming a beam traveling in one direction. Collimation removes from the beam those x-rays traveling in other directions that would interfere with detection by scattering in the cargo or traveling directly from the x-ray generator to the detectors without going through the cargo. The x-ray beam would pass downward through the cargo, generating other x-rays as described above, some of which scatter backwards. Very few other photons do so. Sodium iodide detectors are placed so as to detect these backscattered x-rays. The detectors are collimated so their field of view intersects with an x-ray beam. Figure 14 illustrates this configuration. The intersection of a beam and a detector's field of view forms a voxel. This intersection of two lines locates the voxel in two dimensions; the position of the "slice" of the container being examined locates the voxel in the third dimension. Each detector records the number of individual x-ray photons it detects in each voxel. AS&E expects the system to be able to scan a standard 40-foot cargo container for high-Z material in 15 seconds. Since the backscattered photons would pass through other cargo between the x-ray generator and a voxel, and between a voxel and a detector, the system is designed to account for, and subtract, the effects of this other cargo. Scanning a container produces radiography and backscatter data on how each voxel attenuates x-rays. An algorithm would integrate and analyze both types of data. In effect, to reconstruct the contents of a container, it would create a hypothesis about what is in the container where, and would calculate how closely the hypothesis matched the data. The algorithm would then alter the hypothesis iteratively until it provided a best fit with the data. The system is designed to alarm automatically when it detects voxels containing high-Z material and meeting other conditions. For example, the algorithm might alarm only if it detected a number of contiguous voxels of high-Z material so that it would not alarm each time it detected, say, a lead sinker. The process would repeat for each slice of the container. Korbly states that the algorithm has been shown to work in laboratory demonstrations. (1) Jeffrey Illig, the CAARS project manager at AS&E, stated in October 2008 that the AS&E CAARS would, if successful, look at 3-D voxels, rather than 2-D pixels; the latter approach, in effect, provides the average Z of an x-ray traveling through the entire width of a container as in the L-3 and SAIC CAARS systems. As a result, he says, the AS&E system is expected to generate more data by breaking the volume being inspected into smaller units, simplifying the task of the detection algorithm. (2) Joel Rynes, Program Manager of DNDO's CAARS program, said that the EZ-3D effect is more specific to high-Z materials than is dual-energy radiography, potentially improving performance, though it will not be able to discriminate between (for example) lead and uranium within the scan time and dose to cargo limits required. (3) The system is designed so that, if its radiography unit detects an area of dense material, it could direct the EZ-3D x-ray beam to spend more time scanning that area, further reducing the probability of a false positive or false negative. (4) Illig says that the system is designed to specify the location of a suspicious object in three dimensions; as a result, CBP personnel would know where to look in a secondary inspection, easing their task and reducing the time that a container is delayed for inspection. (5) If the system works as anticipated, it is claimed, it would automatically alarm on high-Z material, making it easy to use. (6) Because the x-ray beam is aimed downward, much of it would be absorbed by the ground, reducing the amount of x-radiation that escapes and reducing shielding requirements. AS&E has been working on its CAARS system since late 2006 under a contract that DNDO awarded for system development in September 2006. (The L-3 CAARS section provides the total cost of DNDO's three CAARS projects.) In early 2008, DNDO changed the goal of the CAARS program from system acquisition to an advanced technology demonstration (ATD). Passport Systems has conducted numerous laboratory experiments at the University of California, Santa Barbara, to develop EZ-3D using the university's 5.3-MeV accelerator to generate x-rays to scan a 4 ft x 4 ft x 4 ft volume containing objects used to simulate commercial cargo. DNDO conducted a Critical Design Review (CDR) of the AS&E CAARS in October 2008, i.e., a review of the specifications for all components of the system and the links between them. DNDO approved the system's design at that time. As a result, the design is locked in and AS&E is able to begin to order hardware to assemble an ATD prototype system. Illig stated in early October that the system's design was complete and that, if the CDR is successful, AS&E would begin assembling a full-scale ATD system in November 2008. AS&E would also construct a shielded-room facility to develop the system in its anticipated production configuration. AS&E anticipates obtaining the first data from this ATD system in April 2009. After several months of developmental testing, AS&E would turn the prototype system over to DNDO so that agency could characterize and evaluate the system's performance using its own containers, cargo, and targets. If that phase is completed successfully, DNDO would decide whether to test the prototype under operational conditions, such as having CBP personnel operate it at a port of entry. Successful completion of that phase, in turn, would lead to a decision by DNDO on whether or not to purchase and deploy the system. Illig stated that AS&E could deliver the first production unit around the end of CY2010, with full-scale production commencing in CY2012; it projects the cost of its CAARS system at $8 million to $10 million per unit, assuming a buy of 25 units. However, Rynes states: DNDO has no plans at present to purchase and deploy the CAARS systems. We will use prototypes of the three CAARS systems to collect data to feed a cost-benefit analysis that could lead to future procurements by DHS. The AS&E CAARS prototype will be a full-scale laboratory prototype that would still take substantial work to get it ready for a port environment. It will take less work to get the SAIC and L-3 prototypes ready for a port deployment. The AS&E system has always been the high risk, high benefit solution. Rynes stated that as of February 2009, development of the AS&E CAARS system was on hold due to technical issues that AS&E is trying to resolve. This report discusses this cost-benefit analysis under "status, schedule, and funding" in the L-3 CAARS section. (1) In theory, the system could differentiate between different high-Z materials, such as uranium vs. lead, if the materials were pure chemical elements and certain other conditions were ideal. In practice, so doing would take longer than differentiating between high- and medium-Z material, and impurities and interference from other cargo could make differentiation between different high-Z materials very difficult at best, so any high-Z material in a container could require a secondary inspection, delaying that container. (2) A container can include many types of cargo, and there is no requirement to declare the arrangement of the cargo. It would appear very difficult to develop an algorithm that can reliably eliminate x-rays scattered by cargo between the voxel being interrogated and a detector and reconstruct the locations of different chemical elements within a cargo container. (1) The system has not been demonstrated in a full-up configuration. Passport Systems, a Massachusetts company, uses an accelerator in California for its experiments, and these experiments use a lower-powered accelerator (5.3 MeV) than the Rhodotron (9 MeV). What risks, if any, are associated with shifting from a lower- to a higher-powered accelerator? (2) The integration of a linear accelerator for radiography and a Rhodotron for EZ-3D has not been demonstrated. (3) Passport Systems has simulated the performance of EZ-3D by gathering radiography data separately, bringing these data to the EZ-3D experimental facility in California, merging ("injecting") the radiography data into the EZ-3D data, and feeding the merged data into the cargo reconstruction algorithm. As with any simulation, one might ask how accurately the simulation reflects reality. (4) Will the AS&E system be able to meet the intended scan speed? There is always a risk of problems of this sort when one scales up from a laboratory demonstration system to an operational system. (5) Rhodotrons take a long time to build, and very few have been built. For example, AS&E has the world's 18 th unit. Could the manufacturer, Ion Beam Applications (IBA), a Belgian company, build them faster and cheaper? IBA has told AS&E that if IBA gets a large order, it would build a facility in the United States to assemble Rhodotrons. Could it ramp up production in a new facility without major hurdles? (1) If AS&E received a contract for multiple (e.g., 25) production units, could IBA ramp up its Rhodotron production facility on schedule? (2) The AS&E system is expected to be costly, and a main component of cost is the Rhodotron, at €2 million to €5.7 million apiece for single units. Will IBA be able to reduce Rhodotron cost through research and through quantity production? (1) Illig states that AS&E has extensive experience in designing systems and their user interfaces for CBP and other front-line users, but that AS&E has not consulted with CBP on the design of its CAARS system. Is that cause for concern, or is the user interface fairly standard by now so that extensive consultation is not needed prior to operational testing? (2) Illig states that the footprint of the unit is 60 ft by 160 ft mainly because it uses concrete walls for radiation shielding. The footprint is a concern for port operators because space is at a premium at ports; it is less of a concern at land border crossings. Illig states that the length could be reduced to perhaps 40-50 ft by 120 ft by using some means other than a truck to pull containers through the system; is that reduction sufficient? (3) The system generates radiation in two ways. A radiography unit uses a 6-MeV linear accelerator, aimed horizontally across a cargo container, to generate x-rays (through the bremsstrahlung process). Illig states that there is a "beam dump" to absorb x-rays on the other side of the container, and that the accelerator is pulsed, so that it is off most of the time, reducing the shielding needed. However, some x-rays scatter off detectors and cargo. The Rhodotron is on all the time, and will generate 9-MeV electrons, but is aimed downward so that the Earth absorbs most of the resulting x-rays. Further, the bremsstrahlung process generates x-rays in all directions; will the shielding be adequate? Accordingly, CBP and port personnel will be concerned about the amount of radiation that escapes. Will AS&E be able to provide satisfactory assurances on this point? Illig states that added funding would allow AS&E to build a test cell that had a Rhodotron and a linear accelerator for radiography together so that it could obtain actual data. That, he says, would permit engineers to develop algorithms to integrate both types of data using actual data. Added funds, he said, would also let AS&E purchase more test articles, conduct tests on more cargo configurations, and increase test time, all of which would characterize system performance better and reduce risk. According to Illig, as part of the ATD for CAARS, AS&E would build a facility integrating backscatter and radiography technologies. This facility could provide a testbed for Passport Systems' nuclear resonance fluorescence technology and, more generally, for research into resolution of alarms caused by possible shielded nuclear material. Similarly, Rynes believes that the facility could have various applications: The AS&E CAARS prototype is being installed at MIT's Bates Linear Accelerator Center. The AS&E x-ray source (9 MeV, continuous wave) provides a capability that does not exist in the United States. After the CAARS program is complete, DNDO must dispose of all equipment procured under the contract. One option proposed is to keep the source at the Bates Center and establish the source as a "user facility" where researchers can come in to do experiments (e.g., NRF measurements at 9 MeV or experiments with prompt photofission). Another option is to let AS&E keep the source to use in a possible follow-on system (e.g., pilot deployment of a modified CAARS design). It is too soon to make this decision; it depends on how well the AS&E CAARS system performs in its upcoming tests. Nuclear weapons or SNM may be hidden in cargo containers, automobiles, or elsewhere. Radiography might detect a fully assembled nuclear weapon but might miss a small piece of HEU, depending on its size and shape, and passive radiation detection might or might not detect lightly shielded HEU, depending on such factors as the amount of HEU, the thickness and type of shielding, and whether it contained trace amounts of uranium-232, which has a high-energy (2.614-MeV) gamma ray from thallium-208 associated with its decay. Beams of neutrons or high-energy x-rays or gamma rays hold the potential to detect SNM by itself or in complete weapons by inducing fission. But the radiation emitted by such beams could require shielding and some standoff distance, possibly making it impractical where space is at a premium. Other properties of SNM are its high density and high Z. Such materials cause much greater deflection of muons, a naturally occurring subatomic particle, than do lower-density, lower-Z materials. Detection using muon tomography (MT) would not use a radiation source, avoiding concerns about radiation exposure or salvage fuzing. Yet while MT has been demonstrated in the laboratory, it remains to be seen if it can be converted to a system that will work in the real world. At issue: Is muon tomography an operationally feasible means of detecting nuclear weapons or SNM in the presence of clutter from actual cargo? Is it a cost-effective means of detecting high-Z material in vehicles with people inside them, and in cargo at ports of entry and choke points, without affecting the flow of commerce? Muons are heavy subatomic particles generated when cosmic rays strike atoms in the Earth's upper atmosphere. Most muons travel at over 95% of the speed of light. Given their speed and mass, they are highly energetic, with a mean energy of 3 billion electron volts. As such, they are highly penetrating. For example, they can penetrate 1.3 m of lead or 15 m of water. About 1 muon strikes each square centimeter of the Earth's surface per minute. Matter deflects muons, with the degree of deflection determined statistically by the density and Z of the matter. As it happens, there is large separation between the average angle of deflection resulting from low-Z, low-density material in commerce, like food or plastic, and medium-density, medium-Z material like steel, and between the latter and high-Z, high-density material like tungsten, lead, or SNM. Tomography divides a solid object into many parts, determines a characteristic (e.g., density) of each part, and assembles the parts into an image of the object. A medical CAT (computed axial tomography) scan, for example, creates images of each slice (about 1 to 10 mm wide) of the body part being scanned. Muon tomography measures the trajectory of each individual muon before it enters a cargo container and again after it exits. In simplest terms, the intersection of the trajectories indicates the angle of deflection (and thus high, medium, or low density and Z) and the point of deflection, though the trajectory is more complex because a muon interacts with many atoms as it passes through a container. An algorithm integrates data from numerous muon trajectories to form a three-dimensional image of the container based on the density and Z of its contents. The statistical difference in deflection between high-Z, high-density material and other material, combined with muons' high penetrating power, is the basis for an MT system to detect SNM, whether in weapons or by itself. Decision Sciences International Corporation (DSIC) is developing an MT system for use with vehicles and containers. (DSIC changed its name from Decision Sciences Corporation in August 2009.) Development began through a Cooperative Research and Development Agreement (CRADA) with Los Alamos National Laboratory (LANL). Figure 15 is a schematic drawing of the system. The prototype works as follows. To determine the track of muons, it uses "drift tubes," which are similar in shape to fluorescent light tubes. They are made of aluminum, with a wire running lengthwise through the center of each tube, and are filled with a mixture of gases typically used in drift tubes. The tubes are arranged in arrays. Each array consists of 12 cross-hatched layers of tubes, alternating between 2 layers in the "x" direction and 2 in the "y" direction. A positive charge is applied to the wires. A muon that strikes the gas in a drift tube creates a trail of free electrons, which are drawn ("drift") to the wire by the positive charge at a known speed. These tubes measure the distance between the wire and a muon's closest approach to the wire. Two layers of "x" tubes establish a "y" measurement, and two layers of "y" tubes establish an "x" measurement. Combining data from each set of 4 tubes establishes a point on a muon's trajectory, and the system uses 3 points to define the trajectory. DSIC had originally planned to have the tubes in a "tunnel" configuration, as illustrated on the left side of Figure 15 , with arrays of drift tubes on the top, bottom, and sides of the object being examined to determine the incoming and exiting trajectories of individual muons, but has instead decided to use a "top/bottom" configuration, as shown on the right side of the figure, with arrays on top and bottom only. This configuration would be less costly than the tunnel, but it would require up to 10% more scan time because muons entering from or exiting to the side would not be counted. That increase could be reduced by using multiple units arrayed side by side to scan multiple lanes of traffic so as to record the tracks of more muons entering and exiting the object being examined. As with any detection system, total throughput (e.g., number of tractor-trailer trucks exiting a port per hour) could be increased by deploying more units. Also in this configuration, units are only as wide as a lane of traffic, unlike many other systems. DSIC views this as important because space is severely limited at many ports and, even where it is not, it could be difficult to rearrange traffic lanes to accommodate wider detection equipment. For MT to work, the system must identify each muon uniquely so it can match entry and exit tracks. According to DSIC, the system's electronics can do this because muons travel at essentially the speed of light, and entry and exit tracks occurring at the same time are easily matched up. The electronics can keep up with the tracks, since the rate at which muons strike the drift tubes is far lower than the rate at which the electronics can process muon signals. Some 3,000 muons strike the drift tube array each second, and the electronics can read a muon hit in a millionth of a second. The odds of two muons striking a drift tube within a millionth of a second are 3000 out of 1,000,000, or 0.3 percent, so MT can uniquely identify a single muon 99.7% of the time. If no matter at all were present between the top and bottom drift tube arrays, a muon's exit track would be a straight-line continuation of its entry track. If a muon interacted at only one point, the intersection of the two tracks would indicate the angle and point of deflection of an individual muon. The point of deflection would locate a voxel, and the angle of deflection would indicate "scattering density," a combined measure of Z and density of the material in that voxel. In practice, a muon interacts with all matter along its path, displacing the exit track from a straight line. The amount of displacement provides information on the scattering density, location, and thickness of the material. From these data, an imaging algorithm calculates the degree of scattering of muons for each voxel and creates a 3-D image of the contents of the object being scanned. Resolution of the scan increases with time, as Figure 16 shows, as each pair of muon tracks adds data. The image is displayed on a computer screen and can be rotated so the viewer can visualize it as if in three dimensions, as Figure 17 shows. Based on computer simulations and laboratory tests conducted in early 2010 using prototype equipment, DSIC states that MT can differentiate between high-Z and medium-Z material, so it can pick out HEU hidden in a cargo of steel parts, or even hidden as a piston inside an engine. Based on tests conducted in early 2010 with its prototype scanner, DSIC estimated in April 2010 that its system would take less than 1 minute to clear most containers with 95% confidence; that it could automatically detect a cube of unshielded SNM 5 cm on a side in a container in that time; and that it could automatically detect that cube inside shielding (e.g., a larger cube) in less time. Others disagree, as discussed under "Scientific risks and concerns," below. DNDO observed, "These performance results are not supported by data collected during the DNDO TRR [test readiness review] demonstration conducted January 11-14, 2010." As with any system, increasing scan time would increase confidence while having a greater impact on the flow of commerce. The DSIC scanner can also detect gamma rays because they produce a signal different from muons when they strike drift tubes. According to DSIC, when a gamma ray strikes an aluminum drift tube, it knocks electrons off the aluminum, which ionize atoms in the gas inside the drift tubes. These electrons drift to the central wire and are recorded. The system can differentiate between electrons generated by gamma rays and by muons, it is claimed, because the muon-tracking algorithm can compute a track for muon-generated electrons but not for gamma-generated electrons, as the latter do not pass through a drift tube. A gamma-ray count above background levels would be suspicious, though there are many innocent gamma-ray emitters in commerce. A low count might reduce suspicions, though vehicles in adjacent lanes could suppress background gamma rays. The scanner has no spectroscopic capability, so it cannot identify the source of gammas by their spectra. However, DSIC argues that its scanner uses the presence or absence of gammas to reduce scan time. By way of background, HEU that has been through a nuclear reactor picks up a small amount of uranium-232, which has an extremely energetic gamma ray (2.614 MeV) from thallium-208 associated with its decay, making it very hard to shield. Even if HEU has not been through a reactor, such as if it has been produced by centrifuge from natural uranium, it will have some uranium-238, which has a gamma ray of 1.001 MeV. DSIC states: The gamma signal from any HEU has a 1.001-MeV component from its uranium-238 content. Even for uranium enriched to 93 percent uranium-235, with 7 percent uranium-238, shielding 1.001-MeV gammas so they fall below the system's detection threshold of about 20,000 gammas per second requires about 1.4cm of lead. This increases the size of the threat object we're searching for with muon tomography to almost 9 cm in diameter, compared with 6 cm for a 2-kg cube of unshielded HEU. Since the number of muons passing through an object is proportional to its area, about 2.25 times more muons will pass through the larger object than the smaller one. This means muon tomography can clear the shielded package 2.25 times faster than the bare HEU. Because only some fraction of containers emits gammas, this allows us to clear the vast majority of containers for the large threat package in 1/2.25 the time (26 seconds). If we were to search for the bare HEU every time, the average time to clear would be around 60 seconds. This makes a huge difference in our throughput rates. Containers with cluttered scenes or potential shielding objects would require longer scan times, but these scenes should be rare. Throughput is determined by the average scan time, so averaging a majority of 26-second scans with a few 60- or 90-second scans would have little effect on throughput. We don't know the number of occurrences in commerce of these types of cluttered scenes, so our next step is to scan containers in the flow of actual commerce and adjusting our scan procedures according to what we find. DSIC also states that, because its system has several thousand drift tubes, which function as detector elements, it can provide a general location of gamma-ray emitters in a container, helping to distinguish between point sources like a small amount of plutonium and distributed sources like kitty litter. It further claims that this capability can help clear false positives and determine which parts of a container warrant closer examination by the system's muon tomography element. DNDO finds the argument that gamma-ray detection capability adds to the efficacy of muon tomography to be unconvincing. "The attenuation of 1-MeV gamma rays by 1.4 cm of lead can also be achieved by about 2 cm of iron or 6 cm of aluminum or 16 cm of water; in other words, the HEU sample can be easily shielded by innocuous materials commonly found in cargo and effectively invisible to the MT system." As a result, DNDO argues, gamma-ray detection capability would probably not reduce MT scan time in actual cargo, much less in a container in which terrorists had arranged the cargo so as to reduce the probability of detecting a nuclear bomb. DNDO prefers that DSIC would concentrate on proving the concept of MT before trying to augment it with detection of other types of radiation. Based on testing, improvements in electronics to reduce noise, and computer modeling, DSIC anticipated in April 2010 that MT would be able to distinguish between SNM and medium-Z materials in under a minute. Also in that month, DSIC estimated that perhaps 2 to 5 minutes would be needed to distinguish between HEU and lead and about twice that to distinguish HEU from tungsten. These figures are about half those of estimates made in July 2009. An extended scan of a container would be easier, less costly, less intrusive, and faster than unloading a container, inspecting its contents, and reloading it, a process that could easily take hours. Christopher Morris, a physicist at Los Alamos who has done extensive research on MT, stated, If muons were to identify a shielded container, I would advise taking as long as reasonable (perhaps ~1 hour) to survey a container with muon tomography before taking the risk of any invasive action. In this longer scanning time, one should be able to provide detailed images of the configuration of a threat object, estimate its yield if it is in a weapon configuration, distinguish between different high-Z materials radiographically, and carefully study the passive radiation signatures. This might avoid triggering a salvage-fuzed weapon. Detection might be made faster and more accurate by an algorithm that would subtract the known part of an image, making it easier to focus on suspicious objects. A library would be constructed with MT images of many models of trucks, cars, containers, and trailers. When a truck entered the MT system, a scanner would read its license plate. The algorithm would call up the MT image of that truck from the library, and would subtract that image, voxel by voxel, from the image of the truck generated by the MT system, leaving an image only of the cargo and any anomalous objects in the truck itself. According to DSIC, scans performed on several vehicles have demonstrated the efficacy of this approach. Some, though, question whether the algorithm could handle correctly any variant to the vehicle (e.g., a modification to the engine). As of May 2010, DSIC had constructed models of several vehicles and was evaluating their utility. The library of vehicles will grow as scans of various vehicle models are performed. This library is not a critical piece of the technology for scanning cargo containers, but would be of more value for scanning passenger cars. To improve its ability to detect SNM, DSIC had initially designed a prototype scanner with the ability to detect neutrons as well as muons and gamma rays. However, DSIC felt that the ability to track muons and to detect and locate gamma ray emitters sufficed As of April 2010, it had postponed plans to use its system to detect neutrons while keeping it as an option. The optional neutron detection capability would use drift tube walls coated with boron-10. Absence of neutrons may help clear false positives, though hydrogenous cargo could absorb neutrons, preventing them from being detected. There are few sources of neutrons in commerce; accordingly, the presence of neutrons would be suspicious. (1) Because it uses naturally occurring muons, muon tomography does not use a source to generate radiation, so it does not require shielding or a standoff distance to protect workers from radiation. (2) Since it does not generate radiation, it cannot harm people or damage the contents of containers, so it could be used at land border crossings to search cars for SNM while the passengers are inside, speeding the flow of traffic. (3) Because it does not generate radiation, it cannot trigger salvage-fuzed weapons. (4) DSIC claims that MT is very unlikely to show a mass of high-Z material where none exists, though DNDO stated that DSIC did not demonstrate this at the TRR. Reducing the false alarm rate is important to CBP because each alarm, whether true or false, may require considerable effort to clear. (5) Because muons are highly penetrating, they can be used to detect high-Z material even when shielded. (6) The detection algorithm is intended to detect, locate, and alarm for high-Z material automatically, greatly reducing the need for human interpretation. The display algorithm shows the operator where high-Z material is located and may provide information about its shape. (7) The top/bottom configuration is narrow enough to scan trucks leaving seaports within existing lanes, avoiding the need to modify traffic patterns. In 1995-1996, LANL built and tested a small MT prototype (6 ft by 6 ft scan area) to demonstrate the detection of high-Z materials. Based on simulations and test data, DSIC and LANL signed a CRADA in May 2007 to commercialize LANL's MT technology. Since then, DSIC has provided about $7 million to LANL as part of the agreement. Under this funding, LANL and DSIC staff built a larger scanner, 12 ft high by 12 ft wide by 16 ft long, large enough to scan a portion of an SUV, that was operated at LANL from October 2008 to mid-June 2009 for a cost of $1 million. Vehicles were tested in the device with various clutters as well as medium- and high-Z materials. DSIC moved the scanner to its headquarters in Poway, CA, and modified it to a top-bottom configuration 12 ft high by 16 ft wide by 24 ft long, large enough to scan SUVs, automobiles, and 20-foot shipping containers. DSIC canceled a Test Readiness Review (TRR) scheduled for April 2009 because of problems with the muon tracking algorithm and because the decision algorithms needed further development and testing. As of July 2009, DSIC planned to conduct a TRR in late September or early October 2009. A TRR shows whether the system is ready to begin a Proof-of-Concept (PoC) demonstration, the last phase of Exploratory Research at DNDO. DNDO conducted a TRR in January 2010 at DSIC's facility in Poway, CA. R. Leon Feinstein, DNDO program manager for near-term testing of the DSIC MT prototype, described the results as follows: The goal of the TRR was to determine if the MT prototype was ready for a DNDO-sponsored Proof-of-Concept (PoC) demonstration that would more fully characterize and evaluate MT technology. Following the TRR, DNDO's test team concluded that the DSIC MT system was not ready for the PoC demonstration. The team recommended that DSIC continue with its planned hardware and decision algorithm upgrades, addressing issues identified by the test team that limit the functionality and performance of the MT prototype. DSIC had already recognized these needed upgrades and fixes at the time of the TRR, and planned to complete them by the end of May 2010. DNDO will conduct a second TRR after the following conditions have been met: (1) DSIC must complete its proposed upgrades and fixes; and (2) the DSIC TRR Report (a contract deliverable) must be revised, re-submitted and approved by DNDO. DNDO rejected DSIC's first draft TRR report of February 8, 2010, for the following reasons. (1) It described demonstrations and measurements that the DNDO test team neither observed nor recorded. (2) It focused on gamma-ray detection results that were not part of the TRR and were not observed or recorded by the DNDO team. (3) It did not address numerous anomalies and instabilities in the image reconstruction and decision algorithm for detection of high-Z, high-density metals. These anomalies and instabilities are quite serious and were carefully recorded by the test team during the TRR and briefed to DSIC at the TRR conclusion. DSIC did not address these issues in its first test report, such as by providing a technical explanation and possible mitigation strategies. (4) Many comments and conclusions in the report are inconsistent with observations by the test team and are not backed up with empirical data or technical analysis. A concern is that terrorists might be able to counter MT. For example, they might try to smuggle uranium through a detector in pieces below the system's detection threshold, but that would risk exposing the plot to detection many times. Alternatively, since MT indicates the Z and density of a voxel, it might be possible to reduce those characteristics of HEU by forming it into pellets and mixing them with a low-Z substance. These techniques, however, would require fabricating HEU into a weapon-usable shape within the United States, introducing considerable difficulty and providing clues to the plot. U.S. nuclear weapons use hollow pits, in which a hollow shell of SNM is imploded to form a supercritical mass, initiating a nuclear explosion. Other nations might use this method as well. If terrorists were to obtain a state-made hollow-pit nuclear weapon, MT might not detect a pit of this type if the SNM shell were thin enough and voxels large enough that SNM did not fill most of a voxel. Also at issue is the amount of time required for a scan. The Royal Society, the U.K. national academy of science, issued a report in March 2008 based on a meeting with dozens of experts from many nations, and stated, The key limiting factor is the time required for muon radiography, up to several hours to image only a cubic foot of a block of iron. According to a detector concept being developed by Los Alamos National Laboratory (LANL), it would take four minutes to image a cargo container. However, this would require detector panels perhaps the size of a large room. Moreover, once a shielded source has been identified it may take several hours to unpack the cargo to locate it. DSIC responds that since these concerns were raised, it has made significant advances in extraction of signal from muon scattering data, such as using 3-D images (tomography) rather than 2-D images (radiography). It also claims that increasing scan time from 1 to 5-10 minutes may permit differentiation between SNM and other high-Z material, avoiding the need to unpack a cargo container. According to another analysis, "only a few scattered muons are required to determine Z accurately enough to distinguish among the major groups of Z [high, medium, and low] with high confidence, and the value of Z is conveniently displayed as a color image." In contrast, Feinstein said in May 2010, It takes many muons to distinguish with high confidence high concentrations of high-Z nuclei found in actinide metals [e.g., uranium and plutonium] from, say, iron and lead in a cargo filled with medium-Z clutter, particularly in a vertical direction. A 10x10x10 [cubic centimeter] voxel at sea level would be penetrated by about 200 muons on the average in 2 minutes of interrogation. The minimal amount of time to discriminate a liter of SNM from a liter of lead has not yet been determined or demonstrated in a densely cluttered cargo environment. MT estimates the nuclear charge concentration in each reconstructed image voxel and, hence, cannot detect high-Z material that is significantly diluted by air or other low density, low to medium Z material in the same voxel; and will not have sufficient sensitivity to discriminate SNM from DU [depleted uranium, i.e., uranium with most U-235 removed] and other relatively high-Z material. Robert Mayo, Program Manager, SNM Movement Detection/Radiation Sensors, and Advanced Materials Programs, Office of Nonproliferation R&D, NNSA, raised other concerns in 2008: While muon tomography has been demonstrated to locate regions of interest in cargo that contains dense material, its material identification abilities are limited. What's more, quite large sized detection equipment, much more so than in other detection systems, is required, making MT rather impractical for many nonproliferation and national security applications. Most critically, however, MT is likely to require rather long scan times to adequately resolve dense images in cargo with a reasonable rate of false alarms. For these reasons, it is considered impractical as a screening technique. There are much more practical threat material identification and characterization tools being developed by various agencies of the federal government including passive spectroscopic and active detection technologies, as well as advanced radiography, all of which could be advanced and operationalized much more quickly with increased support. DSIC claimed in May 2010 that data from actual tests (as distinct from modeled data) do not support the concerns raised in the preceding two paragraphs. The MT system as it stood in April 2010 will incorporate gamma-ray detection (though not identification) as well as muon detection, and retains the option to incorporate neutron detection as well. This plan raises several questions. First, how valuable is the gamma-ray detection capability for reducing scan time? DSIC's plan is that if the scanner detects gamma rays, it would look for an unshielded SNM source rather than a shielded one. Since the latter would be larger than the former because of shielding, and since MT could find a large object more easily than a small one, the argument goes, this procedure would reduce scan time. But there are many sources of gamma rays in cargo. There is also background gamma radiation from such sources as uranium. What fraction of cargo containers in actual commerce contain gammas? DSIC plans to conduct scans on containers in the flow of commerce to help answer this question. Second, what confidence could there be that absence of a gamma-ray signal would permit a reduced scan time? DSIC suggests that scan time could be reduced to 26 seconds. Yet as Figure 16 shows, a 30-second scan of a car contains a considerable amount of clutter. Clearing cluttered scenes in 30 seconds would probably not be a concern for a container full of lettuce, paper towels, or water bottles, but could be a problem for a container with dense metal objects like car parts. Third, helium-3 is the "gold standard" of neutron detection, but given the shortage of it, DSIC worked with Los Alamos to use boron-10 compounds in the tubes for neutron detection, resulting in a much lower cost to add neutron and gamma capability to the scanner. Could boron-10 be expected to work adequately—not as well as helium-3, but adequately—for neutron detection? If not, might some other combination of gases work adequately? Is the schedule too optimistic? In October 2008, DSIC stated that development was proceeding at a rapid pace. It envisioned production after the third-generation prototype was built and field-tested at an operational facility. It stated that the detection algorithms were being modified into a form suitable for operational use. DSIC planned a third-party test validation and life expectancy analyses and experiments. As of October 2008, DSC planned to complete all these steps by the end of 2010. Earlier, DSIC had planned to complete them by the end of 2009. As of July 2009, the schedule had been delayed for several reasons, such as moving the detector to a sea-level location (from Los Alamos, NM, to Poway, CA). As of July 2009, DSIC expected to complete the proof-of-concept demonstration for DNDO in November 2009, to begin construction of a commercial scanner in January 2010, to perform field testing during 2011, and to have the scanner commercially available in 2012. As of April 2010, DSIC stated that that schedule remained current. It had begun design and component testing to increase deployability, manufacturability, and lifetime of its system. The schedule risk is that a system in prototype development must complete many steps before it could be commercially available, yet a problem with any step could delay the schedule. A related concern is whether it is appropriate for DSIC to develop a schedule for commercialization before completing its TRR and PoC demonstration successfully and then moving to an Advanced Technology Demonstration effort. The latter would provide a full characterization of system performance, giving DNDO the data it would need to conduct tradeoff studies for potential applications. One operational issue is the clearing of alarms due to innocuous high-Z objects. MT is expected to differentiate between high-Z material and low- or medium-Z material faster than it could differentiate between various types of high-Z material, such as tungsten vs. uranium, though estimates of scan times differ. However, Feinstein stated, "MT is likely a poor choice to discriminate uranium from tungsten. SNAR [shielded nuclear alarm resolution] technologies will likely do this more reliably and much faster. Further, all SNAR signatures have passed their PoC demonstration and evaluation." If MT proves able to differentiate between SNM and other high-Z material as well as its developers anticipate, then performing an extended-time secondary scan of a container to resolve a high-Z alarm would be faster, simpler, and less costly than unpacking a container. This anticipation, though, is based on experiments using medium-scale laboratory equipment. If experiments find that MT cannot differentiate between SNM and other high-Z material as well as anticipated, then more intrusive means might be required. However, Katz estimates that these alarms would be few and could be cleared easily: I think the false positive rate would be a small fraction of a percent. There just aren't that many lead or tungsten ingots in commerce. When they are shipped they sit on pallets on the floor of a container (strapped down) and the rest of the container is empty. 30 tons of lead fills about 2.7 m^3 [cubic meters] out of the 64 m^3 container volume, so it is mostly empty space. A quick look is enough for secondary inspection. While this approach would reduce the burden of clearing high-Z alarms (for other systems as well as MT), the concern regarding nuclear smuggling is not clearing ingots of tungsten or lead shipped in this manner, but detecting SNM hidden in cargo. Further, the false alarm (false positive) rate depends on the threshold that DSIC chooses for detecting small amounts of SNM. Smaller voxels and lower thresholds might be needed to reduce false negatives, but as voxel size and threshold decrease, the false positive rate will inevitably increase, as discussed under " Computer Modeling to Evaluate Detection Capability ." Another issue is the importance of reducing scan time from 60 to 26 seconds. The concept of operations that DSIC envisions as of April 2010 is to use MT with a low-energy (1-MeV) x-ray source for radiography in a primary inspection mode, and to use MT to clear questionable containers in a secondary inspection mode. But CBP agents would probably need more than 26 seconds to examine a radiograph visually for signs of contraband, which in this case would be done in primary inspection. Regarding secondary inspection, a multi-minute scan time is acceptable, as one alternative, unloading a container for inspection, would take much longer, though other alternatives are under development, such as those in DNDO's Shielded Nuclear Alarm Resolution program. A related issue is why DSIC is considering a low-energy x-ray system when higher-energy x-rays, in the range of 6 to 9 MeV, are considerably more penetrating. A former concern was that many ports could not accommodate an MT system as wide as the original tunnel configuration. In response, DSIC designed a top/bottom scanner the width of existing truck lanes at ports. DSIC states that added funds would enable it to improve the detectors and detection algorithms to provide more detailed imaging; incorporate sensors for additional signatures into the MT system to detect more threats and contraband; expedite the integration of gamma ray, neutron, and muon signals; develop the CONOPS that governs how the system would be used; and enhance and expedite engineering and manufacturing of the production version. Added funds, DSIC says, would also support development of a library of MT images of different vehicle types, as discussed above. The detection algorithm draws on those used for positron emission tomography, a medical technique to image bodily processes. DSIC is working with the positron emission tomography/single photon emission computed tomography imaging group at the University of California, Davis, to develop advanced imaging techniques. DSIC states, "These algorithms will be applied to detection of SNM in our system and will feed back into the development of algorithms for medical imaging and lesion identification." Another role for MT may be as a secondary inspection system for x-ray inspection, such as for containers at seaports. A low-energy x-ray system could quickly clear containers carrying low-density material but not necessarily containers carrying thick, dense cargo. In such cases, MT could interrogate the dense regions for SNM. DSIC claims, "In this role, the scan time requirements imposed on a primary system would be reduced, while still maintaining an effective, high-throughput primary scan and a secondary [scan] that is far less costly and labor intensive than unloading the cargo." MT may help detect SNM in other applications. The Coast Guard is concerned that small boats could enter a port carrying a nuclear bomb. This is of particular concern for Miami, which small boats could reach from the Bahamas. Because muons penetrate about 15 meters of water, it might be possible to construct a muon detection system for boats, with an array of detectors above the water and several meters under water to detect entry and exit tracks of muons. Boats would stop in this array, perhaps for several minutes, while a tomographic image was built up. This application appears scientifically feasible, though engineering it would be considerably more difficult than for a land-based system. Another application might be detection of stowaways or contraband by locating suspicious voids in medium-Z material. MT would be of use in detecting radiological material, such as might be used to make a "dirty bomb," or radiological dispersal device. Such materials are not high Z. Two such materials often mentioned are cobalt-60 and cesium-137. Cobalt has a Z of 27, and cesium has a Z of 55. However, because of their intense radioactivity, a large amount of dense shielding, such as lead, would be required to block gamma rays. For example, it would take a lead sphere two feet in diameter to shield most of the gammas from 0.11 cc of cobalt-60; MT, like existing x-ray systems, could readily detect such shielding. Nuclear resonance fluorescence (NRF), described below, seeks to detect SNM in containers. At issue: Is NRF a useful approach for this task? NRF may address a second problem. Discovery of a nuclear weapon in a cargo container would require an urgent effort to disable it and to gather forensic data. Both efforts would benefit from detailed information about the weapon's design. Several techniques can provide such information. Radiography or MT can show the shape and location of components; discovering that the weapon had a thermonuclear stage, for example, would show that it was manufactured by a nation and could have much higher explosive yield than a terrorist-made bomb. Interrogation using neutrons or high-energy gamma rays can provide information about SNM. NRF may be able to provide different types of data. Knowing what kind of chemical explosive the weapon contained, or combining information on location of electronics with information on their chemical composition, or knowing the mix of isotopes and impurities in SNM, would aid in dismantlement or might point to the source of the weapon. At issue: Is NRF a useful approach to determining the materials in a weapon? When atoms of a given element are illuminated with photons above an energy threshold unique to that element, their electrons absorb the photons' energy and move to a higher energy level, a so-called "excited" state. The electrons then drop back to their normal state, emitting photons that are slightly less energetic than the inbound photons. For example, certain elements or minerals illuminated with ultraviolet light (which is more energetic than visible light but less so than gamma rays) give off visible light. This emission of light is called fluorescence. A different type of fluorescence provides more detailed information. Each isotope has a unique combination of numbers of protons and neutrons in its nucleus, so it vibrates at unique frequencies (the resonant frequencies). When the nucleus is struck by a photon at precisely that energy level—sometimes to within a few hundredths of an electron volt in a beam with photon energies spread over a range of 1 MeV or more—it will absorb the photon and move to an excited state. The nucleus then reverts to its initial state, giving off photons very slightly less energetic than those that it absorbed. This process is known as nuclear resonance fluorescence, or NRF. NRF produces a gamma-ray spectrum unique to each isotope (though different than the gamma-ray spectrum produced by radioactive decay). Identifying the spectrum of the emitted photons identifies the element and isotope. This is of particular importance in differentiating between fissile U-235, which can be made into a nuclear weapon, and non-fissile U-238, which cannot. Unlike the use of neutrons or high-energy photons to stimulate the emission of neutrons or photons in SNM, NRF causes fluorescence in almost all isotopes of elements with Z>2 (helium), so it can identify a wide range of materials, not just SNM and other radioactive isotopes. For example, if nuclear material is shielded by lead, the identification of the various lead isotopes and their ratios may provide information as to where the lead was mined. Technical experts consulted for this report were aware of no other technology that permits identification of a weapon's materials without opening the weapon. CBP could also use NRF to identify other contraband and to check customs manifests. Absorption of photons creates an additional signature. X-rays are generated in a broad spectrum of energies without sharp peaks. If a beam of such photons is sent through a cargo container or other object, and the detector on the other side can record the energy of each transmitted photon, a hole or "notch" in the spectrum at a certain energy level means that some particular material has absorbed photons at that energy level through NRF and then subsequently re-emitted the absorbed photons at about the same energy level. Since NRF photons are emitted in all directions, only a small fraction of them reach the detector. The energy level of the notch indicates what material is present. For example, the notch for U-235 occurs at 1.73 MeV. To detect NRF, an accelerator generates a beam of x-rays, a photon detector records the radiation spectrum generated by the material being interrogated, and an algorithm matches NRF peaks against a library of such peaks. Photons resulting from NRF are differentiated from the incoming photon beam because the latter produces a broad continuum of photon energies while photons generated by NRF produce very narrow peaks. Further, the photon beam travels in a forward direction, while the NRF signal is emitted in all directions, so a photon detector placed behind and to the side of the material being interrogated (relative to the direction of the photon beam) detects photons traveling backward from the beam direction, which are mainly NRF photons. Figure 18 illustrates this geometry. DNDO is studying another approach to NRF using a beam of photons having a single energy level ("monoenergetic photons") near that needed to induce NRF in a particular isotope. At present, that method is technically difficult, costly, and requires large and delicate equipment, making it unwieldy for deployment in the field. However, according to DNDO, this method has been verified experimentally and the Stanford Linear Accelerator Center has demonstrated one type of accelerator technology "that might lead to a mono-energy photon source that could be compacted into a 20-foot cargo container." Passport Systems, Inc., is developing an NRF imaging system, Passport MAX (Material Advanced Inspection), under contract to DNDO to detect SNM in cargo containers. It uses a commercial electron accelerator with a beam that can be varied from 2 to 10 MeV, depending on the materials and containers being searched, to produce a photon beam with energies ranging from several hundred keV to the maximum energy of the electron beam. The beam is collimated; as it scans a container, it excites nuclei in its path that emit photons. A germanium gamma-ray detector views the emitted photons scattered backwards from one region at a time, records their energies, and constructs a spectrum. The intersection of the collimated beam with the detector's view creates a voxel, and the spectrum shows the type and quantity of each isotope in that voxel. An algorithm constructs a three-dimensional image of the container's contents. Passport MAX would include other detector subsystems as well: EZ-3D, as described under AS&E CAARS; a radiography imager; and an NRF detector that detects notches in the transmitted photon spectrum. Passport Systems indicates that this approach could also be used to scan smaller items such as an aircraft cargo container or a terrorist nuclear weapon. Because the NRF imaging component can examine only one region of interest at a time, the CONOPS envisions using the other components of Passport MAX to locate volumes of interest, and then using NRF to interrogate them. According to Passport Systems, "the complete system would scan a 40 ft container for SNM in an average of about 15 seconds. If there were indeed SNM in a container it may take longer (minutes) to identify the material as SNM. However, we anticipate that the actual number of containers with SNM would be very small." For detecting a terrorist nuclear weapon or SNM: (1) The system would identify each isotope, and would alarm on threat substances, with no operator input required. (2) While GADRAS must account for all the spectral data, the algorithm required for the Passport system need only account for spectral peaks, making for a simpler algorithm. (3) The system is to identify most isotopes that CBP finds in contraband, eliminating some false alarms that occur with radiation portal monitors, such as from radioactive potassium. (4) An NRF-based system can scan a cargo container quickly for SNM and high-Z shielding material. The average scan rate for the EZ-3D mode is 15 seconds, but the system would automatically adjust the speed at which individual containers are scanned. If it detected little attenuation of the beam, it would scan faster. Conversely, if EZ-3D identified a region of interest, the system would reposition the container to analyze that region using NRF and photofission signatures and would likely increase scan time for that container. The impact of such delays on average throughput rate would depend on such factors as CONOPS and number of anomalies in containers being scanned. (5) Passport Systems states that laboratory experiments and simulations predict that Passport MAX will be able to meet the scanning requirement that DNDO has set for CAARS, i.e., that it would have a 90% probability of detecting 100 cc of high-Z material, and a false alarm probability less than 3%, both with 95% confidence. For characterizing a nuclear weapon: (1) This system could determine the composition of a nuclear weapon. These data would be of value for disabling a weapon and for nuclear forensics. (2) An NRF-based system can identify the isotopic composition of uranium or plutonium and any impurities, which would be of value in nuclear forensics. (3) A potential difficulty with radiation detection is that large quantities of shielding in a container may block photons or neutrons as they enter and leave the container. The shielding problem would diminish if this system were used against an already-identified terrorist nuclear weapon because the weapon would be shielded only by its casing. (4) A bremsstrahlung source generates photons over a wide range of energies, and detectors are able to record a similarly wide range of emitted photons. As a result, the system could identify multiple materials quickly. From 2004 to 2008, DHS awarded Passport Systems several contracts totaling $8.4 million to build a proof-of-concept (PoC) scanner that is fully integrated and functional. In 2005, the contract was transferred from the DHS Homeland Security Advanced Research Projects Agency to DNDO for management. According to Feinstein, The NRF PoC system demonstration and evaluation completed on August 4-6, 2008. The primary purpose of this PoC test is to demonstrate full functionality and automation. This requires all critical components to operate as specified in an integrated architecture similar to an operational scanner. The Passport PoC subscale system successfully demonstrated its ability to automatically select high-Z [regions of interest] with EZ-3D and auto-identify the isotopic content of [these regions] with NRF. This was accomplished with a variety of cargo and with a mixed set of high-Z material and contraband. Other NRF applications are still being explored including cargo manifest-checking and forensics. Most of the major hardware components that the system uses—accelerator, detector, computer, and display—are commercially available. Passport Systems estimates that its system will be available for commercial delivery by mid-2010 at a unit cost of $5 million to $10 million depending on system configuration. Feinstein states, however, that that system "will not have completed the DHS phased-milestones of development, testing, evaluation and cost-benefit analysis" by that time. He further states that DNDO is developing enabling technologies, such as improved accelerators and detectors, "that, if successful, could significantly reduce the overall size and cost [of the NRF system] (by more than a factor of two) as well as improve its performance and speed," though such technologies would not likely be ready for use in a commercial system by mid-2010. In September 2008, DNDO awarded Passport Systems a contract worth up to $9.3 million to build a full-scale prototype unit for an Advanced Technology Demonstration (ATD) of the NRF system under DNDO's Shielded Nuclear Alarm Resolution program. This contract runs for 2½ years. The ATD scanner is intended to demonstrate performance on cargo containers and is the continuation of the previously demonstrated proof-of-concept (PoC) installation built by Passport at the University of California at Santa Barbara (UCSB), also under DNDO contract. Many organizations have been conducting research into NRF to address national and homeland security issues since 2004. Lawrence Livermore National Laboratory (LLNL), Pacific Northwest National Laboratory (PNNL), and Passport Systems have collaborated to characterize the NRF response of U-235 and of Pu-239. PNNL has developed a computer model of NRF and has used simulations from it to reproduce results from laboratory measurements; Los Alamos National Laboratory is developing another such model. Duke University, Idaho National Laboratory, Idaho State University, LLNL, PNNL, Passport Systems, Purdue University, and University of California at Berkeley are conducting basic research on NRF. Passport Systems built its proof-of-concept prototype at University of California at Santa Barbara in order to use the accelerator in that university's free electron laser facility, and PNNL and Duke University conducted NRF measurements on U-238 and Pb-208 using the High Intensity Gamma Source at Duke as a source of nearly-single-energy photons. (1) A key scientific task is to conduct more experiments to identify the energy levels at which materials of interest undergo NRF. In particular, it would be useful to measure NRF spectra of isotopes of uranium and plutonium other than U-235 and Pu-239, and to measure spectra of materials used in nuclear weapons of other nations (e.g., for alloys) for purposes of nuclear forensics. (2) Another task is to develop the algorithms to identify materials quickly based on their NRF energies. (3) The Passport MAX geometry is designed to improve the signal-to-noise ratio by focusing on photons scattered backwards as a result of NRF, thus avoiding most of the photons generated by the interrogation beam, which travel in a forward direction. However, beam photons may have an energy range of nearly 10 MeV, while the energy range of photons that produce NRF in a particular isotope may be only a few hundredths of an electron volt. As a result, only one out of a few hundred million photons may have an energy level that produces NRF in that isotope, making it hard to detect NRF-generated photons. On the other hand, if the NRF system is tuned correctly, very few photons of the same energy as the NRF photons scatter backwards to the detector, facilitating detection by increasing signal-to-noise ratio. (4) While NRF has routinely been used to detect gram samples, the limitations of the detectable mass of various isotopes has apparently not been quantified, so it is not clear that NRF can be used to detect microgram (or smaller) quantities of all isotopes, possibly limiting the applicability of NRF to nuclear forensics. (1) More work is needed to develop the detection algorithms. (2) The accelerator for this system, called a Rhodotron, is built to order, and it may take the manufacturer a year to build one; unless the manufacturer can build them much faster, it would be difficult to procure Passport MAX units in quantity. As of February 2010, Passport Systems was building a prototype of a high duty cycle accelerator that could be produced more rapidly. In addition, since the accelerator footprint would be much smaller than that of the Rhodotron, Passport MAX would become smaller, which Passport Systems argues would make it or other NRF-based scanners much more attractive for mobile operations. (3) Once the tasks noted under "scientific risks and concerns" are completed, an engineering task would be to integrate hardware and software into an operational system, requiring many tradeoffs between cost, performance, and schedule. This may be particularly complicated for Passport MAX given the many separate detector units it uses, as shown in Figure 18 . A demonstration of the full-scale ATD scanner under the Shielded Nuclear Alarm Resolution program is scheduled for 2010-2011; if successful, it would significantly reduce this risk. The projected unit cost, $5 million to $10 million, is at a level that might preclude ordering large numbers of units. Regarding schedule, as of 2008 it was difficult to predict when an early-stage development program would become commercially available given the work that remained to be done and the possibility of unanticipated problems. As of March 2010, Passport MAX had progressed from early-stage development to Advanced Technology Demonstration (ATD), with construction of the ATD unit scheduled to begin in 2010. As it has progressed, the amount of work remaining and the range of potential problems have decreased, so risk to schedule has decreased as well. Also as of March 2010, DNDO continued to fund enabling technologies, such as low-cost/high-resolution detectors and high duty cycle accelerators, that may, if successful, significantly reduce the cost and size of the commercial system and increase its NRF performance speed. As a result, Passport Systems stated that if the MAX ATD scanner demonstration is successful in 2010, the company could deliver a commercial version of that system in 2011. The system would need to be large enough to hold a tractor-trailer truck. The Rhodotron used in the Passport MAX generates a considerable amount of radiation that requires containment. To meet a radiation safety requirement of no standoff zone, the system is completely enclosed, and a preliminary estimate by Passport is that it would be 90 to 100 ft long; 20 to 30 ft wide at its widest point, where the detection equipment is located; and several stories high at that point. These dimensions are dictated by the requirement to scan a container that is 40 ft long, 9 ft wide and 14.5 ft high. A system for smaller objects would be correspondingly smaller. Passport states that the enclosure will reduce the radiation dose outside the system to levels low enough to not require an exclusion zone. On the other hand, the system is quite large using existing commercial off-the-shelf technologies, which could be a problem in ports where space is at a premium. Passport Systems, a small company, does not have some key equipment of its own; for example, it is using an accelerator at the University of California at Santa Barbara as the photon source for its prototype. Added funds, Passport says, would enable it to buy needed equipment, advance supporting technologies, and hire more staff for engineering, algorithm development, and manufacturing. The prototype Passport MAX uses a considerable amount of expensive off-the-shelf hardware; with added funds, Passport says it could design less costly components specifically for use in its system. (1) NRF could help identify illicit cargo in addition to SNM, such as explosives or chemical weapons. (2) NRF could help verify the manifest (list of contents) of a cargo container. (3) NRF might be used in nuclear forensics to identify rapidly the materials present in radioactive debris from the detonation of a terrorist nuclear weapon. (4) In nuclear nonproliferation applications, it could be used to analyze the isotopic composition of spent nuclear fuel. (5) New detector material could improve the sensitivity and resolution of the system, reducing the amount of electrical energy needed to run it and the amount of shielding needed, thereby reducing acquisition and operational costs. It is hard enough to detect SNM at a range of several meters. Yet the ability to detect SNM or nuclear weapons at a kilometer or more, or in territory to which access is denied, would have great value in the fight against nuclear terrorism, such as locating SNM along a smuggling route, in a distant vehicle or facility, or in ships at sea, or finding a terrorist nuclear bomb in a city. This capability would also help protect military forces by enabling detection of terrorist attempts to use a nuclear weapon to destroy a military base or a carrier battle group. Making the task harder still, SNM might be shielded, and these missions would require a high search rate because of the need to scan a large area quickly or because SNM might be visible to the system for only a brief time. A system to perform this mission would be of value. At issue: Can a system be designed and deployed to detect SNM at an operationally useful standoff distance and search rate? The Defense Threat Reduction Agency (DTRA), a unit of DOD, is pursuing capabilities to increase the distance at which SNM can be detected, with the goal of increasing it to 1 km or more. DTRA states its rationale as follows: DTRA/DoD's motivation for pursuing Active Interrogation arises from the context in which a search for nuclear material would be conducted—potentially in a hostile environment over large areas (due to limited intelligence pinpointing the exact location of the material). DTRA/DoD is also challenged by the need to make the deployed equipment robust/well engineered enough to survive a range of harsh environments which is different from equipment use in a static mode at a border checkpoint. A scientific panel said, "Radiation attenuation due to shielding is an exponential process and so even moderate amounts of shielding can have significant effects. At 10 metres, the radiation emissions of shielded gamma ray and neutron sources are at, or below, natural background rates in almost all cases." DTRA states, "The only way to overcome this physical reality is to stimulate the radiation emitted by SNM to a level many times above background. This can be done, for example, by using a beam of high energy photons to artificially induce photofission, and then detecting the resulting fission signatures. Beams of other types of radiation also have the potential to increase these detectable signatures through other reactions with the SNM." As of April 2010, DTRA was continuing its investigation of the use of protons for active detection, including how a proton beam interacts with various materials and how to integrate passive detection and imaging methods with active interrogation beams. DTRA is sponsoring several remote-detection systems. This section considers the Photonuclear Inspection and Threat Assessment System (PITAS), a project funded by DTRA and conducted by Idaho National Laboratory (INL). In 2008, PITAS was DTRA's remote-detection system closest to deployment; in April 2010 DTRA stated, "In FY10, a project was initiated to build the Integrated Standoff Inspection System (ISIS) to provide a robust system for the standoff detection of special nuclear material. This effort builds on the successful work of the PITAS project, while allowing the PITAS to continue to support experiments in the area of active detection." Data from PITAS will "allow a comparison of experimental results with simulation results." In April 2010, DNDO awarded Raytheon a contract for $20.5 million for R&D on ISIS; DNDO made no other awards for this effort. Minimum requirements ("threshold") for ISIS include distance from accelerator to target greater than 100 m, with a goal of 1,000 m; distance from target to detector greater than 50 m, with a goal of 500 m; detection time less than 10 min, with a goal of less than 1 min; and maximum weight 8 tons and transportable by commercial aircraft, with a goal that one helicopter could transport the system. In May 2010, DNDO stated that the current timeline calls for a demonstration of ISIS in FY2012, and that it has no estimate of the schedule beyond then. Because the contract for ISIS R&D was awarded in April 2010, little information is available on that program. Further, as noted, ISIS builds on the work for PITAS. Accordingly, this section continues to focus on PITAS. Figure 19 shows schematic and cutaway views. The main hardware components are an accelerator and detectors. PITAS would use a powerful linear accelerator, capable of generating a 30-MeV electron beam, to create x-rays that would be aimed at the target. These x-rays have a range of energies, with the maximum equal to that of the electron beam. Air attenuates lower-energy x-rays in the beam, so the target would be struck by x-rays well above the energy needed to induce photofission. Detectors might be located in the same unit as the accelerator. However, radiation spreads out (and diminishes in intensity) as the square of the distance, and the atmosphere would absorb many neutrons and gamma rays, so detection can be more effective if the detectors are separated from the accelerator and placed near the target. For example, detectors might be placed next to a smuggling route or on unmanned aerial vehicles with the accelerator some distance away. The x-ray beam would be used in a pulsed mode with the detectors attempting to detect SNM signatures, such as delayed neutrons and gamma rays (see Appendix ), in the intervals when the beam is off. If PITAS or a follow-on system like ISIS works as anticipated, it would enable the United States to detect SNM at standoff range for the first time. This capability could be used for counterproliferation, counterterrorism, and force protection. As of April 2010, PITAS is to remain available as an experimental tool for at least the next few years. It will be used to address issues associated with field use of accelerator-based technologies, such as ruggedness and reliability. There are plans to improve PITAS diagnostic equipment in 2010 to support research. Funding levels for experiments with PITAS are not publicly releasable. (1) By one calculation, even a collimated x-ray beam could not place enough x-ray photons on a small piece of SNM in the target (such as a cargo container) to induce a detectable set of unique signals under ideal conditions. Trying to detect SNM at a distance under real-world conditions, such as a container being towed by a truck along a winding road, would be even more difficult. (2) How effective would shielding be at stopping inbound x-rays or protons and outbound neutrons and gamma rays resulting from fission? (3) Gamma rays and neutrons resulting from fission of SNM would radiate in all directions, spreading out with distance. A source that caused 1,000 photons per second to strike a detector 1 meter square at a distance of 1 meter would cause only 1 photon to strike that same detector every 1,000 seconds at a distance of 1 km—disregarding attenuation by the air. Yet enough photons must strike the detector to be detected and to be differentiated from background sources. Regarding neutrons, fission generates many fewer neutrons than gamma rays, and the low-Z atoms in the air would attenuate neutrons strongly. Would enough gamma rays and neutrons reach the detectors to be detected? Another concern is that very little research has been done on remote detection. As a result, the developers of PITAS would have to conduct field tests to determine what signals the beam generates in SNM and how to detect them, and would have to develop algorithms to process the data. As of April 2010, DTRA continues to use PITAS to investigate technologies (including radiation sources and detectors) to extract threat signatures from natural and beam-generated background. One candidate neutron detector for PITAS is helium-3 drift tubes, which have a thin metal wall and a wire stretched lengthwise down the middle of the tube. Would these tubes be rugged enough to deploy as part of a mobile system that might operate in difficult terrain and extremes of weather and temperature? More generally, can the entire system be made compact enough to operate under such conditions, yet sensitive enough to operate effectively? Since 2008, as noted earlier, it has become apparent that demand for helium-3 far exceeds supply. Accordingly, DTRA is considering other materials to detect neutrons, such as boron-10 and lithium-6. With PITAS having transitioned to an experimental support program, cost and schedule risks and concerns are much less salient than would be the case for a deployment-oriented program. DTRA does not have any specific information to provide on this topic. The accelerator would generate beams of very high energy, and might not be heavily shielded in many mobile applications. It thus poses some radiation risk to the operator. Could radiation exposure be made low enough? Whether the risk is deemed acceptable would depend on exposure, which in turn depends on radiation output, frequency of use, and shielding, and on the urgency of the mission. Regarding the latter point, detecting SNM that intelligence indicated was being smuggled along a known route for sale to terrorists would justify more exposure risk than would monitoring that route on a routine basis. Further development of accelerators might reduce the shielding required. DTRA remains interested in reducing the size of particle accelerator technology for ease of deployment. DTRA further notes, "Several National Council on Radiation Protection & Measurements (NCRP) scientific committees in which DTRA participates or monitors are currently convened (SC 1-18 and SC 1-19) to examine the use of ionizing radiation for the standoff detection of SNM." Beyond PITAS, DTRA is contemplating another remote-detection system for which, it asserts, added funds would shorten the schedule by several years. That project would use a proton beam with very high energies. DTRA regards it as very promising because, it believes, these protons may be able to defeat shielding at 1 km. As of August 2009, DTRA maintained that this project would be paced by investment. DTRA stated that since most of the technical risk is at the start of the project, more funds would permit exploration of many paths simultaneously so that potential pitfalls and opportunities could be identified at an early stage. However, in May 2010, DTRA said that it "is still investigating use of a high energy proton beam as an active interrogation source, but there are no near-term projects which warrant accelerated funding at this point." PITAS or a follow-on system could be used in support of the Proliferation Support Initiative, which seeks to stop shipments of nuclear weapons and other weapons of mass destruction worldwide. For example, a system of this type could help search a ship suspected of carrying nuclear weapons, SNM, or uranium ore. Such systems might benefit from improved scintillator material for detecting radiation. They require a material with substantial (but not extreme) resolution that is rugged enough to deploy under harsh conditions and inexpensive enough to deploy a large panel in order to capture more of the signal. In 2010, DNDO issued a broad agency announcement seeking in part to develop such materials. Equipment commercially available at the time of the 9/11 attacks was limited in its capability. PVT radiation detectors could detect radiation but could not identify isotopes, and shielding SNM might defeat detection. Radiographic equipment could reveal dense objects, but relied on operator skill to flag potential threats. It might be possible to hide a nuclear artillery shell in a cargo of dense objects, and it would be difficult to pick out a small piece of SNM. Resolving alarms required time-consuming methods, such as using hand-held radioisotope identification devices or unpacking a container. Capabilities of existing systems can be improved incrementally, such as by using different detector material, computers, algorithms, or CONOPS (e.g., scan time). Systems now under development have the potential to reduce false positives (speeding the flow of commerce) and false negatives (improving security). Fission that neutrons or x-rays induce in SNM generates unambiguous signals. Dual-energy radiography detects high-Z material automatically. EZ-3D reveals high-Z material hidden in medium-Z material, and might be able to differentiate SNM from other high-Z material. These approaches detect useful signatures, but have drawbacks as well, such as low signal strength, complexity, high cost, or large size. The task is to utilize these signatures and minimize drawbacks in a system that can be fielded. Other technologies, such as improved detector material and improved algorithms, also have the potential to improve detection capability. It is difficult to predict the schedule of new detection technologies . In March 2008, the Royal Society, drawing on a workshop of experts, issued a report on nuclear detection that found, "In the medium term (5-10 years), there are promising opportunities to develop new technologies, such as muon detection systems. In the long term (10-20 years) detection could benefit from advances in nanotechnology and organic semiconductors." In 2008, the company developing the muon tomography system thought the system could be commercially available in 2011. As of early 2010, that date had slipped to 2012 and the company had not passed its Test Readiness Review, a step to indicate whether a system is ready for its proof-of-concept demonstration. In 2008, some thought that nanocomposite scintillator technology could be available for transfer to industry by September 2009, but the project was canceled in January 2010. It is difficult to evaluate prospects for R&D projects . Based on tracking the technologies presented in this report, it appears extremely difficult to evaluate how likely an R&D project is to succeed, even for the agencies that fund them, and one should not confuse a technical explanation and briefing slides with prospects for success. To succeed, a project must overcome many hurdles between concept and deployment. (1) The concept has to be scientifically sound. This is not always a given for projects that push the state of the art. (2) Even if scientifically sound, the underlying science must be transformed into a prototype through engineering. But materials may prove impossible to develop; laboratory-scale proof-of-concept equipment, where size and complexity are not a concern, may prove difficult to shrink in size; and algorithms may be unstable or may be confused by background radiation. (3) The prototype must be made into a system that is rugged enough to survive the bumps, vibrations, heat, cold, rain, humidity, dust, salt air, gasoline fumes, and whatever else people and nature may throw at it. (4) There must be a workable concept of operations: if it takes 1000 seconds to perform a scan, or if the false positive and false negative rates are too high, or if the operator cannot use the equipment easily, the equipment is useless. (5) The system must be affordable, however defined. It is hard to predict if a concept will make it past the next hurdle, let alone all five (and any others). Here are several examples drawn from this report. Nanocomposite scintillators held the promise of being a gamma-ray detection material that would be sensitive, yet inexpensive and easy to produce on a large scale. Early research started in 2004, but DNDO and DTRA terminated the project in 2010. The AS&E CAARS project appeared promising, but encountered unspecified technical problems and DNDO terminated it; however, some of its technology is being applied to another project. Conversely, SAIC's CAARS depended on the development of an "interleaved" accelerator, one that could switch x-ray beams between two energy levels many times a second. An earlier attempt to develop such an accelerator failed, but SAIC's subcontractor, Accuray, was able to develop one that exceeded requirements by a substantial margin, contributing to the system's ability to differentiate among up to 15 bands of Z rather than simply indicating whether material in a cargo container was high-Z or not. This enhanced capability could help CBP agents search for contraband as well as SNM. It is easier, less costly, and potentially more effective to accelerate a program in R&D than in production. DTRA believes that a significant increase in funding for proton beam technology, a standoff detection technology in early R&D, might shorten time to deployment by several years by enabling researchers to consider many technical alternatives simultaneously to determine the most promising approach faster. It is hard to attain large schedule gains by accelerating production; such gains may entail high cost, such as multiple shifts or more production lines; and a rush to production may cause a project to fail. While R&D projects may also fail, more risk is tolerable in R&D because the investment is much less. A modest amount of money spent in R&D can avoid looming problems. For example, GADRAS, a widely used algorithm for detecting SNM and other materials, runs on the standard Microsoft Windows operating system (OS) for personal computers. Microsoft introduces new generations of OSs from time to time. Typically, new OSs will support programs written for several generations of previous such systems. However, the Graphic User Interface (GUI) for GADRAS is written with the Visual Basic 6.0 compiler, which Microsoft no longer supports. At some point, Microsoft will likely introduce a new OS that will no longer support applications that are written with this compiler; GADRAS would then be unavailable to its users until it is updated. According to Dean Mitchell, who created GADRAS, updating that algorithm to run on current-generation OSs would avoid that problem, at a cost of perhaps $1 million a year for two years. R&D that leads to products that many systems can use may have a large impact on detection capability. Many detector systems have common elements—an accelerator, gamma-ray detector material, computers, algorithms—so improving any of these "building blocks" might improve the capability of many detector systems, including those in the field. Improved gamma-ray detector material can improve sensitivity, reduce cost, or both. An improved algorithm can boost performance. A more powerful computer permits the use of a more powerful algorithm, which may reduce false positives and false negatives. On the other hand, it may not be possible to upgrade systems simply by swapping new components for old. Edward McKigney listed possible difficulties in the (hypothetical) case of upgrading systems by substituting higher- for lower-performance detector material: (1) Detector modules that cannot detect light with high efficiency would need to be redesigned. This is particularly relevant for existing portal monitors that use plastic scintillator material, where the optical design is poor. (2) Electronics for converting signals from detectors into data for algorithms ("readout electronics") that are not suitable for high-resolution readout and analysis, or are mismatched for the technology (such as if the old electronics read electrical charge while the new ones read optical signals), would have to be replaced. (3) Data analysis algorithms that cannot process signals from the new detector module would have to be replaced. (4) The volume of data from the new detector module might be greater than the existing algorithms, data transmission system or computers could handle, requiring new computers, algorithms, data transmission system, or some combination. (5) Electrical power systems would have to be changed if the power requirements for the old and upgraded systems did not match. So, at the extremes, it might be possible to upgrade only the detector module, or the only features of the old system that would remain after an upgrade would be the wide spot in the road and the guard shack. I would recommend that the next generation of detector systems should be more modular so upgrades could be done while retaining as much of the value of deployed systems as possible. Synergisms may arise between technologies. Beams of neutrons or high-energy gamma rays used to induce fission in SNM may harm some products, expose stowaways to high doses of radiation, and require shielding to protect workers. Improved detector material and algorithms could lower the amount of radiation required for this technique, perhaps making it more usable for scanning containers. Technical advances can place two systems in competition unexpectedly. Work is underway on several systems designed to induce fission as a way of detecting SNM. CAARS was not begun as a system of this sort. However, DNDO is investigating a technology add-on to give it that capability. If work proceeds on that path, CAARS and other such systems could be in competition. Competition at the R&D level may be desirable. William Hagan, Assistant Director, Transformational and Applied Research, DNDO, states, if we can squeeze additional functionality out of a system, we want to do that. This will cause various approaches to be in competition for achieving a capability at the R&D stage but that is what we want to do so we can drive towards the most effective. More generally, I think that having multiple organizations pursuing the same R&D goal is a good thing because it allows for different approaches or more capable organizations to compete for the objective. This is a very effective mechanism in R&D. A classic recent example is the race to decode the human genome. Another is the race for commercial space flight. This kind of competition goes on all the time in the basic research community and I think we should encourage it. There is, of course, some limit to this, but we are far from that limit right now for radiation detection. The competitive position of systems in R&D may change over time . Technology development is dynamic. This report presents several examples. The SAIC CAARS overcame a key technical hurdle, the development of an interleaved accelerator, resulting in better performance than expected. The AS&E CAARS encountered problems that led to its termination. The Rapiscan Eagle, with an added algorithm to detect high-Z material, became a competitor to CAARS through the JINII program. Decision Sciences Corporation addressed problems with the original concept for its muon tomography scanner, such as using boron-10 instead of helium-3 in drift tubes because of the latter material's scarcity and designing a top/bottom scanner rather than a top/bottom/both sides scanner to make the footprint more compatible with traffic lanes at ports. " Concept of operations " (CONOPS) is crucial to the effectiveness of detection systems. CONOPS details how a detection system would be operated to gather data and how the data would be used. Without it, a detection system would be valueless. Since CONOPS and systems are mutually dependent, the design of each must take the capabilities and limitations of the other into account. Current equipment to detect and identify SNM makes use of two main signatures of this material, opacity for radiography to detect SNM, and gamma-ray emissions for spectroscopy to detect and identify SNM. However, as discussed in Chapter 2 and the Appendix , SNM has many signatures in addition to opacity and gamma-ray emissions, and some systems under development attempt to make use of these other signatures. If systems utilizing these other signatures were to be deployed, methods that might be used in an attempt to hide or mask opacity and gamma-ray signatures would not necessarily defeat these systems under development—complicating any terrorist attempts to smuggle nuclear weapons or SNM into the United States. At the same time, these future systems tend to be more costly and complex than current systems; whether the added benefits are worth the added costs is a political decision. Detection systems have their limits. Systems to detect SNM at close range, such as at ports and land border crossings, are generally not applicable to detection of terrorists smuggling a weapon across a remote stretch of border. But that is not a flaw of the detection system. Detectors can work at "points," i.e., places where people or cargo may enter the United States legally. There, detectors attempt to find SNM or weapons that may be hidden in cargo. In contrast, at "lines," the vast distances between "points" along coasts or borders, any entry is illegal, so interdiction is a matter of law enforcement. Effective intrusion detection systems (TV cameras, seismic monitors) coupled with a CONOPS that provides rapid response may suffice, though they have a long way to go to become effective. At the same time, standoff radiation detection systems that have yet to be developed, mounted along borders at natural choke points or smuggling routes, might be of value for this mission. Congress has supported a broad portfolio of detection R&D projects that has created a pipeline with technologies expected to become available for operational systems from near-term to long-term. These systems exploit many signatures in addition to those of currently deployed systems, offering Congress the prospect of improved detection capability and a broader menu of choices. Several technical factors may influence the choice among technologies to support. For example: (1) Projects will advance at different rates. (2) Projects may benefit differently from an advance in a related technology. (3) As a project moves from research to development to deployment, cost and capability may vary from early projections. Congress may wish to reevaluate current deployment decisions if it concludes that significantly more capable systems will be available in a year or two. Of course, any such decision would depend on comparing such factors as cost, footprint, ease of use, production rate, and the like for competing systems, and caution is necessary in assessing contending claims. On the other hand, it is difficult for Congress to choose among contending technologies. Each requires evaluation in such terms as cost, scan time, ease of use, reliability, schedule, footprint, radiation exposure, spatial resolution, and ability to thwart shielding. Yet these data are difficult to obtain. Some are proprietary. Some are unknown: schedules may slip and costs rise, or technical advances may cause the opposite to occur. Developers of a technology tend to be its advocates, and see the strengths of their technology and a path to overcome its weaknesses. Even if these data can be obtained, it is necessary to weight data elements to support a choice among contending technologies. With many variables to be traded off against each other, how are weights to be assigned, and who decides? And can this weighting system function despite weaknesses in the data? Congress has focused much attention on preventing terrorists from smuggling nuclear weapons or SNM into the United States in cargo containers. For example, P.L. 110 - 53 , Implementing Recommendations of the 9/11 Commission Act of 2007, Section 1701, states, "A container that was loaded on a vessel in a foreign port shall not enter the United States (either directly or via a foreign port) unless the container was scanned by nonintrusive imaging equipment and radiation detection equipment at a foreign port before it was loaded on a vessel." While terrorists might attempt to smuggle in a nuclear weapon by other means, developing technology to scan containers at seaports is a reasonable place to start. Container-scanning technology can be modified for use in other situations, such as monitoring air cargo containers or passenger cars, which are easier to scan because they can contain much less shielding. Developing and deploying detection equipment for use at seaports ensures ruggedness and ease of use adequate for real-world applications, and forces governments at all levels to plan CONOPS. More generally, some could argue that it is impossible to prevent terrorists from smuggling nuclear weapons into the United States, so there is no point in spending large sums in a futile effort. Congress has rejected that approach, and has appropriated, in total, billions of dollars to deploy available systems and to support R&D on advanced technologies. Supporters of the R&D and deployment approach assert that it offers several advantages. It has provided some capability quickly, increasing the odds of detecting weapons or SNM. An important example of this is the rapid deployment of passive radiation detectors to scan maritime cargo containers. This limited detection capability would help deter terrorists and would complicate plans to smuggle in weapons or SNM. Initial deployments provide data of use to subsequent deployments. They help refine what throughput, robustness, etc., front-line inspectors require of a system. They help refine CONOPS. They help define desirable features of an architecture. These results can make future technologies, systems, and architectures more effective. It has created an R&D pipeline that is intended to generate a steady stream of new technologies and systems. The resulting improvements in individual technologies, operations, and architectures can improve overall system effectiveness. As technologies become more capable, they can plug gaps in the current architecture. For example, remote detection might offer a way to monitor choke points in the United States or overseas that terrorists might pass through in transporting SNM or weapons. Congress may wish to address gaps and synergisms in this portfolio. For example: Gaps: Several systems may use helium-3 tubes for neutron detection, yet the supply is limited. Alternatives are available, but the longer developers take to switch to these alternatives, the longer it would take to deploy their systems because of the need to incorporate different detectors, modify algorithms, and test the revised system. Other gaps include sensors that can detect SNM at long range (e.g., over 100 m), sensors that can operate autonomously in remote areas, and large but inexpensive detectors that can distinguish SNM from other radioactive material. Synergisms: A component, algorithm, or material developed for one system may be applicable to another. Projects are under way to develop more sensitive materials to detect gamma rays and neutrons. These materials can be used in systems that induce fission in SNM. Their improved sensitivity permits a smaller source (e.g., an accelerator) to generate the interrogation beam, reducing cost, complexity, and radiation dose. Similarly, if detector material offers only fair resolution of gamma ray spectra, then peaks in a spectrum may blur, requiring a complicated algorithm to deal with the uncertainties. Sharper resolution from improved materials would reduce these uncertainties, permitting simpler algorithms to be used. More powerful computers could support faster, more powerful algorithms, reducing scan time, false positives, and false negatives. Minimizing gaps and maximizing synergisms have the potential to lead to more capable systems faster and at lower cost. Companies that considered using helium-3 for neutron detection might expedite deployment and reduce costs by sharing effort to develop an alternative neutron detector for their common use. Information on progress in developing more sensitive detector material would permit companies to incorporate such materials into their systems sooner, also speeding deployment and lowering costs. Is there a way that development could be shared or licensed so that companies, especially those working on government-funded projects, could avoid duplicating effort? And could this be done while retaining the benefits of competition? In considering the Advanced Spectroscopic Portal, Congress and the Government Accountability Office examined in detail whether DNDO had followed proper procedures for testing competing systems. An alternative means by which Congress could address testing is to direct the executive agency in charge of a system to conduct specified tests. These tests would need to be designed, and perhaps overseen, by experts not affiliated with the relevant agency, company, or laboratory. Congress has ample access to the technical expertise required. The relevant congressional committees could consult with individual experts or with groups that have a long history of providing independent technical advice to the government, such as the American Association for the Advancement of Science, the JASON defense advisory group, the National Academy of Sciences, the National Council on Radiation Protection and Measurements, and the National Institute of Standards and Technology. In this way, Congress could seek a fair comparison between systems on variables of interest, such as scan times or the ability to detect specified targets in containers with specified cargoes, enhancing confidence in the test results and decisions based on them. Other alternatives exist. Congress could require DHS to establish an independent test and evaluation unit; obtain an outside review of DHS test and evaluation procedures; require DNDO to provide detailed reporting of each step in the acquisition process as it occurs; or provide for an external review of a program. Ongoing improvement in U.S. detection capabilities produces uncertainties for terrorists that seem likely to increase over time, adding another layer of deterrence beyond that of the capabilities themselves. Capability of fielded equipment may be upgraded. Terrorists may not know the capability or availability of future detectors. More advanced technologies should improve detection capability. It should be harder for terrorists to evade new systems than current ones. Detection may affect terrorists in another way. A nuclear weapon would be of immense value to them. Therefore, increasing the risk of detection would have a much greater deterrent effect for them than for drug smugglers, where detection and confiscation of drugs are part of the cost of doing business. The multiplication of technical obstacles to a successful terrorist attack may thus help deter an attack or an attempt to undertake a project to launch one. At the same time, it is important to avoid the " fallacy of the last move. " Herbert York, a former Director of Defense Research and Engineering, coined this term to argue that in the Cold War nuclear arms race, one side's actions typically led to countervailing actions by the other side. The same principle applies to nuclear detection. This report suggests that some U.S. detection systems nearing readiness for deployment are more capable than current detectors. Yet if terrorists were to attempt to bring a nuclear weapon or SNM into the United States, they could use various techniques to evade detection by such systems, though these techniques might complicate the plot and increase the risk of detection by non-technical means. Further, the threat might increase in various ways, such as if new terrorist groups emerged or if more nations built nuclear power plants or nuclear weapons. For such reasons, Congress has funded, and executive agencies are pursuing, R&D with short- and longer-term time horizons. Also for such reasons, the global nuclear detection architecture may need to be updated from time to time. Thus, while the United States has an immense technical advantage in a competition of detection vs. evasion, and a pipeline of increasingly more capable technologies, it is important to recognize not only the dynamic aspects of advances in detection capabilities but also the dynamic aspects of the competition. Detectors must detect complete weapons, which can be quite small. During the Cold War, the United States made 155 mm and 8 inch (diameter) nuclear artillery shells. The United States made even smaller atomic demolition munitions, and there have been reports of Soviet-era "suitcase bombs." A weapon that terrorists fabricated without state assistance would surely be less sophisticated and, as a result, probably much larger. Detectors must also detect the types of uranium and plutonium used in nuclear weapons. The type of uranium used in weapons is harder to detect than plutonium because it emits much less radiation; it is also much easier to fabricate into a weapon component. It is important to detect small quantities of these materials in order to interdict stolen and smuggled materials because small quantities suffice to fuel a bomb. According to a widely quoted report by five nuclear weapon scientists from Los Alamos National Laboratory, it would take 26 kg of uranium, or 5 kg of plutonium (both of types discussed later) to fuel an atomic bomb. These masses would fit into cubes 11.2 cm or 6.3 cm, respectively, on a side. The ability to detect even smaller masses would help thwart nuclear smuggling. How is it possible to find weapons or materials among the vast amount of cargo that reaches the United States each day? Fortunately, there are many clues. Nuclear detection makes extensive use of photons. Photons are packets of energy with no rest mass and no electrical charge. Electromagnetic radiation consists of photons, and may be measured as wavelength, frequency, or energy; for consistency, this report uses only energy, expressed in units of electron volts (eV). Levels of energy commonly used in nuclear detection are thousands or millions of electron volts, keV and MeV, respectively. The electromagnetic spectrum ranges from radio waves (some of which have photon energies of 10 -9 eV), through visible light (a few eV), to higher-energy x-rays (10 keV and up) and gamma rays (mostly 100 keV and up). An x-ray photon and a gamma-ray photon of the same energy are identical. Gamma rays originate in processes in an atom's nucleus. Each chemical element has two or more isotopes. Isotopes of an element have the same number of electrons, and thus in most cases similar chemical properties, but different numbers of neutrons in their nuclei, and thus different nuclear properties. Each radioactive isotope emits gamma rays in a unique spectrum, a plot of energy levels (horizontal axis) and number of gamma rays detected at each energy level (vertical axis). These spectra are a series of spikes at particular energy levels. Figure 1 and Figure 2 show the spectra of uranium-235 and plutonium-239, respectively. Such spectra are the only way to identify an isotope outside a well-equipped laboratory. A detector with a form of "identify" or "spectrum" in its name, such as Advanced Spectroscopic Portal or radioactive isotope identification device, identifies isotopes by their gamma-ray spectra. X-rays originate in interactions with an atom's electrons. Many detection systems use x-ray beams, which can have higher energies than gamma rays and thus are more penetrating. X-ray beams are often generated through the bremsstrahlung process, German for "braking radiation," which works as follows. An accelerator creates a magnetic field that accelerates charged particles, such as electrons, which slam into a target of heavy metal. When they slow or change direction as a result of interactions with atoms, they release energy as x-rays whose energy levels are distributed from near zero to the energy of the electron beam. They do not exhibit spectral peaks like gamma rays. This difference is important for detection. Radioactive atoms are unstable. They decay by emitting radiation, principally alpha particles (a helium nucleus consisting of two neutrons and two protons, thus having a double positive charge), beta particles (electrons or positrons, the latter being electrons with a positive charge), and gamma rays (high-energy photons). These forms of radiation are of differing relevance for detection. Alpha particles, being massive (on a subatomic scale) and electrically charged, are easily stopped, such as by a sheet of paper or an inch or two of air. Beta particles, while much lighter and faster, are also electrically charged and are stopped by a thin layer of material. Gamma rays have no charge and can penetrate much more material than can alpha or beta particles. Depending on their energy, they may travel through several hundred feet of air. When an atom decays by emitting an alpha particle or beta particle, it transforms itself into a different element; it does not do so when it emits a gamma ray. Gamma-ray emission typically follows alpha or beta decay. As discussed in more detail below, each radioactive isotope that emits gamma rays does so in a spectrum of energies unique to that isotope. For example, the spectrum of U-235 has a prominent peak at 186 keV. In addition to these typical means of radioactive decay, atoms of some heavy elements fission, or split into two smaller atoms. Of the naturally occurring isotopes, only U-238 spontaneously fissions with an appreciable rate (about 7 fissions per second per kg). One by-product of fission is the emission of neutrons (typically 2-3 neutrons per fission). Neutrons have no electrical charge and can penetrate dense materials, as well as many tens of meters of air. Some isotopes of heavy elements fission spontaneously or when struck by neutrons or high-energy photons, emitting neutrons and gamma rays in the process. U-235 and Pu-239 are unique in that neutrons of any energy can cause them to fission; they are called "fissile." Neutrons of much higher energies are required to cause other isotopes to fission. This characteristic of U-235 and Pu-239 allows them to support a nuclear chain reaction. Fissile material is essential for nuclear weapons; U-235 and Pu-239 are the standard fissile materials used in modern nuclear weapons. The Atomic Energy Act of 1954 designates them as "special nuclear material" (SNM). Plutonium is not found in nature. It is produced from uranium fuel rods in a nuclear reactor and is separated from uranium and other elements using chemical processes. Weapons-grade plutonium (WGPu) is at least 93% Pu-239. In contrast, uranium in nature consists of 99.3% U-238 and 0.7% U-235, with very small amounts of other isotopes. Enriching it in the isotope 235 for use as nuclear reactor fuel or in nuclear weapons cannot be done through chemical means because isotopes of an element are nearly chemically identical, so other means must be used. For example, uranium may be converted to the gas uranium hexafluoride and placed in centrifuges specially designed to separate U-235 from U-238 based on the very slight differences in the weight of individual molecules. Uranium enriched to 20% in the isotope 235 is termed highly enriched uranium, or HEU; for use in nuclear weapons, uranium is typically enriched to 90% or so, though lower enrichments could be used. For purposes of this report, "HEU" is used to refer to uranium of 90% enrichment. HEU may also be produced from material that has been in a nuclear reactor. HEU produced in this manner contains small amounts of another isotope, U-232, which, as we shall see, is easier to detect than is U-235. Nuclear detection uses neutrons and high-energy photons in various ways. Because they can penetrate different materials, they are the main forms of radiation by which most radioactive material can be detected passively, by "listening" for signals coming out of a container without sending signals in. Because of their penetrating properties, they can be used in an active mode to probe a container for dense material. X-rays or gamma rays are used for radiography, that is, creating an opacity map like a medical x-ray. Neutrons of any energy level, and photons above 6 million electron volts (MeV), can be shot into a container to induce fission in SNM. Fission results in the emission of neutrons and gamma rays, which can be detected. Gamma rays can also be used to identify a radioactive source. Neutrons, in contrast, do not have a characteristic energy spectrum by which an isotope can be identified, and it is difficult to measure their energy, though the presence of neutrons in certain situations, as discussed below, can indicate that SNM is present. Another characteristic of radioactive materials important for detection is the rate at which a material decays. The half-life of an isotope, or the time it takes for half the atoms in a sample to decay, is an indicator of the rate of decay, with shorter half-lives indicating faster decay. The half-lives of cobalt-60, plutonium-239, and uranium-235 are 5.3 years, 24,000 years, and 700 million years, respectively. Even if a source emits high-energy gamma rays, it will be difficult to detect if it emits only a few of them. Thus type, energy level, and quantity of radiation are important for detection. Different materials attenuate neutrons and gamma rays in different ways. Heavy, dense materials like lead, tungsten, uranium, and plutonium have a high atomic number (the number of protons in the nucleus), or "Z." High-Z materials attenuate gamma rays efficiently. In contrast, neutrons are stopped most efficiently by collisions with the nuclei of light atoms, with hydrogen being the most effective because it has about the same weight as neutrons. The element with the nucleus closest in weight to a neutron is hydrogen, which in its most common isotope consists of one proton and one electron. Thus hydrogen-containing material like water, wood, plastic, or food are particularly efficient at stopping neutrons; other low-Z material is less efficient at stopping neutrons, but nonetheless more effective than high-Z material. Conversely, gamma rays are less attenuated by low-Z material and neutrons are less attenuated by high-Z material. Different amounts of material are needed to attenuate gamma rays depending on their energy level. Gamma rays from WGPu are sufficiently energetic and plentiful that it is more difficult to shield WGPu than HEU. In contrast, as explained in the footnote, an inch of lead would render gamma rays from U-235 essentially undetectable, though as discussed later other uranium isotopes that may be present in HEU are more readily detectable. Indeed, 186-keV gamma rays from U-235 have so little energy that many are absorbed by the uranium itself, a process known as self-shielding, so that the number of gamma rays emitted by a piece of U-235 depends on surface area, not mass. Unclassified demonstrations performed at Los Alamos National Laboratory for the author in June 2006 indicate how shielding and self-shielding impair the detection of low-energy gamma rays from HEU. The demonstrations used a top-of-the-line detector that had an excellent ability to identify materials by their gamma-ray spectra. In the first demonstration, the detector picked up gamma rays from a thin sheet of HEU foil at perhaps 30 feet away and quickly identified them as coming from HEU. The foil had a large surface area and little thickness, so there was little self-shielding. In the second, the detector gradually picked up gamma rays from a marble of HEU as it was brought closer to the detector. Because the marble had much more thickness and much less surface area than the HEU foil, there was considerable self-shielding, greatly reducing the gamma-ray output. In the third, the marble of HEU was placed in a capsule of a high-Z material, lead, perhaps 1 cm thick, and the detector picked up nothing even when the capsule was touching the window of the detector. Sources of radiation other than SNM complicate detection. Background radiation from naturally occurring radioactive material, such as thorium, uranium, and their decay products such as radon, is present everywhere, albeit often in trace amounts. Cosmic rays generate low levels of neutrons. Some legitimate commercial goods contain radioactive material, such as ceramics (which may contain uranium), kitty litter (which may contain thorium and uranium), and gas mantles made of thorium oxide. Other radioactive isotopes are widely used in medicine and industry. Finally, a terrorist group might conceivably place radioactive material in a shipment containing a weapon or SNM chosen so as to mask the unique gamma-ray spectrum of SNM by presenting a spectrum of several known innocuous materials with peaks to interfere with those of SNM or that have an intensity much higher than SNM. For purposes of this report, a signature is a property by which a substance (in particular, SNM) may be detected or identified. A nuclear weapon or its fissile material may be detected by various signatures, some of which are discussed next. Atomic number, abbreviated "Z," is the number of protons in an atom's nucleus. For example, the Z's of beryllium, iron, and uranium are 4, 26, and 92, respectively. Z is a property of individual atoms. In contrast, density is a bulk property, and is expressed as mass per unit volume, e.g., grams per cubic centimeter. The densities of beryllium, iron, and uranium are 1.848, 7.874, and 19.050 g/cc, respectively. At its most basic, density measures how many neutrons and protons (which constitute almost all of an atom's mass) of a substance are packed into a volume. In general, the densest materials are those of high Z. These properties may be used to detect uranium and plutonium. Uranium is the densest and highest-Z element found in nature (other than in trace quantities); plutonium has a slightly higher Z (94), and its density varies from slightly more to slightly less than uranium, depending on its crystal structure. Some detection methods discussed in Chapter 2, such as effective Z, make use of Z; and some, such as radiography and muon tomography, make use of Z and density combined. An object's opacity to a photon beam depends on its Z and density, the amount of material in the path of the beam, and the energy of the photons. Gamma rays and x-rays can penetrate more matter than can lower-energy photons, but dense, high-Z material absorbs or scatters them. Thus a way to detect an object, such as a bomb, in a container is to beam in x-rays or gamma rays to create a radiograph (an opacity map) like a medical x-ray. Background gamma radiation is ubiquitous. Since many materials, including SNM, emit gamma radiation, elevated levels of gamma radiation may or may not indicate the presence of SNM. Cosmic rays and naturally occurring uranium generate a very low background flux of neutrons. Most materials do not emit neutrons spontaneously, but HEU and plutonium do. The spontaneous emission rates for 1 kg of plutonium and 1 kg of of HEU are 60,000 neutrons per second and 3 neutrons per second, respectively. As a result, neutrons above the cosmic ray background coming from a cargo container would be suspicious. For HEU, however, the rate is not too different from the background and thus is not a strong signature. Each isotope has a unique gamma ray spectrum. For example, uranium-235 produces gamma ray peaks at several dozen discrete energy levels. This spectrum of energies is well characterized for each isotope, and is the only way to identify a particular isotope outside a well-equipped laboratory. As a result, any detector with a variant of "spectrum" or "identify" in its name, such as Advanced Spectroscopic Portal or radioactive isotope identification device, relies on identifying isotopes by their gamma-ray spectra. HEU presents other gamma ray signatures as well. HEU contains some U-238, which produces a gamma-ray peak at an energy of 1.001 MeV. While these gamma rays are energetic, they would be hard to detect unless the detector is very close to the uranium because they are emitted at a very low rate, and could easily be missed because trace amounts of naturally occurring uranium, such as in clay and soil, also generate 1.001 MeV gamma rays. HEU derived from spent nuclear reactor fuel rods also contains small amounts of uranium-232, which is formed when uranium is bombarded with neutrons in a nuclear reactor. Uranium-232 decays through a long decay chain of short-lived isotopes to thallium-208, which has a gamma ray of 2.614 MeV, one of the highest-energy gamma rays produced by radioactive decay, so it is distinctive as well as highly penetrating; it takes 2.041 cm of lead to attenuate half the gamma rays of that energy. Thallium-208 is also a decay product of naturally occurring thorium-232. U-232 decays very much faster than U-235 or U-238 (half-lives of 69 years, 700 million years, and 4.5 billion years, respectively), and thallium-208 decays even faster (half-life of 3 minutes), so even a very small amount of U-232 produces many gamma rays. Similarly, WGPu presents various gamma ray signatures because it is a mix of several isotopes of plutonium and their decay products. SNM is unique in that it can fission when struck by low-energy ("thermal") neutrons. Like some other materials, it also fissions when struck by high-energy gamma rays. In a sufficiently large mass of SNM, the neutrons (usually two or three) released by the fission of one atom cause other atoms to fission, releasing more neutrons in a chain reaction. SNM also fissions spontaneously, and neutrons released by these fissions have a non-negligible probability of causing other SNM atoms to fission. Characteristic products of fission offer indications that SNM is present. These products include neutrons that may be emitted over periods ranging from nanoseconds to many seconds, whether as a result of spontaneous fission or of fission induced by gamma rays or neutrons, and gamma rays emitted within nanoseconds of induced fission. When U-235 and Pu-239 fission, they release a nearly instantaneous burst of 2 or 3 neutrons and 6 to 10 gamma rays. These prompt neutrons are emitted in a continuum of energies, with an average of about 1 to 2 MeV, and are termed fast or high-energy neutrons. The prompt gamma rays are also emitted in a spectrum of many narrow lines. Only SNM will fission when struck by low-energy neutrons, so a beam of low-energy neutrons that results in a burst of neutrons and gamma rays indicates the presence of SNM. A beam of high-energy gamma rays (with energy greater than 6 MeV) will also cause SNM to fission. However, that beam will also cause other materials to fission, including natural uranium, so emission of a burst of neutrons and gamma rays resulting from interrogation by a high-energy gamma ray beam is a possible, but not a definitive, indicator by itself of the presence of SNM. When U-235 or Pu-239 atoms fission, they split into two smaller fission fragments in any of approximately 40 ways for each isotope, resulting in "[s]omething like 80 different fission fragments" for U-235 or Pu-239. These fission fragments are unstable and decay radioactively into isotopes of various elements. Fission is a statistical process, so that fissioning of a great many U-235 or Pu-239 atoms produces a complex mixture of some 300 isotopes of 36 elements. These isotopes have a great range of half-lives, from a small fraction of a second to millions of years, but the isotopes with a half-life greater than approximately 30 years emit only very low levels of radiation. This process produces thousands of times more gamma rays than neutrons. Since much cargo consists of low-Z material and since gamma rays penetrate low-Z cargo much more readily than do neutrons, many more gamma rays than neutrons resulting from fission of SNM escape containers holding such cargo. Higher-Z cargo will attenuate the gamma rays more than the neutrons. Some of the gamma rays have energies exceeding those of thallium-208, 2.614 MeV, the highest energy typically observed in natural backgrounds. "Their high energy makes this gamma radiation a characteristic of fission, very distinct from normal radioactive background that typically produces no gamma radiation exceeding an energy of 2.6 MeV." Note that some other isotopes, such as U-238 and Pu-240, are "fissionable," that is, they can undergo fission only when struck by high-energy (fast) neutrons. The high-energy gamma rays resulting from fission are a strong indicator of the presence of SNM. The intensity of the neutron and gamma-ray flux over a short period, caused by rapid decay of many of the fission products, and the prompt response to a probe, are distinctive signatures as well. There is another time-delay signature. A neutron beam makes atoms of some other elements radioactive, in particular transforming some atoms of stable oxygen-16 to radioactive nitrogen-16. Researchers at Lawrence Livermore National Laboratory conducted experiments in which they bombarded a target of natural uranium (99.3% U-238, 0.7% U-235) inside a cargo container with a neutron beam, and recorded the gamma ray spectrum resulting from radioactive decay. After they turned off the neutron beam, they found that the high-energy portion of the spectrum was dominated by gamma rays from the decay of nitrogen-16 for the first 15 seconds, and after that the dominant signal was from the decay of radioactive fission products, with an average half-life of about 55 seconds. This time difference is an indicator of the presence of SNM. Interrogation of SNM with a beam of neutrons or high-energy photons to induce fission produces another unique signature. While the beam may cause neutrons to be emitted immediately through various nuclear reactions (e.g., fission), materials other than SNM will not support a nuclear chain reaction. In contrast, even a subcritical mass of SNM can sustain a chain reaction for a short time. As a result, fission in a multi-kilogram block of SNM will continue to produce neutrons for a short time after the beam has been turned off, with the intensity and duration of the neutron flux depending on the amount of SNM and the cargo loading. This delayed neutron time signature is called differential die-away, is measured on the order of a thousandth of a second after the beam is turned off, and is specific to U-235 and Pu-239 (and, rarely, other fissile isotopes). This technique depends on the detection of the prompt fission signal, but hydrogenous materials such as those found in cargo tend to attenuate this signal, and there may be background neutrons, so that some difficult scans may require more time, possibly two minutes, and some may not be feasible. A subcritical mass of SNM is too small to support a supercritical chain reaction because too many neutrons escape the SNM for the number of neutrons to increase exponentially. Nonetheless, chain reactions do occur in SNM, triggered by a neutron from spontaneous fission or a background neutron. These chain reactions may last several to dozens of generations, producing a burst of neutrons and gamma rays over some billionths of a second. No other material produces this signature. In contrast, most background neutrons and gamma rays arrive at a detector in a random pattern. The one exception is that neutrons generated as cosmic rays strike matter also tend to be generated in bursts; work is under way to try to differentiate between bursts of neutrons induced by cosmic rays and those generated by fission chains. Detection of this signature is therefore a strong sign of the presence of SNM. Unlike differential die-away or delayed neutrons and gamma rays, this signature can be detected with passive means provided the SNM is not well shielded. This technique places great demands on detector technology but can be done with state-of-the-art electronics. Chapter 2 discusses in detail two other signatures—deflection of muons and nuclear resonance fluorescence and absorption—and their detection. Detection involves using detector elements to gain data, converting data to usable information through algorithms, and acting on that information through concept of operations, or CONOPS. Detectors, algorithms, and CONOPS are the eyes and ears, brains, and hands of nuclear detection: effective detection requires all three. Since photons or neutrons have no electrical charge, their energy is converted to electrical pulses that can be measured. This is the task of detectors, discussed next. The pulses are fed to algorithms. An algorithm, such as a computer program, is a finite set of logical steps for solving a problem. For nuclear detection, an algorithm must process data into usable information fast enough to be of use to an operator. It receives data from a detector's hardware, such as pulses representing the time and energy of each photon arriving at the detector. It converts the pulses to a format that a user can understand, such as displaying a gamma ray spectrum, identifying the material creating the spectrum, or flashing "alarm." Every detector uses one or more algorithms. Improvements to algorithms can contribute as much as hardware improvements to detector capability. Algorithms may be improved in many ways, such as by a better understanding of the physics of a problem, or by improving the computers in detection equipment so they can process more elaborate algorithms. CONOPS may be divided into two parts. One specifies how a detection unit is to be operated to gain data. How many containers must the unit scan per hour? How close would a detector be to a container? Shall the unit screen cargo in a single pass, or shall it be used for primary screening, with suspicious cargo sent for a more detailed secondary screening? A second part details how the data are to be used. What happens if the equipment detects a possible threat? Which alarms are to be resolved on-site and which are to be referred to off-site experts? Under what circumstances would a port or border crossing be closed? More generally, how is the flow of data managed, in both directions? What types of intelligence information do CBP agents receive, and how do data from detection systems flow to federal, state, and local officials for analysis or action? While this report does not focus on CONOPS because is not a technology, it is an essential part of nuclear detection. A discussion of how detectors work is essential to understanding the capabilities and limits of current detectors and how detectors may be improved. Detecting each signature of a nuclear weapon or SNM requires a detector that is appropriate for that signature. Further, there is a hierarchy of gamma ray detectors. The simplest can only detect the presence of gamma radiation. The next step up, detectors with low energy resolution, have a modest capability to identify an isotope by its gamma ray spectrum. Next, detectors with high energy resolution have very accurate isotope identification capabilities. More sophisticated detector systems can also identify the presence of SNM by the time pattern of gamma rays released when such material fissions. The most sophisticated detector systems can produce an image showing where each gamma ray came from. Detectors require a signal-to-noise ratio sufficient to permit detection. That is, they must be able to extract the true signal (such as a gamma-ray spectrum) from noise (spurious signals caused, for example, by background radioactive material or by imperfect detectors or data-processing algorithms). Two concepts are central to gamma-ray detector sensitivity: detection efficiency and spectral resolution. The former refers to the amount of signal a detector records. One aspect of detection efficiency is the fraction of the total emitted radiation that the detector receives. Radiation diminishes according to an inverse square law; that is, the intensity of radiation (e.g., number of photons per unit of area) from a source is inversely proportional to the square of the distance from the source. Since a lump of SNM emits radiation in all directions, moving a detector closer to SNM, or increasing its size, increases efficiency. Reducing the cost of the active material in a detector may increase efficiency by making a larger sensor area affordable. Another aspect is the fraction of the radiation striking the detector that creates a detectable signal. For example, a detector that can absorb 90% of the energy of photons striking it is more efficient than one that can absorb 10%. A more efficient detector will collect information faster, reducing the time it takes to screen a cargo container. Spectral resolution refers to the sharpness with which a detector presents energy peaks in a radiation spectrum. A graph of the gamma-ray spectrum of a radioactive isotope plots energy levels along the horizontal axis of the graph and the number of counts per unit time at each energy level along the vertical axis. A perfect device would record the energy levels of a gamma-ray spectrum as a graph with vertical "needles" of zero width because each radioactive isotope releases gamma rays only at specific energy levels. In practice, however, detectors are not perfect, and 186-keV gamma rays will be recorded as a bell curve centered on 186 keV. The narrower the spread of the bell curve, the more useful the information is. Polyvinyl toluene (PVT), a plastic that is widely used in radiation detectors because it can be fielded in large sheets at low cost, is sensitive but has poor resolution, i.e., extremely wide bell curves for each gamma-ray energy level. As a result, while PVT can detect radiation, the peaks from gamma rays of different energy levels blur together, making it impossible to identify an isotope. Figure 3 makes this point; it shows the spectra of 90% U-235 and background radiation as recorded by a PVT detector. At the other extreme, high-purity germanium (HPGe) produces very sharp peaks, permitting clear identification of specific isotopes. These detectors are expensive, heavy, have a small detector area, and must be cooled to extremely low temperatures with liquid nitrogen or a mechanical system, making them less than ideal for use in the field. However, mechanically cooled HPGe detectors weighing some 2.5 kg are being developed for field use. Figure 4 shows the spectrum of Pu-239 as recorded by various types of detectors with better resolution than PVT. Various means can improve detector sensitivity. One type of semiconductor detector crystal is cadmium-zinc-telluride, or CZT. The peak on the far right of each spectrum in Figure 5 shows improvement in the resolution of the gamma-ray spectrum for cesium-137 (a radioactive isotope) taken with different CZT detectors that, for the years indicated, were at the high end of sensitivity. The top line shows a spectrum taken with a CAPture device developed by eV Products (1995-1998); the middle line shows a spectrum taken with a coplanar-grid device developed by Lawrence Berkeley National Laboratory (2000-2003); and the bottom line shows a spectrum taken with a 3-D device developed by the University of Michigan (2008). Better CZT crystals and better ways to overcome limitations of these crystals have both improved sensitivity in various ways: Researchers have been able to grow larger crystals. CZT crystal volume for the three devices was 1.00 cc in 1995-1998, 2.25 cc in 2000-2003, and 6.00 cc at present. Larger crystals are more efficient, i.e., they can capture more photons, and more of the energy of individual photons, permitting more counts per unit time (i.e., more data). Crystal quality has improved. A more uniform crystal structure and fewer impurities allow for better transport of the photon-induced electrical charge through the crystal and thus more accurate determination of the energy of each photon. University of Michigan researchers have constructed three-dimensional arrays of CZT crystals, permitting their detector to determine the 3-D coordinates of each individual gamma ray photon as it interacts with the CZT crystal, in turn permitting location as well as identification of gamma-ray sources. Electronics have improved. Researchers have made significant progress in reducing the noise inherent in electronic circuits (application-specific integrated circuits) that translate signals from the interaction of photons with CZT into a form in which algorithms can process them. Reducing the noise in these circuits permits more accurate measurement of gamma-ray energy. For example, a circuit developed in 2007 by Brookhaven National Laboratory has improved energy resolution substantially, and other advances in detector electronics in the last few years enable electronic components to compensate for defects in the crystals (analogous to adaptive optics in astronomy). Algorithms to reconstruct the signal from gamma rays have improved, also permitting more accurate measurement of gamma ray energy. Another factor that affects the ability to detect SNM is the time available for a detector to scan a container or other object, often called "integration time." Detectors build up radiography or tomography images, or gamma-ray spectra, over time. More time enables a detector to have more photons per pixel (in the case of radiography) or per bin (in the case of gamma-ray spectra), or more muons per voxel. More time also enables a neutron detector to detect more neutrons and measure their times of arrival, as discussed below, helping to determine if the neutrons are generated by SNM or by background materials. More time thus provides better data, which provides for better separation of signal from noise, better separation of different sources of radiation, fewer false alarms, and a better chance of detecting and identifying shielded threat material. Figure 16 illustrates how one system builds up an image over time. From a physics perspective, then, increasing integration time improves the accuracy of the result, but from a port operator's perspective, longer integration time impedes the flow of commerce, which costs money, so a balance must be struck between these two opposed goals. This balance may be stated formally in a concept of operations (discussed in more detail below), which specifies how, among other things, a detection system will be operated; detection equipment must be designed to operate within the time required, and port operations must allow that amount of time for scans. Still another means of improving the ability to detect SNM is to increase the spatial resolution of a detector. According to DTRA, This is easily demonstrated in the example of a shielded versus unshielded radiation detector. Unshielded detectors are sensitive to radiation impinging on it in all directions, which is characteristic of the nature of naturally-occurring background radiation. By adding shielding, a detector's field-of-view can be controlled, and background radiation levels reduced, increasing the signal-to-noise ratio for the detector in the direction the detector is aimed. Gamma rays do not have an electrical charge, but an electrical signal is needed to measure them. There are two main ways by which a gamma ray can be turned into electrical energy. One is with a scintillator material, such as PVT or sodium iodide. When a single higher energy photon, such as a gamma ray, strikes the scintillator and interacts with it, the scintillator emits a large number of photons of lower energy, usually visible light ("optical photons"). A photomultiplier tube (PMT) converts the optical photons to electrons, then multiplies the electrons to generate a measurable pulse of electricity whose voltage is proportional to the number of optical photons, which is in turn proportional to the energy deposited by the gamma ray. An electronic device called a multi-channel analyzer sorts the pulse into a "bin" depending on its energy and increases the number of counts in that bin by one. A software package then draws a histogram with energy level on the horizontal axis and number of counts on the vertical axis. The histogram is the gamma ray spectrum for that isotope. In contrast, a semiconductor material, such as HPGe, turns gamma rays directly into an electrical signal proportional to the gamma-ray energy deposited. A voltage is applied across the semiconductor material, with one side of the material being the positive electrode and the other being the negative electrode. When a gamma ray strikes the material, it knocks some electrons loose from the semiconductor's crystal lattice. The voltage sweeps these electrons to the positive electrode. Their motion produces an electric current whose voltage is proportional to the energy of each gamma ray. Each pulse of current is then sorted into a bin depending on its voltage and the spectrum is computed as described above. This approach, with either type of detector, is used to detect the various gamma-ray signatures described earlier. However, the requirements for detecting time signatures varies somewhat. Because prompt gamma rays are emitted so quickly, identifying them requires the ability to record time of arrival to several billionths of a second. Delayed gamma rays of interest are generated over a period of tens of seconds, so the ability to record precise time of arrival is less important. Detecting fission chain time signature requires a high-efficiency detector because long fission chains are relatively rare. Thus to detect SNM rapidly, the detector must have a high efficiency for detecting every fission chain. While the delayed emissions from fission chains are too weak to detect passively, fission chain time signature focuses on detecting the prompt emissions from fission, which are stronger. High efficiency is also important for neutron and gamma-ray interrogation, but the emphasis is less stringent because far more fissions are induced (i.e., the signal is stronger). Detecting nuclear resonance fluorescence requires high-resolution detectors in order to differentiate between the various materials being analyzed. Neutrons, like photons, do not have an electrical charge, but the two interact with matter differently. Photons interact chiefly with electrons, while neutrons interact with atomic nuclei. As a result, neutrons are counted by a different process. A common neutron detector is a tube of helium-3 gas connected to a high-voltage power supply, with positively and negatively charged plates or wires in the tube. In its rest state, current cannot pass through the helium because it acts as an insulator. When a low-energy neutron passes through the tube, it is absorbed by a helium-3 atom, producing a triton (1 proton and 2 neutrons) and a proton. These particles are highly energetic and lose their energy by knocking electrons off other helium-3 atoms. Positively charged ions of helium-3 move to the negative plate, while electrons move to the positive plate. Since electric current is the movement of charged particles, these particles generate a tiny electric current that is measured and counted. Neutrons are emitted as a continuum of energies. While the mean energy of each neutron spectrum varies somewhat from one isotope to the next, neutron energy spectra do not have lines representing discrete energies as with gamma rays. Moreover, neutrons lose energy as they collide with low-Z material, further blurring their spectra. Thus neutron spectra are of little value for identifying isotopes. Instead, the total neutron count is an important means of identifying SNM because only SNM gives off neutrons spontaneously in significant numbers, though some neutron background is generated mainly when cosmic rays knock neutrons off atoms. Several other methods of detecting SNM by neutron emission, discussed above, rely on the time pattern in which a group of neutrons arrives. Several systems detect neutrons with tubes filled with helium-3 (He-3), a standard method. DOE obtains He-3 as a byproduct from the decay of tritium used in nuclear warheads. With the decades-long decline in numbers of warheads and a hiatus in tritium production for many years, there is little new supply of He-3. DOE plans to supply customers with 10,000 liters of He-3 a year, with a starting bid price expected to be around $72 per liter, and states, "This appears short of what customers are requesting." (Russia sells He-3 to U.S. companies, but quantities are proprietary and not available.) Deploying He-3 neutron detection systems in large numbers would require a considerable amount of He-3. Customs and Border Protection (CBP) states that "based on our RPM [radiation portal monitor] deployments CBP would need approximately 2500 [detector] units to cover sea and land borders." (Data for number of units needed for air cargo are not available.) Given the shortage and cost of He-3, deployment of neutron detectors using large amounts of He-3, or large numbers of units requiring small amounts of He-3, does not appear feasible. Alternative neutron detection systems are possible. They include tubes coated with boron-10 or lithium-6, tubes filled with boron-10 trifluoride (a toxic gas), nanocomposite scintillators, and "neutron straws," thin tubes being developed commercially under sponsorship of the Defense Threat Reduction Agency. Substituting any of these technologies for He-3 in a system would necessitate re-engineering the system's neutron detectors, revising algorithms, conducting tests, perhaps modifying the resulting system for operational conditions, and so on. Those changes have the potential to add delay and affect system performance (for better or worse), though given the high cost of He-3 (about $2.7 million for 38,000 liters) they might well reduce cost. Photons of sufficiently high energy can penetrate solid objects. Denser, higher-Z material within a solid object absorbs photons of lower energy and scatters photons of higher energy. For cargo scanning, a fan-shaped planar beam of photons is sent through a cargo container as the container passes through the beam, and a detector array on the other side consisting of semiconductor or scintillator material records the opacity of each pixel to the photons. An algorithm then creates a two-dimensional opacity map of the contents of the container and displays it as an image on a computer screen. Increasing the energy of photons allows them to penetrate more material. Radiography is used to search cargo containers for terrorist nuclear weapons, among other things. A radiograph would reveal clearly a large dense object, such as a nuclear weapon encased in lead shielding. Two limitations of radiography are noteworthy. First, radiographs do not detect radiation and thus do not specifically detect SNM, just high-density, high-Z material. Second, if a terrorist bomb is placed in a shipment of dense or mixed objects, the image of the bomb might be hidden or a radiographic equipment operator might not notice it. It would be much harder to detect a small piece of SNM using radiography than to detect a bomb. In order to understand the capabilities of detection systems, it is important to know their weaknesses as well as their strengths. However, detailed discussions of means of evasion tend to become classified. Some references are made throughout this report, but some are withheld to keep the report unclassified. In general, an enemy could use various means in an effort to defeat these technologies. For example, high-Z material absorbs and deflects gamma rays, low-Z material deflects neutrons, radiography might miss a small piece of SNM (especially if mixed in with other dense material), and reducing the apparent density and Z of SNM by mixing it with a low-Z substance reduces the deflection of muons. Further, enemy attempts to defeat one type of detection system may complicate plans or make a plot more vulnerable to detection by other means, as several examples illustrate. (1) The use of multiple detection systems that detect different phenomena are harder to defeat than those detecting one phenomenon only. Placing a lead shield around a bomb in order to attenuate gamma rays from plutonium would create a large, opaque image that would be quite obvious on a radiograph. It is for this reason that Congress mandated, "A container that was loaded on a vessel in a foreign port shall not enter the United States (either directly or via a foreign port) unless the container was scanned by nonintrusive imaging equipment and radiation detection equipment at a foreign port before it was loaded on a vessel." This restriction is to apply by July 1, 2012. (2) An enemy could attempt salvage fuzing, which would detonate a weapon if the weapon sensed attempts to detect it, such as with photon beams, or if it was tampered with. However, salvage fuzing has various shortcomings. It could result in a weapon detonating by accident or if it is scanned overseas. It could detonate a weapon in a U.S. port, where it would do much less damage than in a city center. (3) Enemy attempts to smuggle HEU into the United States in order to avoid detection of a complete bomb would require fabricating the weapon inside this nation, which in turn could require such activities as smuggling other weapon components and purchase of specialized equipment, and could run the risk of accidents (such as with explosives), any of which could provide clues to law enforcement personnel. For these reasons, it is important to view technology development not only as advances in capabilities per se but also in the context of an offense-defense competition.

Detection of nuclear weapons and special nuclear material (SNM, plutonium, and certain types of uranium) is crucial to thwarting nuclear proliferation and terrorism and to securing weapons and materials worldwide. Congress has funded a portfolio of detection R&D and acquisition programs, and has mandated inspection at foreign ports of all U.S.-bound cargo containers using two types of detection equipment. Nuclear weapons contain SNM, which produces suspect signatures that can be detected. It emits radiation, notably gamma rays (high-energy photons) and neutrons. SNM is dense, so it produces a bright image on a radiograph (a picture like a medical x-ray) when x-rays or gamma rays are beamed through a container in which it is hidden. Using lead or other shielding to attenuate gamma rays would make that image larger. Nuclear weapons produce detectable signatures, such as radiation or a noticeable image on a radiograph. Other detection techniques are also available. Nine technologies illustrate the detection portfolio: (1) A new scintillator material to improve detector performance and lower cost. This project was terminated in January 2010. (2) GADRAS, an application using multiple algorithms to determine the materials in a container by analyzing gamma-ray spectra. If materials are the "eyes and ears" of detectors, algorithms are the "brains." (3) A project to simulate large numbers of experiments to improve detection system performance. (4, 5) Two Cargo Advanced Automated Radiography Systems (CAARS) to detect high-density material based on the principle that it becomes less transparent to photons of higher energy, unlike other material. (6) A third CAARS to detect material with high atomic number (Z, number of protons in an atom's nucleus) based on the principle that Z affects how material scatters photons. This project was terminated in March 2009. (7) A system to generate a 3-D image of the contents of a container based on the principle that Z and density strongly affect the degree to which muons (a subatomic particle) scatter. (8) Nuclear resonance fluorescence imaging to identify materials based on the spectrum of gamma rays a nucleus emits when struck by photons of a specific energy. (9) The Photonuclear Inspection and Threat Assessment System to detect SNM up to 1 km away, unlike other systems that operate at very close range. It would beam high-energy photons at distant targets to stimulate fission in SNM, producing characteristic signatures that may be detected. These technologies are selected not because they are necessarily the "best" in their categories, but rather to show a variety of approaches, in differing stages of maturity, performed by different types of organizations, relying on different physical principles, and covering building blocks (materials, algorithms, models) as well as systems, so as to convey many points on the spectrum of detection technology development. This analysis leads to several observations for Congress. It is difficult to predict the schedule or capabilities of new detection technologies. It is easier and less costly to accelerate a program in R&D than in production. "Concept of operations" is crucial to detection system effectiveness. Congress may wish to address gaps and synergisms in the technology portfolio. Congress need not depend solely on procedures developed by executive agencies to test detection technologies, but may specify tests an agency is to conduct. Ongoing improvement in detection capabilities produces uncertainties for terrorists that will increase over time, adding deterrence beyond that of the capabilities themselves. This report will be updated occasionally.

The Supplemental Nutrition Assistance Program (SNAP) is the nation's largest domestic food assistance program, serving about 42.2 million recipients in an average month at a federal cost of over $68 billion in FY2017. It is jointly administered by the federal government and the states and provides means-tested benefits to recipients who are deemed eligible. These benefits may be used only for eligible foods at any of the approximately 260,000 authorized retailers, which range from independent corner stores to national chain supermarkets. In a program that operates with so many different stakeholders, detecting, preventing, and addressing errors and fraud is a complex undertaking. Among the complexities are the monitoring of retailer acceptance and recipient use of benefits, the accuracy of information provided by applicant households, and states' performance administering the program. Many governmental entities—federal and state agencies, including both human services and law enforcement—play a role in efforts to detect, prevent, and punish fraudulent SNAP activities and to reduce inadvertent errors. SNAP has typically been reauthorized in a farm bill approximately every five years; this occurred most recently in 2014 ( P.L. 113-79 ). Policymakers have long been interested in reducing fraud and improving accuracy in the program, and provisions related to these goals are frequently included in farm bills. In preparation for the next farm bill, up for reauthorization in September 2018, policymakers have again begun to discuss error and fraud in the program. The Trump Administration has also announced related policy changes. At the same time, some policymakers defend the program against criticism of its integrity. To help policymakers navigate this complex set of policy issues, this report seeks to define terms related to errors and fraud; identify problems and describe what is known of their extent; summarize current policy and practice; and share recommendations, proposals, and pilots that have come up in recent years. The report answers several questions around four main types of inaccuracy and misconduct: (1) trafficking SNAP benefits (by retailers and by recipients); (2) retailer application fraud; (3) errors and fraud in SNAP household applications; and (4) errors and fraud committed by state agencies (including a discussion of states' recent Quality Control (QC) misconduct). The report then discusses challenges to combating errors and fraud—across the four areas—and potential strategies for addressing those challenges. Certain key ideas that are fundamental to discussion of SNAP errors and fraud are explored further in the report: Errors are not the same as fraud. Fraud is intentional activity that breaks federal and/or state laws, but there are also ways that program stakeholders—particularly recipients and states—may inadvertently err, which could affect benefit amounts. Certain acts, such as trafficking, are always considered fraud, but other acts, such as duplicate enrollment, may be the result of either error or fraud depending on the circumstances of the case. SNAP fraud is relatively rare, according to available data and reports. While this report discusses illegal or inaccurate activities in SNAP, they represent a relatively small fraction of SNAP activity overall. There is no single data point that reflects all the forms of fraud in SNAP. The most frequently cited measure of fraud is a national estimate of retailer trafficking, which is a significant, but not the only, type of fraud in the program. While retailer trafficking and retailer application fraud are pursued primarily by a single federal entity, recipient violations are pursued by 53 different state agencies. This leads to disparate approaches and disparate reporting. The national payment error rate (NPER) is the most-often cited measure of nationwide SNAP payment accuracy, but it has limitations. For example, it only reflects errors above an error tolerance threshold. Policies to reduce fraud and increase accuracy can be in tension with other policy objectives, and may have unintended consequences. Policies that make retailer authorization more onerous, for instance, have the potential to decrease participants' access to SNAP-authorized stores. Making eligibility determinations more complex for recipients can impede recipients' access to the program and could strain states' eligibility determination operations. Implementing better data collection and accountability systems could require more staff and could incur more costs than it reduces. This report provides a foundation for discussing error and fraud in SNAP and for evaluating policy proposals. It does not make independent CRS findings, but rather synthesizes the many available resources on error and fraud in SNAP. It relies, in particular, on reports and data from the United States Department of Agriculture's Food and Nutrition Service (USDA-FNS) as well as the published audits of the USDA's Office of the Inspector General (USDA-OIG) and the Government Accountability Office (GAO). For a list of abbreviations used in this report, see Appendix A . This section defines each of the types of intentional fraud and unintentional errors committed by recipients, retailers, and state agencies, including retailer trafficking (fraud), recipient trafficking (fraud), retailer application fraud, recipient application fraud, recipient errors, agency errors, state agency employee fraud, and state agency fraud. USDA-FNS is responsible for administering the retailer side of SNAP and for pursuing retailer fraud; while states are responsible for administering the recipient side of SNAP (with federal oversight) and for pursuing recipient fraud. "Trafficking" usually means the direct exchange of SNAP benefits (formerly known as food stamps) for cash, which is illegal, and both retailers and recipients can engage in this form of fraud. Although SNAP benefits have a dollar value, they are not the same as cash because they can only be spent on eligible food for household consumption at authorized stores equipped with Electronic Benefit Transfer (EBT) point of sale (POS) machines . Trafficking can also include the exchange of SNAP benefits for controlled substances, firearms, ammunition, or explosives. Additionally, trafficking includes indirect exchanges, such as obtaining cash refunds for products purchased with SNAP benefits or reselling products purchased with SNAP benefits. Trafficking SNAP benefits includes recipient trafficking and retailer trafficking. Retailer trafficking of SNAP benefits usually occurs when a SNAP recipient sells their benefits for cash, often at a loss, to an owner or employee of a store participating in SNAP. Recipient trafficking usually coincides with retailer trafficking, but it may take other forms (e.g., if a recipient were to sell their benefits, or food purchased with benefits, to another individual). Trafficking is one of the most serious forms of SNAP fraud, and although it does not increase costs to the federal government (as overpayments do), it does divert federal funds from their intended purpose. Retailers misrepresenting themselves or circumventing disqualification in the application process can be a source of fraud. To obtain SNAP authorization, applicant retailers must meet certain requirements, including stocking and business integrity standards. When a retailer initially applies to receive authorization to participate in SNAP or applies for reauthorization to continue SNAP participation, the store owner must submit personal and business information and documentation to USDA-FNS in order to verify eligibility for SNAP participation. If a retailer deliberately submits false or misleading information of a substantive nature in order to receive SNAP authorization despite their ineligibility, then they have committed falsification—retailer application fraud. Another kind of retailer application fraud involves a store owner attempting to circumvent disqualification from SNAP by engaging in a purported sale or transfer of ownership of their store to a spouse or relative; after which the new purported owner applies to participate in SNAP, claiming that the former disqualified owners are no longer associated with the store. This practice is often referred to as "straw ownership," and USDA-FNS does not consider such sales or transfers of ownership to be bona fide. Such actions by the disqualified retailer are considered circumvention—retailer application fraud. Retailer application fraud does not increase costs to the federal government (as overpayments can), but it does enable retailers who may be more likely to engage in trafficking to enter the program. In addition to retailer trafficking and retailer application fraud, errors and fraud can arise in determining eligibility and benefit amounts for recipients. When a household initially applies to receive or recertifies to continue receiving SNAP benefits, the applicant household must submit personal information and documentation to their state agency for eligibility determination, and for benefit calculation if found to be eligible. During this application process, an applicant may misunderstand SNAP rules, make a miscalculation, otherwise unintentionally provide incorrect information, or accidentally omit certain information. If this error results in an overpayment to the household and there is no proof that this error was intentional , then this error is designated as an inadvertent household error (IHE). If an applicant is found to have intentionally submitted false or misleading information during the initial application or recertification process that leads to an incorrect eligibility or allotment determination (resulting in an overpayment), then that applicant has committed an intentional program violation (IPV)—recipient application fraud. SNAP overpayments or underpayments that are not the result of recipient actions (i.e., not the result of recipient errors or recipient fraud) are generally the result of agency errors (AEs). Agency errors include overpayments or underpayments caused by the action of, or failure to take action by, any representative of a state agency. "State agency employee fraud" and "state agency fraud" are not terms defined in statute, regulation, or agency guidance. As used in this report, "state agency employee fraud" and "state agency fraud" include forms of fraud often referred to as "insider threats"—a threat to SNAP integrity that comes from within entities that administer SNAP (i.e., state agencies). State agency employee fraud is any intentional effort by state employees to illegally generate and benefit from SNAP overpayments. State agency employee fraud usually involves eligibility workers who abuse their positions and access to the SNAP certification process in order to unlawfully generate SNAP accounts that materially benefit individuals not entitled to such benefits. State agency fraud is any intentional effort by state officials to mislead USDA-FNS or other federal authorities in order to illegally obtain federal funds or avoid federal monetary penalties. State agency fraud cases are very infrequent and generally center on a state's falsification of program-related data. Of interest to policymakers, the state agency fraud case examined in this report, first identified in 2017, deals with multiple states' falsification of Quality Control (QC) data in order to obtain monetary bonuses and avoid monetary penalties, with some actions dating back to 2008. (For more information, see " State Agency Fraud: SNAP Quality Control .") USDA-FNS publishes an annual report that summarizes their annual administrative activities pertaining to retailers participating in SNAP, including detailed retailer data on participation and redemptions, retailer applications and authorizations, investigations and sanctions, and administrative review. According to this Retailer Management Report, in FY2016 there were 260,115 retailers participating in SNAP, and USDA-FNS permanently disqualified 1,842 stores for retailer trafficking (less than 1% of all stores). Roughly every three years, USDA-FNS publishes a study estimating the extent of retailer trafficking in SNAP over about three years of SNAP redemption data. The retailer trafficking studies referenced in this report were issued in 2017 (covering 2012-2014), 2013 (covering 2009-2011), and 2011 (covering 2006-2008). By examining a representative sample, these studies determined two national rates that reflect the prevalence of retailer trafficking. The national retailer trafficking rate represents the proportion of SNAP redemptions at stores that were estimated to have been trafficked. The national store violation rate represents the proportion of authorized stores that were estimated to have engaged in trafficking. The national retailer trafficking rate is the most-cited measure of fraud in SNAP, although it does not capture all types of fraud (i.e., it represents only retailer trafficking). According to the September 2017 USDA-FNS Retailer Trafficking Study, the national retailer trafficking rate for 2012-2014 was 1.50%, up from 1.34% in the 2009-2011 study. This means that, during this period, USDA-FNS estimates that 1.50% of all SNAP benefits redeemed were trafficked at participating stores. This constitutes about $1.1 billion in estimated benefits trafficked each year at stores during this period. Additionally, this study estimated that the national store violation rate for this period was 11.82%, up from 10.47% in the 2009-2011 study. This means that, during this period, USDA-FNS estimates that 11.82% of all SNAP-authorized retailers engaged in retailer trafficking at least once. The September 2017 USDA-FNS Retailer Trafficking Study found that the increase in retailer trafficking was due to increased program participation by smaller stores, which have a higher rate of retailer trafficking. While stores enter and leave the program from year to year, the overall growth in SNAP-authorized stores over the last 10 years (FY2007-FY2016) was about 93,000, and about 63% of this growth came from convenience stores in the program (see Table D-1 in Appendix D ). As of FY2016, convenience stores constitute about 46% of all stores in the program, up from 36% in FY2007. According to the September 2017 USDA-FNS Retailer Trafficking Study, covering 2012-2014, convenience stores account for about 5% of total SNAP redemptions, but about 57% of retailer trafficking (see Table D-3 in Appendix D ). Also according to this study, about 18% of all SNAP benefits used at authorized convenience stores are trafficked by these stores (i.e., the convenience store trafficking rate), and about 19% of all authorized convenience stores are engaged in trafficking (i.e., the convenience store violation rate). These rates are significantly higher than the national rates for all stores (see Table D-2 in Appendix D ). The increase in SNAP participation by smaller stores appears to correlate to an overall increase in retailer trafficking, according to USDA-FNS. Figure 1 displays some of these data from the three most recent trafficking studies. There is no standard measure of retailer application fraud. However, USDA-FNS does report annually on actions taken against business integrity violations, and a retailer engaged in application fraud (including falsification and circumvention) is generally considered to be in violation of business integrity standards. In FY2016, USDA-FNS sanctioned 126 stores for business integrity violations. This number includes sanctions not related to retailer application fraud and amounts to less than 1 store sanctioned for every 2,064 stores participating in the program. During the same period, USDA-FNS permanently disqualified about 15 times as many stores for retailer trafficking. The SNAP Quality Control (QC) system measures improper payments in SNAP. This system was first established by the Food Stamp Act of 1977. Under the QC system, every state agency conducts a monthly review of a sample of its households, comparing the amounts of overpayments and underpayments to total issuance. From this review, state agencies calculate their state payment error rate (SPER). USDA-FNS conducts annual reviews of a sample of each state's reviews to validate state findings and determine national rates—developing the national payment error rate (NPER). The NPER is the most-often cited measure of payment accuracy in SNAP. Unlike the national retailer trafficking rate, the NPER is not a measure of fraud. The NPER reflects improper payments, but not the cause of these overpayments and underpayments. The NPER estimates all overpayments and underpayments resulting from recipient errors, recipient application fraud, and agency error. Per current federal law, only overpayments and underpayments of $38 or more (inflation-adjusted annually) in the sample month are counted when calculating the payment error rate—this is called the Quality Control threshold. Additionally, the NPER combines both the overpayment rate and the underpayment rate, so it does not reflect only excess expenditures. For example, in FY2017, the NPER was 6.30%—which included a 5.19% overpayment rate and a 1.11% underpayment rate. In discussions regarding SNAP payment accuracy, the NPER is sometimes misunderstood to be a measure of the federal dollars lost to fraud and waste in the program. The NPER instead reflects the extent of inaccurate payments that exceed the Quality Control threshold in a given year. Regardless of the cause of an overpayment, SNAP agencies are required to work towards recovering excess benefits from households that were overpaid. Recovery of overpayments involves, first, the establishment (or determination) of a claim against a household, and, second, the actual collection of that claim. Applying the FY2017 NPER to total benefit issuance, in FY2017 an estimated $3.3 billion in benefits were overpaid, an estimated $710 million in benefits were underpaid. In FY2016, the most recent year available, states established over $684 million in claims to recover overpayments. Recent years' NPERs are listed in Table 1 , showing rates from FY2011-FY2014 and then skipping to FY2017. SNAP national payment error rates were not released by USDA-FNS in FY2015 or FY2016, due to data quality concerns. In 2014, USDA found data quality issues in 42 of 53 state agencies' Quality Control data reporting. These data quality issues are not, in and of themselves, proof of wrongdoing. In some cases, states had not followed protocol, while in other cases states had been found to have deliberately covered up errors (fraudulent actions). (A more detailed discussion of Quality Control as well as these audits and investigations can be found in " State Agency Fraud: SNAP Quality Control "). USDA-FNS suspended error reporting for FY2015 and FY2016, and also used this time to examine and improve state quality control procedures. In June 2018, USDA-FNS published FY2017 state and national error rates (NPER). USDA-FNS's accompanying materials describe that this NPER was determined "under new controls to prevent any recurrence of statistical bias in the QC system," which includes "a new management evaluation process to examine state quality control procedures on a regular basis." The agency also described that the FY2017 rate stems from "a modernized review process, which includes updated guidance, revisions to [the relevant FNS handbook], extensive training for State and Federal staff, and modifications to State procedures to ensure consistency with Federal guidelines."   As displayed ( Table 1 ) and discussed earlier, the FY2017 NPER of 6.30% is a substantial increase from the FY2014 of 3.66%. USDA-FNS states the FY2017 rate "is higher than the previous rate ... but it is more accurate." However, changes to data collection and related oversight since FY2014 make it difficult to reliably compare FY2017 rates to earlier years, as it is possible that earlier years include systemic under-reporting. The SNAP overpayment rate (component of the national payment error rate) estimates the extent of all SNAP overpayments, including overpayments resulting from recipient errors, recipient fraud, and agency errors (estimated to total about $3.3 billion overpaid in FY2017). The NPER does not , however, differentiate between the relative extents of each of these types of errors and fraud (i.e., the NPER cannot tell us what percentage of this $3.3 billion is due to, for example, agency errors). There is currently no single standard measurement that individually quantifies the extent of recipient errors, recipient fraud, or agency errors. State agencies are, however, responsible for administering the recipient side of SNAP, and every year states report data on these activities which USDA-FNS publishes in the SNAP State Activity Report (SAR). This report includes detailed data on state-level program operations including benefit issuance, participation, administrative (i.e., non-benefits) costs, recipient disqualification, and claims. When a recipient error, an act of recipient fraud, or an agency error results in an overpayment to a household (and that overpayment is detected by the state agency), the household is generally required by the state agency to repay the overpaid amount (i.e., a claim is established). Data on the establishment of claims resulting from recipient errors, recipient fraud, and agency errors is provided in the state report (subdivided by type). The extent of claims establishment, therefore, can serve as a proxy for the extent of these types of errors and fraud. In addition, when a recipient commits fraud (and that act of fraud is detected and proven by the state agency), that recipient is generally punished with disqualification from SNAP. The extent of recipient disqualifications, therefore, can serve as a proxy for the extent of recipient fraud. Before examining these claims and disqualification data, however, it is important to understand the limitations of this approach. Claims are not established in all instances of overpayments resulting from recipient errors, recipient fraud, or agency errors. For example, claims may not be established when overpayment amounts fall below state agencies' claims thresholds or when overpayments are not detected by state agencies. Likewise, not all acts of recipient fraud are detected, proven, and punished with disqualification. Also, these claims establishment and disqualifications data are not based on representative samples and, therefore, these data may not fully reflect the prevalence of recipient errors, recipient fraud, or agency errors in the SNAP caseload. Despite these shortcomings, these claims and disqualification data are the only available measures which reflect, albeit imperfectly, the extent of recipient errors, recipient fraud, or agency errors in SNAP. The following calculations of the extent of these types of errors and fraud are based on SNAP State Activity Report FY2016 data including the following: total issuance of $66,539,351,219; average monthly participation of 21,777,938 households; an average monthly participation of 44,219,363 persons; total claims established of 884,301; and total claims dollars established of $684,197,891. Unlike retailer trafficking, which is handled by one federal entity (USDA-FNS), recipient fraud is detected and punished by 53 different SNAP agencies (50 states, DC, Guam and the U.S. Virgin Islands) and, as noted in the September 2012 USDA-OIG report, "FNS cannot estimate a recipient fraud rate because it has not established how States should compile, track, and report fraud in a uniform manner." This lack of standardization is a reason why a national recipient fraud rate does not exist. Both recipient trafficking and recipient application fraud are included in these figures. According to the FY2016 SNAP State Activity Report for every 10,000 households participating in SNAP, about 14 contained a recipient who was investigated and determined to have committed fraud that resulted in an overpayment that the state agency required the household to repay (30,274 claims established); for every $10,000 in benefits issued to households participating in SNAP, about $11 were determined by state agencies to have been overpaid due to recipient fraud and were required to be repaid by the overpaid household ($73,403,758 in fraud claims established); about 3% of the total number of claims established were established due to recipient fraud; about 11% of the total claims dollars established were established due to recipient fraud; for every 10,000 recipients participating in SNAP, about 13 were disqualified from the program for violating SNAP rules (e.g., committing fraud; 55,930 disqualified); about 1.5% of disqualification entries made into the USDA-FNS electronic Disqualified Recipient System (eDRS) in FY2016 were permanent disqualifications; and for every $10,000 in benefits issued to households participating in SNAP, about $21 were determined by state agencies to have been lost (overpaid due to recipient application fraud or trafficked) to recipient fraud associated with disqualified recipients ($136,475,242 in program loss associated with disqualified recipients). According to the FY2016 SNAP State Activity Report for every 10,000 households participating in SNAP, about 181 were overpaid due to a recipient error and the state agency required the household to repay the overpaid amount (394,883 recipient error claims established); for every $10,000 in benefits issued to households participating in SNAP, about $63 were determined by state agencies to have been overpaid due to recipient errors and were required to be repaid by the overpaid household ($421,934,288 in recipient error claims established); about 45% of the total number of claims established were established due to recipient errors; about 62% of the total claims dollars established were established due to recipient errors; about 65% of FY2016 claims were established by four states; about 55% of FY2016 claims amounts were established by these four states; and these four states accounted for about 30% of SNAP participants. According to the FY2016 SNAP State Activity Report for every 10,000 households participating in SNAP, about 47 were overpaid due to agency errors, and the state agency required the household to repay the overpaid amount (459,144 agency error claims established); for every $10,000 in benefits issued to households participating in SNAP, about $28 were determined by state agencies to have been overpaid due to agency errors and were required to be repaid by the overpaid household ($188,859,846 in agency error claims established); about 52% of the total number of claims established were established due to agency errors; about 28% of the total claims dollars established were established due to agency errors; about 80% of the total number of agency error claims established were established by California; about 64% of the total agency error claims dollars established were established by California; and California accounted for about 10% of SNAP participants. Although the total volume of claims established has increased over time, the majority of claims established have been the result of recipient errors, with agency errors being second most common, and recipient fraud claims being least common—as illustrated by Figure 2 . State and federal efforts to detect and correct errors, as well as efforts to detect and deter fraud, are detailed in this section. USDA-FNS is responsible for administering the retailer side of SNAP and for pursuing retailer fraud. USDA-OIG, in collaboration with the Federal Bureau of Investigations (FBI), U.S. Secret Service, and other federal, state, and local law enforcement entities, is responsible for pursuing criminal charges against retailers found to be engaging in retailer trafficking. Retailer trafficking can be detected through a variety of means, including the following: Analysis of EBT Transaction Data —Whenever a SNAP EBT card is swiped, the transaction data is captured and analyzed by USDA-FNS for suspicious patterns. USDA-FNS use these data to develop a case against a retailer when the transactions indicate retailer trafficking is occurring at their store. In FY2016, USDA-FNS reviewed the transactions of nearly 9% of participating stores. Over 80% of retailer trafficking detected by USDA-FNS are found primarily through EBT transaction analysis. Undercover Investigations —USDA-FNS performs undercover investigation of stores suspected of violating SNAP rules (e.g., trafficking), and in FY2016, USDA-FNS investigated over 1% of participating stores. State Law Enforcement Bureau (SLEB) Agreements — Some state agencies enter into state law enforcement bureau (SLEB) agreements with law enforcement entities in their jurisdictions in order to further their efforts to detect trafficking. These agreements are typically focused on recipient trafficking, but they can have implications for retailer trafficking. Tips and Referrals —USDA-FNS receives tips, complaints, and referrals, which can lead to cases of retailer trafficking. These referrals come from SNAP retailers, SNAP recipients, members of the public, state agencies, SLEBs, USDA-OIG, or other law enforcement entities. USDA-OIG operates a website and hotline for members of the public to report instances of fraud. In FY2016, USDA-OIG referred 4,320 complaints to USDA-FNS. If a store is found to have committed trafficking, then all of the owners of the store may be subject to penalties. Major penalties associated with retailer trafficking include the following: Disqualification —If USDA-FNS finds that a SNAP-authorized retailer violated any SNAP rules, then that retailer may be subject to a period of disqualification from program participation. Trafficking SNAP benefits is considered one of the most severe violations of SNAP rules, and a retailer found by USDA-FNS to have trafficked SNAP benefits (regardless of the amount) is generally subject to a permanent disqualification (PDQ) from program participation. Reciprocal WIC Disqualification —Stores that are disqualified for violations of the rules of SNAP are disqualified for an equal (but not necessarily concurrent) period of time from participation in the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). Likewise, stores disqualified from WIC are disqualified from SNAP for an equal (but not necessarily concurrent) period of time. PDQs, such as PDQs for trafficking, are also reciprocal between the programs. Restitution of Benefits Trafficked (Claims) —When a retailer accepts or redeems SNAP benefits in violation of the Food and Nutrition Act of 2008 (FNA), such as engaging in retailer trafficking of SNAP benefits, that retailer may be compelled to repay the amount that they illegally redeemed. This is called a claim and is considered a federal debt. USDA-FNS has the authority to collect such claims by offsetting against a store's SNAP redemptions as well as a store's bond or letter of credit (LOC), where applicable. Public Disclosure of Disqualified Retailers —USDA-FNS has the authority to publicly disclose the store and owner name for disqualified retailers. A December 2016 USDA-FNS Final Rule asserted USDA-FNS's intent to disclose this information in order to deter retailer trafficking. Transfer of Ownership Civil Money Penalty (TOCMP) —If a retailer under a period of disqualification sells or transfers ownership of their store, then USDA-FNS is to assess that disqualified retailer a "transfer of ownership civil money penalty" (TOCMP). This means that retailers permanently disqualified from SNAP for committing retailer trafficking are to be assessed this penalty whenever they sell or transfer ownership of their stores (regardless of how much time has passed since the disqualification occurred). In FY2016, USDA-FNS assessed 257 such penalties with a mean value of $29,284. Exclusion from the General Service Administration's System for Award Management (GSA-SAM) —This GSA system tracks individuals and entities that do business with the federal government. An individual or entity excluded from this system is prohibited from doing business with the federal government for the duration of the exclusion. All of the owners of a store permanently disqualified from SNAP participation for trafficking benefits are permanently listed as exclusions in GSA-SAM. As of September 2017, 10,307 permanently disqualified retailers have been listed by USDA-FNS in GSA-SAM as exclusions due to SNAP and WIC violations. This type of exclusion can have collateral consequences for the excluded party. Criminal Charges and Penalties —Retailers engaged in trafficking may be criminally charged and penalized with fines up to $250,000 and imprisonment up to 20 years. In addition, other adverse monetary penalties (e.g., asset forfeitures, recoveries, collections, and restitutions) may be assessed against those convicted. USDA-OIG, in collaboration with federal, state, and local law enforcement entities, pursues charges against retailers who traffic SNAP benefits. USDA-OIG usually criminally pursues only retailers who traffic in high dollar amounts of benefits and/or retailers who also engaged in other criminal activity. In some cases, state law enforcement bureaus may pursue criminal charges against individuals engaged in retailer trafficking under state or local statutes. In FY2016, USDA-OIG opened 208 SNAP fraud investigations, and obtained 600 indictments, 510 convictions, and $95.3 million in monetary penalties. USDA-FNS reviews all information and materials submitted by applicant retailers in order to identify suspicious items and documentation that may indicate retailer application fraud. Where such suspicions arise, USDA-FNS may require additional supporting documentation from the applicant retailer and may contact other federal, state, or local government entities (e.g., entities that administer business licensure, taxation, or trade) to verify questionable items. Denial of Application —If USDA-FNS finds during the application process that a retailer fails to meet requirements such as stocking and business integrity standards, then the retailer's application is to be denied. If USDA-FNS determines that an applicant retailer has falsified the application, then that retailer's application is to be denied—the period of denial ranges from three years to permanent depending on the severity and nature of the falsification. A retailer denied authorization to participate in SNAP is not generally subject to any penalties other than denial. Permanent or Term Disqualification —Retailers who knowingly engage in falsification of substantive matters (e.g., falsification of ownership or eligibility information) may be subject to a permanent disqualification from program participation. Retailers who engage in falsification of a lesser nature (e.g., falsification of store information such as store name or address) are generally subject to a term disqualification of three years. Retailers that are permanently disqualified for falsification may be subject to all of the penalties associated with permanent disqualification (as discussed previously in the context of retailer trafficking penalties), including reciprocal WIC disqualification, claims, public disclosure, TOCMP, GSA-SAM exclusion, and criminal charges and penalties where appropriate. SNAP certification is the process of evaluating an application, determining if an applicant is eligible to receive SNAP benefits, and the appropriate size of the benefit allotment if the applicant is found to be eligible. This is one of the primary responsibilities of state agencies (with federal oversight). Errors (i.e., recipient errors and agency errors) that occur during this process can result in underissuance or overissuance of SNAP benefits. The primary sources for information needed to make certification determinations are generally the applicants themselves, but the eligibility worker may also utilize collateral contact with other entities when necessary. In addition, an eligibility worker may perform additional checks using federal, state, local, or private data systems in order to verify information provided by applicants. A visual overview of data matching in the certification process is presented in Figure 3 . In FY2016, about 62% of overpayment dollars identified through the claims establishment process (i.e., after overpayments have already occurred) were due to inadvertent household errors made by recipients when applying for benefits. With a caseload of about 22 million households, recipient errors (sometimes stemming from simple misunderstanding of federal SNAP regulations) can add up quickly and create a serious payment accuracy problem for states. Although the upfront cost and effort required of a state agency to implement a data match as part of the SNAP certification process can be considerable, data matches using federal, state, local, or private systems can allow agencies to quickly identify recipient errors that could affect applicants' eligibility or benefit amount. Over the years, policymakers have been interested in data matching systems to reduce overpayments. The following six data matches have been statutorily mandated as part of the SNAP certification process: U.S Department of Health and Human Services, Administration for Children and Families, National Directory of New Hires (HHS-ACF-NDNH) New Hire File —This system is used to verify household employment information. The 2014 Farm Bill mandated state use of the New Hire File and this requirement was implemented in a January 2016 USDA-FNS Interim Final Rule. Social Security Administration, Prisoner Verification System (SSA-PVS) —This system is used to verify if household members are incarcerated. The Balanced Budget Act of 1997 mandated that all SNAP agencies match against the SSA's Prisoner Verification System. Social Security Administration, Death Master File (SSA-DMF) —This system is used to verify if household members are deceased. In 1998, P.L. 105-379 mandated that all SNAP agencies match against the SSA-DMF. USDA-FNS Electronic Disqualified Recipient System (USDA-FNS-eDRS) —This system is used to verify if household members are disqualified from SNAP. U.S. Department of Homeland Security U.S. Citizenship and Immigration Services Systematic Alien Verification for Entitlements (DHS-USCIS-SAVE) —This system is used to verify household members immigration status. The 2014 Farm Bill mandated that SNAP agencies utilize an immigration status verification system as a part of the certification process; a December 2016 USDA-FNS notice of proposed rulemaking (NPRM) regarding the requirement to utilize this data match was published, but the rule has not yet been finalized. Income and Eligibility Verification System (IEVS) —SNAP agencies are required to verify the income and eligibility of all applicants during the SNAP certification process. They generally fulfill this requirement through the use of an income and eligibility verification system (IEVS). An IEVS is not a single data match, but rather a state system that may use multiple federal, state, and local data sources to confirm the accuracy of eligibility and income information provided by the applicant and to locate pertinent information that may have been omitted by the applicant. The specific data matches used in an IEVS, however, will vary from state to state. The 2014 Farm Bill made states' use of IEVS mandatory in accordance with standards set by the Secretary of Agriculture. This policy is pending implementation, as USDA-FNS published an NPRM in December 2016, but a final rule has not yet been published. States also use optional data matches and incorporate these into their processes. Several key eligibility data examples, such as income and program disqualifications, are discussed below: Income matches —A household's income and related SNAP deductions are basic determinants of eligibility and an applicant's benefit allotment. As a result, in addition to the mandatory matches discussed above, most states utilize several optional federal and state data matches to verify earned and unearned income. For examples of optional income matches, see Appendix C . SNAP disqualification matches —In addition to the mandatory USDA-FNS-eDRS match, states maintain their own internal databases of recipients disqualified within the state, and a match from such state databases indicates that a member of an applicant household is ineligible. Other d ata m atch es —In addition, state agencies use data sources to assess a number of other aspects of a household's application or recertification. For instance, state criminal justice or correctional agency system matches and state department of health vital information system or burial assistance program matches can ensure that a household does not include incarcerated or deceased members. Likewise, state department of children's services or foster care matches can ensure that a household does not include children that have been removed. Such state matches to verify that household size is correct are generally considered verified upon receipt. Matches against state and federal crime databases can ensure that individuals subject to crime-related restrictions are correctly excluded in eligibility determination. Data matches between SNAP and other public benefit programs can also help a state agency ensure that states are accurately implementing their comparable disqualification policies. These data matches are discussed in more detail in the October 2016 GAO report. State agencies are responsible for preventing, detecting, and correcting agency errors. Agency errors are generally the product of human error, so training and supervision of eligibility workers is the primary means of mitigating them (e.g., something as simple as an eligibility worker transposing two digits during data entry). Agency errors can be detected by ongoing, independent process improvements (e.g., quality control or quality assurance), supervisory case review, eligibility workers, and recipients. Agency errors may also result from state system technical glitches, so states may detect these errors through system audits and mitigate them through system improvements. If a household receives an overpayment, and that overpayment is detected by the state agency, then the agency generally establishes a claim against the household, requiring the adult members of the household to repay the amount that was overpaid. Claims are considered federal debt and must be repaid by the adult members of overpaid households regardless of the cause of the overpayment (i.e., recipient error, recipient fraud, or agency error) except in the case of a major systems failure. Agencies must also correct underpayments that they identify. State agencies may elect not to establish claims on low dollar overpayments when such overpayments fall below the agency's claims threshold, explained below. Claims are not always established in the year that the overpayment occurs and claims are not always collected in the year that they are established. State agencies are entitled to retain 35% of the amount they collect on recipient fraud claims and certain recipient error claims, 20% of the amount they collect on all other recipient error claims, and none of the amount they collect on agency error claims. State agencies are responsible for administering the recipient side of SNAP (with federal oversight) and for pursuing recipient fraud. State agencies must, furthermore, establish and operate a SNAP recipient fraud investigation unit. These units detect and punish recipient trafficking, as well as other forms of recipient fraud. USDA-FNS supports state agencies in this capacity by providing technical assistance and setting policy. USDA-OIG, in collaboration with other federal and state law enforcement entities, sometimes criminally pursues recipients who traffic SNAP benefits when such recipients traffic in high dollar amounts of benefits and/or such recipients also engage in other criminal activity. Recipient fraud, like retailer fraud, can be detected through a variety of means, including the following: Analysis of EBT Transaction Data —Once USDA-FNS has completed the process of administratively penalizing a retailer for retailer trafficking, and the retailer has exhausted their appeal rights, then USDA-FNS provides the retailer trafficking case to the appropriate state agency including EBT card numbers which can be used to identify SNAP recipients who may be trafficking. Social Media —State agencies use automated tools and manual monitoring to detect postings on social media and online commerce websites by individuals attempting to traffic SNAP benefits. Undercover Investigations —As is done with retailer trafficking cases, state agencies perform undercover investigations to detect recipient trafficking and recipient application fraud. Multiple Card Replacement —Recipients who frequently request replacement EBT cards are flagged for review as potentially involved in trafficking benefits, because they would request replacements after selling their cards. This recipient trafficking detection mechanism was established by an April 2014 USDA-FNS Final Rule. In December 2017 USDA-FNS granted a waiver for one state to contact recipients who request a replacement card more than two times in a 12-month period, as opposed to the current regulations' standard of four requests in a 12-month period. State Law Enforcement Bureau (SLEB) Agreements —Some state agencies enter into state law enforcement bureau (SLEB) agreements with law enforcement entities in their jurisdictions in order to further their efforts to detect recipient trafficking and recipient application fraud. There are advantages to such arrangements for state agencies; for example, under SLEB agreements, the agency could be notified whenever an individual is arrested in possession of multiple EBT cards, allowing the agency to flag the recipients associated with those EBT cards for potential recipient trafficking. Tips and Referrals —As is done in detecting retailer trafficking, agencies use tips and referrals to detect recipient trafficking and recipient application fraud. Data Matching and Other Verification —As is done in detecting recipient errors when applying for SNAP benefits, the data matching and certification process may also provide information useful in detecting recipient application fraud. Whenever a SNAP recipient is found to have committed fraud, that individual is subject to individual penalties, such as disqualification. The other members of the SNAP household will not automatically be subject to such penalties, but the adult members of the household will generally be obligated to repay the amount established by the state agency as a claim for overpayment or trafficking. Major penalties associated with recipient fraud include the following: Disqualification —Trafficking and recipient application fraud are types of intentional program violations, and a SNAP recipient found to have committed fraud is generally subject to a period of program disqualification varying from one year to permanent. Figure 4 below compares the number of FY2016 SNAP recipient disqualifications to the monthly average number of participating recipients in the state in FY2016. Performing investigations and proving that recipients have committed intentional program violations (in order to disqualify them from SNAP) can require a considerable amount of state agency resources. This chart illustrates the extent to which agencies have prioritized this aspect of SNAP administration relative to their SNAP caseload. Restitution of Benefits Defrauded (Claims) —A SNAP household must generally repay benefits amounts that are overpaid due to recipient application fraud or are trafficked. Comparable Disqualification —If a SNAP recipient is disqualified from any federal, state, or local means-tested public assistance program, then the state agency may impose the same period of disqualification on the individual under SNAP. This comparable disqualification is mandatory for the Food Distribution Program on Indian Reservations (FDPIR). Criminal Charges and Penalties —Generally, if criminal charges are pursued against recipients who traffic benefits or commit recipient application fraud, it is the states that will pursue and prosecute. State fraud laws vary in their penalties for recipient fraud. Additionally, as stated in a GAO report from August 2014, each state exercises its discretion differently with respect to filing criminal charges in cases of recipient fraud. As with retailer trafficking, USDA-OIG sometimes pursues criminal charges in collaboration with federal and state law enforcement entities against recipients engaged in SNAP fraud. U.S. Department of Agriculture, Office of the Inspector General (USDA-OIG), in conjunction with local, state, and other federal law enforcement entities, investigates cases of state agency employee fraud and penalizes state agency employees engaged in it. Criminal penalties for state agency employee fraud vary from state to state, and individuals who commit state agency employee fraud may be prosecuted for other crimes (e.g., identity theft) that occurred during the commission of the state agency employee fraud. Penalties for this type of criminal fraud vary but may include imprisonment, probation, and/or monetary restitutions. SNAP has long had policies and procedures in place for measuring improper payments—largely, the program's Quality Control (QC) system. QC is currently the basis for levying financial penalties from low-performing states and providing financial performance incentives for the higher-performing and most improved states. In June 2018, following concerns that there had been misreporting of errors, USDA-FNS released a FY2017 NPER under new quality control procedures. This section reviews QC and these developments. This section discusses false claims by state agencies with regard to Quality Control (QC) data and state payment error rates (SPERs). As discussed earlier in this report, since 1977, the SNAP Quality Control system has measured improper payments in SNAP, comparing the amounts of overpayments and underpayments that exceed the error tolerance threshold ($38 adjusted annually for inflation) to total benefits issuance. The Quality Control process starts with state agency analyses that determine state payment error rates, which are then reviewed by USDA-FNS to develop the SNAP national payment error rate (NPER). After conducting this annual Quality Control review, USDA-FNS awards bonuses to high-performing state agencies and assigns penalties to low-performing state agencies. USDA-FNS annually awards high-performance bonuses to up to 10 states with the lowest or most improved state payment error rates. High-performance bonuses must be used by states to improve their administration of SNAP. The total annual amount awarded for SPER high-performance bonuses is $24 million. The bonuses awarded in FY2014 are summarized in Table 2 . Awards for FY2017 have not yet been announced, as of the date of this report. State sanctions—known as "liabilities"—are used to punish states that have comparatively high payment error rates. If there is a 95% probability that a state makes payment errors 5% more frequently than the national average, then that state has "exceeded the liability level". If a state exceeds the liability level for two years in a row, then it is assessed a penalty—known as a "liability amount". Liability amounts are assessed for only that portion of the state payment error rate that is above 6% (e.g., a state that exceeds the liability level with a state payment error rate of 5.99% would be assessed a $0 liability amount). Once assessed, states have the option to pay the liability amount in full or enter into a settlement agreement with USDA-FNS. From FY2005 to FY2014, 42 of 53 state agencies have exceeded the liability level at least once, but only 9 state agencies have ever been compelled to actually repay an at-risk penalty amount to USDA-FNS. This is because most states improve their state payment error rates within one or two years and avoid being required to make a payment to USDA-FNS. Over these 10 years, these 9 states repaid about $1.5 million to USDA-FNS (see Table 3 ). State agencies perform Quality Control reviews to determine state payment error rates and then submit these rates to USDA-FNS for its annual review; and agencies may be awarded or sanctioned according to these rates. This combination of positive and negative reinforcement is intended to incentivize high payment accuracy among states. USDA-FNS oversees state agencies through the management evaluation process and the Quality Control system, in addition to other federal oversight mechanisms. USDA-OIG performs regular audits of and investigations into state agency compliance with a range of SNAP rules. Through this oversight, USDA-OIG and USDA-FNS identified concerns in state-reported Quality Control data. In order to examine this issue, USDA-OIG began a series of audits in March 2013, which culminated in a September 2015 USDA-OIG report. USDA-OIG looked at eight states and determined that all eight state agencies had deliberately weakened the integrity of the Quality Control process with the aid of hired consultants. USDA-FNS responded in the September 2015 USDA-OIG report that USDA-OIG drew its conclusions on the basis of unconfirmed information, misunderstandings of SNAP policy, and insufficient statistical analysis. As a result, USDA-FNS contends that the concerns identified over these eight states' QC efforts were largely the result of administrative issues rather than fraud. According to 2017 U.S. Department of Justice (DOJ) findings, at least three state agencies (Virginia, Wisconsin, and Alaska) engaged in state agency fraud related to Quality Control data falsification since at least 2008. These three state agencies, with the help of their third-party consultants, were found to have mitigated errors, fraudulently improving their state payment error rates. USDA-FNS and USDA-OIG testified on this subject in two hearings, one before the Senate Committee on Agriculture, Nutrition, and Forestry in August 2017 and one before the House Committee on Agriculture in July 2016. Entities, including state agencies, found to have defrauded federal programs are required to repay funds obtained through fraud, plus interest, under the False Claims Act (31 U.S.C. §3729). As of the date of this report, these three state agencies have admitted to the DOJ that they engaged in falsifying QC data and violating the False Claims Act in their administration of SNAP. As part of their settlements with DOJ, the Virginia state agency agreed to pay $7,150,436, the Wisconsin state agency agreed to pay $6,991,905, and the Alaska state agency agreed to pay $2,489,999. These $16.6 million in payments represent the share of the high-performance bonuses awarded to these states for low state payment error rates while they were engaged in fraudulent practices, plus interest. For FY2015, USDA-FNS determined that data quality issues existed for 79% of state agencies; however, such issues are not in and of themselves proof of fraud. All three states that settled with DOJ had hired the same Quality Control consultant firm. As of the date of this report, the USDA-OIG investigation into this state agency fraud is still ongoing and Mississippi is known to be under investigation for Quality Control fraud. In her comments at the August 2017 Senate Agriculture Committee Hearing, Ann M. Coffey, Assistant Inspector General of Investigations at USDA-OIG, stated that a "significant number" of states were still under investigation and that the scale of this state fraud was "unique." Over time, USDA-FNS, SNAP state agencies, USDA-OIG, GAO, and other stakeholders have identified issues that may complicate or impede the detection and correction of errors and fraud in SNAP. These kinds of issues can stem from shortcomings or gaps in existing regulation and law, as well as complexities in the fundamental design of the program itself. In addition, stakeholders have proposed strategies to address these kinds of issues and further curb errors and fraud in SNAP. These include, for example, proposed rulemaking actions, proposed statutory changes, and state pilots. Changes that strengthen payment accuracy and punishments against fraud can be in tension with other policy objectives, such as preserving recipient access to the program, and may have unintended consequences such as incurring costs greater than their savings. Balancing program objectives such as these is always a consideration for policymakers in this area. According to SNAP rules, if a store is permanently disqualified from participating in SNAP and later that store's owner applies to participate in SNAP at a new store, then USDA-FNS will deny the new store's application. Due to a longstanding USDA-FNS policy, however, store owners who own multiple stores that participate in SNAP have been able to remain in the program with some of their stores despite a permanent disqualification at another of their stores. This USDA-FNS policy, identified and examined in the July 2013 USDA-OIG report, was intended to prevent the elimination of whole chains of stores from the program as a result of violations at one store. However, the policy has been applied beyond chain stores, and USDA-OIG identified it as a weakness in efforts to combat trafficking. In the July 2013 report, USDA-OIG identified 586 store owners who remained in SNAP due to this policy despite their association with a permanently disqualified store; 66 of these owners were found to have obtained SNAP authorization at new stores. In the July 2013 report, USDA-OIG proposed that USDA-FNS make a change to SNAP regulations and USDA-FNS policy to allow for the permanent disqualification or denial of all current or future stores, respectively, associated with an owner of a store that is permanently disqualified for retailer trafficking unless the retailer can meet certain criteria. USDA-FNS responded to USDA-OIG with an alternative policy that would impose collateral requirements for these owners. (Under current law, collateral bonds or letters of credit are required as a condition of participation in SNAP for stores that have been subjected to a term disqualification. These are held as collateral against the retailer committing future violations.) USDA-FNS suggested requiring a bond or letter of credit for all authorized stores associated with a permanently disqualified owner and for new stores when such stores have an owner associated with a store permanently disqualified for trafficking. USDA-OIG indicated that it considered this USDA-FNS alternative to its disqualification recommendations inadequate, noting "[w]e believe that continuing to allow known traffickers to participate in SNAP will undermine program integrity." As of the date of this report, none of these proposed policy changes have been implemented. An estimated $1.1 billion in SNAP benefits were trafficked annually at stores, but in FY2016, USDA-FNS fined trafficking retailers only about $7.5 million. Monetary penalties can discourage retailers from engaging in trafficking and also help recoup federal funds lost to fraud. For these reasons, changes to SNAP rules have been proposed to augment the monetary penalties assessed against trafficking retailers. Increasing Transfer of Ownership Civil Money Penalties —The 2008 Farm Bill modified the FNA to increase civil monetary penalties against retailers that break SNAP rules to a maximum of $100,000 per violation. If a retailer that has been permanently disqualified for trafficking SNAP benefits subsequently sells or transfers ownership of a store, then USDA-FNS assesses that retailer a "transfer of ownership civil money penalty" (TOCMP). This is currently the primary financial penalty assessed by USDA-FNS against retailers found to have engaged in trafficking. In August 2012, USDA-FNS published a notice of proposed rulemaking (NPRM) to implement the 2008 Farm Bill change. This notice stated that existing limits used by USDA-FNS were $11,000 per violation and $59,000 per investigation, and that this rulemaking action would increase these limits to up to $100,000 per violation per the intent of Congress expressed in the 2008 Farm Bill. As of the date of this report, this rulemaking action is inactive (see Table B-1 in Appendix B ). Because this change in the limits on TOCMPs has not been implemented, USDA-FNS continues to assess TOCMPs according to the limits in place before the passage of the 2008 Farm Bill (i.e., $11,000 per violation and $59,000 per investigation). In FY2016, the mean value of TOCMPs assessed by USDA-FNS was $29,284, about half of the limit per investigation. Implementation of these changes in the maximum limits on TOCMPs could represent a nearly tenfold increase in the penalty amounts for permanently disqualified retailers engaged in a high volume of SNAP business, potentially increasing the penalties' deterrent effect. Creating Additional Civil Money Penalties —Currently, USDA-FNS only fines a limited share of trafficking retailers. Firms permanently disqualified for trafficking are subject to a TOCMP when USDA-FNS becomes aware that the permanently disqualified store owner has sold a store, but USDA-FNS can only become aware of such a sale when, and if, the new store owner applies for SNAP authorization. For every retailer assessed a TOCMP in FY2016, more than seven retailers were permanently disqualified for trafficking. Ultimately this means that the overwhelming majority of store owners found by USDA-FNS to have committed and materially benefited from retailer trafficking are subject to no monetary penalty at all. USDA-FNS proposed to create a new kind of monetary penalty, the trafficking civil penalty (TCP), in the August 2012 USDA-FNS NPRM. Under this proposal, a retailer permanently disqualified for trafficking would be subject to this new kind of fine, the size of which would be based on the retailer's volume of fraud, as it is for a TOCMP. Establishing this new fine would provide an immediate monetary penalty at the time of permanent disqualification to further deter retailers from engaging in trafficking activity and recoup misappropriated federal funds. As of the date of this report, this rulemaking action is inactive (see Table B-1 in Appendix B ) and USDA-FNS is not assessing this new kind of fine. Prior to September 2014, about half of all SNAP-authorized retailers (including many smaller independent retailers) used free EBT-only point of sale (POS) devices provided by their state's EBT host processors. Transaction data for purchases made at these free EBT-only POS devices went directly to EBT host processors and then to USDA-FNS. USDA-FNS uses this transaction data to detect retailer trafficking activity. The 2014 Farm Bill modified the FNA to require that all nonexempt retailers pay for their own EBT equipment and services. Since this change, most stores now work with third-party companies that provide POS equipment and services for a fee. The introduction of these unregulated intermediary entities has complicated USDA-FNS's efforts to detect retailer trafficking, and has also facilitated new forms of fraud. For example, in 2017, an account executive for a third party processor was sentenced to prison, to be followed by supervised release, and was ordered to pay restitution for his role in illegally providing 50 unauthorized stores with active SNAP EBT point-of-sale devices which were used to redeem about $6.5 million in benefits (at least eight of these stores were found to engaged in retailer trafficking). Since 1994, retailers applying to participate in the program have been required to meet stocking standards which mandate a minimum of 12 food items. In an October 2006 GAO report on trafficking, these minimal stocking requirements were identified as a factor potentially contributing to retailer trafficking, as the standards may make it easier for small, fraud-prone retailers that do not primarily sell food to enter the program. In addition, the September 2017 USDA-FNS Retailer Trafficking Study identified a correlation between an increase in small stores (e.g., convenience stores) in the program and an increase in retailer trafficking (for more information, see Appendix D ). As a result, increasing stocking standards has been proposed as a strategy to curb retailer trafficking. The 2014 Farm Bill modified the FNA to enhance retailer stocking standards for participating stores. The December 2016 USDA-FNS Final Rule implemented these changes and included several other provisions that would have significantly increased stocking standards for retailers; however, Section 765 of the Consolidated Appropriations Act of 2017 (2017 Omnibus, P.L. 115-31 ) prevented full implementation of this rule. On January 17, 2018, USDA-FNS began implementing the remaining provisions of the December 2016 USDA-FNS Final Rule. Current implementation requires a modest increase to the number of items stocked (from 12 to 36 food items) but not as much as would have been required by the final rule before the 2017 Omnibus (84 food items). Some retailers have been found to have delayed the disqualification process for their stores, enabling them to continue trafficking. Between the USDA-FNS official notification of trafficking charges and the permanent disqualification for trafficking, there are a number of administrative steps. Until final implementation of a permanent disqualification, the retailer may continue to participate in the program, accepting and redeeming SNAP benefits. According to USDA-FNS, some charged retailers exploit the delay created by these administrative steps in order to continue (or even accelerate) their trafficking of SNAP benefits, sometimes remaining in the program for months. The 2008 Farm Bill modified the FNA to require USDA-FNS to utilize the EBT system to immediately suspend the payment of redeemed SNAP benefits to stores determined to be engaged in this "flagrant" retailer trafficking. A February 2013 USDA-FNS NPRM included a provision to implement this 2008 Farm Bill requirement, but, as of the date of this report, this rulemaking action is inactive (see Table B-1 in Appendix B ). When a store applies for authorization to participate in SNAP, USDA-FNS internally assigns that store a risk status (i.e., high, medium, or low) based on retailer trafficking data for the location and area. If a new store applies at a physical address associated with past retailer trafficking, that new store is more likely to be considered "high risk." In a July 2013 report, USDA-OIG noted that certain high-risk store locations evidence a pattern of retailer trafficking that continues under new ownership. USDA-OIG recommended requiring a bond or letter of credit as a precondition of SNAP authorization at high-risk store locations, which would require statutory changes. While some have argued that placing recipient photographs on EBT cards would reduce trafficking, specifically the sale of cards between recipients and unauthorized use of cards at authorized stores, there are operational and access challenges to this strategy. Since 1996, state agencies have had the option to require photographs of one or more SNAP household members on the household's EBT card(s). This state option is known as "photo EBT." Like SNAP benefits, EBT cards are issued to households, not to individuals. Also, households may appoint authorized representatives (outside of the household) to use their EBT cards to shop on the households' behalf. As a result, a photo EBT card might only bear the image of the head of a household despite the fact that all members of the household can use the card. Similarly, an authorized representative may use a card that does not have the representative's picture on it. Retailers therefore cannot legally deny a SNAP transaction just because the user does not match the photo on the card. Additionally, some advocates point out that photo EBT has shown some adverse effects on recipient access. A number of states have considered or implemented photo EBT since 1996. States' evaluations of photo EBT have generally concluded that the option has or would have little to no effect on recipient trafficking. Though evidence of reduced trafficking is lacking, two states, Maine and Massachusetts, currently implement photo EBT. Maine contended that it "[strengthens] the integrity of our public assistance programs." The implementation of photo EBT in a state requires both upfront and ongoing costs to the state and federal government. Upfront costs generally exceed ongoing costs, and ongoing costs generally increase over time. State estimates and actual expenditures on the cost of photo EBT vary widely. As an example, in 2000, Missouri enacted a state law mandating photo EBT, and the Office of the Missouri State Auditor evaluated the option in August 2001. This audit determined that in the first year of implementation, photo EBT effected no fraud reduction, cost $1,801,858 ($947,280 federal costs and $854,578 state costs), and should be discontinued. In 2001, Missouri discontinued its use of photo EBT. In reviewing 14 states that have considered photo EBT implementation since 2001, upfront costs range from about $1.6 million in New Hampshire (2016) to about $25.1 million in North Carolina (2011). Estimates of ongoing annual costs vary across an even wider range, from approximately $65,000 in Virginia (2017) to $8.4 million in Arizona (2016). There is currently no single standard measurement of recipient fraud (neither recipient trafficking nor recipient application fraud). In the absence of a national recipient trafficking rate, it is difficult to observe trends and evaluate the effectiveness of enforcement strategies. Both GAO and USDA-OIG have commented on the significance of this shortcoming and recommended changes to allow for the creation of a national recipient trafficking rate akin to the national retailer trafficking rate. Based on USDA-FNS analysis, however, GAO found it is infeasible to create a uniform methodology for states to calculate a national recipient trafficking rate without statutory changes to require and enable USDA-FNS and state agencies to assign sufficient resources to this issue. USDA-FNS echoed these feasibility concerns in a May 2014 evaluation. Additional authority and resources to develop a recipient trafficking rate might allow USDA-FNS to do some or all of the following: conduct and publish a study of recipient trafficking of SNAP benefits using currently existing data, including a national recipient trafficking rate; determine and document what changes must be made to current regulations, forms, policies, and practices to standardize state agency reporting and calculation of recipient trafficking, including at minimum the definition of relevant terms (e.g., definition of "investigation"), the annual timeframes, and the data sources for compilation of recipient trafficking data; and implement the identified changes necessary to reliably and accurately document the national recipient trafficking rate. USDA-FNS provides financial incentives to state agencies to reward high performance. These bonuses reward states with low error rates but do not reward states that effectively detect and penalize recipient trafficking. In April 2014, USDA-FNS published a Request for Information (RFI) soliciting comment on ways to modify performance bonuses for state agencies, including creating bonuses related to activities targeting recipient trafficking. The July 2016 GAO report also found that USDA-FNS does not sufficiently incentivize state agencies to pursue recipient trafficking cases. The report stated, "to help address the increased caseloads and the resources needed to conduct investigations, we recommended that USDA explore ways that federal financial incentives could be used to better support cost-effective anti-fraud strategies. At this time, FNS has decided not to pursue bonus awards for anti-fraud and program integrity activities." Establishing a standard to measure performance for these bonuses would likely require the establishment of a national recipient trafficking rate as discussed earlier in this section. Additionally, as stated earlier, state agencies establish and collect claims against recipients who traffic SNAP benefits. If a state agency collects on a claim resulting from fraud, such as recipient trafficking, the state agency is entitled to retain 35% of the amount collected. The August 2014 GAO report suggested that increasing this retention rate and restricting the use of retained funds to state agency anti-fraud activities could significantly enhance efforts to combat recipient trafficking, noting that the strategy "may result in a net savings for SNAP if increased collections in payment recoveries outweigh the increased amount states receive in retentions." Implementation of this strategy may require statutory change. USDA-FNS oversees state agency administration of SNAP, and one of the primary tools used in this federal oversight is the management evaluation (ME). USDA-FNS conducts annual management evaluations on high priority areas and triennial reviews on lower priority areas. If a state agency is found to be out of compliance with SNAP rules, then a corrective action plan (CAP) will be developed and USDA-FNS will work with the state agency to improve compliance. A January 2012 USDA-OIG report noted that USDA-FNS did not utilize management evaluations to assess the effectiveness of state agencies' efforts to detect and penalize recipient trafficking. In response, USDA-FNS created a "recipient integrity" management evaluation in FY2012 which it currently uses to evaluate state agencies every three years. State agencies are responsible for investigating recipient trafficking, and USDA-FNS is responsible for investigating retailer trafficking. A large share of trafficking, however, results from collusion between recipients and retailers. If a state agency is made aware that a store in its jurisdiction is engaged in retailer trafficking, it can place the store under surveillance and build cases against recipients engaged in trafficking at that location. Usually, however, state agencies have no such opportunity. USDA-FNS provides retailer trafficking cases to state agencies only after completing the agency administrative and appeal process. By the time the state agency is made aware of a retailer trafficking case, the store has ceased accepting SNAP and has often closed. At that point, meaningful surveillance of the store cannot be performed and EBT transaction data cannot be corroborated with other forms of hard evidence. It is important to note, however, that providing state agencies with advance notification regarding ongoing USDA-FNS investigations of retailers may jeopardize these investigations. Retailer and recipient trafficking proceedings have different burdens of proof; therefore, governments will not necessarily prevail in both cases with the same evidence. Accepting SNAP benefits as a form of payment is not an entitlement for retailers. To disqualify a SNAP retailer for a violation of SNAP rules, USDA-FNS must only meet a lower-level burden of proof—the "preponderance of the evidence" standard. Receiving SNAP benefits is an entitlement for eligible individuals. To disqualify a SNAP recipient for fraud, a state agency must meet a higher-level burden of proof—the "clear and convincing evidence" standard. This means that evidence deemed sufficient to prove retailer trafficking may not be sufficient to prove recipient trafficking. Indeed, over 84% of the USDA-FNS retailer trafficking cases that resulted in a permanent disqualification in FY2016 relied primarily on an analysis of suspicious transaction patterns based on Anti-fraud Locator using EBT Retailer Transactions (ALERT) system data. These EBT transaction data, on their own, are not generally considered sufficient grounds for the disqualification of SNAP recipients. For this reason, state agencies often have difficulty disqualifying recipients whose EBT cards were used in transactions flagged as trafficking by ALERT transaction data analysis, absent other evidence of recipient trafficking. Grants to states for integrity activities, established by Section 4029 of the 2014 Farm Bill, were awarded in FY2014 and FY2015 but not in FY2016 or FY2017. USDA-FNS is currently developing a "SNAP Fraud Framework," which combines best practices for fraud prevention gathered by USDA-FNS over several years from federal, state, and private partners. USDA-FNS plans to launch the SNAP Fraud Framework in FY2018 and to offer states grant opportunities using this funding to implement the framework. USDA-FNS is responsible for reviewing the applications submitted by retailers and ensuring that retailers authorized to participate in SNAP meet all eligibility requirements. Included in these applications are store owners' personal information, including but not limited to owners' Social Security Numbers (SSNs), but USDA-FNS is statutorily limited in how it can use these SSNs. During the application process, retailers provide USDA-FNS with the SSNs of all store owners. USDA-OIG compared these retailer-submitted SSNs to the Social Security Administration's Death Master File to identify store owners using SSNs that matched the SSNs of deceased individuals. In a January 2017 USDA-OIG report, 3,394 stores were found to have at least one owner using an SSA-DMF matched SSN, and 346 of these stores were found to have all owners using SSA-DMF matched SSNs. USDA-OIG recommended that USDA-FNS follow up with these 3,394 retailers and implement a new workflow process to check retailer-submitted SSNs on an ongoing basis. In the agency response to the report, USDA-FNS addressed these 3,394 identified retailers, but also identified the statutory barrier to this proposed change, stating: "FNS recognizes the value in conducting a DMF match on an on-going basis. As such, should FNS be granted future authority to use SSN for matching purposes, FNS will match to the SSA DMF using SSN on an on-going basis." As of the date of this report, USDA-FNS does not verify retailer-submitted SSNs or match against the SSA-DMF due to this statutory restriction. Implementation of this change would require modification to the Social Security Act. In the July 2013 report, USDA-OIG recommended that USDA-FNS use other methods to verify applicant retailer information such as memoranda of understanding (MOUs) with state licensing agencies. USDA-FNS proposed instead to test the use of data brokers to complement existing techniques used to verify retailer applicant information. In 2014, USDA-FNS conducted four pilots testing the use of data brokers and determined that it had low return on investment, in part due to USDA-FNS's inability to utilize applicant retailers' SSNs in data matches. Store owners who have been convicted of certain crimes will be denied authorization to participate in SNAP for lack of business integrity if they declare the past conviction when applying. However, USDA-FNS is not currently able to verify the information provided by the retailer if he/she chooses to falsify the application and conceal past criminal convictions. A September 2008 USDA-OIG report suggested that USDA-FNS utilize the Interstate Identification Index (III) of the National Crime Information Center (NCIC) to perform background checks on retailers applying to participate in SNAP. The July 2013 USDA-OIG report repeated this recommendation, finding three owners who failed to disclose past criminal convictions on their application for SNAP authorization out of a sample of 212 owners (all three were later permanently disqualified for retailer trafficking). In response, USDA-FNS agreed to initiate a proposed rulemaking action to require retailer applicants and currently authorized retailers deemed "high risk" to provide USDA-FNS with a self-initiated background check. However, USDA-FNS does not currently have the statutory authority to compel retailer applicants to submit background checks. As of the date of this report, this rulemaking action is "inactive" (see Table B-1 in Appendix B). The August 2012 and February 2013 USDA-FNS NPRMs contained four provisions addressing shortcomings in existing retailer application regulations. These proposed rules are currently "inactive" (see Table B-1 in Appendix B ). Proposed changes included the following: Retailers failing to report changes in ownership —Currently, authorized retailers are required to report any changes in the ownership of their stores, but there is currently no penalty for noncompliance. To deter retailer noncompliance, USDA-FNS proposed to subject to a six-month disqualification any retailer that failed to report ownership changes to USDA-FNS within 10 days of the change. Disqualified SNAP recipients applying to become SNAP-authorized retailers —Under current SNAP rules, USDA-FNS may not deny the application of a retailer who was permanently disqualified from SNAP as a recipient for fraud on business integrity grounds. USDA-FNS proposed to add recipient fraud to the definition of business integrity standards, "because a person, who violates program rules as a recipient, lacks the necessary business integrity and responsibility expected of a store owner who must train employees and oversee operations to ensure that SNAP EBT transactions are conducted in accordance with Department rules." Data matches with the USDA-FNS electronic Disqualified Recipient System (eDRS) are needed to determine whether individuals are disqualified from receiving SNAP benefits, and such matches rely on the use of individuals' SSNs; therefore, USDA-FNS would have difficulty implementing this provision due to statutory restrictions on allowable uses of applicant retailers' SSNs. Illegal retailer-to-retailer transfers of SNAP authorization —Authorized retailers are prohibited from transferring the SNAP authorization of their stores to a new owner in the event of a sale, and retailers are prohibited from accepting SNAP benefits without first applying for and obtaining SNAP authorization. Under current regulations, if a retailer sells the authorization and a retailer buyer uses it, USDA-FNS penalizes the buyer but not the seller. To address illegal collusion on the part of the seller and curtail unauthorized SNAP redemptions, USDA-FNS proposed to subject the seller to two penalties: permanent SNAP retailer ineligibility (for all current and future stores) and a fine equal to that of the buyer (under current regulations). Retailers' failure to pay fines, claims, or fiscal penalties —Current SNAP regulations allow USDA-FNS, on the basis of business integrity, to deny or withdraw the authorization of retailers who fail to pay certain fiscal claims or fines. USDA-FNS proposed to allow the agency to deny or withdraw the authorization of retailers who fail to pay any fine, claim, or fiscal penalty assessed against them under 7 C.F.R. §278 when such debts become delinquent. In the June 2016 GAO report, GAO recommended that federal financial incentives should be restructured to encourage effective pre-certification investigations "because some investigative agencies were not rewarded for cost-effective, anti-fraud efforts that could prevent ineligible people from receiving benefits." As this report noted, "when fraud by a recipient is discovered, the state may generally retain 35 percent of the recovered overpayment, but when a state detects potential fraud by an applicant and denies the application, there are no payments to recover." According to FY2016 State Activity Report data, about half of the state agencies dedicated minimal resources to pre-certification investigations. The five state agencies that engaged in the most extensive pre-certification investigation activity represented 96% of these investigations despite serving only 32% of all SNAP participants in FY2016. Together, the five states reported about $369 million in prevented improper federal expenditure through these efforts. With incentives, it is possible that more states would dedicate resources to conducting pre-certification investigations to find error and fraud on a regular basis. As one might expect, it is challenging to recover overpayments from poor and near-poor households. Establishing and collecting claims is the primary way that overpayments are recovered; and, while state agencies have improved the rate of claims establishment since FY2005, states' efforts to actually collect on these claims have not likewise improved. From FY2005 to FY2014: the total annual dollar value of claims established has increased from about 20% to about 28% of the total annual dollar value of estimated overpayments; this improvement indicates increased claims establishment activity by state agencies. the total annual dollar value of claims collected has remained around 16% of the total annual dollar value of estimated overpayments; this reflects persistent difficulties in claim collection. Figure 5 reflects these trends. This was a finding in the August 2014 GAO report and, furthermore, "[s]tates' difficulty collecting overpayments compounds their concerns about having adequate resources for investigations because some states use recovered overpayments for this purpose." The GAO report did not provide strategies for how states might address this concern. Individuals are not allowed to apply for or receive benefits from more than one state agency at a time. It is important to note, however, that duplicate enrollment may be indicative of either an error or fraud depending on the circumstances of the case. Duplicate enrollment (or "dual participation") results in a 10-year disqualification from SNAP if it is due to intentional fraud. Some state agencies detect duplicate enrollment through exchanging enrollment data with neighboring states. As of the October 2016 GAO report, Massachusetts and New York, for example, had such an arrangement. The National Accuracy Clearinghouse (NAC) is a significant effort to detect and prevent duplicate enrollment. The NAC was funded as a pilot by the U.S. Office of Management and Budget (OMB) Partnership for Program Integrity and Innovation from April 2013 until May 2015. The NAC gathers and analyzes SNAP state enrollment data from five participating states. Since the conclusion of the pilot in May 2015, these five states have continued NAC operations. In practice, the NAC is another data match performed during certification. NAC matches are not considered verified upon receipt, so additional steps are necessary to confirm matches. An evaluation of NAC published in October 2015 documented several elements of NAC's performance, outcomes, and costs, including the following: In May 2014, prior to implementation, 10,076 instances of duplicate enrollment across the five states were identified. One year later, in May 2015, duplicate enrollment in these five states had been reduced by almost 50% (5,464 instances identified). Using NAC is estimated to have prevented about $548,336 in monthly overpayments during the pilot year, with monthly state agency work effort costs totaling $81,913 (resulting in about $6.69 in monthly overpayments prevented for every $1.00 spent monthly). In the first year, using NAC produced an estimated annualized savings of $5,597,076 (less the $669,331 spent on one-time startup costs). Nationalizing NAC has been estimated to result in $114,072,753 in annual savings. Costs of setting up and utilizing NAC for the first year came to about $1,652,287 for all five participating states. USDA-FNS provides federal matching funds for states' program administration costs, including costs of NAC participation. During the 115 th Congress, the House passed an emergency supplemental appropriations bill, which included a provision that would have required the expansion of NAC to all states (Section 3003 of H.R. 4667 ; however, this provision was not included in the emergency supplemental appropriations which became law (Bipartisan Budget Act of 2018, P.L. 115-123 ). As discussed earlier, states are required to conduct certain data matches to verify household application information, and many opt to include additional data sources. There are arguments for and against expanding states' use of additional data matches. While verifying household data to high-fidelity sources seems compelling, the use of matching to less authoritative data can require additional employee hours and might introduce the errors it seeks to prevent. Implementing new data matches may require large upfront investments and ongoing costs to state agencies. Non-verified upon receipt data matches may necessitate additional manual follow-up, which can create even more cost and delay. As a result, state agencies prefer to use verified upon receipt data matches whenever possible. However, only one of the six federally required databases is considered verified upon receipt. In comments published in response to USDA-FNS rulemaking implementing the statutorily mandated data matches, some states pointed out that the implementation of these data matches is burdensome on state agencies while providing minimal cost avoidance due to the rarity of matches and the effort needed to verify them. A range of anecdotal evidence also points to the limited return on investment for the non-verified upon receipt of federally mandated data matches. In a 2017 series of USDA-OIG audits of five states' compliance with federal requirements for state agencies, USDA-OIG found that all five were improperly handling a mandatory SSA-PVS data match. At least one state explicitly stated that it elected not to perform the mandatory match due to perceived low return on investment. Some optional data matches are widely used and considered worthwhile by state agencies, while other verified upon receipt and useful non-verified upon receipt data matches are arguably underutilized. Although not federally mandated, SSA benefit program databases were utilized and considered useful by all state agencies surveyed in the October 2016 GAO report, because these data matches provide verified upon receipt data on unearned income. Matches with state systems that provide verified upon receipt data on eligibility and income were used by many, but not all, state agencies. In some cases, statutory obstacles prevent using existing federal data sources, such as the Centers for Medicare and Medicaid Services (CMS) federal data services hub (the Hub), which consolidates various sources of earned and unearned income data matching. Some state agencies were concerned that the same data match services are being paid for twice, once for SNAP and once for Medicaid, often for the same beneficiaries. In 2017, certain states have piloted data sharing agreements to utilize these federal data services hubs for SNAP. Earned income may be especially difficult to verify through data matching, and the costs associated with these matches may be prohibitive. Currently, state agencies contract individually with The Work Number, but USDA-FNS has proposed negotiating a single contract that would make the service available for all state agencies at a greatly reduced cost per match. According to the October 2016 GAO report, USDA-FNS has not done enough to encourage state agencies to adopt best practices in data matching. This includes explaining technical improvements such as unifying data sources into a centralized portal (data brokering) and publicizing the methods and successes of pilot projects like NAC. The September 2015 USDA-OIG report stated that the primary vulnerability of the QC system was its "two-tier" structure. USDA-OIG argued that because a state calculates its own SPER, it has the means to manipulate the outcome of the QC process, and because a state stands to benefit from a low SPER, it has the motive to commit this fraud. USDA-OIG recommended the adoption of a "one-tier" QC process conducted exclusively by USDA-FNS. USDA-FNS noted that a one-tier QC system could create additional federal cost. Appendix A. Glossary of Abbreviations Appendix B. "Inactive" USDA-FNS Rules In the last 10 years, the U.S. Department of Agriculture Food and Nutrition Service (USDA-FNS) had started to draft new rules in response to direction in federal law and USDA Office of the Inspector General (USDA-OIG) audit findings, and at their own initiative. Currently, none of the regulatory initiatives discussed in this appendix have been completed. Before USDA-FNS's actions were suspended, they were in various stages of the regulatory process, which occurs as follows: In order to codify a federal regulation in the Code of Federal Regulations (C.F.R.), the following steps must generally be completed: a regulatory work plan must be submitted to the Office of Management and Budget (OMB) and OMB must assign the rulemaking action a Regulatory Identification Number (RIN), adding the RIN to OMB's Unified Agenda (UA); a notice of proposed rulemaking (NPRM) generally must be published by the rulemaking agency in the Federal Register (FR) with a comment period open to the public; and the rulemaking agency must consider the comments, make necessary changes to the rulemaking action, and then publish the final rule in the FR. Along with other rulemaking actions, USDA rules had been in a "pending" status and had not been made available to the public. The Trump Administration made these rules public in July 2017 and termed them "inactive." Appendix C. Optional Income Data Matches Data matching is used during the SNAP certification process to help make SNAP eligibility determinations and, if appropriate, designate the benefit allotment amounts for applicant households. In addition to the mandatory data matches discussed earlier in this report, states have many additional federal, state, and local data sources that they might use to verify household income data. This appendix lists some additional data matches that are discussed in related audit reports and state-specific policy manuals. Their verified upon receipt status varies. Optional Federal Income Data Matches Social Security Administration (SSA) Benefit Programs Databases —State agencies can match with SSA databases to verify an applicant's unearned income from these SSA programs. These are verified upon receipt data matches. They are conducted and considered moderately or extremely useful by 51 of the 51 state agencies surveyed (50 states plus D.C.) in October 2016. SSA Beneficiary Earnings Exchange Record (BEER)—State agencies can match with SSA-BEER to verify income based on Internal Revenue Service (IRS) earnings and tax data. This is a non-verified upon receipt data match. It is conducted by 24 of the 51 state agencies and considered moderately or extremely useful by only 10 of those using it. U.S. Department of Health and Human Services Administration for Children and Families (HHS-ACF) Public Assistance Reporting Information System (PARIS) —State agencies can match with HHS-ACF-PARIS to verify an applicant's earned and unearned income from public assistance and federal employment or retirement. These are non-verified upon receipt data matches. The HHS-ACF-PARIS Interstate Match File is conducted by 40 of the 51 state agencies and considered moderately or extremely useful by 31 of those using it. The HHS-ACF-PARIS Federal/VA File matches are conducted by 31 of the 51 state agencies and considered moderately or extremely useful by 20 of those using them. The Work Number—State agencies can match with this commercial verification service operated by Equifax, Inc. (for a fee) to obtain payroll information from participating retailers (covering about 35%-40% of working population) to verify an applicant's earned income. This is a non-verified upon receipt data match. It is used by 45 of the 51 state agencies and considered moderately or extremely useful by 43 of those using it. HHS-ACF National Directory of New Hires (NDNH) Unemployment Insurance and Quarterly Wage Files—These data matches are distinct from the mandatory HHS-ACF-NDNH New Hire File match. The Unemployment Insurance File compiles information from state workforce agencies regarding unearned income, and the Quarterly Wage File compiles information from state workforce agencies regarding earned income. These are non-verified upon receipt data matches. The former is used by 9 of the 51 state agencies and the latter by 4 of the 51. Optional State Income Data Matches State Unemployment Insurance Benefits (UIB) Database—State agencies can match with state workforce agencies that administer UIB to verify applicants' unearned income. This is generally a verified upon receipt data match. It is conducted by 49 of the 51 state agencies surveyed in October 2016 and considered moderately or extremely useful by 48 of those using it. Child Support Payments Database—State agencies can match with state human or social services agencies that administer and enforce child support payments to verify applicants' unearned income. This is generally a verified upon receipt data match. It is conducted by 47 of the 51 state agencies and considered moderately or extremely useful by 46 of those using it. State Wage Information Collection Agency (SWICA) Database—State agencies can match with SWICAs that gather quarterly wage and new hire data from employers to verify applicants' earned income. This is the state equivalent of the HHS-ACF-NDNH. These are non-verified upon receipt data matches. The former is conducted by 45 of the 51 state agencies and considered moderately or extremely useful by 31 of those using it; the latter is conducted by 36 of the 51 state agencies and considered moderately or extremely useful by 23 of those using it. State Day Care License Database—State agencies can match with state human or social services agencies that license day care workers and facilities to verify applicants' earned income. This is generally a verified upon receipt data match. It is conducted by 11 of the 51 state agencies. State Taxpayer Database—State agencies can match with state taxation agencies to verify applicants' unearned and earned income. This is generally a verified upon receipt data match. It is conducted by 7 of the 51 state agencies. Database of Income Verified by Other State Programs—State agencies can match with state human or social services agencies that administer other means-tested programs to verify applicants' unearned and earned income. This is generally a verified upon receipt data match. It is conducted by 42 of the 51 state agencies and considered moderately or extremely useful by 38 of those using it. Appendix D. Trends in Retailer Trafficking and Convenience Store Participation in SNAP The following three tables include CRS calculations based on data from U.S. Department of Agriculture Food and Nutrition Service (USDA-FNS) Retailer Management Reports, the last three Retailer Trafficking Studies, and other agency sources. Table D-1 compares the growth in total stores participating in SNAP with the growth of convenience stores ("c-stores") participating in the program. From FY2007 to FY2016, convenience stores have grown from about 36% of all stores in the program to about 46%. The national retailer trafficking rate represents the proportion of SNAP benefits redeemed that were trafficked at stores, and the national store violation rate represents the proportion of authorized stores that were estimated to have engaged in trafficking. Table D-2 compares these two rates for all stores with these rates for convenience stores. Across the nine years examined in the three studies, the convenience store retailer trafficking rates have been more than 1000% of the national retailer trafficking rates, and the convenience store violation rates have been more than 150% of the national store violation rates. Table D-3 displays data regarding the convenience store share of total redemptions and data regarding the estimated convenience store share of total trafficking. Across the nine years examined in these three studies, convenience stores' shares of redemptions have not exceeded 5% of total redemptions and convenience store shares of trafficking have averaged more than half of total trafficking. Appendix E. Payment Error Rate Information This appendix provides a state-by-state summary of payment-error related data from FY2010-FY2014, including state payment error rates (SPERs), high-performance bonuses, and liabilities for low performance. Table E-1 shows the states' annual rates and whether the state received an award or a sanction, while Table E-2 displays the amounts of awards and sanctions. Using Alabama as an example, according to the first table the state received a bonus in FY2012 based on a 1.85% SPER, and according to the second table that award amount was approximately $1.9 million.

The Supplemental Nutrition Assistance Program (SNAP) is the nation's largest domestic food assistance program, serving over 42.1 million recipients in an average month at a federal cost of over $68 billion in FY2017. SNAP is jointly administered by state agencies, which handle most recipient functions, and the federal government—specifically, the U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS)—which supports and oversees the states and handles most retailer functions. In a program with diverse stakeholders, detecting, preventing, and addressing errors and fraud is complex. SNAP has typically been reauthorized in a farm bill approximately every five years; this occurred most recently in 2014 (P.L. 113-79). Policymakers have long been interested in reducing fraud and improving payment accuracy in the program. Provisions related to these goals have been included in past farm bill reauthorizations and may be considered for the next farm bill, expected in 2018. There are four main types of inaccuracy and misconduct in SNAP: Trafficking SNAP benefits is the illicit sale of SNAP benefits, which can involve both retailers and recipients. Retailer application fraud generally involves an illicit attempt by a store owner to participate in SNAP when the store or owner is not eligible. Errors and fraud by households applying for SNAP benefits can result in improper payments. Errors are unintentional, while fraud is the intentional violation of program rules. Errors and fraud by state agencies—agency errors can result in inadvertent improper payments; the discussion of agency fraud largely focuses on certain states' Quality Control (QC) misconduct. Certain key ideas are fundamental to any discussion of SNAP errors and fraud: Errors are not the same as fraud. Fraud is intentional activity that breaks federal and/or state laws, while errors can be the result of unintentional mistakes. Certain acts, such as trafficking SNAP benefits, are always considered fraud; other acts, such as duplicate enrollment, may be the result of either error or fraud depending on the circumstances of the case. SNAP fraud is relatively rare, according to available data and reports. There is no single measure that reflects all the forms of fraud in SNAP. There are some frequently cited measures that capture some parts of the issue, and there are relevant data from federal and state agencies' enforcement efforts. The most frequently cited measure of fraud is the national retailer trafficking rate, which, estimated that 1.5% of SNAP benefits redeemed from FY2012-FY2014 were trafficked. While the national retailer trafficking rate (which is issued roughly every three years) estimates the extent of retailer trafficking, there is not a standard recipient trafficking rate, nor is there an overall recipient fraud rate. USDA-FNS is responsible for identifying stores engaged in retailer trafficking—using transaction data analysis, undercover investigations, and other tools—and imposing penalties on store owners who commit violations. Retailers found to have trafficked may be subject to permanent disqualification from participation in SNAP, fines, and other penalties. USDA-FNS also works to identify fraud by retailers applying to accept SNAP benefits. Retailers found to have falsified their applications may be subject to denial, permanent disqualification, and other penalties. While retailer trafficking and retailer application fraud are primarily pursued by a single federal entity (USDA-FNS), recipient violations (i.e., recipient trafficking and recipient application fraud) are pursued by 53 different state agencies. Recipients found to have trafficked may be required to repay the amount trafficked and may be subject to disqualification from receiving SNAP benefits and other penalties. State agencies' efforts to reduce and punish recipient fraud vary, which is evident, for instance, in state-submitted data on recipient disqualification activities. The national payment error rate (NPER) is the most-cited measure of nationwide payment accuracy. Using USDA-FNS's Quality Control (QC) system, the NPER estimates states' accuracy in determining eligibility and benefit amounts. The NPER has limitations, though; for instance, it only reflects errors above a threshold amount ($38 in FY2017). After publishing a FY2014 NPER, USDA Office of the Inspector General (OIG ) and USDA-FNS identified data quality issues that prevented the publication of an NPER in FY2015 and FY2016, but USDA-FNS published a NPER for FY2017 in June 2018. For FY2017, it was estimated that 6.30% of SNAP benefit issuance was improper—including a 5.19% overpayment rate and a 1.11% underpayment rate. Regardless of the cause of an overpayment, SNAP agencies are required to work toward recovering excess benefits from households that were overpaid (this is referred to as "establishing a claim against a household"). Applying these rates to benefits issued in FY2017 (over $63.6 billion), an estimated $3.30 billion in benefits were overpaid, and about $710 million in benefits were underpaid. Overpayments and underpayments to households can be the result of recipient errors, recipient fraud, or agency errors during the certification process. State agencies rely on household-provided information in applications, but also employ a range of data matches—some required by federal law, some optional that vary by state—to promote accuracy and double-check information. According to the USDA-FNS FY2016 State Activity Report, of states' established claims for overpayment, approximately 62% of overpayment claim dollars were for recipient errors, about 28% were for agency errors, and about 11% were due to recipient fraud. In addition to inadvertent agency errors, state agencies and their agents have been involved in isolated instances of fraud. Beyond cases of fraud conducted by state agency employees for personal gain, in FY2017 the Department of Justice obtained False Claim Act settlements from three state agencies accused of falsifying their Quality Control data and unlawfully obtaining federal bonuses. Investigations into this matter, conducted by the USDA-OIG, are ongoing. Across all types of fraud, oversight entities such as the Government Accountability Office and USDA-OIG have identified issues and strategies relevant to combating errors and fraud in SNAP. USDA-FNS has also proposed related regulatory changes that were not finalized. On the retailer side, issues identified focus on opportunities to prevent and more promptly punish trafficking. On the recipient side, issues identified include the nonexistence of a recipient fraud rate, states'varied levels of anti-fraud efforts (which may be better incentivized), and improvements to data matching in the application process. During the 115th Congress, Members voted on farm bill proposals that contained some changes to SNAP program integrity policy; these proposals are summarized in CRS Report R45275, The House and Senate 2018 Farm Bills (H.R. 2): A Side-by-Side Comparison with Current Law. Changes that might strengthen payment accuracy and punishments against fraud can be in tension with other policy objectives such as preserving recipient access to the program, and may have unintended consequences such as incurring costs greater than their savings. Balancing program objectives such as these are considerations for policymakers in this area.

Currently, U.S. meat and poultry slaughter facilities and processing plants operate under one of two parallel inspection systems. The one familiar to most people is the federal meat and poultry inspection system administered by the U.S. Department of Agriculture's (USDA's) Food Safety and Inspection System (FSIS). The other is made up of 27 separate state-administered inspection programs. Federal law has prohibited state-inspected meat and poultry plants from shipping their products across state lines, a ban that many states and small plants have long sought to overturn. Both the House and Senate versions of the omnibus farm bill ( H.R. 2419 ) included amendments to the Federal Meat Inspection Act (FMIA) and the Poultry Products Inspection Act (PPIA) that would permit interstate shipment of these products if USDA approves and certain requirements are met. However, the Senate approach diverged in significant ways from the House version. The conference farm bill, cleared in May 2008, generally opted for the Senate approach, viewed by many on both sides of the issue as an acceptable compromise. Proponents of ending the current ban have long argued that limiting state-inspected products to intrastate commerce is unfair. Many state agencies and state-inspected plants have argued that their programs by law already must be, and are, "at least equal" to the federal system. While state-inspected plants cannot ship interstate, foreign plants operating under USDA-approved foreign programs, which are to be "equivalent" to the U.S. program, can export meat and poultry products into and sell them anywhere in the United States. Advocates for change have contended that that they should not be treated less fairly than the foreign plants, and that foreign programs are not as closely scrutinized as state programs. Opponents of allowing state-inspected products in interstate commerce have argued that state programs are not required to have, and do not have, the same level of safety oversight as the federal, or even the foreign, plants. For example, foreign meat and poultry products are subject to U.S. import reinspection at ports of entry, and again, when most imported meat is further processed in U.S.-inspected processing plants. Opponents also contended that neither the USDA Inspector General (OIG) in a 2006 report nor a relevant 2002 federal appeals court ruling would agree, without qualification, that state-inspected meat and poultry were necessarily as safe as federally inspected products. Approximately 2,100 meat and poultry establishments in 27 states are subject to state-conducted rather than federal inspection programs. However, these state programs are operated in accordance with cooperative agreements that USDA's Food Safety and Inspection Service (FSIS) has with each of the states; the federal government also provides 50% of the cost of state programs. The "Federal and State Cooperation" provisions of the FMIA (21 U.S.C. 661) were added by the Wholesome Meat Act of 1967 (P.L. 90-201). Congressional Quarterly (CQ) at the time of the 1967 legislation observed that the state cooperation provision was "[t]he farthest-reaching portion [of the measure] ... aimed at helping—or, if necessary, forcing—states to strengthen their own meat inspection systems." All plants providing meat for interstate and foreign commerce had been subject to federal inspection regulations basically since passage of the Meat Inspection Act of 1907. However, plants that limited their product sales within a state were covered by what critics described as a patchwork of varying, often inadequate laws and regulations; seven of them had no inspection at all, according to CQ. "Revelations in the press and during committee hearings about slaughter and packing practices at some state plants made meat inspection the most emotional consumer issue of 1967." Currently, the Secretary of Agriculture (hereafter, USDA or FSIS) is authorized to approve a cooperative program in any state if it has enacted a "law that imposes mandatory ante mortem and post mortem inspection, reinspection and sanitation requirements that are at least equal to those under Title I of [the FMIA], with respect to all or certain classes of persons engaged in the State in slaughtering amenable species [i.e., cattle, sheep, swine, goats, equines], or preparing the carcasses, parts thereof, meat or meat food products, of any animals for use as human food solely for distribution within such State" (21 U.S.C. 661(a)(1); emphasis added by CRS). Section 661 also requires USDA to assume federal inspection of state plants whenever a state decides to terminate its own program, or USDA determines that FMIA requirements are not being met. Pursuant to the FMIA as amended by the Wholesome Meat Act, USDA-FSIS must receive a formal request for a program from the governor, and review the state's laws, regulations, and performance plan (including funding, staffing, training, labels and standards, enforcement, laboratory and testing procedures, and other aspects). To ensure continued compliance, FSIS annually certifies state programs based on a review of materials (like performance plans and an annual report submitted by the state); FSIS also conducts a more comprehensive review of each state every one to five years. Section 11103 of the House version of H.R. 2419 would have rewritten rather than merely amended Title III of the FMIA. It would have entailed a number of major departures from current authority. The Senate language was approved as Section 11067. House-Senate conferees generally adopted the Senate language, as Section 11015 of the final bill. Unlike the provisions in the House bill, the conference-adopted Senate language would not replace Title III (federal-state cooperation) in the current FMIA. Rather, it would create a new Title V—Inspections by Federal and State Agencies. Currently, state-inspected meat cannot be sold in interstate commerce. Under the Senate bill as endorsed by the conference committee, state programs currently operating under the Title III "at least equal to" requirements presumably could continue, so long as products were not shipped across state lines. The new Title V would enable many state-inspected establishments—i.e., those already covered by Title III—to be selected by USDA (in cooperation with the state agency) to receive the federal mark of inspection and ship products in interstate commerce. Although state inspectors could continue to be in these designated plants, inspection in such plants essentially would be under federal supervision. More specifically, under the conference (and Senate ) bill, the U.S. Secretary of Agriculture would be required to designate and directly supervise a federal employee as the state coordinator for each appropriate state agency. This new coordinator's responsibilities would be to provide oversight and enforcement of Title V, and to oversee state training and inspection activities by state personnel. The coordinator would have to visit the covered establishments to ensure they are operating consistently with the FMIA, submit quarterly reports on each establishment's status and compliance, and "deselect" plants or suspend their inspection if they violate any requirement. The House language would have explicitly allowed "the shipment in commerce" of products (i.e., carcasses, carcass parts, meat, and meat food products) under the newly approved Title III programs. Another House provision would have changed Title IV of the current FMIA to further direct that "a State or local government shall not prohibit or restrict the movement or sale of meat or meat food products that have been inspected and passed in accordance with the Act for interstate commerce." Currently USDA is authorized to approve state programs that have requirements at least equal to federal requirements. According to FSIS, "at least equal to" now means "that the food safety and other consumer protection measures effected by a State program address the same issues addressed by the Federal (FSIS) program, and the results of the State's approach are to be at least as effective as those of the Federal program. The State program need not take exactly the same action as the Federal program." The proposed House language would have authorized USDA to approve (and then enter into cooperative agreements with) only those state programs that "adopt (including adoption by reference) provisions identical to titles I, II, and IV (including the regulations, directives, notices, policy memoranda, and other regulatory requirements under those titles) ..." States would have had to ensure that their products bear a mark of state inspection as the official mark. Titles I, II and IV essentially are all other provisions of the FMIA, which cover such components as inspection requirements, definitions of adulteration and misbranding, and enforcement authorities, among other provisions. The conference (and Senate ) bill would limit eligible establishments to those with 25 or fewer employees. Also, USDA would be authorized to develop procedures enabling state-inspected establishments with more than 25 employees to shift to regular federal inspection. Finally, under the conference ( Senate ) version, state-inspected plants with more than 25 employees but fewer than 35 employees could be selected for the new state program, but they would have to shift to regular federal inspection within three years of promulgation of a final rule. The House version would have imposed a restriction limiting the size of an establishment that could be accepted under a new state program to no more than 50 employees. However, it appears that larger establishments could have continued to participate if they became state-inspected within 90 days of enactment. Under the conference (and Senate ) bill, current, future, and previously federally inspected establishments would be ineligible to join the new state program. Under the House bill, certain establishments that currently are federally inspected could have applied for inspection under the new state program if their states had one. Currently, USDA and the states with programs enter into formal cooperative agreements that provide for, among other things, matching federal funds of 50%. Under the conference bill, states would continue to be eligible for federal reimbursement, but now for up to 60% of the cost of their meat and poultry inspection programs. Conferees deleted a provision in the Senate bill that would have reimbursed a state for 100% of eligible costs if the state provided additional microbiological verification testing of selected establishments. The conference (and Senate ) bill also would create a new technical assistance division at FSIS to coordinate training, education, technical assistance, and outreach for very small and certain smaller-sized establishments. The state inspection provisions of the House-passed farm bill essentially were adapted from language found in H.R. 2315 / S. 1150 , introduced, respectively, by Representative Pomeroy in May and Senator Hatch in April 2007. Introduced in March 2007 by Representative Kind and in April 2007 by Senator Kohl, H.R. 1760 / S. 1149 , would strike the provisions in the FMIA and PPIA that prohibit the interstate shipment of state-inspected meat and poultry. The bills also would set the federal reimbursement rate for state costs at no less than 50% and no more than 60%. Under the new farm bill, for the first time in 40 years, meat and poultry that is not federally inspected could be shipped across state lines. These and other pending changes raised a series of issues that were debated by proponents and opponents of the legislation. At issue have been the impacts, if any, of these changes on the safety of meat and poultry products. Concerns about any adverse effects stem largely from the supposition, long held by consumer advocates and other critics, that state inspection programs do not provide the same level of safety as the federal inspection programs. As noted, state measures now must be "at least equal to" the federal measures, notably including mandatory ante mortem and post mortem inspection, reinspection and sanitation requirements. The current FSIS state review manual provides more specifics on how this is to be achieved. For example, under FSIS rules promulgated in 1996, each federally inspected establishment must have a HACCP (for hazard analysis and critical control point) plan that identifies each point in its process where contamination could occur, have a remedy to control it, implement the plan, monitor the process, and keep detailed records. As part of the plans, all operations must have site-specific standard operating procedures (SOPs) for sanitation. USDA inspectors check the establishment's records to verify a plant's compliance. Accordingly, the FSIS state review manual directs that "State MPI Program officials also must verify a HACCP or equivalent system that evaluates hazards, takes steps to address hazards, and routinely verifies that product is safe, wholesome, unadulterated, and properly labeled." FSIS must approve and regularly review the states to ensure that they are following these types of procedures. The House farm bill language would have gone even further by requiring that they be identical, and making it clear that this applies to all "regulations, directives, notices, policy memoranda, and other regulatory requirements." Moreover, a condition of acceptance into the new state program would have been that the state implement, within 180 days of a USDA review of its system, all changes identified in the review to ensure enforcement of federal requirements. A possible indication of its more prescriptive nature was that the National Association of State Departments of Agriculture (NASDA), which promoted interstate shipment legislation for many years, had once suggested that it might not support a proposal with a requirement that states adopt "identical" rules. Nonetheless, supporters of the House bill had argued that it would replace the current collection of 27 separate state programs with a single type of state program operating seamlessly with the federal system. On the other hand, opponents of the House bill countered that it was unclear whether or not the "identical" language would also apply to all activities associated with inspection, some of which might fall outside of the "regulations, directives, notices, policy memoranda and other regulatory requirements." Would or could the language apply, for example, to states' certifying procedures and contractual relationships with testing laboratories? What about staffing and training practices? Opponents of the House farm bill language had argued that at a minimum, these types of questions should be answered before a new program was passed that might continue some "at least equal to" activities that, in their view, have been substandard. They cited a September 2006 report by USDA's Office of Inspector General (OIG) that examined FSIS's oversight of the state programs. Though FSIS routinely gathers state staffing data, it does not use the data to determine if state staffing levels are appropriate for carrying out inspection activities, so some state programs may not have enough personnel to ensure their programs are "at least equal to" the federal program, OIG concluded. FSIS state reviews did not include determinations of whether laboratories used by the state to test products were providing accurate, reliable results, OIG also concluded, adding that FSIS officials told the OIG investigators that these were outside the scope of the FMIA and PPIA. One area where state and federal programs may diverge is in their sampling and testing methodologies used to verify that HACCP plans are producing safe products. Inspection officials have argued that regardless of which particular testing system is used, it has to be scientifically and legally defensible; critics have asserted that different methodologies can lead to different safety findings and therefore potentially different levels of safety. Another area where a present state program may differ from the federal system is in staffing and training; some states, for example, avail themselves of at least some USDA training; others may prefer their own programs—but all must meet basic outcomes. By requiring a federal employee to oversee each new state program, and by creating a new FSIS training division, drafters of the Senate bill (adopted by conferees) aimed to address concerns about these aspects of state-level inspection. The Senate Agriculture Committee held a hearing in April 2000 on a proposal ( S. 1988 ) by Senator Daschle to permit state-inspected products in interstate commerce, if the programs adopted all federal inspection requirements. At that hearing, the director of the Ohio Department of Agriculture argued that state personnel are generally more accessible and flexible in providing inspection resources geared to the needs and time constraints of small plants; and that states offer practical information, technical assistance, and other support to smaller plants that lack the scientific and legal expertise needed to deal with government regulations. Furthermore, the Ohio director characterized the federal system as a "multilayered chain of command [with a] frequently adversarial attitude." Several meat processing companies also testified that communicating with state officials to solve problems was far easier than with federal officials. Pressed for more specifics on barriers to joining federal inspection, the Ohio director cited three reasons. First, USDA's plant design and engineering requirements include elements that, he said, do not relate to food safety but would be expensive to meet—changing 3-inch drains to 4-inch drains, for example. Second, plants would rather communicate with the state than federal "bureaucracy," as noted above. Third is overtime costs (which plants pay for inspection beyond regularly scheduled shifts); the federal government charges considerably more than states. In a 2001 report, the University of Nebraska examined, for the state legislature, the potential impacts of adopting a state inspection program there. It polled other states to determine why some adopt such programs and others do not. Among those that chose to maintain state inspection, the most frequently cited factor was "the desire for greater responsiveness to the unique needs of producers and processors." Consumer advocates interpret the communication and flexibility arguments to mean that companies can more easily influence states to adopt less stringent safety requirements or to enforce them less rigorously. One consumer advocate who testified at the 2000 Senate hearing argued that the state "equal to" provision was adopted as a compromise: The 1967 Wholesome Meat Act "was driven by the revelation of filthy conditions and the lack of standards in state-inspected meat plants and the need to improve physical facilities and sanitation practices. However, it became clear that some of the smallest plants could not meet the physical facility requirements of the proposed law.... There was no discussion in 1967 of the potential public health risk inherent in this action, but the prohibition on sale across state lines recognized that these products were likely not to be the same as those produced in federally inspected plants." Such advocates continue to assert that state standards are not as strong as federal standards, regardless of the "equal to" determination. Neither the OIG in its 2006 report nor a relevant 2002 federal appeals court ruling would agree, without qualification, that state-inspected meat and poultry are necessarily as safe as federally inspected products. The OIG report concluded, for example, that although FSIS had a manual with detailed procedures and checklists for conducting onsite state reviews, "how the agency arrived at its decisions regarding the acceptability of State MPI (meat and poultry inspection) programs are not clearly documented in FSIS' summary reports. In other words, while the manual establishes clear guidelines for identifying problems in State MPI programs, how those problems are weighed in the determination and documented in the summary report [on a state program] was less clear. This condition was caused by the agency's decision to eliminate specific decision-making criteria from its comprehensive review methodology." OIG noted elsewhere in its findings: "When the agency revised its directives for inspecting these programs, an agency official said FSIS eliminated specific criteria for weighing violations and rendering decisions in order to avoid being overly prescriptive and to allow reviewers to use their discretion. Officials reviewing these programs thus lack clear, objective, and uniform guidelines for weighing the effect of establishment deficiencies on State MPI program findings and for documenting the relationship between these violations and the final determinations." OIG said, for example, that FSIS had granted "at least equal to" status to several states even though they found HACCP and sanitation deficiencies in establishments in those states—and the deficiencies were similar to those from a review of another state program where "significant concerns" were cited. In Dailey v. Veneman , a federal appeals court in 2002 upheld a district court's decision to reject Ohio's legal bid to gain interstate acceptance of its state-inspected products. Among other arguments, Ohio had asserted that the lower court should have accepted as true the allegation that state-inspected products were as safe as federally and foreign-inspected meat and poultry and the current federal law lacks a rational basis for treating state-inspected meats and poultry differently. The appeals court responded in part: "Though the USDA does keep an eye on state inspection programs, it keeps yet a closer eye on its own plants and on meat and poultry entering the country, and it is possible that a state program could deteriorate for a time without the USDA's knowledge. This policy provides a rational basis for Congress to restrict the interstate transport of state-inspected meat." CRS informal discussions in 2007 with various state and federal inspection experts suggest that many state inspection procedures look remarkably similar (and often may be identical) to those in federal establishments, including all key ante-mortem and post-mortem functions. For example, in all state programs, a government veterinarian examines all live animals before they are slaughtered, just as in the federal system. Trained state inspectors observe slaughter and processing operations and look for virtually the same problems that federal inspectors are looking for, according to these experts. Where the inspection process may diverge appears primarily to be in how the inspector communicates with the establishment to correct deficiencies, those knowledgeable with the programs explain. Federal officials, for example, might simply point out a deficiency and possibly inform the establishment where it might look for information or assistance to correct the situation. State officials are more likely to work directly with the plant, providing technical assistance and other resources to remedy the problem, these inspection experts explained. A longstanding argument, that federal rules require plants to undertake costly plant and equipment changes, may be less relevant today since all plants, including small and very small ones, now are expected to be operating under HACCP plans, according to those knowledgeable about federal-state inspection. Recordkeeping by establishments and verification by inspection personnel are used to ensure that the system is working. Since January 2000 all slaughter and processing operations, including small and very small establishments, are required to have HACCP plans in place under the federal inspection program—and all state programs also have incorporated HACCP or equivalent plans, these experts state. HACCP by nature is less prescriptive with regard to how individual establishments achieve the standards of safety, they add. The president of NASDA in 2007 asserted that USDA pays much closer attention to the state programs than to foreign programs. "State inspection programs undergo annual audits containing more than 125 pages of compliance procedures. By comparison, USDA's audit document for evaluating the 38 foreign inspection systems is a one-page checklist." This question first arose out of two provisions in the House bill. First, Section 302(d), Restriction on Establishment Size, stated that after the date that is 90 days after enactment, "establishments with more than 50 employees may not be accepted into a State meat inspection program. Any establishment that is subject to state inspection on such date, may remain subject to State inspection." Second, Section 306, Federal Inspection Option, stated that "[a]n establishment that operates in a State with an approved State meat inspection program may apply for inspection under the State meat inspection program or for Federal inspection." (Such an establishment cannot apply more than once every four years.) There was concern that under the House bill, larger plants could have evaded the size restriction by coming under state inspection if they did it within the initial 90 days of enactment. There was some uncertainty as to whether this 90-day window in the House bill would have applied to larger plants that want to enter existing state programs, or whether this would have applied to the newly authorized state program, although it would appear that the existing programs would no longer have been authorized under the proposal. Assuming that the House legislation implied the latter situation, then further uncertainty arose regarding whether a state could apply for and achieve recognition within such a short time period. The conference-adopted Senate language, by adding a new Title V, supplements rather than replaces the existing state programs. Consumer advocates and employee unions had found the second House provision—to permit federal plants to convert to state inspection—to be one of the more controversial provisions. They cited statistics provided by USDA that there are 5,603 federally inspected meat and poultry plants. Of these, approximately 80% (or more than 4,500) have fewer than 50 employees, creating the potential for an exodus from the national program. "With that change, if a federal inspector pressures a meat packer to improve sanitation, the packer could instead try to negotiate a more understanding regulatory response from his state inspection program," these groups recently argued. This would have threatened not only food safety but also the jobs of thousands of federal inspection employees, they claimed. "The provisions would also unleash lobbying campaigns to set up state inspection programs in the 22 (now 23) states that currently do not have them so plants in those states can also seek 'more understanding' enforcement of food safety laws under state programs." The Senate "compromise" language adopted by conferees clarifies that current, future, or prior federal establishments would not be eligible for the new state inspection program. Under Section 20 of the FMIA (and Section 466 of the PPIA), FSIS is responsible for determining the equivalence of other countries' meat and poultry safeguards. A foreign plant cannot ship products to the United States unless FSIS has certified that its country has a program that provides a level of protection that is at least equivalent to the U.S. system. FSIS experts visit the exporting country to review its rules and regulations, meet with foreign officials, and accompany them on visits to slaughtering and processing plants. When a foreign program is approved, FSIS relies on that government to certify eligibility of, and to inspect, the plants. FSIS periodically reviews foreign government documents and conducts on-site audits at least annually to verify continuing equivalence. In addition, FSIS operates an extensive reinspection program at U.S. border entry points. Food safety equivalence is a concept the United States adopted as a signatory to the 1994 Uruguay Round (UR) trade agreements, and specifically the Agreement on the Application of Sanitary and Phytosanitary Measures (the SPS agreement). Article 4.1 of the SPS agreement states: Members shall accept the sanitary or phytosanitary measures of other Members as equivalent, even if these measures differ from their own or from those used by other Members trading in the same product, if the exporting Member objectively demonstrates to the importing Member that its measures achieve the importing Member's appropriate level of sanitary or phytosanitary protection. For this purpose, reasonable access shall be given, upon request, to the importing Member for inspection, testing and other relevant procedures. According to FSIS, the burden for demonstrating equivalence rests with an exporting country. The agency's initial evaluation to determine foreign equivalence is quite extensive and detailed. As a practical matter, it would appear to be difficult for a foreign country to demonstrate successfully that any system that is not nationally administered (i.e., state, local) should be recognized as equivalent; apparently, none are so recognized currently. In fact, countries that ship meat and poultry to the United States are more likely to have dual safety regimes: one for the plants that sell domestically, and another, certified by the United States (and possibly other countries) as equivalent for export. If the conference bill permits products inspected by states into commerce (and if such commerce included foreign as well as interstate shipments), it might be reasonable to assume that other countries with their own "state systems" could seek new equivalency determinations which encompass such systems. As described earlier, the new farm bill would explicitly allow the shipment in commerce of products (i.e., carcasses, carcass parts, meat, and meat food products) under the newly approved programs. Some have argued that the new language should be interpreted to cover only commerce between (not outside) the states and territories. However, Title I of the current FMIA defines commerce as "commerce between any State, any Territory, or the District of Columbia, and any place outside thereof; or within any Territory not organized with a legislative body, or the District of Columbia." Related USDA questions have included whether individual states might be negotiating with foreign trading partners about import policies and conducting their own audits of foreign establishments, whether trading partners would audit all state programs, whether some states could export products to a particular country while others could not, and whether the United States would (and could) segregate products intended for export based upon state of origin. Food safety advocates and others frequently cite the incidences of foodborne pathogens and of foodborne illnesses as reasons to be concerned about food safety programs. A frequently cited estimate used by federal officials and food safety advocacy groups alike is that each year, 76 million people become sick, 325,000 are hospitalized, and 5,000 die from foodborne illnesses caused by contamination from any one of a number of microbial pathogens. It also should be noted that these estimates reflect illnesses related to all types of foods, not solely to meat and poultry products. The CDC does observe: Raw foods of animal origin are the most likely to be contaminated; that is, raw meat and poultry, raw eggs, unpasteurized milk, and raw shellfish. Because filter-feeding shellfish strain microbes from the sea over many months, they are particularly likely to be contaminated if there are any pathogens in the seawater. Foods that mingle the products of many individual animals, such as bulk raw milk, pooled raw eggs, or ground beef, are particularly hazardous because a pathogen present in any one of the animals may contaminate the whole batch. A single hamburger may contain meat from hundreds of animals. A single restaurant omelet may contain eggs from hundreds of chickens. A glass of raw milk may contain milk from hundreds of cows. A broiler chicken carcass can be exposed to the drippings and juices of many thousands of other birds that went through the same cold water tank after slaughter. In April 2007 and April 2008 reports, the CDC compared the incidence of various foodborne infections in 2006 with baseline data from 1996-1998. The reports observed that significant declines in the incidence of certain foodborne pathogens have occurred since 1996, but generally the declines were before 2004. The April 2007 CDC report had observed that an earlier decline in Shiga toxin-producing E. coli O157 (STEC O157) infections was "temporally associated" with measures by FSIS and by beef processors to reduce ground beef contamination—measures which were "accompanied by a decline in the frequency of isolation of STEC O157 from ground beef in 2003 and 2004." Further, although the frequency of finding the pathogen in products in 2005 and 2006 was the same level as in 2004, "Reasons for the increases in human STEC O157 infections in 2005 and 2006 are not known." While not attributing this to either meat and poultry or to produce, the CDC did take note of STEC O157 outbreaks in 2006 caused by contaminated lettuce and spinach. The CDC report explained that transmission of Salmonella to humans can occur via many vehicles, including produce, eggs, poultry and other meat, and direct contact with animals and their environments. (It also noted an occurrence through tomatoes in 2006.) However, the report noted that poultry is an important source of human Salmonella infections. It also discussed the FSIS initiative to reduce Salmonella in poultry and other meat, and that in 2006 the lowest percentages of chickens tested positive for the pathogen. The FSIS pathogen testing cited by the CDC is one of the ways the agency monitors the effectiveness of establishments' HACCP plans. Consumer advocates, industry officials, and others closely follow both FSIS testing results and the CDC disease reports, and often speculate about their significance. Nonetheless, neither FSIS testing results nor this CDC report appear to offer any conclusive evidence of a causal relationship between FSIS program modifications on the one hand, and changes in the occurrence of foodborne illnesses on the other. Even if the difficulties in making such an attribution could be overcome, it would not likely answer the further question regarding the distinctions, if any, between federally inspected and state-inspected products as the cause of foodborne illnesses. Among other potential variables, state testing programs can differ from the federal programs, making comparisons between testing results difficult at best. As noted, the new farm bill would amend the FMIA and PPIA in order to modify a key element of federal food safety policy that has been in place for 40 years. At the heart of the debate has been a seemingly simple question: do, or can, state programs provide the same assurance of product safety as the federal program? If the bill becomes law, stakeholders will turn their attention to USDA, which will be required to implement the new provisions. This rulemaking process can be expected to fill in many of the details on program operation and, ultimately, to help determine its effectiveness.

Federal law has prohibited state-inspected meat and poultry plants from shipping their products across state lines. The final conference version of H.R. 2419, the omnibus farm bill, amends the Federal Meat Inspection Act and the Poultry Products Inspection Act to permit such interstate shipment under certain conditions. Limiting state-inspected products to intrastate commerce is unfair, many state agencies and state-inspected plants have long argued, because the 27 currently state-operated programs by law already must be, and are, "at least equal" to the federal system. Meanwhile, foreign plants operating under U.S. Department of Agriculture (USDA)-approved foreign programs, which are to be "equivalent" to the U.S. program, can export meat and poultry products into and sell them anywhere in the United States. Advocates for change have contended that they should not be treated less fairly than the foreign plants which, they say, are not as closely scrutinized as state plants. Opponents have argued that state programs are not required to have, and do not have, the same level of safety oversight as the federal, or even the foreign, plants. For example, foreign meat and poultry products are subject to U.S. import reinspection at ports of entry, and again, when most imported meat is further processed in U.S.-inspected processing plants. Opponents also have contended that neither the USDA Office of Inspector General in a 2006 report nor a relevant 2002 federal appeals court ruling would agree, without qualification, that state-inspected meat and poultry were necessarily as safe as federally inspected products. The Senate-passed farm bill—the approach ultimately adopted by conferees—supplements the current federal-state cooperative inspection program with a provision whereby state-inspected plants with 25 or fewer employees could opt into a new program that subjects them to federally directed but state-operated inspection, thus allowing them to ship interstate. The Senate version reportedly was developed as a compromise by those on both sides of the issue. The House-passed farm bill would have replaced (rather than supplemented) the current federal-state cooperative inspection programs with a new program to enable meat and poultry that is not federally inspected to be shipped across state lines, so long as the state programs adopted standards identical to those of USDA along with any additional changes USDA required. The House bill also would have enabled many plants currently under federal inspection to apply for state inspection and continue to ship interstate. Opponents of this change feared that many would seek to opt out of the federal system if they believed that could receive more lenient oversight by the states—an assertion that state proponents dismissed. If the conference farm bill becomes law, as many anticipate, stakeholders will next turn their attention to USDA, where implementation details will be determined through the rulemaking process.

Many voices, domestic and international, have called upon the United States and other industrialized countries to increase foreign assistance to lower- and middle-income countries to address climate change. Proponents maintain that such assistance could help promote climate-friendly and high-growth economic development in these countries, while simultaneously protecting the more vulnerable nations from the effects of a changing climate. For their part, most, if not all, lower-income countries have stated that their success at combating climate change depends critically on receipt of international financial support. They argue that mitigating climate change pollutants, adapting to the effects of climate change, and building climate resilience into their development agendas incur costs above and beyond their normal economic growth trajectories. These costs are particularly challenging to nations that have scant resources compared to industrialized countries, do not recognize themselves as the historical sources of climate pollution, and consider alleviating poverty as their first priority. The Green Climate Fund (GCF) is an international financial institution connected to the United Nations Framework Convention on Climate Change (UNFCCC). The GCF was proposed by Parties to the UNFCCC during the 2009 Conference of Parties (COP) in Copenhagen, Denmark, and its design was agreed to during the 2011 COP in Durban, South Africa. The fund aims to assist developing countries in their efforts to combat climate change through the provision of grants and other concessional financing for mitigation and adaptation projects, programs, policies, and activities. The GCF is capitalized by contributions from donor countries and other sources, potentially including innovative mechanisms and the private sector. The GCF currently complements many of the existing multilateral climate change funds (e.g., the Global Environment Facility, the Climate Investment Funds, and the Adaptation Fund); however, as the official financial mechanism of the UNFCCC, some Parties believe that it may eventually replace or subsume the other funds. Expectations by many countries, specifically developing countries, are that the GCF becomes very large (i.e., in the range of several tens of billions to over $100 billion annually) and serves as the predominant institution for climate change assistance in the developing world. These countries believe that the agreement to establish the GCF has been a key success in the recent international negotiations. But others caution that ambitious steps need to be taken to ensure that the fund is operated correctly in order to achieve an adequate buy-in by donor countries of its effectiveness and by recipient countries of its legitimacy. The GCF was made operational in the summer of 2014. Parties called for an immediate capitalization of between $10 billion and $15 billion over the course of the first year. Initial funding came from Germany, France, and a dozen other countries who pledged approximately $2.3 billion during the United Nations Climate Summit in September 2014. Further pledges brought the total to approximately $10 billion by the close of 2014. The Obama Administration announced a pledge of $3 billion over four years during the G-20 meetings in Australia on November 15, 2014. The Administration's FY2016 budget requested $500 million for the fund. Notwithstanding these financial pledges, details remain to be worked out. While the governing board, a host city, and the basic design of the fund have been agreed to by Parties, many structural aspects have yet to be clarified, some involving long-standing and contentious debate. They include what role the GCF would play in providing sustained finance at adequate levels; how it would fit into the existing development assistance and climate financing architecture; whether sources beyond public funding would successfully contribute to it; and how it would allocate and deliver assistance efficiently and effectively to developing countries. The U.S. Congress—through its role in authorizations, appropriations, and oversight—would have significant input on U.S. participation in the fund, including whether and when to participate in the fund; whether and how much to contribute to the fund, and with what source or sources of finance; whether fund contributions would carry specific guidance in distribution and use; how contributions to the fund would relate to other U.S. bilateral, multilateral, and private sector climate change assistance; and whether and when to consent to negotiated treaty obligations, if submitted. The UNFCCC was the first formal international agreement to acknowledge and address human-driven climate change. The U.S. Senate provided its advice and consent to the Convention's ratification in 1992, the same year it was concluded. For the United States, the UNFCCC entered into force in 1994. As of November 2014, 196 governments are Parties. As a framework convention, the UNFCCC provides a structure for international consideration of climate change but does not contain detailed obligations for achieving particular climate-related objectives in each Party's territory. It recognizes that climate change is a "common concern to humankind," and, accordingly, requires parties to (1) gather and share information on greenhouse gas (GHG) emissions, national policies, and best practices; (2) launch national strategies for addressing GHG emissions and adapting to expected impacts; and (3) cooperate in preparing for the impacts of climate change. The UNFCCC did not set binding targets for GHG emissions; however, it did commit the higher-income Parties (i.e., those listed in Annex II of the Convention) to provide unspecified amounts of financial assistance to help lower-income countries meet the broad, qualitative obligations common to all Parties. As the treaty entered into force and the UNFCCC Conference of the Parties (COP) met for the first time in 1995, the Parties agreed that achieving the objective of the UNFCCC would require new and stronger GHG commitments. As a first step toward meeting this objective, the 1997 Kyoto Protocol was drafted and entered into force with a stated aim to reduce the net GHG emissions of industrialized country Parties (Annex I Parties) to 5.2% below 1990 levels in the period of 2008 to 2012. The United States signed the Kyoto Protocol in December 1997. However, at the time, opposition in Congress was strong. The Kyoto Protocol was not submitted to the Senate by President Bill Clinton or by his successor, President George W. Bush. Thus, the United States is not a Party to the Protocol. In 2007, UNFCCC Parties reconvened negotiations for further commitments beyond the Kyoto Protocol, and agreed to negotiate a suite of agreements that included new GHG mitigation targets for Annex I Parties, "nationally appropriate mitigation actions" for non-Annex I Parties, and other commitments for the post-2012 period. The mandates (referred to as the Bali Action Plan) specified that the products of negotiation should be ready by the end of 2009. Due perhaps to high expectations, as well as continued divergence among Parties on some key issues, the 2009 COP in Copenhagen, Denmark, did not produce a legally binding treaty, but a short, non-legally binding political document called the Copenhagen Accord. The Copenhagen Accord was a policy document drafted by leaders of about two dozen countries in the final hours of the 2009 COP, and subsequently acknowledged by 114 countries. The Accord sat in sharp contrast to the Kyoto Protocol, as its bottom-up and nationally appropriate model differed greatly from the top-down implementation of the Protocol. Provisions in the Accord included voluntary GHG mitigation efforts by all Parties, adaptation and forestry actions, technology transfer mechanisms, and transparency and reporting standards, as well as financial provisions by developed country Parties. The Accord also proposed the "Green Climate Fund" (GCF) to serve as the operating entity of the financial mechanism of the Convention. Many of the elements of the Copenhagen Accord, the Bali Action Plan, and the UNFCCC were adopted officially at the 2010 COP in Cancun, which yielded several decisions collectively called the Cancun Agreements. The establishment of the GCF—as well as some other financial arrangements mentioned in the Copenhagen Accord—was a central aspect of the negotiations, and was entered into the negotiating text of the UNFCCC's Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA). Climate finance provisions in the Cancun negotiating text (1/CP.16) included the following: Fast Start Financing. The agreement put forth a collective commitment by developed country Parties (not specified in the text) to provide new and additional resources approaching $30 billion for the period 2010–2012 to address the needs of developing countries (the allocation, or "burden-sharing," among countries was not specified in the text) (1/CP.16§95). 2020 Pledge. The agreement took note of the pledge by developed country Parties (not specified in the text) to achieve a goal of mobilizing jointly $100 billion per year by 2020 to address the needs of developing countries (the allocation, or "burden-sharing," among countries was not specified in the text) (1/CP.16§98). Sources. The agreement outlined that the pledged assistance was to be scaled-up, new and additional, predicable and adequate, and that it may come from a wide variety of sources, including public and private, bilateral, multilateral, and alternative (1/CP.16§§97, 99). Balanced Package. The agreement recognized that the financial pledges were offered in the context of continued negotiations toward a balanced package of commitments by all Parties that would include, among other items, meaningful actions on mitigation and transparency (1/CP.16§98). Green Climate Fund. The agreement opened the way for the establishment of the GCF, to be designated as an operating entity of the financial mechanism of the UNFCCC, accountable to and under the guidance of the COP, to support projects, programs, policies, and other activities in developing country Parties (1/CP.16§102). Transitional Committee. The agreement stipulated the formation of a Transitional Committee to design the fund, comprising 40 members, with 15 members from developed country Parties and 25 members from developing country Parties, with experience and skills in the areas of finance and climate change, in accordance with given Terms of Reference (1/CP.16§§109–110). The basic design of the GCF, recommended by the Transitional Committee, was adopted officially at the 2011 COP in Durban, South Africa, which yielded several decisions collectively called the "Durban Platform." The design of the GCF was a central aspect of the negotiations, and the approved guidelines, referred to as the "Governing Instrument of the Green Climate Fund," was entered into the negotiating text of the UNFCCC's Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA). Decisions on the GCF in the Durban negotiating text (CP.17) included the following: Status . The agreement designated the GCF as "the operating entity of the Financial Mechanism of the Convention" to be "accountable to and function under the guidance of the Conference of Parties to support projects, programmes, policies and other activities in developing country Parties" (3/CP.17§3). Governance . The agreement set forth the composition of a board, to have 24 members, composed of an equal number from developing and developed country Parties, with representation from relevant United Nations groupings including Small Island States (SIDS) and Least Developed Countries (LDC) (3/CP.17§A9). The decision invited Parties to submit their nominations for board membership (3/CP.17§10). Functions of the board were to include designing operations, establishing funding windows, approving funding, selecting implementing agencies, defining an accreditation process for implementing agencies, developing fiduciary standards and environmental and social safeguards, and building a framework for the monitoring and evaluation of performance. Host Country . The agreement began the process of selecting a host country for the GCF, asked Parties to submit expressions of interest, and required a final decision for endorsement by the 18 th session of the COP (3/CP.17§§12-13). Management . The agreement tasked the board with establishing an independent secretariat to execute the day-to-day operations of the fund, to be in place no later than by the 19 th session of the COP (3/CP.17§§15, 19). Trustee . The agreement asked the board to open a transparent and competitive bidding process for the selection of a trustee, either to replace or continue the services of the World Bank, as interim trustee (3/CP.17§16). Board Meetings . The agreement authorized the board to set up an interim secretariat immediately with the goal of convening the first board meeting. The first two board meetings were hosted by Switzerland and South Korea (3/CP.17§24). The Governing Instrument. The agreement adopted the guidelines for the general operation of the fund. This included rules and procedures for the board, secretariat, and trustee, as well as initial discussions on fund structure, eligibility, access, allocation, standards, and evaluation (3/CP.17§Annex). The GCF Board formed in 2012 and began a series of meetings to decide on recommendations to bring before the UNFCCC at the 2012 COP in Doha, Qatar. Decisions on the GCF in the Doha negotiating text (CP.18) included the following: Host Country. The agreement endorsed the consensus decision of the GCF Board to select Songdo, Incheon, Republic of Korea as the host of the GCF. The GCF Board and the Republic of Korea were asked to conclude the legal and administrative arrangements for hosting the fund, and to ensure that juridical personality and legal capacity are conferred to the GCF (6/CP.18§§3, 4). Governing Instrument. The agreement recognized the Governing Instrument for the GCF, and asked the board to develop the final arrangements for the Instrument's provisions (7/CP.18). At the November 2013 conference in Warsaw, Poland, the GCF Board reported on the progress of the implementation of the Governing Instrument, including the work accomplished on the development of procedures, allocation of resources, securing of funding, establishment of a secretariat, selection of a trustee, and initiation of inter-fund linkages with other relevant thematic entities. Decisions on the GCF in the Warsaw negotiating text (CP.19) included the following: Secretariat . The agreement established the independent secretariat and named Ms. Héla Cheikhrouhou as the executive director (4/CP.19§2). Guidance . The agreement adopted official guidance from the COP on policies, program priorities, and eligibility criteria for the fund to include (1) balancing resources for mitigation and adaptation, (2) pursuing country-driven approaches, and (3) confirming that all developing country Parties are eligible to receive resources (4/CP.19§9). Arrangements . The agreement laid out the governing arrangements between the COP and the GCF, including provisions for guidance, reporting, cooperation, review, and evaluation (5/CP.19). Funding . The agreement called for "ambitious and timely contributions" by developed country Parties by COP 20 (4/CP.19§13). The GCF was made operational in the summer of 2014, commencing its initial resources mobilization process. However, while the governing board, a host city, and the basic design of the fund have been agreed to by Parties, many structural aspects have yet to be clarified. They include the fund's administrative policies, best-practice fiduciary principles and standards, and environmental and social safeguards; financial risk management and investment framework; initial results areas, core performance indicators, and results management framework; procedures for accrediting national, regional, and international entities that will implement activities for the fund or intermediate finance to such entities; policies and procedures for the initial allocation of fund resources, including results-based approaches; initial proposal approval process, including criteria for program and project funding; and initial modalities for the operation of the fund's mitigation and adaptation windows, and the Private Sector Facility. The GCF was officially opened for capitalization at the United Nations Climate Summit in September 2014. A total of $2.3 billion was pledged initially to the fund, including the following (in approximate U.S.$): Germany $1 billion, France $1 billion, Korea $100 million, Switzerland $100 million, Denmark $70 million, Norway $33 million, Mexico $10 million, Luxemburg $6.8 million, Czech Republic $5.5 million. The Obama Administration announced a U.S. pledge of $3 billion over four years during the G-20 meetings in Australia on November 15, 2014. Japan pledged $1.5 billion at the meetings. The Administration's FY2016 budget requested $500 million for the fund. The GCF has confronted many challenges in design, scope, governance, and implementation, the details of which are still being finalized. The following sections provide a brief outline of some of the more significant issues. As currently conceived, the GCF is intended to operate at arm's length from the UNFCCC, with an independent board, trustee, and secretariat. The Governing Instrument states that the GCF is to be "accountable to and function under the guidance of the Conference of Parties" (3/CP.17§A4) (i.e., similar in legal structure to the Global Environment Facility), as opposed to "accountable to and function under the guidance and authority of the Conference of Parties" (i.e., similar in legal structure to the Adaptation Fund). While subtle, the distinction carries import, and negotiators from China and the Group of 77 have—for the moment at least—kept the latter structure in conversation in an effort to ensure representation by all Parties of the UNFCCC. The majority of developed country Parties, however, opposes the Adaptation Fund model as inefficient and overly politicized for two key reasons: (1) the COP would have direct authority over the selection and release of all board and secretariat members, and (2) the COP would have final approval over all rules and guidelines proposed by the board. Keeping the fund independent from the COP has been a key negotiating point for the United States. Given the current language of the negotiating text (7/CP.18§1), and the design of the board to carry equal representation between developed and developing country Parties, this issue may already be resolved. The role of the World Bank in the GCF has been, and continues to be, controversial. The Governing Instrument confirms the World Bank as the interim trustee, subject to review after three years of fund operation (3/CP.17§A26). Most believe that once established, a subsequent shift in institutional arrangement is doubtful. Many developing countries hold the World Bank in a negative light, believing it to be non-transparent, overly bureaucratic, and reflecting solely the interests of higher-income countries, which command greater decision-making power by virtue of their greater financial contributions. Additionally, some Parties see the potential for conflicts of interest during the implementation phase of the fund, since the Bank (1) already operates a portfolio of Climate Investment Funds that might compete against the GCF for potential donor country contributions, and (2) has been asked to serve as support staff to aid in designing the operational procedures, project selection criteria, performance standards, and safeguard measures for the new fund. Despite these concerns, some Parties remain unconvinced that an adequate substitute exists, claiming that no other extant institution could undertake the proposed financial administration and fiduciary standards with the same level of confidence from the donors. The Cancun negotiating text is silent on sources, with no proposal for how finance would flow into the fund. The text simply "takes note" of "relevant reports on the financing needs and options for mobilization of resources to address the needs of developing country Parties with regard to climate change adaptation and mitigation, including the report of the High-level Advisory Group on Climate Change Finance [AGF]" (1/CP.16§101). The Governing Instrument elaborates little on the sources of funding beyond two short statements: (1) the fund "would receive financial inputs from developed country Parties to the Convention," and (2) the fund "may also receive financial inputs from a variety of other sources, public and private, including alternative sources" (3/CP.17§§A29-A30). The Doha and Warsaw negotiating texts simply reiterate this language, calling for "ambitious and timely contributions by developed countries," and inviting "financial inputs from a variety of other sources, public and private, including alternative sources" (4/CP.19§§13, 15). Most see the faint mention of sources as unsurprising. The 2010 report by the AGF concluded that the goal of mobilizing adequate and predictable climate finance to developing countries on the order of $100 billion annually would be "challenging but feasible." Further, while it is acknowledged that adequate international finance would likely require a range of sources (including public finance, development bank instruments, carbon markets, and private capital), little unity exists among COP Parties as to the balance between public and private sources, developed and developing country participation in international carbon markets or tax schemes, and the political feasibility of other large-scale fund mobilizations. Several other multilateral fora have taken up the issue of climate finance sourcing, including the G-20 and the Major Economies Forum. However, the means by which the issue may be resolved during the fund's implementation is unclear. The Governing Instrument outlines several design aspects regarding the operation of the fund, including "complementarity, eligibility, structure, access modalities, and financial instruments" (3/CP.17§§A31-A56). Each category engenders debate among Parties, and the negotiating text leaves a number of issues open for consideration during implementation. Complementarity. While little has been decided regarding the eventual size and scope of the GCF, its formation is being viewed by many as a means through which to simplify the complex network of multilateral and bilateral funding mechanisms that currently provide climate change assistance to developing countries. Many early proponents of a global fund had envisioned that such an institution would play the role of a "fund of funds," or an "umbrella," under which to collect both the resources and the comparative advantages of the other mechanisms. As it currently stands, the Governing Instrument gives little indication that such an ambition is to be pursued by the GCF. It states, instead, that the fund would "operate in the context of appropriate arrangements between itself and other existing funds under the Convention, and between itself and other funds, entities, and channels of climate change financing outside the fund" (3/CP.17§A33). Nevertheless, the fate of the other funds would be called into question by the establishment of the GCF. At present, the Adaptation Fund is the sanctioned U.N. mechanism in support of climate change assistance for adaptation actions. The Global Environment Facility is the sanctioned UNFCCC financial mechanism in support of mitigation actions. The World Bank's Climate Investment Funds were designed originally to sunset in 2012 at the presumed commencement of the new UNFCCC mechanism. It is possible that the eventual scope of the GCF may overshadow and/or replace these funds. Conversely, it is also possible that the GCF may be deemed inadequate to existing arrangements in the eyes of potential donors. Eligibility. The Governing Instrument text states that "all developing country Parties to the Convention are eligible to receive resources from the fund" (3/CP.17§A35). Presumably this characterization would include middle-income countries like Brazil, India, South Africa, and China. The United States is on record as objecting to this arrangement. Structure. While the Copenhagen Accord specifies that the GCF would support activities related to "mitigation including REDD-plus, adaptation, capacity building, technology development and transfer" (2/CP.15§10), the Cancun negotiating text dropped such references, opting instead to state that the GCF would use "thematic funding windows" (1/CP.16§102). The Governing Instrument further unsettles the structure of the fund by stating that the GCF would "initially have windows for adaptation and mitigation"; but would likewise "ensure adequate resources for capacity-building and technology development and trade" as well as "consider the need for additional windows" (3/CP.17§§A37-A39). Further, the board is tasked with "balancing" the allocation of resources between adaptation and mitigation (3/CP.17§A50). With present funding by existing financial institutions decidedly tilted toward mitigation actions, there is likely to be a strong expectation—by developing countries as well as certain civil society organizations—that adaptation actions receive a significant portion of support from the GCF. Currently, no allocation formula has been provided, nor has a definition of "balance." Access. Consideration of how countries would access funds from the GCF, and which agencies and organizations would be allowed to acquire funds to implement projects, remains an ongoing issue of debate. Currently, most multilateral financial assistance for climate change activities in developing countries is channeled through third-party implementing agencies (e.g., U.N. agencies, multilateral development banks, major nongovernmental organizations). The Governing Instrument invites international entities to provide services for the GCF; however, it emphasizes "direct access" modalities as a way to enhance recipient country ownership in the process (3/CP.17§§A45-48). Direct access has become a prominent, new arrangement in climate finance delivery, allowing the recipient country to access financial resources directly from the fund, and/or allowing it to assign an implementing agency of its own choosing. This operational freedom has been a rallying point for many developing country Parties. The modality is also supported by many developed country Parties as a means to secure broader competition and greater country ownership. Nevertheless, implementation of direct access arrangements may prove to be slow and difficult, because they would likely require the same stringent level of fiduciary standards, competitive procurement practices, and environmental and social safeguards demanded of existing third-party implementing agencies. The Governing Instrument places the burden of developing "an accreditation process for all implementing entities" on the board (3/CP.17§A49). Instruments. As for the choice of instruments, the Governing Instrument states that financing would be provided "in the form of grants and concessional lending, and through other modalities, instruments or facilities as may be approved by the Board" (3/CP.17§A54). Observers stress that climate finance can take a variety of forms; however, debate consistently arises between donor and recipient countries as to the appropriateness of debt-based instruments (i.e., loans) for humanitarian aid. While the general presumption is that climate finance in support of adaptation actions in developing countries should be provided on grant terms, this is less customary with regard to mitigation actions. Thus, many see it as important for the GCF to secure a good match between the type of finance and the object of financing, retaining sufficient funds to provide grants when necessary, as influenced by both the country and the project profile. The relationship of the GCF to other climate finance commitments by the United States can be outlined as follows: UNFCCC 2020 Pledges. The collective pledge by developed country Parties to the goal of mobilizing jointly $100 billion per year by 2020 is not tied directly to the GCF. The Cancun negotiating text makes clear that "funds provided to developing country Parties may come from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources" (1/CP.16§99). The GCF is one of many possible public and multilateral sources. While any financial assistance that is channeled through the GCF would likely be considered a part of the $100 billion goal, the entirety of the $100 billion goal is not expected to be provided solely by the GCF, and no estimation of the GCF's presumed share has been suggested officially. Many Parties, as well as the AGF report, have suggested that development bank instruments, carbon markets, and—especially—private capital would be critical to mobilizing assistance at the level pledged. Bilateral Aid. The GCF would not necessarily interfere with current or proposed bilateral climate change assistance to developing countries. The GCF would be another multilateral mechanism for climate change assistance that would exist alongside bilateral activities, much the way that the Global Environment Facility and the Climate Investment Funds currently do. U.S. allocations between and among bilateral and multilateral assistance channels would continue through authorized congressional appropriations. Other Multilateral Aid. The GCF Board has been tasked with determining the complementarity of the GCF with respect to other U.N. multilateral mechanisms. Thus, the negotiations may produce some alteration in the landscape of the multilateral choices provided by the UNFCCC. Development bank mechanisms such as the Climate Investment Funds are currently being reevaluated by their governing boards in light of the final implementation of the GCF. Presumably, choices would remain available to donor countries. U.S. allocations among multilateral assistance channels would remain based on congressional guidance and would continue through authorized congressional appropriations. Members of Congress hold mixed views about the value of international financial assistance to address climate change. While some Members are convinced that human-induced climate change is a high-priority risk that must be addressed through federal actions and international cooperation, others are not as convinced. Some are wary, as well, of international processes that could impose costs on the United States, redirect funds from domestic budget priorities, undermine national sovereignty, or lead to competitive advantages for other countries. Regardless of current views, the United States is a Party to the UNFCCC and has certain obligations under the treaty. The executive branch continues negotiations and implementation of the UNFCCC obligations, while committees of Congress engage in oversight (from home and at the international meetings), providing input to the executive branch formally and informally, and deciding program authorities and appropriations for these activities. As Congress considers potential authorization and/or appropriations for the GCF, it may raise concerns regarding the cost, purpose, direction, efficiency, and effectiveness of the UNFCCC and existing international financial institutions. These concerns may be weighed against the design characteristics of the GCF in an effort to assess its potential performance. Congress may then be required to determine the allocation of funds between bilateral and multilateral climate change assistance as well as among the variety of multilateral mechanisms. Congress may also wish to gauge and give guidance to the new fund's relationship with domestic industries and private sector investment, as well as the spillover effects of U.S. participation on technological innovation, humanitarian efforts, national security, and international leadership. Potential authorizations and appropriations for the GCF would rest with several committees, including the U.S. House of Representatives Committees on Foreign Affairs (various subcommittees); Financial Services (Subcommittee on International Monetary Policy and Trade); and Appropriations (Subcommittee on State, Foreign Operations, and Related Programs); and the U.S. Senate Committees on Foreign Relations (Subcommittee on International Development and Foreign Assistance, Economic Affairs, and International Environmental Protection); and Appropriations (Subcommittee on State, Foreign Operations, and Related Programs). Additional issues for Congress concerning the climate negotiations in general, and the GCF in particular, may include the means to establish a more desirable form of agreement (or lack thereof); the compatibility of any international agreement with U.S. domestic policies and laws; the adequacy of appropriations and fiscal incentives to achieve any commitments under the agreement; and any requirements for potential ratification and implementing legislation, should a formal treaty emerge from the negotiations.

Over the past several decades, the United States has delivered financial and technical assistance for climate change activities in the developing world through a variety of bilateral and multilateral programs. The United States and other industrialized countries committed to such assistance through the United Nations Framework Convention on Climate Change (UNFCCC, Treaty Number: 102-38, 1992), the Copenhagen Accord (2009), and the UNFCCC Cancun Agreements (2010), wherein the higher-income countries pledged jointly up to $30 billion in "fast start" climate financing for lower-income countries for the period 2010-2012, and a goal of mobilizing jointly $100 billion annually by 2020. The Cancun Agreements also proposed that the pledged funds are to be new, additional to previous flows, adequate, predictable, and sustained, and are to come from a wide variety of sources, both public and private, bilateral and multilateral, including alternative sources of finance. One potential mechanism for mobilizing a share of the proposed international climate financing is the UNFCCC Green Climate Fund (GCF), proposed during the 2009 Conference of Parties (COP) in Copenhagen, Denmark, accepted by Parties during the 2011 COP in Durban, South Africa, and made operational in the summer of 2014. The fund aims to assist developing countries in their efforts to combat climate change through the provision of grants and other concessional financing for mitigation and adaptation projects, programs, policies, and activities. The GCF is capitalized by contributions from donor countries and other sources, potentially including innovative mechanisms and the private sector. The GCF currently complements many of the existing multilateral climate change funds (e.g., the Global Environment Facility, the Climate Investment Funds, and the Adaptation Fund); however, as the official financial mechanism of the UNFCCC, some Parties believe that it may eventually replace or subsume the other funds. The GCF was made operational in the summer of 2014. Parties have pledged approximately $10 billion for the initial capitalization of the fund. The Obama Administration announced a pledge of $3 billion over four years during the G-20 meetings in Australia on November 15, 2014. The Administration's FY2016 budget requested $500 million for the fund. Notwithstanding these financial pledges, some operational details remain to be clarified. They include what role the GCF would play in providing sustained finance at scale, how it would fit into the existing development assistance and climate financing architecture, whether sources beyond public funding would successfully contribute to it, and how it would allocate and deliver assistance efficiently and effectively to developing countries. The U.S. Congress—through its role in authorizations, appropriations, and oversight—would have significant input on U.S. participation in the GCF. Congress regularly determines and gives guidance to the allocation of foreign aid between bilateral and multilateral assistance as well as among the variety of multilateral mechanisms. In the past, Congress has raised concerns regarding the cost, purpose, direction, efficiency, and effectiveness of the UNFCCC and existing international institutions of climate financing. Potential authorizations and appropriations for the GCF may rest with several committees, including the U.S. House of Representatives Committees on Foreign Affairs, Financial Services, and Appropriations, and the U.S. Senate Committees on Foreign Relations and Appropriations. Appropriations for foreign aid are generally provided through the U.S. Administration's State, Foreign Operations, and Related Programs 150 account.

Advertising has been—and continues to be—transformed as consumers spend more of their time using electronic devices, such as smartphones and tablet computers, to access digital content of many varieties. This shift has given rise to difficult and novel public policy issues. This report examines some of these issues in the context of the structural shifts that have reshaped the advertising industry over the past decade. Thirty years ago, consumers viewed an average of 560 ads per day. As advertising has spread from newspapers and television shows to gasoline pumps, cell phones, and bus stops, the exposure to advertising is almost certainly higher today. By one count, the average American consumer may be exposed to 3,000 commercial messages every day. Advertising pays for much of the content on traditional media and online platforms. It provides 84% of television networks' revenue, and until recently furnished 60%-80% of most daily newspapers' revenue. Advertising generates more than 80% of total revenue at Internet companies such as Google, Yahoo, and Facebook, and covers the cost of many of the free "apps" consumers download to increase the functionality of their smartphones and tablet computers. Compared with traditional advertising, digital advertising seems to have some significant advantages for advertisers. For instance, small businesses can now reach millions of potential customers at low cost. Smartphones, tablets, and other mobile devices give advertisers greater access to more consumers for more hours of the day. Companies can now directly tout their products online and better tailor their ads to consumer behavior using the wealth of information consumers generate online. Nevertheless, digital advertising is causing industry-wide disruptions. The proliferation of ad-supported websites, online video, and blogs has pushed down advertising rates for both online and conventional media markets. Media traditionally dependent on advertising are being forced to find new business models as advertising revenue streams decline. SNL Kagan, an industry research firm, pegged total national and local ad revenues at $219 billion in 2012, down 9% from 2008 (see Table 1 ). The television industry continues to capture the largest share of these revenues, 35% in 2012, and, according to SNL Kagan, its total advertising receipts have been rising even as advertisers' spending on direct mail, newspapers, radio, and magazines has fallen. Digital advertising—revenue from Internet and mobile sources—represents a rising fraction of ad revenue, growing to 16% in 2012 from 10% in 2008. Using the SNL Kagan estimate, total advertising revenue came to 1.4% of GDP in 2012. Most ad spending is undertaken directly by advertisers, but a significant portion passes through advertising agencies, which develop advertising campaigns and purchase display space or broadcast time. According to the U.S. Census Bureau, advertising and related services firms had revenue of $94.8 billion in 2012. This represents 44% of all ad spending, as measured by SNL Kagan. In 2008, by comparison, these firms' revenue of $89.2 billion came to 37% of total ad spending, as measured by SNL Kagan. The increasing role of ad agencies may reflect the fact that some types of advertising frequently placed directly by individuals or small firms, notably classified ads and real estate ads in newspapers, have migrated to online media, including websites such as Craigslist that may not charge for some ads. Advertising agencies range from small operations heavily reliant on freelance talent to multinational, multi-agency conglomerates. According to the Bureau of Labor Statistics (BLS), an estimated 18,700 business establishments made up the U.S. advertising industry in 2012. However, the five largest global advertising holding companies reportedly accounted for 73% of global ad agency revenue and more than half of U.S. agency revenue in 2012. Each of these large holding companies owns or controls a large number of separate agencies, which supply services from creative work and production to media planning, buying, and post-buy analysis (see Table 2 ). Omnicom and Publicis recently announced plans to merge in a deal that is still subject to approval by competition authorities, which are considering the extent to which the combined company would be able to exercise market power in the advertising market. A 2008 study found that the advertising and market services industry was not overly concentrated at the general level. However, market research firm IBIS World recently wrote, "Industry concentration has increased over time as more agencies merge, acquire, and operate on a global basis." Regulators will also need to take into account the increasing consolidation among sellers of advertising space and time, such as television stations and search engine owners, with which advertising agencies must bargain. The explosive growth of digital advertising raises questions about the role of advertising agencies in the future. Online advertising, as compared to traditional ad campaigns, is more data-driven, based on information drawn from users' Internet activity about consumer preferences, website popularity, and clicks per ad. Sellers of digital ads increasingly use mathematical formulas (algorithms) to determine price and placement of ads. It is possible that digital-driven disintermediation may ultimately allow some advertisers to place their ads directly rather than engaging advertising agencies to handle this work, reducing the ad agencies' importance. Employment at advertising firms is one indicator of demand for advertising services. Given the importance of personnel in service-related businesses such as advertising, it is not surprising that an ad agency's largest cost is its personnel. At a typical agency, wages and salaries can account for 55%-60% of expenses. At the end of 2012, the U.S. advertising industry employed 178,500 workers at an average annual pay of more than $90,000. Advertising employment peaked above 200,000 in 2000, but has fluctuated in a relatively narrow range over the past decade (see Figure 1 ). Approximately 37% of total advertising industry employment is in either New York or California, although every state has some employment directly related to advertising. U.S. advertising agencies traditionally charged clients a 15% commission based on the cost of media placement. Such pricing continued to be the industry standard even after courts in the 1950s ruled in favor of magazine and newspaper publishers' claims that the commission system limited their ability to directly bargain with advertisers. Industry compensation has changed significantly in recent decades, with most large national advertisers paying fixed fees to their ad agencies rather than commissions. In recent years, some advertising agencies have begun to focus on developing higher-growth non-advertising businesses, including market research, media planning, interactive media, and customer relationship management. They are also deriving a larger share of revenue from non-advertising sources such as special events promotion and public relations management. Revenue from these sources may be less cyclical than that from advertising. The most recent structural changes affecting advertising began around 1995, as consumers started to migrate from traditional media sources to online platforms. Online and mobile activities have accounted for steadily growing shares of consumers' media use at the expense of all other types of media (see Appendix ), and advertisers have been forced to rethink their marketing efforts in recognition of that trend. In 2012, Internet advertising revenues in the United States totaled $37 billion, a rise of 500% from $6 billion 10 years earlier (see Figure 2 ), according to the Interactive Advertising Bureau (IAB). eMarketer, a market research firm, projects that online ad spending may total $61 billion by 2017. Trillions of digital ads are served up annually. These ads are linked to many types of content and may be viewed on a wide variety of devices. According to Nielsen data, more than 209 million Americans were active online in January 2013. Facebook reported nearly 230 million daily desktop and mobile device views in the United States at the end of June 2013. Although television remains the dominant advertising choice, in 2011 spending on online advertising exceeded spending on print advertising for the first time. Due to the expanding online market, many print publications face increased financial stress. They have responded by attempting to increase their own online advertising revenues, although few print publications have managed to charge enough for online ads to make up for the loss of print revenue. In 2012, online ad revenue made up 15% of total newspaper advertising revenues, compared with 7% in 2007. Although online and traditional advertising are similar in many ways, there are important differences. A print newspaper may be the dominant source of information in its local market and therefore be able to charge advertisers a premium price, but on the Internet that same newspaper competes against hundreds or thousands of websites, bloggers, and Twitter users, and has less pricing power. The supply of online advertising opportunities is almost unlimited, and very few of the estimated 670 million websites on the Internet are essential buys for advertisers. The abundance of ad inventory means that online advertising rates can be substantially lower than ad rates in other media. A 2011 Federal Communications Commission report found that in May 2010 a typical online ad cost about $2.52 per 1,000 viewers, whereas the average cost per thousand viewers on primetime broadcast television networks was $19.74. Digital advertising can also be sold in other ways, including cost-per-click or by keyword purchase. Despite the multitude of websites and social media outlets, the online advertising market is a concentrated market. In 2012, the top 10 sellers of advertising space on websites accounted for more than 70% of online ad revenue, and the top 50 for nearly 90%, according to IAB. Real-time bidding systems (RTBs) like Google's DoubleClick or Facebook's Exchange let marketers buy and publishers sell advertising inventory through automated exchanges. RTBs account for a relatively small part of total online ad spending, at 13%, or $1.9 billion, in 2012, but market research firm IDC predicts that they may handle 27% of all U.S. online display advertising by 2016. Over time, automated ad exchanges may be used to sell other forms of advertising, such as digital radio and electronic screens on billboards and bus shelters. Some ad companies have started to build automated ad buying systems for television and radio. The regulatory and legal implications of RTBs are getting increased attention from lawmakers and regulators because these new systems raise issues about companies' data and consumer privacy disclosure practices in online and mobile environments. Concerns about anticompetitive business practices have also come into play, with attention to whether algorithms and restrictions on the use of certain data by advertisers could threaten competition and innovation. Measuring the effectiveness of advertising has long been a challenge. Newspaper and magazine circulation figures are compiled by the Alliance for Audited Media (AAM), formerly the Audit Bureau of Circulations. Nielsen, using consumer panels and electronic devices, collects television viewership numbers. Arbitron, using its proprietary Personal People Meter (PPM) technology, produces audience data on radio shows and stations. Figures from these groups are used to determine the prices of ads on traditional media outlets. In addition, many outlets commission studies to obtain demographic information, such as the age distribution of a magazine's readers, that may be of interest to advertisers. Advertisers and others have long groused about audience measurement techniques, and they have become even more skeptical as consumers increasingly view media in digital formats. For example, digital editions of newspapers (e.g., tablet or smartphone apps, PDF replicas, or e-reader editions) made up 19.3% of U.S. daily newspapers' total average circulation in March 2013. In many cases, newspaper and magazine subscribers have access to both paper and electronic publications, and meaningful ratings measurement must track readership across various formats. No commercially available national syndicated cross-platform audience measurement service exists today. Moreover, technology increasingly allows consumers to view digital content while bypassing advertisements, so audience data may not accurately provide the information of greatest interest to advertisers. In the digital world, advertisers can count the number of people who click on an ad, forward an e-mail, or view a video on their personal computer or mobile device. They can easily track ad impressions, click-throughs, unique visits, and time spent on each page. Cable and satellite digital set-top boxes can track users and deliver different ads for different audiences. Cell phone companies are also able to follow customers on mobile phones, which provide a wealth of data for advertisers. Companies like Google have built their business models upon gathering as much information as possible about consumer interests and behavior. The ability to monitor consumer response in this granular way has large financial consequences for both advertisers and sellers of advertising. According to the IAB, 66% of online ads sold in 2012 were priced on a performance basis such as cost-per-click, meaning that if the advertisement was ineffective in attracting consumer interest, the advertiser paid little or nothing. Questions about the accuracy of digital metrics abound. According to a 2009 study by comScore, only 16% of Internet users clicked on an ad and just 8% of Internet users accounted for 80% of all clicks; the company contends that ignoring Internet users who do not click on ads is unwise. Measurement of clicks can also be manipulated through click fraud, the practice of generating sham clicks to make ads look more popular and thereby increase website owners' revenues. One recent study reported that accidental or fraudulent clicks cost companies 40% of their mobile advertising budgets. Ratings measurement firms are competing to develop more finely tuned cross-platform measurement tools. Arbitron, which traditionally gathers data on radio listening patterns, now includes high-definition and streaming listening in its national broadcast ratings and is planning a service that will measure audio as a single medium, regardless of whether it is distributed over the air or via digital streaming. Nielsen plans to introduce services to measure television shows by their level of social media chatter; to measure video viewing over streaming services such as Netflix and Amazon and on TV-enabled game systems such as X-Box and PlayStation alongside traditional audience measurement; and to measure video streaming from each television network's own website. Last year, comScore, a competitor to Nielsen and Arbitron, introduced a service called vCE to track viewing on TV, web, and mobile platforms. Rentrak measures TV content viewing by audiences using scheduled interactive video-on-demand and digital video recorders. TRA, acquired by video recording company TiVo in 2012, attempts to correlate households' television TV viewing and purchasing habits. In September 2013, following a nine-month review process, the Federal Trade Commission (FTC) approved the acquisition of Arbitron, which holds about 90% of the market for radio audience measurement, by Nielsen, which has about 80% of the TV ratings industry market. The FTC's approval included one significant condition: it required Nielsen to make available for license certain Arbitron technology and related data to ensure continued competition in TV and radio audience measurement. The collection of large amounts of data for advertising purposes has proved controversial. Some Members of Congress and industry regulators have raised questions about what companies do with the data they collect, as consumers are often uninformed about how, where, and to what extent their information is used. They are also concerned about customer targeting and privacy safeguards attached to search and behavioral advertising and social media marketing. The Senate Commerce Committee and the FTC have both taken closer looks at industry practices. A difficult challenge for advertisers is how to find potential customers in the large, but scattered, digital world. Search advertising, in which ads are linked to particular search terms and are featured near the "natural" or "organic" search results on the search results page, barely existed a decade ago, but has emerged as one answer. In 2012, search ad revenue stood at around $17 billion, accounting for about 6% of the overall ad market and nearly half of the digital ad market (see Table 3 ). The search model, which includes contextual and behavioral targeting, is viewed as an effective means of matching relevant information with user interests, helping advertisers reach potential customers at the moment they might be considering the purchase of an automobile or a vacation trip. Advertisers generally pay only if a consumer clicks on an ad. An online advertiser can easily track users who navigate to its website when they search for certain products or services. Once the user has clicked on an ad associated with a particular search term, the advertiser can use its internal server logs to trace how the individual behaves. The importance of search as an advertising medium has generated antitrust concerns. In some European countries, Google has a market share of more than 90% of all Internet searches. In November 2010, the European Commission began an investigation of whether Google "has abused a dominant position in online search, in violation of European Union rules (Article 102 TFEU)." The investigation responded to complaints by publishers and competitors, such as online map companies, about unfavorable treatment of their services in Google's unpaid and sponsored search results, as well as alleged preferential treatment of Google's own services. The European Commission's investigation may well raise new issues, such as whether a search provider's secret algorithms can be anticompetitive when used for certain purposes. Although Google's ad practices have angered privacy advocates and attracted the attention of antitrust regulators in the United States as well, the FTC closed an investigation into Google's business practices after finding that it had not manipulated search results. Ad networks, or ad brokers—reportedly numbering more than 300 companies—pool hundreds or even thousands of web pages together to facilitate advertising across the web and many other digital platforms (e.g., RSS feeds, blogs, and e-mails). Such networks deliver ads from central computer servers that can engage in targeting, tracking, and reporting of impressions. Online publishers rely on ad networks such as Google Ad Network, Casale Media Network, ValueClick Networks, and Yahoo!SearchMarketing to sell inventory that they have not succeeded in selling directly. In some cases, website owners use networks as a substitute for direct selling. Ad networks are also an important sales tool for small web ventures that have limited resources to do their own marketing. More recently, the hundreds of ad networks have given rise to a new kind of ad inventory consolidator, the ad exchange, which matches ad buyers with ad sellers hoping to fill excess inventory. Some established companies say online advertising networks and exchanges affect prices for all ad-dependent companies because they can buy up blocks of residual or less attractive ads and release them on the market at fire-sale prices, in some cases for as little as 5%-10% of what the publisher might charge for the exact same ad space on a direct buy from an ad agency. The Online Publishers Association, a coalition of media and entertainment companies with a digital presence such as the Wall Street Journal , New York Times , and ESPN.com , released a study in August 2009 arguing that ads sold via brokers were less effective than ads sold directly on their websites—for which they can charge higher prices. But many prominent media companies use ad networks to sell at least part of their own inventory that they cannot sell directly. As ad networks and ad exchanges proliferate, lawmakers have started to focus on how they use data targeting and how they track behavioral activity. The White House, IAB, and leading ad networks, including Google, Yahoo, and Microsoft, recently agreed to self-regulatory guidelines and best practices whereby they agree to prohibit websites that engage in copyright piracy or the sale of counterfeit goods from participating in an ad network's advertising program. Advertisers have had to change their strategies quickly as digital consumers have changed the way they spend their time. The digital marketplace includes a variety of platforms: Mobile . More than 9 in 10 U.S. adults now own a mobile phone. As ownership of smartphones has increased, advertising on mobile phones has grown at a torrid pace, with revenues rising from $251 million in 2007 to $4.75 billion in 2012. By 2017, revenues could reach $27 billion, according to eMarketer. One challenge is that advertisers reportedly pay less for these ads than other online ads because consumers are less likely to make a purchase on their phones, perhaps due to the smaller screen size of mobile devices. Social networks . Two-thirds of online adults in the United States use social networking sites, including networking tools such as Facebook and Twitter; social sites such as Reddit, Digg, and propeller; photo and video sharing sites such as Flickr and You Tube; and social bookmarking sites such as Delicious. This segment accounts for nearly 20% of total time that U.S. adults spend on personal computers and 30% of total time online via mobile devices. Social networking sites typically garner most of their revenues through sale of advertising space. An advantage of social media advertising is that it allows advertisers to target users' demographic information. Advertisers, however, must be aware that social network members may be less inclined to accept advertising based on their personal data than visitors to other types of websites. According to Nielsen's 2012 Social Media Report, a third of users are annoyed by ads on social networks. Gaming . More than half of U.S. households own a dedicated game console, according to the Entertainment Software Association (ESA). The industry trade group says that casual, social games are the most frequently played online games, followed by action, sports, strategy, and role-playing games. Advertisers are trying to reach these consumers by running ads before digital games on online sites or embedding their ads into the games. Ad revenues from mobile gaming were reportedly around $200 million in 2012. Digital Video . Six out of seven U.S. consumers reported watching video content over the Internet in 2012, according to a 2013 survey by Accenture. After initially struggling to figure out how to sell ads against consumer-generated content, advertisers have become comfortable with the medium. Another advertising strategy associated with video is viral ads—videos and other promotions that gain an audience through online word of mouth. eMarketer recently projected U.S. spending on digital video ads to be $4 billion in 2013, doubling to $8 billion by 2016. Video ads generally sell for higher rates than banner ads. By browsing the web, blogging, joining social networks, and playing online games, consumers produce a large quantity of personal data. One way in which advertisers and marketing firms may use this information is to deliver higher-value ads targeted at consumers with identifiable interests. The ever-growing trails of personal data being collected by commercial enterprises have raised concern among privacy advocates, who have urged legislation to give consumers greater control over what information websites collect and how that information is used. Website owners and the advertising industry, on the other hand, worry that tougher privacy standards could make it more difficult to serve up targeted ads, harming one of the more lucrative aspects of online advertising. Contextual and behavioral advertising are two ways to place relevant information in front of a potential customer. The general idea behind contextual advertising is to generate ads expected to be of interest to an Internet user due to that user's recent online activity. Because contextual advertising involves little or no data storage beyond the current online session, it raises few privacy concerns. Behavioral ads, in contrast, use past browsing behavior to target ads. A company collects information about websites and specific pages a consumer visits and uses that viewing history to make guesses on the consumer's interests; a consumer with a history of visiting cat forums, for example, might be likely to see ads for kitty litter. Such ads can command prices more than twice those of other forms of online advertising. The main mechanism for following consumers' online activity is tracking cookies, small text files that can store data. By design, cookies are largely invisible to consumers and are encrypted to be unintelligible to any user wanting to know what information they contain. Behavioral tracking and targeting can create highly detailed user profiles by combining a user's history of online activity with data derived offline. Companies that collect and sell data gathered by cookies claim the data do not identify users by name, and that their activity is adequately disclosed in privacy policies. Separately, mobile devices use location-based services to track consumers' whereabouts. This allows advertisers to serve ads related to the user's current location. Device users may be able to turn off locational tracking, although this may reduce the functionality of their devices. A 2012 survey by the Pew Research Center found that 68% of Americans did not like having their online behavior tracked and analyzed. Among the concerns are that tracking can be used to take advantage of vulnerable consumers, particularly children, and that the information collected may be used inappropriately or might reveal the identity of a person. A coalition of consumer groups has called for mandatory constraints on behavioral advertising. Behavioral tracking remains largely unregulated in the United States, although some researchers point to a strong domestic regime of corporate "privacy on the ground." U.S. courts have ruled it is legal to deploy "first-party" cookies, or information collected by a company or an online publisher for its own use. In contrast, more complex "third party" advertising cookies, placed by a party other than the site the user is currently visiting, raise questions about intrusive monitoring. According to an analysis by Keynote Systems, which describes itself as an Internet and mobile cloud testing and monitoring company, 86% of 269 top websites across four industries placed one or more third-party tracking cookies on their visitors. Common third-party advertising trackers include Google Adsense, DoubleClick, Quantcast, OpenX, Google AdWords Conversion, and Amazon Associates. The growing use and power of tracking technology have raised regulatory concerns. The FTC has already taken enforcement actions related to third-party web tracking against several companies, including Facebook and Google. In March 2012, the FTC released a report recommending a "Do-Not-Track" registry to allow consumers to opt out of online tracking. It noted that while many companies treat consumer information carefully, "some appear to treat it in an irresponsible or even reckless manner." Several web browsers have adopted "do not track" features, but some privacy experts question their effectiveness. When the feature is on—some browsers require the user to turn it on rather than making it the default setting—the browser sends a signal to websites that a user does not want to be tracked, so that any cookies placed by a website should collect only the bare minimum amount of information required to provide service. As of April 2013, Google reported that approximately 17% of its U.S. viewers using the Firefox browser had turned the "do not track" setting on. In the United States, a consortium of ad trade groups created the Digital Advertising Alliance's (DAA's) turquoise Advertising Option Icon in response to pressure from the FTC. Depicted in the adjacent box, the DAA icon may show up in or near online ads or on web pages where data are collected and used for behavioral advertising. After clicking on the icon, users find a disclosure statement on data collection, use practices associated with the ad, and a voluntary opt-out mechanism. Proponents view the DAA Icon as a means of assisting consumers with managing their online tracking profiles, although skeptics maintain Ad Choice does not go far enough to inform people about what data are being collected from them and how they are being used. An international body, the World Wide Web Consortium (W3C), is attempting to come up with tracking standards that might apply worldwide. W3C is made up of computer scientists, consumer advocates, and dozens of companies like Microsoft and Google. The group has not yet reached consensus on the technology or policy components related to consumer web tracking. Congress has been involved in regulating advertising since at least 1914, when the Federal Trade Commission Act made unlawful "the dissemination or the causing to be disseminated of any false advertisement" that might affect commerce." Among the motivations for federal legislation regarding advertising over the years have been ensuring fair competition; shielding consumers from unfair or misleading messages; limiting exposure of children to certain types of advertisements; and restricting promotion of products deemed morally or physically harmful. More recently, Congress, regulators, and the courts have turned their attention to digital advertising. Several federal agencies are involved: The FTC, the principal federal agency responsible for regulating public advertisements in all media, is charged with protecting consumers from claims that are false, deceptive, or unfair. Its authority covers both online and traditional advertising. The FTC Bureau of Consumer Protection enforces rules regarding online consumer privacy. In recent years, the FTC has investigated several companies, including Sears, Myspace, and Google, for their online behavioral advertising practices. The Food and Drug Administration (FDA) enforces the Federal Food Drug and Cosmetic Act (P.L. 75-717), which regulates food package labeling and health claims and consumer prescription drug advertising. Its recent efforts include formulating policy on the marketing of prescription drugs and restricted medical devices through social media tools. The Federal Communications Commission (FCC) regulates various issues affecting advertising on radio, television, telephone, satellite and cable television, and the Internet. The FCC is taking a fresh look at children and digital media. The FCC also adopted a rule in 2012 that for the first time requires affiliates of the four major networks in the top 50 TV markets to post political ad buying information online. All other stations will have to comply by July 1, 2014. The Consumer Financial Protection Bureau (CFPB), an independent agency created in 2011, oversees advertising of financial products to consumers. Its Mortgage Acts and Practices Advertising rule, which took effect in August 2011, prohibits mortgage lenders and brokers from making misleading claims about mortgage products. The CFPB has launched formal investigations into six companies that it believes have violated the MAP Rule. The Federal Election Commission (FEC) oversees political ads. A patchwork of state regulations also affects online advertising. Every state has consumer protection laws applying to ads running in that state, most often governed through state regulatory authorities and overseen by the state attorney general. An increasing number of states have passed laws affecting digital advertising. At least nine states, including California, Maryland, and New York, have introduced legislation on consumer or child online privacy. For instance, California requires commercial websites to post a privacy policy to any website accessible by California residents. California also enacted the so-called "eraser law" that, beginning on January 1, 2015, allows minors to remove publicly posted content on social media sites such as Facebook and Twitter and prohibits online advertising of harmful products directed at minors, including the sale of firearms, alcohol, and tobacco. The advertising industry has its own self-regulatory system organized through the Advertising Self-Regulatory Council (ASRC), formerly the National Advertising Review Council. The ASRC aims to develop standards of "truth and accuracy" for national advertisers through a compliance system that includes recommendations for corrective actions and an internal appeals process. The ASRC also sets policies for the National Advertising Division of the Council of Better Business Bureaus and the Children's Advertising Review Union. These self-regulatory bodies look into specific complaints regarding possibly inaccurate product claims and more general questions about whether certain advertising is appropriate, particularly for children. Other initiatives promote healthier food and beverage choices in advertising targeted at children; aim to improve consumer confidence in electronic advertising; establish principles for online behavioral advertising; and provide guidance for the mobile environment. The IAB, founded in 1996, develops voluntary standards for online businesses and advertisers. The IAB is a coalition of more than 500 media and technology companies that sell nearly 90% of all U.S. online advertising. One of the IAB's self-described goals is to fend off intrusive legislation. In that vein, it worked with other advertising organizations to craft voluntary guidelines for behavioral advertising, which were released in 2009. The IAB also has set guidelines for advertising in social media and on mobile platforms. It has tried to standardize online advertising, issuing definitions for terms like "click" and "impression" as well as ad sizes and use of techniques such as pop-up ads. Even though many U.S. consumers are concerned about online privacy and many actively avoid companies they do not trust, only 38% of consumers claim to know how to limit information collected on them by a website, according to Pew Research. Increasingly, regulators in the United States and Europe are scrutinizing the use and power of tracking technology. The European Union's approach to protecting privacy includes comprehensive national laws, prohibitions against collection of data without a consumer's consent (the Cookie Directive), and requirements that companies that process data register the activities with government authorities. So far, the U.S. approach has been more ad hoc and industry-based. These differences may raise significant compliance challenges for U.S. companies doing business in Europe—including those transacting with European nationals solely through the Internet without a physical presence in Europe. The FTC recommended a Do Not Track framework in 2012 and provided recommendations on privacy protections for mobile services in 2013. To keep up with changing technology, the FTC amended its Children's Online Privacy Protection (COPPA) Rule in 2012, strengthening its privacy protections to give greater control to parents over what information is collected online from children under 13. Among the more significant changes, which took effect on July 1, 2013, the revised COPPA rule expanded the definition of the term "personal information" that operators of commercial websites and online services, including mobile apps, can collect from children and revised how companies obtain parental consent. A 2012 FTC report discussed how mobile apps affect the privacy of children, which some observers believe could be a prelude to proposed regulation. Besides privacy, the FTC updated its Dot.com disclosures for online advertising to give businesses examples and direction on how to avoid unfair or deceptive business practices in their online ads. In December 2010, the Department of Commerce Internet Policy Task Force released a green paper on commercial data privacy issues that recommended, for instance, the establishment of a Privacy Policy Office and a commercial data privacy framework for businesses. That report did not endorse any privacy initiatives. Building on the Department of Commerce's work, the White House released its consumer data privacy framework in 2012, which also considers the issue of third-party personal data collection and how companies deliver targeted ads to consumers. In the 113 th Congress, Do Not Track legislation was reintroduced by Senators Jay Rockefeller and Richard Blumenthal. The Do-Not-Track Online Act of 2013 ( S. 418 ) was first introduced in 2011. If the bill is passed in its present form, companies would be required to honor user requests not to have online activities tracked, much the same as provided by the original 2011 bill. In April 2013, the Senate Commerce Committee held a hearing on the progress of industry self-regulation of online behavioral advertising. Senators Ron Wyden and Mark Kirk reintroduced geolocation privacy legislation ( S. 639 ). That measure would prohibit the interception, disclosure, and use of geolocation information (information concerning the location of a wireless device) pertaining to another person. In the House of Representatives, the Online Communications and Geolocation Protection Act ( H.R. 983 ), reintroduced by Representatives Zoe Lofgren, Ted Poe, and Suzan DelBene, contains many of the same provisions. Representative Joe Barton, who sponsored the Do Not Track Kids Act of 2011 ( H.R. 1895 ) in the 112 th Congress with then Representative Edward Markey, has said he plans to reintroduce the bill in the 113 th Congress. That act would prohibit the collection and use of minors' information for targeted marketing and strengthen privacy protection for children through, for instance, creating an eraser button for parents to delete information that companies gather about their children.

The United States is the world's largest advertising market. According to one estimate, domestic advertising revenue totaled $219 billion in 2012, accounting for about 1% of U.S. gross domestic product (GDP). Almost every major medium of information, including the press, entertainment, and online services, depends on advertising revenue. Advertising accounts for 60%-80% of total revenue at many newspapers and magazines and for most revenue at search engines and social networking sites. Television still remains the main choice for advertisers, with ad revenue at almost $76 billion in 2012. However, spurred by the growth of paid search, online video, social networks, and mobile devices, advertising is moving to online platforms. Digital advertising revenue is estimated to have reached $36 billion, or 16% of total ad revenue, in 2012. Companies can more easily track and measure consumer behavior online, which allows them to develop detailed profiles of their customers. Some Members of Congress have raised concerns about the business practices of online advertisers, particularly since their activities are largely unregulated in the United States. Digital publishers favor targeted consumer tracking because it allows them to provide free or low-cost ad-supported content. Without it, they argue, their ad-supported businesses could be harmed or possibly destroyed. Yet more than two-thirds of Americans do not like having their online behavior tracked and analyzed, according to a recent Pew Research Survey. Privacy and consumer advocates argue for more expansive federal regulations to protect consumers' online privacy. Because of these concerns, recent Congresses, including the 113th, have focused on issues relating to digital advertising. They have held hearings on data privacy and proposed legislation including "Do Not Track" to give consumers the online equivalent of a "Do Not Call" option. In addition, lawmakers have proposed legislation to protect consumers from unlawful geolocation tracking of mobile devices. Congress is also looking at search advertising (where companies sell ads around consumer-initiated search results on web browsers) and fraudulent marketing over social networks. The growing use of online and mobile tracking has raised regulatory concerns. The Federal Trade Commission (FTC) has published updated "Dot Com" disclosures for online ads; recommended a voluntary Do Not Track (DNT) function; and released new guidance on mobile advertising. The Food and Drug Administration (FDA) is studying pharmaceutical marketing in social media, with guidance required by June 2014. Since 2012, the Obama Administration and the FTC have introduced new privacy frameworks. Other countries are debating, and some already have and others might adopt, new privacy laws. In particular, digital advertising in the European market is becoming more challenging as European lawmakers consider much stricter DNT rules, raising ever greater compliance hurdles for U.S. businesses. A patchwork of state regulations, including California's eraser law, also affects online advertising.

The Experimental Program to Stimulate Competitive Research (EPSCoR) of the National Science Foundation (NSF) was authorized by Congress in 1978, partly in response to concerns from Congress and from some of those in academia and the scientific community about the geographic distribution of federal research and development (R&D) funds. Additional concerns resulted from the practice of congressional directed spending —allocating funds for specific institutions or research projects. Historical data revealed that there was a concentration of federal R&D funds in large and wealthy states and universities, and that the continuation of such funding patterns might ensure a dichotomy between the "haves" and "have-nots." As designed, EPSCoR is to help achieve broader geographical distribution of R&D support by improving the research infrastructure of those states that historically have received limited federal R&D funds. While these states fall outside of the top 10 states in receipt of federal R&D support, according to the NSF, they have "demonstrated a commitment to improve the quality of science and engineering research and education conducted at their universities and colleges." The premise of the program is that "academic research activity underpins every state's overall competitiveness." James Savage, writing in Funding Science in America , describes EPSCoR's creation as a type of "affirmative action program designed to aid less successful states and their universities in their competition for federal research funds." W. Henry Lambright, Director, Center for Environmental Policy and Administration, Syracuse University, stated that "EPSCoR was not intended as an entitlement, but rather as a catalyst." Lambright noted further that EPSCoR had a "troubled birth," having been rejected in its first vote by the National Science Board, the policy-making arm of NSF. In order to win approval, the program had to be modified, expressing values consistent with those of the NSF: "... merit, with the emphasis on an institution, the university." EPSCoR began in 1979 with five states and funding of approximately $1.0 million. Currently, EPSCoR operates in 29 jurisdictions, including 27 states and the Commonwealth of Puerto Rico and the U.S. Virgin Islands. (See Figure 1 for the participating jurisdictions.) To 2006, the NSF had invested approximately $920.0 million in EPSCoR programs and activities. Currently, EPSCoR jurisdictions receive approximately 12% of all NSF research funding. When established, it operated solely in the NSF. Congressional action led to its expansion in the mid-1980s and early 1990s, and by 1998, seven other agencies had established EPSCoR or EPSCoR-like programs. This report is limited to a discussion of EPSCoR programs at the NSF. Arden L. Bement, Jr., Former Director, NSF, stated that "EPSCoR is based on the premise that no one region and no one group of institutions has a corner on the market of good ideas, smart people, or outstanding researchers." EPSCoR is a joint program of NSF and selected states and territories. Its goal is to build competitive science by developing science and technology (S&T) resources through partnerships involving state universities, industry, government, and the federal R&D enterprise. The program is a partnership between the NSF and a state to improve the R&D competitiveness through the state's academic S&T infrastructure. The mission of EPSCoR is to raise the capability of a research institution or to assist in making a less-competitive institution more research intensive. Eventually, EPSCoR supporters hope those states receiving limited federal support would gain some level of equity in competing for federal and private sector funds through the regular grant system. The goal of the program as described by NSF is to Provide strategic programs and opportunities for EPSCoR participants that stimulate sustainable improvements in their R&D capacity and competitiveness, and to advance science and engineering capabilities in EPSCoR jurisdictions for discovery, innovation and overall knowledge-based jurisdictions. EPSCoR achieves its objectives by: (1) catalyzing key research themes and related activities within and among EPSCoR jurisdictions that empower knowledge generation, dissemination and application; (2) activating effective jurisdictional and regional collaborations among academic, government and private sector stakeholders that advance scientific research, promote innovation and provide societal benefits; (3) broadening participation in science and engineering by institutions, organizations and people within and among EPSCoR jurisdictions; and (4) using EPSCoR for development, implementation and evaluation of future programmatic experiments that motivate positive change and progression. In a prepared statement before the NSF EPSCoR 21 st Annual Conference, Arden Bement stated that "Over the past 30 years, EPSCoR has evolved into a Program of Experimentation. It is a federal-state partnership that continues to show how to create and sustain robust infrastructures that support world-class research and education in science and engineering." EPSCoR, while designed as a sheltered program, has been integrated into the performance of all NSF directorates. Its grants are awarded on a competitive peer- or merit-reviewed basis. Proposals submitted vary, and come from academic, state, profit and nonprofit organizations, and individuals. Also, support is provided to cooperative programs among institutions in different EPSCoR states, or between a state's research institution and a primarily undergraduate institution. All principal investigators of NSF EPSCoR projects are required to be associated with research institutions, organizations, or agencies within the participating state. In addition, all of the projects must be designed to contribute to the research competitiveness of the colleges and universities in the particular state. EPSCoR funding was not intended to replace existing federal, state, institutional, or private sector support, but to "... add specific value to the state's academic infrastructure not generally available through other funding sources." Responsibility for operating the program rests within the individual states. A state is required to provide matching funds. An EPSCoR governing committee is established in each participating state to identify opportunities for EPSCoR awards. States devise strategies that allow them to adapt to vastly different federal funding environments. The programs are reviewed periodically by external panels and assessments are performed by independent organizations. Data reveal that the 29 EPSCoR jurisdictions account for more than 20% of the U.S. population, about 25% of research institutions, and an estimated 16% of employed scientific and technical personnel. As a whole, these 29 jurisdictions receive approximately 13.6% of all NSF R&D funding. In FY2010, NSF provided an estimated $145.4 million for EPSCoR activities, an increase of $12.4 million (9.3%) above the FY2009 level. (See Table 1 for funding levels of previous years.) Funding was provided through three complementary investment strategies—research infrastructure improvement grants, co-funding, and outreach and workshops. NSF's current portfolio for EPSCoR includes three complementary investment strategies—research infrastructure improvement (RII) grants, co-funding of disciplinary and multidisciplinary research, and outreach and workshops. RII grants support S&T infrastructure improvements that have been designated by a governing committee in the EPSCoR state as essential to the state's future R&D competitiveness. RII grants are of two types—RII Track 1 and RII Track 2. RII Track 1 grants are made to individual jurisdictions and are awarded up to $15.0 million for a period of up to 60 months. RII Track 2 grants are made to consortia of EPSCoR jurisdictions and are limited to a maximum of $2.0 million for up to 36 months. Examples of RII grants include startup funding for faculty research, faculty exchange projects with major research centers, development of nationally competitive high-performance computing capabilities, acquisition of state-of-the-art research instrumentation that is unavailable through the NSF's regular grant system, creation of graduate research training groups that encourage multidisciplinary experiences, developing linkages between industry and national laboratories, and development of programs to expand minority participation in science, engineering, mathematics, and technical disciplines. RII grants are the principal focus of the EPSCoR program. NSF funding for EPSCoR RII grants in the FY2012 appropriations is estimated at $110.0 million, a $5.3 million decrease from the FY2011 level. The Administration's request for RII in the FY2013 request is $116.2 million. The co-funded grant mechanism encourages EPSCoR researchers and institutions to move into the mainstream of federal and private sector R&D support. Co-funding is an internal, cross-directorate, NSF funding mechanism. Co-funding activities are applicable in the various directorates, the Office of Polar Programs, the Office of International Science and Engineering, the Office of Cyberinfrastructure, and the Office of Integrative Activities. Co-funding allows states to receive more support than would have available under EPSCoR alone. Proposals supported are in areas that have been identified by the state's EPSCoR governing committee as critical to the future R&D competitiveness of the state or jurisdiction, and include, among other things, individual investigator-initiated research proposals and R&D encompassed by the various crosscutting and interdisciplinary programs in NSF. To receive support for co-funding, a grant proposal must be, among other things, rated at or near the same level as the highly rated grants in the regular grant process. The FY2012 appropriation for co-funding is $39.4 million, a slight increase over the FY2011 level of $38.9 million. The Administration requests $40.0 million in FY2013 for co-funding. The outreach and workshops funding mechanism of EPSCoR provides support for NSF program directors and relevant personnel to visit participating researchers in EPSCoR states and to further familiarize the states and researchers with NSF policies, practices, and programs. Also, it allows agency personnel to become more cognizant of the availability of resources within the states and their institutions. Outreach and workshops visits take two forms—those initiated by a host of an EPSCoR state or jurisdiction, and those initiated by NSF program officers. The visits may result in colloquia or seminars. It is NSF's contention that the contact provided by outreach visits will lead to an increase in both the quality and quantity of grant proposals submitted by participating states. Funding for the outreach strategy in the FY2012 appropriation is estimated at $1.5 million, slightly above the $1.2 million enacted in FY2011. It is anticipated that funding in FY2012 will allow for expansion of activities that build regional and jurisdictional research infrastructure. The budget request for outreach and workshops in FY2013 is $2.0 million. In 1994, an evaluation of the EPSCoR program was conducted by the COSMOS Corporation. The evaluation, released in May 1999, covered the period 1980-1994, and was designed to, among other things, determine whether participating states and their institutions had increased their share of federal R&D funds and to identify the EPSCoR program strategies that led to improvement of the states' and institutions' research competitiveness. The evaluation found that states' R&D competitiveness did improve and that EPSCoR had contributed to this competitiveness. The report stated that Based on the observed changes in federal and NSF shares, it can be concluded that the EPSCoR states' share of R&D funding did increase relative to the shares of the other states. To this extent, EPSCoR was associated with a lessening of the undue geographic concentration of R&D in the United States. Although the changes were small in absolute terms, this was a notable accomplishment in an era when research universities in non-EPSCoR states also were thriving and upgrading substantially. The report noted that NSF EPSCoR had facilitated the development of partnerships and linkages among institutions, state and federal government, and the private sector. It also revealed that while no state had graduated from EPSCoR (no longer receiving EPSCoR support), many EPSCoR research clusters had become fully competitive and no longer sought EPSCoR resources. The evaluators determined that for colleges and universities in EPSCoR states, the cluster strategy may have been a more effective approach to improving research capability than that of supporting individual researchers or single research projects, a strategy used in the early years of EPSCoR. An August 2006 report, EPSCoR 2020: Expanding State Participation in Research in the 21 st Century—A New Vision for the Experimental Program to Stimulate Competitive Research (EPSCoR) , found that while some participating states and jurisdictions had developed S&T capabilities that address national issues, they needed to progress at a faster pace in order to benefit more fully in a national research agenda. The report stated that The task now is to accelerate the positive trends in building research infrastructure and capacity in the states, and to incorporate the expertise and capabilities of these states into the larger national research agenda. As we move into a time of doubling the federal commitment to basic research, it is particularly critical and appropriate to make a new commitment to the EPSCoR states that have been left behind in the S&T community... . It is imperative that all of NSF's science, engineering, and education programs adopt the concept of broadening geographical and cultural participation in NSF activities as part of their objectives. Programmatic planning should consider how best to include all states and their research institutions as potentially important S&T resources. The workshop that generated this report proposed that a more flexible RII grant program should be instituted. The position of the workshop participants was that since the states were heterogeneous, a "one-size program" should not be applied to the then 27 different jurisdictions. Rather, the individual needs of the states should be a factor in determining the most effective strategy for infrastructure improvement. The current award structure is viewed as being no longer adequate for some jurisdictions to achieve a higher level of competitive science in some areas of research. It was proposed that RII grants be awarded for a period of up to five years, in the amount of $3.0 million-$5.0 million per year, per state or jurisdiction. The longer period of time for the grant would enable states to better implement their strategic plans. The increased level of funding would be related to the size of the jurisdiction and the extent of the "S&T transformative challenge." Another suggestion from the workshop was to place the EPSCoR program in NSF where its cross-directorate interactions would be maximized and integrated into all of the cutting edge initiatives of the agency. The FY2008 budget request for NSF did transfer the EPSCoR program from the Education and Human Resources Directorate to the Integrative Activities in the Research and Related Activities account. The FY2008 budget submission stated that "The relocation will allow the EPSCoR program greater leverage for improving the research infrastructure, planning complex agendas, and developing scientific and engineering talent for the 21 st century." An additional recommendation of the workshop was for EPSCoR states and jurisdictions to become a "test bed" for new initiatives. The report noted that because EPSCoR has matured as a program, it should expand its research capacity by developing expertise in areas of national importance, such as homeland security and national defense, cyberinfrastructure, environmental observatories, coastal and ocean issues, and energy expenditures. With the proposed flexibility to the RII grant mechanism, the participating states and jurisdictions could pursue multiple strategies, such as support for transformative research and innovation that has been outlined in NSF's strategic plan. The workshop participants maintained that "Developing expertise in topics of national importance will enhance success of proposals in other competitions." At the beginning of the EPSCoR program, some questioned the length of time required for a state to improve its research infrastructure. It was suggested to be five years, but that proved to be "... unrealistic, both substantively and politically." Questions remain concerning the length of time states should receive EPSCoR support. There are those in the scientific community who believe that some states and their institutions should assume more responsibility for building their research infrastructure and become less dependent on EPSCoR funds. They argue that some researchers and states have become comfortable with EPSCoR funding and are not being aggressive in graduating from the program. It continues to be called an experimental program after three decades, and no state has yet graduated from the EPSCoR program. The issue of graduation from the program has generated considerable Congressional interest. In August 2005, the NSF's Committee of Visitors (COV) released a review of the EPSCoR program for the period FY2000 through FY2004. One of the issues in the August 2005 review was centered on determining when states would become independent of EPSCoR resources. Questions included What initiatives are there to promote graduation from EPSCoR and mainstreaming in the regular grant making process? What level of progress must a state achieve to justify that it is no longer eligible for EPSCoR resources? The COV admitted that graduation/progression from the EPSCoR program is a "challenging" issue and has been debated from the beginning of the program within NSF and among the various stakeholders and participating states and jurisdictions. The review determined that it has become necessary to revisit what it means to "graduate" from the program. Because of the importance in developing a mechanism or measure for graduation from the program, the COV proposed the creation of a dedicated EPSCoR Advisory Committee (external) that would make recommendations for both eligibility for and graduation from EPSCoR. The report stated that Clearly, a fixed definition of graduation would be a moving target, especially in an environment where jurisdictions are still being added to the EPSCoR family. The current Office Head has articulated a vision of "programmatic graduation/progression," which necessarily includes the evolution of the EPSCoR programs themselves as infrastructure continues to grow. This vision should be further developed, vetted, and eventually implemented. The issue of increasing the number of states seeking support through the program was addressed in the review. The COV noted that the increase in the number of eligible jurisdictions has strained limited resources. In FY2002, 5,595 proposals were received, and 1,511 awards were made with a funding rate of 27.0%. In FY2006, 7,037 proposals were received, and 1,489 awards were made with a funding rate of 21.0%. The report stated that Given the likely budgetary constraints to be imposed on EPSCoR in the coming years, the program runs the danger of not being able to serve its core clientele with the limited funds available if the number of eligible states and institutions continues to increase. At some point, the Foundation must more fully address infrastructure, capacity, and geographic distribution in its other grant programs. One solution might be for the Foundation to re-organize some of its existing programs in order to create an EPSCoR-like program that used "institutional competitiveness" rather than "state competitiveness" as the primary definitional criterion for support. Additional issues and questions were included in the August 2005 review by the COV. The review found that the majority of EPSCoR programs were capacity building based (infrastructure). The COV proposed that the significant number of capacity building programs should be supplemented with "complementary programs for building capability and competitiveness." The SBRC grant mechanism was cited as important to expanding the "competitiveness" building component of EPSCoR. Also, the COV report found that while EPSCoR's program portfolio was diverse, and included minority serving institutions, community colleges, and high schools, it was determined that EPSCoR jurisdictions should further strengthen the linkages between faculty at minority serving institutions and those at research intensive institutions. An examination of the review process for large RII-type proposals concluded that the review process should be more rigorous. The COV proposed including site visits in the review process, and in enlarging the pool of reviewers in the scientific and technical areas proposed for research. The review noted that with the current, relatively small number of reviewers of EPSCoR programs, there is "insufficient injection of new viewpoints in the review process." The report suggested that the pool of reviewers should be expanded by rotating in a minimum of 25.0% new reviewers each year. The report further proposed that EPSCoR management use the review model employed by NSF's Engineering Research Centers, Science and Technology Centers, and Science of Learning Centers. Many of the questions posed by the EPSCoR COV following its review of the program are those that are being debated by the various stakeholders in the EPSCoR community. In particular, questions concerning the criteria used to determine when a state or jurisdiction graduates from the EPSCoR program may continue to receive Congressional attention during the 112 th Congress. On March 2, 2007, Senator Rockefeller introduced S. 753 , EPSCoR Research and Competitiveness Act of 2007. S. 753 would have authorized appropriations for FY2008-FY2012 to NSF for EPSCoR in the following amounts: FY2008, $125.0 million; and FY2009-FY2012, $125.0 million and "... $125,000,000 multiplied by a percentage equal to the percentage by which the Foundation's budget request for such fiscal year exceeds the total amount appropriated to the Foundation for fiscal year 2008." Language in the bill would have required the development of plans that allow EPSCoR states and jurisdictions to participate in NSF's Cyberinfrastructure Initiative and Major Research Instrumentation program. S. 753 would have required the NSF Director to obligate not less than 20.0% of the EPSCoR budget on co-funding projects that are ranked, by peer review, in the top 20.0% of all submitted grant proposals. Also, EPSCoR states and jurisdictions participating in the RII grant mechanism would have had to include in the proposals, partnerships with out-of-state research institutions. S. 753 was referred to the Senate Committee on Health, Education, Labor, and Pensions. It saw no further action. On January 4, 2011, President Obama signed into law the America COMPETES Reauthorization Act, FY2010 ( P.L. 111-358 ). The law authorizes appropriations for the NSF from FY2011 through FY2013 (FY2011, $7,424.4 million; FY2012, $7,800.0 million; and FY2013, $8,300.0 million). The authorization does not provide any specific funding levels for EPSCoR. However, the legislation includes language stating that The NSF Director shall continue EPSCoR to help eligible states develop their research infrastructure that will make them more competitive for research funding. The program shall continue to increase as NSF funding increases. A cross-agency evaluation of EPSCoR and other federal EPSCoR-like programs will be conducted, examining accomplishments, management, investment, and metric-measuring strategies implemented by the different agencies directed at increasing the number of new investigators receiving peer-reviewed funding. The examination will also include the degree of broadening of participation, knowledge generation, application, and linkages to national research and development competitiveness. The legislation also directs the National Academy of Sciences to conduct a study on the EPSCoR program to determine, among other things, the effectiveness of each state program; recommendations for improvements for all participating agencies to reach EPSCoR goals; and an assessment of the effectiveness of participating states in using awards to develop and build their science and engineering infrastructure. This study of EPSCoR and EPSCoR-like programs will provide recommendations that may result in policy implications for various federal agencies. It is anticipated that this study will be completed in August 2013. On November 18, 2011, the President signed into law the Commerce, Justice, Science, and Related Agencies Appropriations Act, FY2012 ( P.L. 112-55 ). The law provided a total of $7,033.1 million for the NSF in FY2012, $120.5 million above the FY2011 enacted level of $6,912.6 million. EPSCoR is contained within the Integrative Activities account and was funded at $150.9 million in FY2012, $4.1 million above the FY2011 level. The FY2012 appropriation supported a portfolio of three complementary investment strategies—research infrastructure improvement ($110.0 million), co-funding ($39.4 million), and outreach and workshops ($1.2 million)—for the 29 EPSCoR jurisdictions. The NSF indicated that approximately 24.0% of the funding for EPSCoR is to be used for new research awards in FY2012, with the balance providing continuing support for ongoing grants. The Administration's FY2013 budget request for the NSF is $7,373.1 million, a 4.8% increase over the FY2012 estimate of $7,033.1 million. Included in the total is $158.2 million for EPSCoR, an increase of 4.8% over the FY2012 level. NSF estimates that approximately 40.0% of the FY2013 requested funding will be made available for new awards. The balance will be directed at supporting awards made in prior years.

The Experimental Program to Stimulate Competitive Research (EPSCoR) of the National Science Foundation (NSF) was authorized by Congress in 1978, partly in response to concerns in Congress and the concerns of some in academia and the scientific community about the geographic distribution of federal research and development (R&D) funds. It was argued that there was a concentration of federal R&D funds in large and wealthy states and universities, and that the continuation of such funding patterns might ensure a dichotomy between the "haves" and "have-nots." EPSCoR began in 1979 with five states and funding of approximately $1.0 million. Currently, EPSCoR operates in 29 jurisdictions, including 27 states and the Commonwealth of Puerto Rico and the U.S. Virgin Islands. To 2006, the NSF had invested approximately $920.0 million in EPSCoR programs and activities. When established, it operated solely in the NSF. EPSCoR was expanded in the mid-1980s and early 1990s; by 1998, seven other agencies had established EPSCoR or EPSCoR-like programs. EPSCoR is a university-oriented program, with the goal of identifying, developing, and utilizing the academic science and technology resources in a state that will lead to increased R&D competitiveness. The program is a partnership between NSF and a state to improve the R&D competitiveness through the state's academic science and technology (S&T) infrastructure. Eventually, it is hoped that those states receiving limited federal support would improve their ability to compete successfully for federal and private sector funds through the regular grant system. On November 18, 2011, President Barack Obama signed into law the Commerce, Justice, Science, and Related Appropriations Act, FY2012, P.L. 112-55. The law provides, among other things, funding for the NSF. The law provides a total of $7,033.1 million for the NSF in FY2012, $173.2 million above the FY2011 enacted level. Included in the total funding for NSF is $150.9 million for EPSCoR, approximately $5.5 million above the FY2011 level. The FY2012 appropriation for EPSCoR supports a portfolio of three complementary investment strategies—research infrastructure improvement ($110.0 million), co-funding ($39.4 million), and outreach and workshops ($1.5 million). It is anticipated that approximately 24.0% of the funding for EPSCoR in FY2012 will be used for new research awards. The remaining will be directed at providing support for grants made in previous years. The Administration's FY2013 budget request for the NSF is $7,373.1 million, a 4.8% increase ($340.00 million) over the FY2012 estimate of $7,033.1 million. Included in the request total is $158.2 million for EPSCoR, an increase of 4.8% over the FY2012 estimate. Approximately 40.0% of the requested funding for EPSCoR in FY2013 will be directed toward new awards. The balance will support continuing awards made in prior years. This report will be updated periodically.

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.

A spate of autumn 2008 news stories reported the downsizing or closure of periodicals and their publishers due to financial challenges: U.S. News & World Report magazine will reduce its paper issues to once per month; Time Inc., which publishes 24 magazines for the U.S. market, has said it will cut 600 jobs, about 6% of its workforce; Alpha Media Group, publishers of Maxim and other magazines for young men, will lay off 50 to 60 of its staffers; Hearst magazines will transition CosmoGirl magazine to a web-only publication; Condé Nast announced that it would reduce its business magazine, Portfolio , from 12 issues per year to 10, and Men ' s Vogue from 10 issues per year to 2; Radar magazine ceased operations in October, and Manhattan Media Inc. announced that it had put off its plans to restart publication of 02138 , a lifestyle magazine for Harvard University alumni; and The century-old Christian Science Monitor , a newspaper that is delivered via U.S. mail five days per week, will cease publishing in paper format in April 2009. Except for a weekend paper edition, the newspaper will become a Web-only publication. These are not the only periodicals so affected. Since 2006, revenue shortfalls have compelled many other magazines to cease publication or to become Web-only publications. Generally, observers have cited three causes for periodicals' recent difficulties: (1) a decline in subscriptions, (2) a rise in paper costs, and (3) a decline in advertising revenue due to the downturn of the U.S. economy and advertisers' decisions to spend larger portions of their advertising budgets on websites instead of print publications. The aforementioned factors are not the only factors that have negatively affected the survival of periodicals. As with any business, firm-specific causes, such as managerial errors (e.g., financial mismanagement) and oversupply (e.g., too many periodicals competing for the same audience of readers), also have come into play. In light of these high profile incidents, and because of a possible U.S. Postal Service postage increase in 2009, the 111 th Congress may be asked to help periodical publishers reduce their operating costs by providing them with increased postage subsidies. Some publishers sought postage relief during the 110 th Congress. Such assistance would not be unprecedented. In fact, as this report details, Congress has subsidized periodicals postage since the founding of the United States. Postage on periodicals has been subsidized since the U.S. postal system was established more than two centuries ago. Initially, senders of all types of mail were subsidized—they did not have to pay postage. Instead, the U.S. Post Office Department (herein, Post Office) attempted to collect postage from the persons who received mail. Periodicals, though, benefitted from an additional subsidy. The Post Office Act of 1792 (1 Stat. 238) set the postage charged to the recipients of newspapers lower than the postage charged to the recipients of letters. In 1794, Congress expanded this subsidy to include magazines, although the postage on magazines was not set as low as the postage on newspapers (1 Stat. 362). These subsidies were problematic for the Post Office. It struggled to collect postage from mail recipients, who often balked at paying, and suffered significant costs from carrying periodicals. According to one estimate, by 1801, "newspapers constituted 45 percent of all pieces mailed, but defrayed a mere eight percent of the [Post Office's] costs." The Post Office's costs exceeded its revenues, so each year, Congress appropriated funds to cover the costs not provided for by postage. The Post Office's periodicals revenue problem continued unabated until 1874, when Congress enacted a statute that required publishers to prepay postage (18 Stat. 232). Publishers were charged two cents per pound of newspapers and three cents per pound of magazines. This began to remedy the revenue shortfall, yet the postage charged still did not cover the total periodical delivery costs to the Post Office. Congress subsidized the delivery of newspapers, then magazines, for at least three reasons. First, some Members of Congress reasoned that if citizens were to play their role in a democratic republic, they needed to have information on matters affecting the nation. Telegraphs, radio, and other modern information technologies did not yet exist. Newspapers were a means to provide information to the geographically dispersed members of the public so they might ably discharge their duties as citizens. Second, publishers, who gained increased readerships through subsidized delivery, actively lobbied Congress and, by editorial and other means, could attempt to unseat Members who voted contrary to the publishers' interests. Third, as the newly formed political parties developed, Congress saw the mails as a means for getting their message out and winning elections. This national policy of subsidizing newspapers was problematic, though, because it did not clearly define what constituted a newspaper. Postmasters general and postal employees were obliged to work out definitions themselves on the fly. Some Post Office officials thought a publication's format was conclusive—if it was printed on a single sheet of large paper, it was a newspaper. Others at the Post Office looked to the publication's contents or frequency of publication. Seeing the incentives available, advertisers produced advertisements that looked like newspapers and magazines in order to receive the periodicals postage subsidy. Over the course of the 19 th century, Congress and the Post Office sought a policy that would clearly distinguish between publications with contents worthy and unworthy of government postage subsidies. In 1852, Congress reworked the postage rate schedule to provide the same subsidized postal rates for newspapers, magazines, and circulars (10 Stat. 38-39). Congress enacted other incremental alterations in 1863 (12 Stat. 705), 1872 (17 Stat. 300), and 1874 (18 Stat. 233), which set higher postal rates for other "printed matter," such as advertisements, and, critically, required mailers of periodicals to prepay postage. The Post Office was no longer obliged to attempt to collect postage from mail recipients. Despite these efforts, the Post Office continued to be inundated with non-periodical mail pieces that mailers wished to send at subsidized periodicals postage rates. They could do this because the laws governing the mails simply did not provide a clear distinction between periodicals and non-periodicals. With the Post Office's support, Congress further refined postal classifications. An 1876 statute distinguished advertising mail from periodicals by referring to the former as a "publication designed primarily for advertising" (19 Stat. 82). Three years later, Congress enacted a significant reclassification of mail types and postage (20 Stat. 358-361). The statute limited periodical or second-class mail to "printed paper sheets, without board, cloth, leather, or substantial binding." It required a publisher seeking a periodical postage rate to register the publication with the Post Office, which would certify that the printed matter met the new statutory criteria for second-class mail. By law, a periodical had to be published at regular, stated intervals, and be addressed to a particular subscriber (e.g., John Q. Public, 74 Further Lane), not the household (Resident, 74 Further Lane). The 1879 law also included a provision that attempted to distinguish periodicals from non-periodicals based on content. While a periodical was permitted to carry advertisements, its total contents had to be devoted primarily to "information of a public character, or devoted to literature, the sciences, arts, or some special industry" (20 Stat. 359). Reduced postage rates, then, would not be limited only to magazines that carried information directly relevant to government, policy, and politics. Mail pieces that failed to meet the second-class criteria were charged the higher third-class postal rates levied on pamphlets, books, and other printed matter. Underlying the 1876 and 1879 laws' distinction between periodical mail and advertising mail was a principle enunciated by Arthur H. Bissell, an attorney for the Post Office—postage on periodicals that benefited the nation by informing the public on useful matters might justifiably be subsidized by taxpayers. However, "the government should not carry at a loss to itself publications which are simply private advertising schemes." Despite these efforts to limit access to subsidized periodicals postage, some publishers still attempted to pass off non-periodicals as such. During the first seventy years of the 20 th century, Congress little altered the postal laws that provided reduced rates for periodicals. Congress did expand the range of mailers whose publications could qualify for periodical postage rates even if they did not meet the legal standards for what constituted a periodical. Fraternal groups, religious organizations, and not-for-profit entities were permitted to mail their publications at the reduced periodicals postage rates (28 Stat 104-105; 37 Stat. 551; and 40 Stat. 328). Some lauded these expansions of the availability of subsidized periodical postage, while others expressed concerns over the utility of these policies. Congress also further refined the postal laws to distinguish editorial from advertising content. In 1917, Congress bifurcated the postage rates paid by periodicals. Mailers would be charged one rate for the editorial portion of the periodical, and a higher rate for the advertising portion (40 Stat. 328). In 1951, Congress enacted a statute that prohibited providing periodicals postage rates to any publications "having more than 75 per centum advertising in more than one-half of its issues during any twelve-month period" (65 Stat. 762). In 1960, Congress enacted a statute to recodify the nation's postal laws. The definition of a periodical had changed little since 1879 (74 Stat. 666-667). The law required a periodical to (1) be regularly issued at stated intervals as frequently as four times a year and bears a date of issue and is numbered consecutively; (2) be issued from a known office of publication; (3) be formed of printed sheets; (4) be published for the dissemination of information of a public character, or devoted to literature, the sciences, arts, or a special industry; and (5) have a legitimate list of subscribers. Additionally, any publication seeking the periodicals postage rate could not consist of more than 75 percent advertising in more than half of any of its issues in any 12-month period. There matters stood until Congress enacted major reforms in 1970. In the late 1960s, the Post Office was widely recognized to be in crisis. The department had been running deficits for years. In FY1967, it spent $1.2 billion more than it earned. Periodicals mail was the biggest money loser for the Post Office, contributing nearly $400 million to the department's deficit that year. The postage on periodicals covered only about a quarter of the delivery costs. As before, taxpayers made up the shortfalls through annual appropriations. Congress addressed this problem and many others afflicting the Post Office by enacting the Postal Reorganization Act of 1970 (PRA; 84 Stat. 719-787; 39 U.S.C. 101 et seq.). The statute abolished the Post Office Department, replacing it with the U.S. Postal Service (USPS), an "independent establishment of the executive branch." This new entity was designed to be financially self-sufficient, that is, it was to operate without annual congressional appropriations. To this end, the PRA provided the USPS with greater authority over its operations so that it could control its costs and boost its revenues. The law also had effects on periodicals, which had continued to fail to provide the USPS with revenues that covered the cost of their delivery. As described above, periodicals had received special treatment under postal law since 1792. The PRA required periodicals to be charged "reduced rates" (84 Stat. 762-763; 39 U.S.C. 3626). Additionally, the PRA did not end the policy enacted in 1917 (40 Stat. 328) that required lower postage rates for the editorial portion of a periodical than for the advertising portion. Hence, the law permitted periodicals to continue to pay postage rates that were subsidized. The PRA retained much of the earlier statutory criteria. To receive periodicals rates, a publication had to meet the following requirements: (a) Each owner of a publication having periodical publication mail privileges shall furnish to the Postal Service at least once a year, and shall publish in such publication once a year, information in such form and detail and at such time as the Postal Service may require with respect to— (1) the identity of the editor, managing editor, publishers, and owners; (2) the identity of the corporation and stockholders thereof, if the publication is owned by a corporation; (3 ) the identity of known bondholders, mortgagees, and other security holders; (4) the extent and nature of the circulation of the publication, including, but not limited to, the number of copies distributed, the methods of distribution, and the extent to which such circulation is paid in whole or in part; and (5) such other information as the Postal Service may deem necessary to determine whether the publication meets the standards for periodical publication mail privileges. The Postal Service shall not require the names of persons owning less than 1 percent of the total amount of stocks, bonds, mortgages, or other securities. (b) Each publication having such mail privileges shall furnish to the Postal Service information in such form and detail, and at such times, as the Postal Service requires to determine whether the publication continues to qualify for such privileges. (c) The Postal Service shall make appropriate rules and regulations to carry out the purposes of this section, including provision for suspension or revocation of periodical publication mail privileges for failure to furnish the required information (84 Stat. 765-766; 39 U.S.C. 3685). These requirements remain in law, and the USPS's interpretations of these requirements and its interpretation of what constitutes a "periodical" may be found in the USPS's Domestic Mail Manual . PRA dramatically reduced Congress's role in setting postal rates, shifting this responsibility to USPS and the newly created Postal Rate Commission (PRC, renamed the Postal Regulatory Commission in 2006). PRA mandated that postal rates and fees be set so that USPS's revenues would equal its costs (84 Stat. 760). It devised a new quasi-judicial process for setting postage rates. USPS would file a request for rate increases with the PRC; the public and interested parties would submit comments and rebuttals; then the PRC would produce a "recommendation" of rates that USPS's board of governors could accept, reject, or return to the PRC for further consideration (84 Stat. 760-762). The recommendation of the PRC had to be based upon the following factors: (1) the establishment and maintenance of a fair and equitable schedule; (2) the value of the mail service actually provided each class or type of mail service to both the sender and the recipient, including but not limited to the collection, mode of transportation, and priority of delivery; (3) the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to that class or type plus that portion of all other costs of the Postal Service reasonably assignable to such class or type; (4) the effect of rate increases upon the general public, business mail users, and enterprises in the private sector of the economy engaged in the delivery of mail matter other than letters; (5) the available alternative means of sending and receiving letters and other mail matter at reasonable costs; (6) the degree of preparation of mail for delivery into the postal system performed by the mailer and its effect upon reducing costs to the Postal Service; (7) simplicity of structure for the entire schedule and simple, identifiable relationships between the rates or fees charged the various classes of mail for postal services; and (8) such other factors as the Commission deems appropriate. (84 Stat. 760-761) Many of these criteria include calculations of value and cost. For example, for the first time, periodicals (and all mail classes) were to "bear the direct and indirect postal costs attributable to that class or type plus that portion of all other costs of the Postal Service reasonably assignable to such class or type" (84 Stat. 760). None of the PRA's criteria, however, required the PRC to provide reduced postage rates for mail devoted to "the dissemination of information of a public character, or devoted to literature, the sciences, arts, or a special industry." The PRA had an immediate effect on all mail classes, including periodicals. In setting second-class rates, the costs to USPS now had to be considered. PRA did authorize "revenue forgone" appropriations for some types of mail, such as not-for-profit mailings (84 Stat. 762-763). Generally, though, the law required postage to cover the costs to USPS of receiving, handling, and delivering mail. The PRA had significant effects on postage rates, and on periodicals rates in particular. In 1972, USPS and the PRC agreed to raise periodicals postage rates significantly. The two agencies agreed to further large increases in periodicals postage rates in 1974. In 1976, the PRC recommended raising rates further still. The PRA established timetables for phasing out the subsidies for periodicals over five years. In 1974, Congress lengthened this phase-out period to eight years (88 Stat. 287). Congress justified this extension on the basis of publishers' economic hardship—the industry claimed it was suffering from the significantly increased postage rates. Despite the PRA's changes to the law and the postage increases, periodicals did not cease to be subsidized. For one, the PRA did not end the policy enacted in 1917 (40 Stat. 328) that required lower postage rates for the editorial portion of a periodical than for the advertising portion. For another, the statute required each mail class to bear its "attributable cost," but not its "total cost," which includes both its attributable cost (i.e., the cost to USPS to process a particular class of mail), and its "institutional cost" (i.e., the cost that is fixed, such as the compensation of a mail carrier, who delivers all classes of mail). Because the PRA required all mail and postal services to collectively cover USPS's costs, when periodicals failed to cover their attributable and institutional costs, other classes of mail had to cover the shortfall. After the steep postage increases of the early 1970s, some publishers had protested that the new postage rates were too high. Some of them publicly pondered using private couriers to deliver their periodicals. In 1976, Congress amended the PRA to underscore its desire that periodicals mailers were to pay postage that was less than their total delivery costs. The new law required the PRC to consider an additional criterion when setting postage rates—"the educational, cultural, scientific, and informational value to the recipient of mail matter" (90 Stat. 1303; 39 U.S.C. 3622(b)(8)). Between 1971 and 1996, the repeated increases of periodicals postage helped the mail class cover its attributable costs ( Figure 1 ) and provide significant revenues toward USPS's institutional costs ( Figure 2 ). After 1996, however, periodicals postage revenue did not climb as quickly as their delivery costs, and periodicals ceased contributing revenues toward the USPS's institutional costs. By 2006, periodicals revenue had fallen nearly $375 million below their attributable costs. It is difficult to determine the cause or causes for the decline of periodicals revenues relative to the USPS's costs to deliver them. The data above are not conclusive, although one observation may be made. For reasons unclear, the USPS did not propose to increase periodicals postage in 1997, and as Figure 1 indicates, a drop in cost coverage followed. However, it must be noted that subsequently the USPS and PRC agreed to raise periodicals rates repeatedly. In 2000, the USPS proposed boosting rates 14.4%; the Postal Rate Commission suggested lowering that increase to 9.9% after the USPS announced that it had devised means to reduce its periodicals processing costs. The USPS and PRC agreed to increase postage on periodicals more than 10% in 2002, and more than 5% in 2005. Nevertheless, these higher rates did not increase revenues sufficiently so that periodicals covered their attributable costs. The USPS filed a rate case on May 3, 2006. "Without rate and fee changes," the USPS explained, it "would incur a substantial revenue deficiency in the proposed test year, in contravention of 39 U.S.C. 3621." Periodicals rates were particularly problematic. Postmaster General John E. Potter later testified before Congress that the volume of periodicals mailed had declined 13 percent between 2000 and 2006, and some periodicals paid rates that did not cover even their attributable, let alone institutional, costs. The PRC Chairman, Dan Blair, told Members of a House Subcommittee that USPS's costs of delivering first-class and standard mail letters have remained essentially flat over the past 10 years and as a result, the rates for that mail have been fairly stable. This is in sharp contrast to the spiraling costs associated with periodicals. For many years, the Commission has sought to keep periodicals postage rates as low as possible in the face of declining magazine mail volume and increasing Postal Service costs.... [M]agazines make the lowest contribution to overhead of any class of mail—roughly $3.6 million to fund almost $35 billion in [USPS] overhead costs. After holding open hearings, accepting public comment, and reviewing testimony submitted from witnesses, the PRC issued its recommended decision on February 26, 2007. The USPS, with a few caveats, accepted PRC's recommended postage rates. Most of the new postage rates were implemented on May 14, 2007, but USPS did not implement the new periodicals rates until July 15. According to Postmaster General Potter, the USPS delayed the new periodicals rates to give periodicals mailers time to adjust to the new and very different postage schedule. The PRC was concerned that periodicals as a class had "low cost coverage;" it made no contribution to the USPS's institutional costs, and had failed to cover all its attributable costs. Thus, the PRC recommended rates that would increase periodicals rates 11.8 percent. Additionally, the PRC held that the periodicals postage schedule should identify more of the "cost drivers" within USPS's mail handling process. Doing this required the PRC to produce a new periodicals rate schedule that was much more complex than the old one. The new schedule recognizes these cost drivers and reduces postage costs for mailers who undertake mail preparation activities (such as presorting mail pieces by zip code and stacking them on pallets) that lower USPS's handling costs. Rate case R2006-1 had direct effects on periodical subsidies. First, the postage subsidy would be reduced by requiring periodicals to cover a little more of their attributable costs. Second, by identifying more of the cost drivers in mail handling, the decision tacitly recognized that some periodicals mailers paid postage that covered a higher percentage of their attributable costs than other mailers. That is, these latter periodical mailers were receiving an intra-periodical class subsidy from the former periodical mailers. The new rate schedule would remedy this inequity. The new rate schedule for periodicals provoked much debate. Some critics suggested that the new periodicals rates were the result of a conspiracy. On the scale of giant social troubles, this one won't register, but as a breathtaking example of corporate influence and regulatory cronyism, it can't be beat. After almost a year of hearings, last month the Bush-appointed U.S. Postal Service Board of Governors tossed out their own staff recommendations and at the last minute approved a 758-page plan submitted by Time Warner that will increase mailing costs between 18 and 30 percent a year for small-circulation magazines like Mother Jones, while postal costs for the big guys—Time, Newsweek, People—will actually go down. The PRC stated that the goal of the new rate schedule was to better reflect costs, and send price signals that will encourage more efficient mailing practices. Periodicals costs have risen disproportionately in recent years, in part because current rates send such poor signals [to mailers]. For example, Periodicals is the only class where no rate penalty is applied to nonmachinable pieces. The [PRC] recommends a new design that draws from the separate proposals of the Postal Service and Time Warner Inc. The recommended rates recognize only a limited portion of the costs associated with identifiable cost drivers in order to moderate the impact on mailers. Nonetheless, Periodicals mailers are extremely cost conscious, and the Commission expects that these rates will foster more efficient, less costly Periodicals mail. Representatives from some periodicals complained that the new rate structure was unfair to publishers of small circulation magazines, who claimed they could not take the mail preparation steps required to reduce their postage costs. Some magazines and newspapers, sharply criticized the rate increases in editorials, and expressed concern that the higher rates imperiled their existence, thereby threatening free speech and the free flow of information. Sensing the dissension, the House Subcommittee on Federal Workforce, Postal Service, and the District of Columbia held a hearing on October 30, 2007. Victor Navasky, publisher emeritus of The Nation magazine, told Congress that the R2006-1 rate case decision had imperiled those magazines that devote the most space to public affairs—to covering in depth events like the hearings before this very subcommittee .... In the case of The Nation , the cost of mailing the magazine is already more than three times the cost of the paper on which it is printed.... [The new rates] will cost the magazine an additional $500,000 a year. Some small-circulation periodicals, Navasky warned, would "undoubtedly expire in the months ahead" due to the higher postage rates. In a letter to the subcommittee that was appended to the statement of Victor Navasky, Scott McConnell of The American Conservative , stated that the magazine faced a 58% increase in mailing costs, with postage rising from a little under 20 cents per issue to 31.5 cents per issue. Not everyone sympathized with these views. James O'Brien of Time Inc. told Congress that the USPS's cost of delivering periodicals had "outpaced inflation by more than 60% since 1986." The incentive structure of the rate system, O'Brien argued, was at fault. "Because the postage rates for periodicals did not reflect the Postal Service's costs, and gave mailers little reason to choose more efficient mailing practices, periodicals costs continued to escalate." Mark W. White of U.S. News & World Report, L.P., argued that the rate case did not benefit all large circulation publishers and afflict all small circulation publishers. His company, which mailed 95 million magazines in the previous fiscal year, faced a 15% increase in postage rates. White argued that the R2006-1 rate case decision had not gone far enough to end biases in the periodicals rate structure that benefit "inefficient mailers" at the expense of efficient periodicals mailers. Some critics of the new periodicals rates have argued that Congress should enact legislation to increase postage subsidies for small circulation magazines. During the 110 th Congress, no Member introduced legislation to alter postage rates for periodicals. The enactment of the Postal Accountability and Enhancement Act (PAEA; P.L. 109-435 ; 120 Stat. 3198-3263) in December 2006 made the future of the postage subsidy for periodicals less clear. The PAEA requires the new Postal Regulatory Commission (PRC) to devise a new postage rate-setting system. The statute states that an "objective" of the new system is that it will allocate "the total institutional costs of the Postal Service appropriately between market-dominant and competitive products" (120 Stat. 3201). Additionally, one of the "factors" that the PRC had to consider in establishing the new pricing system is the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to each class or type of mail service through reliably identified causal relationships plus that portion of all other costs of the Postal Service reasonably assignable to such class or type (120 Stat. 3201). Prima facie, it might appear that this provision requires each mail class, including periodicals, to cover all of its costs. Were this the case, it might be expected that the periodicals subsidy would diminish. This interpretation, however, does not appear to be correct. First, the PAEA does not state that each mail classes must cover its total costs. Rather, the law requires each mail class to cover its "attributable" costs. Second, the PAEA only requires that the USPS's institutional costs be allocated among mail classes "appropriately." The law does not define what "appropriately" means. The PRC interpreted it to mean that competitive products (overnight mail and other products) must contribute a minimum of 5.5% of the USPS's institutional costs. This would mean that up to 94.5% of the USPS institutional costs would need to be covered by market dominant products. However, neither the law nor the PRC's rules require periodicals or any other market dominant product to cover a particular percentage of these institutional costs. Third, the PAEA contains provisions that clearly favor the continued subsidization of periodicals as a class of mail. The PAEA did not abolish the longstanding statutory policy of lower postage rates for the editorial portion of a periodical. Also, the PAEA stipulates that one of the factors that the PRC is to consider in devising the new postage rate system is "the educational, cultural, scientific, and informational value to the recipient of mail matter" (120 Stat. 3202). In light of these points, nothing in the law would appear to indicate that the postage subsidy for periodicals need diminish. That said, the PAEA may provide one means under which periodicals postage could be greatly increased and its subsidies greatly reduced. The new rate-setting system mandated by the PAEA must limit the annual postage increases for periodicals and other market dominant products. Postage may not be increased more than the Consumer Price Index for All Urban Consumers (CPI-U) (120 Stat. 3202-3203). Thus far, it appears that both the PRC and the USPS strongly respect the PAEA's rate cap. On February 11, 2008, the USPS filed its first notice of increased postage for market dominant products. The Postal Service proposed to raise postage beginning May 12, 2008. It sought to increase periodicals postage 2.71%, an amount beneath the CPU-U of 2.9%. On March 17, 2008, the PRC found the proposal appropriate under the PAEA. However, the PAEA does permit postage increases in excess of the CPI-U in the event of an "extraordinary and exceptional circumstance." Neither the law nor the PRC's rules define what would constitute such a circumstance. Notably, the USPS may file its second annual notice for increased postage for periodicals and other non-market products in the winter of 2009. During 2008, the monthly CPI-U has been between 3.0% and 4.5%. The USPS is experiencing financial distress and operating deficits, due in part to a decline in mail volume. If the USPS's revenues continue to drop significantly and its operating costs increase, the USPS may argue that it is experiencing an "extraordinary and exceptional circumstance" that would justify raising the postage of periodicals and other market dominant products sharply. It is unclear whether the PRC would agree and accede to such an argument. Nor is it clear whether the PRC would interpret the law to permit the USPS to raise periodicals postage at a rate higher than that charged to other mail classes. Over the long-term, it is unclear whether the periodicals postage subsidy will increase or decrease. To date, the new rate schedule and the PAEA have not had any obvious effects on the periodicals postage subsidy. A PRC analysis found that in FY2007 periodicals postage revenues covered only 83% of the class's attributable costs, a shortfall of $448 million, and made no contribution toward the USPS's institutional costs. Government provision of postage subsidies for periodicals long has been a contentious issue because it involves disputed principles and vexing implementation issues. Some persons argue that periodicals play a unique role in a representative democracy, that they provide for a flow of information and ideas that benefit the nation. Adherents of this viewpoint argue that this special role means that periodicals deserve subsidization, and that this role was recognized by PRA, which requires USPS to "have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people" (39 U.S.C. 101(a)). Not everyone agrees with this policy. Some persons contest the purported contribution of periodicals to the public weal or suggest that other means of information transmission, such as the telephone, television, and the World Wide Web are at least equally effective. Still other individuals take the position that fairness requires that each mailer should pay his or her total postage costs. Meanwhile, other observers accept the importance of periodicals to a representative democracy, but suggest that actuating this idea into a policy has been an overly complex undertaking. As the above review of postage subsidy policy indicates, none has worked perfectly. Postage subsidies policies inevitably have raised two contentious questions: (1) Which periodicals should receive these subsidies?; and (2) Who should pay for these subsidies? The sheer diversity and plenitude of periodicals—from The Atlantic Monthly to People to Sports Illustrated to Zymurgy —has made enacting periodical postage subsidies a challenging and, frequently, expensive undertaking. Should Congress wish to consider attempting to assist periodicals publishers, it may wish to consider the following seven issues: (1) Are the conditions that are negatively affecting periodicals likely to continue? (2) Does the closure of some periodicals negatively affect the health of the U.S.'s democratic republic? (3) Is the transformation of periodicals from paper publications to online publications a positive or negative development? (4) Would increased postage subsidies greatly decrease the probability that more publishers will cease publication? (5) Would some other form of governmental aid—such as below market loans—be more helpful to periodicals publishers? (6) Should government assistance be provided to all periodicals regardless of their editorial subject matter (e.g., government and politics, celebrity news, sports, and hobbies)? (7) If periodicals should be further subsidized, what should be the goal of that subsidy? Should it cover the shortfall between periodicals postage revenues and periodicals attributable costs? Or should it also provide a contribution toward periodicals institutional costs?

Recently, financial challenges have compelled a number of publishers of periodicals (e.g., magazines and newspapers) to downsize their operations and to cease printing certain publications. To cite just two examples—Time Inc. has said it will cut 600 jobs, and the century-old Christian Science Monitor newspaper, which is delivered via U.S. mail five days per week, is to cease publishing in paper format in April 2009. In light of these high profile incidents, and because of a possible U.S. Postal Service postage increase in 2009, the 111th Congress may be asked to help periodical publishers by providing them with increased postage subsidies. Some publishers sought postage relief during the 110th Congress. Such assistance would not be unprecedented. In fact, Congress has subsidized periodicals' postage since the founding of the United States. This report describes and assesses the major federal policies that have subsidized postage for periodicals. These policies have been contentious because they involve disputed principles and vexing implementation issues. Some persons believe that periodicals provide important information about politics and government to U.S. citizens, which helps members of the public to discharge their civic duties. Others dispute this contention. Additionally, considerable implementation issues also arise, such as "which periodicals should receive these subsidies?" Since 1792, Congress has provided periodical mailers with reduced rates that are lower than their delivery costs. Initially, Congress funded these postage subsidies through annual appropriations. Senders of other types of mail, such as first-class letters, have paid rates that covered the revenue shortfall of periodicals. In 2007, the Postal Regulatory Commission (PRC) restructured the postage rate schedule to more accurately peg periodical rates to their delivery costs. The postage paid by some periodical mailers jumped dramatically and their postage subsidies fell. Later that same year, the PRC established the new rate-setting system mandated by the Postal Accountability and Enhancement Act (PAEA; P.L. 109-435; 120 Stat. 3198-3263). The system requires each class of mail to bear its "direct and indirect costs," but it also includes a rate cap that forbids the USPS from raising postage rates by more than the rate of inflation, except in "extraordinary or exceptional circumstances." The long-term effects of the new rate schedule and rate-setting system on periodicals subsidies are unclear. Thus far, the USPS's periodicals delivery costs continue to exceed greatly its periodicals postage revenues. This report will be updated as events warrant.

This report examines the Department of Defense (DOD) use of aviation fuel and possibilities to reduce that use by examining related issues and presenting options Congress may choose to consider. DOD, the largest single consumer of energy in the United States, recognizes the need to reduce its reliance on fossil fuel. For a number of years, the department has been making steady progress at decreasing their use of fossil fuels on their installations and in their facilities but following the sharp rise in oil prices after Hurricane Katrina in August 2005, DOD stepped-up its examination of fuel use in weapon systems. The largest portion of fossil fuel used by DOD is in the form of aviation fuel. Although formulated for use in aircraft, aviation fuel is also used in other, land-based, platforms such as tanks and generators to reduce DOD's logistics requirements. Reducing DOD's consumption of aviation fuel could, by itself, significantly reduce the department's overall use of and reliance on fossil fuel. In Fiscal Year 2005, DOD consumed roughly 125 million barrels of oil—approximately 1.2% of the nation's total. About 74% of DOD's energy powers its mobility vehicles—Air Force aircraft, Navy ships, and Army ground vehicles. Over half—roughly 52%—is aviation fuel. There are several options available to DOD for reducing its use of fossil-based aviation fuel. Each has advantages and disadvantages and no single option provides the perfect solution. Advanced technologies such as synthetic fuels offer potential sources of alternate fuel but further development and study are required before DOD can employ them on a large scale. DOD can also take measures to decrease its use of fuel. Possible options include upgrading aircraft engines and modifying operational procedures. Many of these measures, however, are costly and must compete for funding with other operational priorities. The Department of Defense has a unique fuel-use pattern. Approximately 74% of its energy powers its mobility vehicles and over half—roughly 52% of the total—is comprised of aviation fuel. By comparison, aviation accounts for only about 4% of the energy used in the United States. Fuel costs, although less than 3% of the total DOD budget, have a significant impact on the department's operating costs. For every $10 increase in the price of a barrel of oil, DOD's operating costs increase by approximately $1.3 billion. DOD budgets for fuel a year or more in advance of its purchase, therefore and sudden large increases in fuel costs must be paid for with emergency funds or by shifting funds from other programs. The Air Force, which operates most of DOD's fixed-wing aircraft, spends the largest share of DOD's fuel budget. Every $10 increase in a barrel of oil increases the Air Forces' already sizable annual fuel costs by $600 million. Fuel use varies significantly among the different types of aircraft. For example, the B-52H, one of the oldest aircraft in the service's inventory, has a maximum takeoff weight of 488,000 pounds, runs on eight TF-33 turbine engines, and burns approximately 3500 gallons per flight hour. That is 138 pounds of aircraft for each gallon per hour. By contrast, the C-5B, designed with 1980s technology, is a larger aircraft with four engines, has a maximum takeoff weight of 769,000 pounds, and also burns about 3500 gallons per flight hour. That is 219 pounds of aircraft for each gallon per hour-an increase of 59% over the B-52 capabilities. The T-38, a high-performance jet-engine aircraft used for training, has a maximum takeoff weight of 12,000 pounds and burns only about 395 gallons per flight hour. That is only 30 pounds of aircraft for each gallon per hour-much less than either of the above. The lower fuel efficiency of the T-38 compared to either the B-52H or the C-5B is a reflection of the smaller aircraft's aerodynamic design, afterburning engines, and much shorter sortie length rather than the efficiency of its engines. Fuel consumption rates for a representative selection of Air Force aircraft is provided in Table 1 . Delivering fuel to the operational user can add substantially to its cost. The "fully burdened" cost of fuel refers to the price of fuel with the costs of delivery added in. Costs of delivery include the acquisition, maintenance, and operating costs of an aerial refueling tanker and the crew that flies it. The cost of a gallon of fuel delivered to an aircraft on a flight line is a relatively straight-forward computation and generally ranges between $2 and $3 per gallon. On the other hand, the fully burdened cost of a gallon of fuel delivered to an aircraft in flight is estimated to be around $20 per gallon. / The complexity of measuring fuel use and costs for aircraft is one of the many challenges DOD has to becoming a more efficient user or making other changes in its fuel use, such as using alternative fuels. As fuel costs rose, DOD recognized the need to understand factors that contribute to the department's heavy usage and examine ways to mitigate them. Consequently, DOD has conducted or sponsored a number of studies in recent years to examine DOD's fuel use, determine the extent to which that use is problematic, and recommend actions to decrease its use. Two general conclusions seem to emerge from various government studies. The first is that there does not appear to be one ideal alternative fuel with which to replace or augment the fossil fuel already although different technologies are being pursued to varying degrees. The second is that there appears to be several methods currently available to DOD with which it can decrease fuel consumption. The earliest comprehensive DOD study on fuel use, conducted by the Defense Science Board in 2001, focused on the fuel efficiency of weapon systems and was the first to suggest that the true cost of fuel—the fully burdened rate—was not sufficiently understood by decision-makers. Two other comprehensive studies were completed more recently, in September 2006. The JASON report, Reducing DOD Fossil Fuel Dependence , asserted that an energy shortage was unlikely in the near term to hinder DOD operations and emphasized the value of optimizing the energy efficiency of weapon systems over pursuing alternative fuels at this time. The Defense Task Force on Energy Security was an internal cross-functional group that looked at energy use throughout the department. It presented three recommendations: 1) increase the energy efficiency of weapon systems, 2) accelerate energy-saving initiatives for facilities, and 3) establish an alternative fuels programs. The most recent government sponsored report, completed in April 2007 by LMI Government Consulting, Inc. (LMI), identified areas in which DOD's energy goals are not synchronized with their current practices and recommended actions to address the misalignment. Each of these studies is more fully examined below. In 2000, the Under Secretary of Defense (Acquisition, Technology and Logistics) directed the Defense Science Board (DSB) to form a task force to examine how DOD could improve the fuel efficiency of their weapons systems. The task force would also identify institutional barriers that impeded the department's understanding of and ability to capture the full advantages of more fuel efficient systems. The task force was not asked to look at possible sources of alternative fuel and they did not address that topic in their report. They reported five significant findings. Finding #1: Although significant warfighting, logistics and cost benefits occur when weapons systems are more fuel-efficient, these benefits are not valued or emphasized in the DOD requirements and acquisition processes. When buying new weapons, DOD placed performance as its highest priority and seemed to overlook how fuel efficiency could result in improved performance. Furthermore, when developing new systems the department did not seem to take into account how the fuel use of a particular system could have far-reaching effects on the total force (e.g., a system's logistical requirements may create a vulnerable delivery chain). Finding #2: The DOD currently prices fuel based on the wholesale refinery price and does not include the cost of delivery to its customers. This prevents a comprehensive view of fuel utilization in DOD's decision-making, does not reflect the DOD's true fuel costs, masks energy efficiency benefits, and distorts platform design choices. The DSB pointed out that overlooking the true cost of fuel also masks the real benefits of fuel efficiency. As a consequence, fuel efficiency is not regarded as a relevant factor in the acquisition of weapon systems or in other logistics related decisions. For example, in 1997, using an average fuel price of 97 cents, the Air Force estimated that re-engining the B-52H would generate a savings of just under $400 million over 40 years. Based on that calculation, the service concluded that retrofitting was not cost-effective. The DSB reworked the equation using an average fuel cost of $1.50 per gallon (the board estimated that 10% of the fuel would be delivered via aerial refueling at a cost of $17.50 per gallon) and calculated a savings of $1.7 billion. Finding #3: DOD resource allocation and accounting processes (the Planning, Programming, and Budgeting System (PPBS), DOD Comptroller) do not reward fuel efficiency or penalize inefficiency. The task force found that DOD interest in fuel efficiency had been mainly limited to meeting goals established by legislation or executive order. Since those goals mainly applied to installations, including their non-warfighting vehicles, there was little incentive to improve the fuel efficiency of weapon systems. Additionally, the department had no way to quantify—and therefore value—the benefits of conserving fuel. Finding #4: Operational and logistics wargaming involving fuel requirements are not cross-linked to the Service requirements development or acquisition program processes. The task force found that in DOD combat simulation exercises, each military service emphasized mission execution while adequate fuel supplies were considered a constant. DSB asserted that doing so left DOD unaware of the potential effects of fuel efficiency on combat operations and of the vulnerability of the fuel supply chain. Furthermore, with no model of efficient or inefficient fuel use, DOD could not analyze fuel related logistical requirements as part of the acquisition process. Finding #5: High payoff, fuel-efficient technologies are available now to improve warfighting effectiveness in current weapon systems through retrofit and in new systems acquisition. The task force found that there were existing technologies that could increase weapon systems' fuel efficiency. However, without the tools to analyze the collective benefits of fuel efficiency to warfighting capability, the value of improvements could be misjudged and not fully appreciated. JASON, an independent scientific advisory group for DOD, was asked by the Director, Defense Research and Engineering (DDR&E) to assess ways in which DOD could reduce its demand for fossil fuel using advanced technology, including alternative energy sources. The group was asked specifically not to conduct a detailed analysis of U.S. Air Force fuel use. The JASON report contained three relevant findings: Finding #1: DOD fuel costs, though high, represent only about 2.5-3% of the DOD budget and should not be a "primary decision driver at present." JASON determined that other fuel related issues such as life-cycle costs of weapon systems and the supply chain (in terms of both money and human life) were more significant and compelling factors but that the cost of fuel may become a significant issue in the future. They further noted that the number of Air Force aircraft, the largest source of fuel consumption in DOD, is expected to decline significantly in the next several decades, which should result in a corresponding decrease in fuel use. Finding #2: Although revolutionary options in weapon system design exist in their early stages, the technologies that currently promise the most significant fuel savings are light -weighting and modernizing diesel engines. JASON saw little use at the present for most alternative ground vehicle designs such as hybrids, all-electric, or fuel-cell vehicles. In the case of the first two, military use patterns would not allow optimal use of the technologies. In the case of fuel-cells, JASON found that the technology was not sufficiently mature and that there was not a good way to transport hydrogen to theater. JASON suggested light-weighting vehicles by decreasing the weight of manned vehicles and using more unmanned vehicles. JASON recommended upgrading the gas turbine engine in the Army M-1 Abrams tanks to a modern diesel and that the Army, in particular, install fuel consumption tracking devices in vehicles. The resulting data will allow DOD to gauge use patterns and provide data with which to make informed decisions on engine selections and optimal efficiency. Finding #3: The Department of Defense uses less than 2% of the oil consumed in the United States and is therefore not a large enough consumer to drive the market for conventional or alternative fuels. JASON and others have suggested that finding substitutes for fossil fuels must be a national endeavor. According to DOD it uses roughly 340,000 barrels of oil a day whereas the daily consumption rate for the United States is approximately 21 million barrels. DOD agrees that it plays a significant role in testing, certification, and demonstrating the use of synthetic jet fuel but is not a large enough consumer to drive the market. JASON contended that in the search for alternative fuels, the most economical and environmentally sound method is to use Fischer-Tropsch technology to produce liquid fuel from "stranded" natural gas. They further reported that ethanol was not suitable as a DOD fuel due to its low energy density and high flammability. In Spring 2006, former Secretary of Defense Donald Rumsfeld formed a DOD task force with a four-part charter: 1) Examine the issue of energy security; 2) Devise a plan for lowering DOD's fossil fuel requirements; 3) Identify alternate energy sources; and 4) Examine past and ongoing studies to help define DOD's options. The Director of Defense Research and Engineering (DDR&E) led the effort. Task force representation included a cross-section of skills within the military departments, the staff of the Chairman of the Joint Chiefs of Staff, and other defense agencies. Unlike the other studies discussed, the DOD task force did not produce a written report but presented its findings in a slide format that contained little explanation or background. Their three recommendations were: Recommendation #1: Increase weapon platform fuel efficiency. Incorporate the component of energy efficiency into acquisition policy decisions Develop more efficient propulsion systems, power generators, and machinery Develop more light-weight military vehicles Strive for efficient operations and increased use of simulators (primarily affects the aviation community) Recommendation #2: Accelerate energy efficiency initiatives for military installations. Meet or accelerate present energy efficiency goals for military installations. Consider and address the energy efficiency of installation-based non-tactical vehicles. Expand Energy Conservation Investment Program/Energy Saving Performance Contracts. Recommendation #3: Establish an alternate fuels program. Further develop and test synthetic/alternative fuels for military weapon systems. Measure and assess DOD's progress in alternate fuel use. Develop incentives programs for alternate fuel industry. The Pentagon's Office of Force Transformation and Resources contracted LMI to develop an approach for the creation of a new DOD energy strategy. LMI identified three areas where DOD's current practices were not aligned with its stated energy goals, recommended three main actions that DOD needed to take in order to address the misalignments, and provided other energy related options that could enable DOD to improve their corporate energy related processes. The three areas of strategic, operational, and fiscal considerations LMI identified where DOD's practices and stated energy goals produced some friction and limitations were as follow. 1. Strategic: DOD's dependence on foreign supplies of fuel limits its flexibility in dealing with certain producer nations; 2. Operational: DOD seeks greater mobility, persistence, and agility for its forces but the energy requirements of its forces limits the department's ability to attain those things; and 3. Fiscal: DOD seeks to reduce the operating costs of its forces and of future procurements but increased energy consumption and increased prices are causing energy associated operating costs to grow. The three actions LMI recommended DOD take to address the areas noted above were as follow. 1. Incorporate energy considerations (energy use and energy logistics support requirements ) in the department's key corporate decision making: strategic planning, analytic agenda, joint concept and joint capability development, acquisition, and planning, programming, budgeting, and execution (PPBE); 2. Establish a corporate governance structure with policy and resource oversight to focus the department's energy efforts; and 3. Apply a new framework to promote energy efficiency, including alternate energy sources, to those areas consuming the most fuel (aviation forces), requiring the most logistics support (forward land forces and mobile electric power), or having the most negative effect on the warfighter (individual warfighter burden). Other options LMI proposed for DOD to consider included the following. 1. Incorporate energy considerations (energy use and energy logistics support requirements) in all future concept development, capability development, and acquisition actions; 2. Make energy a top research and development priority; 3. Increase global efforts to enhance the stability and security of oil infrastructure, transit lanes, and markets through military-to-military and state-to-state cooperation; and 4. Make reducing energy vulnerability a focus area of the next strategic planning cycle and Quadrennial Defense Review. The government sponsored reports seem to indicate, with limited exceptions, that DOD should consider various options for reducing its reliance on fossil fuels. Aviation fuel in particular is viewed as a primary target of that reduction as it accounts for the largest share of fuel consumed by the department. Generally, DOD has several available methods for decreasing its use of petroleum-based aviation fuel. They can be placed in two categories: 1) increasing the use and supply of alternative fuels and 2) decreasing the demand for petroleum-based fuel. In the first category, options include producing synthetic fuel from coal, natural gas, and biomass, as well as hydrogen fuel cells. In the second category, DOD can use various existing technologies to increase the fuel-efficiency of weapon systems and modify operating procedures and polices to use less fuel. All the options have limitations and none provide a perfect solution. Whether it is more prudent to aggressively pursue alternative fuels or concentrate resources on decreasing the department's fuel demand is a matter of debate. There are many who suggest that DOD can spur the development of a viable domestic Coal-To-Liquid industry. Others suggest that developing such an industry would contribute to carbon emissions and divert funds from the development of alternative fuels produced from renewable sources as well as from efforts to increase the fuel-efficiency of weapon systems. The following is a discussion of the most frequently cited options. Alternative fuels are often divided into two categories: "synthetic" fuels derived from non-renewable sources such as coal and natural gas; and "biofuels," produced from renewable feedstocks such as corn, sugar cane, and prairie grasses. Both offer advantages and disadvantages as substitutes for petroleum-based fuel. An issue that may affect DOD's search for alternative fuels is the department's desire for a "Single Battlespace Fuel." Currently there are seven to nine different types of fuel used in theater. Ultimately, DOD would like there to be just one in part to decrease risks associated with the elaborate and vulnerable fuel delivery system now in place. However, that may be several years away. Although DOD has been exploring the use of synthetic fuel for aircraft, there is no indication that DOD is actively pursuing alternative fuels for battlefield ground vehicles. There is speculation that this is due to the difficulty of altering the current logistical system and also to the fact that research and development in alternative ground fuel are still in the early stages. The technology used to produce synthetic liquid fuel from coal, natural gas, or other solid carbon-containing feedstocks has existed since around 1923 when two German researchers, Franz Fischer and Hans Tropsch, found a way to turn carbon-based materials into useable petroleum products. Their discovery—the "Fischer-Tropsch" process—forms the basis of the technology in use today. Synthetic fuel can also be extracted from oil shale and tar sands (also referred to as oil sands), forms of organic-rich sedimentary rock abundant in North America. There are many positive qualities associated with Coal-To-Liquid (CTL) and Gas-To-Liquid (GTL) fuels produced via the Fischer-Tropsch (F-T) process. The most frequently cited advantage is that it burns cleaner producing fewer carbon emissions as a result of its consumption in the aircraft. F-T fuels produce approximately 2.4% less carbon dioxide, 50%-90% less particulate matter, and 100% less sulphur than traditional petroleum-based fuels. Other positive attributes of F-T fuels include excellent low temperature properties that improve high altitude operations and low temperature starting; and "superior" thermal stability, which makes possible the development of highly fuel efficient engines. Another oft cited advantage of F-T fuel for DOD is that it can be produced using resources available within the United States. Coal and natural gas, two common feedstocks , are relatively abundant in the United States. The Energy Information Administration estimated in a 1995 report that the United States has an approximately 250 year supply of coal. It should be noted that an increased demand for coal driven by a growing F-T industry may affect that estimate. The Air Force has already conducted testing of F-T GTL fuel with positive results. In September, 2006, at Edwards Air Force Base in California, the Air Force tested a 50/50 mix of F-T synthetic fuel and Jet Propellant 8 (JP-8) in one engine of a B-52 Stratofortress. No detrimental effects were noted as a result of the flight. In December, 2006, the Air Force tested the synthetic fuel mixture in all eight of the B-52's engines and again, no detrimental effects were noticed. The last set of tests—cold weather engine starting—took place in January, 2007, at Minot Air Force Base in North Dakota. Detailed data analysis and further inspections of the aircraft and its engines are ongoing. Challenges involved with the large-scale production of F-T fuel may make its long-term use by DOD problematic. Notwithstanding the low carbon emissions produced by burning F-T fuel in engines, total carbon emissions generated through the fuel's production and use are estimated to be twice that of petroleum-based fuel. Although advocates of F-T argue that the carbon emissions generated during fuel manufacture can be sequestered, U.S. Department of Energy (DOE) officials and other experts have stated that large-scale carbon sequestration is several years away. Emissions from F-T fuels seems to be of general concern as examination of the technology continues. The Air Force acknowledges that capturing carbon emissions is the "big issue" as they move ahead with the exploration of F-T fuels. According to an Air Force spokesperson, DOD is working with the Department of Energy, the Defense Logistics Agency, and the Task Force on Strategic Unconventional Fuels to explore ways to mitigate the problems that may be associated with F-T fuel production. Furthermore, legislation proposed in January 2007 ( S. 154 , S. 155 , and H.R. 370 . See Appendix for relevant legislative language.) calls for the Secretary of Energy, in cooperation with the Administrator of the Environmental Protection Agency, the Administrator of the Federal Aviation Administration, the Secretary of Health and Human Services, and the Secretary of Defense, to report on emissions from F-T products used as transportation fuel. Although F-T fuel burns cleaner in aircraft engines, the fuel's lack of sulphur presents two problems for the engines. One is that it reduces the fuel's ability to provide lubrication causing stress on the engine's moving parts. The other problem is that less sulphur results in fewer aromatic hydrocarbons, which, in traditional petroleum-based fuels, have the desirous effect of causing engine seals to swell and prevent leakage. Critics of F-T fuel also point to the potential environmental hazards posed by increased coal mining as an additional drawback. Some fear a "mining boom" that could lead to the strip mining of public lands, degraded water quality in some locations, and additional miners put at risk. They question whether a relatively small dent in oil imports is worth what they predict as a 40% increase of coal production. Instead a need for increased fuel efficiency and cleaner energy alternatives is often cited. Recent efforts at constructing F-T plants in the United States have proven challenging. In September 2006, after supplying DOD 100,000 gallons of synthetic fuel to test in the B-52, Syntroleum, a company that produces synthetic fuel, closed its demonstration plant in Tulsa, Oklahoma, its revenue falling after completion of its contracts with DOD and the Department of Transportation. In a February 2007 hearing before the House Energy and Commerce Committee, Secretary of Energy Samuel W. Bodman, in response to questions about why the Department of Energy proposed halting funding for a CTL diesel fuel plant in Pennsylvania, stated that the "financial viability" of the project was questionable. Cost estimates had grown from an original $612 million in 2003 to approximately $800 million. On the other hand, potential developers may be encouraged by DOD's interest in synthetic fuels. In May 2006, when the Defense Energy Support Center, the agency within the Defense Logistics Agency that purchases fuel for DOD, asked companies to submit proposals for the production of 200,000 gallons of F-T fuels for testing by the Air Force and Navy in 2008 and 2009, it received over 20 responses. The Air Force has set a goal of using a domestically produced synthetic fuel blend for 50 percent of its aviation fuel by 2016. At current usage rates, that would require approximately 325 million gallons of mixed fuel a year. The number of plants that would be required to reach this capacity have been reported at five and ten. Establishing plants in the United States would reportedly take several years and a significant amount of capital. Estimates for the cost of construction vary between $1 billion for a plant with a daily output of 10,000 barrels a day to $5-10 billion for a plant with a daily output of 80,000 barrels a day. According to GAO, DOE estimates that a CTL plant would cost up to $3.5 billion and require 5-6 years to build. Compounding the difficulties posed by the high cost of constructing a F-T plant are restrictions on DOD's ability to enter into long-term contracts for fuel. Currently the department may only enter into contracts for fuel up to five years—not long enough, in the opinion of some, to provide potential suppliers with the economic assurance necessary to justify the up-front costs of building a plant. The five-year limitation is based on language in 10 U.S.C. 2306b, which outlines the circumstances under which the department may sign a "multiyear contract." The statute defines a multiyear contract as "a contract for the purchase of property for more than one, but not more than five, program years." Proposed legislation is intended in part to alleviate this contracting restriction and thus eliminate a perceived barrier to increased F-T synthetic fuel production. The bills— Coal-To-Liquid Fuel Energy Act of 2007 ( S. 154 ), Coal-to-Liquid Fuel Act of 2007 ( S. 155 ), and Coal-To-Liquid Fuel Promotion Act of 2007 ( H.R. 370 )—propose permitting the Department of Defense to enter into contracts for synthetic fuel for up to 25 years. Critics of the legislation express concern that encouraging increased CTL production before large-scale carbon sequestration is available will significantly increase carbon emissions. Biofuels are a number of synthetic fuel products that use biological matter as a feedstock: ethanol, produced mainly from corn; cellulosic biofuel, ethanol made from cellulosic plants such as fast-growing trees, prairie grass, and agricultural waste; and biodiesel. / Many cite as one of the advantages of biofuel that the feedstocks are renewable. Also, unlike synthetic fuel from coal and natural gas, biofuel can theoretically be "carbon neutral." That is the carbon dioxide emitted during the burning of biofuel is offset by the carbon dioxide consumed during the feedstocks' growth. However, current production methods involve the use of some carbon emitting sources, which detracts from the claim of carbon neutrality. In its present state of technological development, the energy density of biofuel is too low to make it a suitable substitute for jet fuel. Ethanol's energy density is approximately 25% lower than that of conventional aviation fuel and is therefore not suitable for jets' turbine engines. Furthermore, ethanol cannot operate at the extreme temperatures—both high and low—at which military aviation fuel is needed to perform. However, in 2006, the Defense Advanced Research Projects Agency (DARPA) awarded a contract for the development of a synthetic fuel from "oil-rich crops produced by either agriculture or aquaculture (including but not limited to plants, algae, fungi, and bacteria) and which ultimately can be an affordable alternative to petroleum-derived JP-8" Delivery of the product for government testing is expected in 2008. Hydrogen powered fuel cells are a potential alternative power source for DOD and have received considerable attention and study over the past few years. Fuel cells—thin, flat, and stackable—generate electricity through an electrochemical process that combines hydrogen and oxygen and produces water and heat as waste products. One fuel cell generates a modest amount of energy but several can be stacked together for increased power production. Hydrogen fuel cells have many positive attributes. They are more efficient than combustion engines and do not produce carbon emissions. They do not run down or need to be recharged but can continue operating with the addition of more fuel. For the military, hydrogen fuel cells provide the added benefits of near silent operation and reduced infrared exposure. Furthermore, for portable applications, hydrogen fuel cells weigh less than batteries and retain power longer. Finally, since hydrogen can be obtained from many sources including water, hydrogen fuel could, theoretically, be manufactured on the battlefield. Fuel cells are already used on several DOD installations mostly in stationary applications such as back-up generators. At Hickam Air Force Base in Hawaii, a hydrogen station produces enough hydrogen every day to power a 30-foot long, 24-passenger fuel cell shuttle bus with a range of approximately 100 miles. DOD is also exploring the use of fuel cells for ground vehicles and small portable applications. In September 2006, the Army began testing a fuel cell vehicle manufactured by General Motors, Corp. A number of obstacles prohibit the wide-spread use of hydrogen fuel cells by DOD. Cost, durability, and the transport, storage and delivery of hydrogen fuel are the three largest. At this stage in their development, fuel cells and hydrogen fuel are quite costly. According to DOE, a fuel cell with a generating capacity of 80 kilowatts lasts approximately 1000 hours and the energy it produces costs approximately $110 per kilowatt hour. DOE's goal is to reduce the cost to $30 per kilowatt hour and extend the fuel cell's life to 5000 hours by 2015. Finally, neither DOD nor the nation has a comprehensive system at this time to transport, store, or deliver hydrogen fuel. In 2004, DESC issued a report that assessed hydrogen as a potential future fuel for DOD. The report concluded that hydrogen may be a viable source of fuel for small-scale power generation and portable devices within the next 10-30 years however, based on the current state of its development, employing hydrogen fuel cells in weapons systems will not be feasible for 30-40 years. The volume of liquid hydrogen required to power a Navy ship, for example, is four times the volume of conventional fuel. Either carrying capacity on the ship for hydrogen fuel would need to be expanded four times—especially difficult on ships that are already space-restricted—or the ship would have to refuel four times as often. Also, since hydrogen is highly flammable, there is no practical way at the present time to carry it aboard a ship. Similar obstacles preclude its use as an aviation fuel. Current research indicates a potential way to convert solid waste at deployed DOD locations into a fuel source. Power demands of today's military base-camps have risen sharply over the past several years requiring more fuel deliveries to power generators. Various technologies exist to turn some of the solid waste generated at the camps into fuel. The technologies vary in efficiency rates and range from incineration—the least efficient conversion method—to pyrolysis, which is the chemical decomposition of organic matter and has an efficiency rate of approximately 70-90%. Turning a camp's waste into a source of energy could benefit DOD in two ways: 1) by decreasing the amount of fuel that must be transported to the camp and 2) by reducing the amount of waste that must be taken out. According to a study conducted by the Army, approximately 79% of waste generated in the field is a potential source of energy. Meals Ready to Eat (MRE) are a prime source for much of it. One of the challenges of "trash-to-gas" technologies will be making them easy to operate for service members. Additionally, although seven pounds of plastic waste theoretically equates to about one pound of JP-8, there is not enough plastic waste generated in-theater to make on-site production of aviation fuel feasible. DOD is also looking into other "trash-to-gas" options. In early 2007, DARPA awarded a contract for the further exploration of a technology that produces plastics from plant oils, which can then be broken down into biodiesel in the field. Solar power has been successfully used to fly unmanned aerial vehicles as well as manned vehicles in a limited capacity. The Helios Prototype, an unmanned drone built by AeroVironment, Inc., under the National Aeronautics and Space Administration's (NASA) Environmental Research Aircraft and Sensor Technology Program successfully demonstrated high-altitude, long-duration solar-powered flight in August 2001 when it achieved an altitude of over 96,000 feet and stayed airborne for almost 17 hours. Helios was ultra-light at just over 1,300 pounds empty and its wings, which span 247 feet, were covered with over 62,000 solar cells. During daylight, sunlight powered the aircraft while excess energy went into an on-board fuel cell energy storage system for night operations. The aircraft, along with an experimental fuel cell package, was lost in June 2003 when it experienced control difficulties during a checkout flight near the Hawaiian islands. Since that time, other solar powered aircraft have flown successfully including a manned sailplane that remained in flight for over 48 hours and another unmanned drone developed by AeroVironment that used a fuel cell fueled with liquid hydrogen. A group of pilots aided by the European Space Agency is developing a manned solar powered aircraft that they intend to fly around the world by 2010. The advantages of solar powered aircraft include the potential for long-duration flights perhaps lasting months, no emissions, and quiet operation. At their current rate of development, solar powered aircraft may carry relatively small payloads such as cameras or other surveillance equipment. It is possible that solar aircraft may eventually be equipped with armaments as well. Currently, the unmanned MQ-1 Predator and MQ-9 Predator B can carry relatively light-weight armaments: The MQ-1 can carry Air-to-Ground Missile (AGM)-114 Hellfire laser-guided missiles (about 100 pounds each) and the MQ-9 Predator can carry several Guided Bomb Unit (GBU)-12 laser-guided bombs (about 500 pounds each). A disadvantage of solar powered aircraft, given the current state of solar technology, is that they must be light-weight with a specialized design that maximizes wing-span and minimizes drag. Their small size and light weight restricts the size of the payload they may carry. Payload capacity for Helios, for example, was only about 700 pounds. Furthermore, both solar cell and the fuel cell technology used to store the sun's power for night operations are expensive. DARPA is soliciting industry to identify and develop improved technologies for inexpensive, very high efficiency solar cells for high altitude, long-endurance solar aircraft. Increasing fuel efficiency and eliminating areas of waste are the most expedient ways DOD can reduce its reliance on petroleum-based fuel. Just as military facilities abound with potential ways by which DOD can save energy such as replacing old heating and cooling systems with more energy efficient models, there are ways in which DOD's weapon systems and operations can be made more fuel-efficient. The Air Force, has modified some operational practices and systems to improve energy efficiency and is considering others. Light weight composite materials could greatly increase the fuel efficiency of all DOD platforms. Lighter vehicles can travel faster on less fuel. In one effort to light-weight, DOD is striving for a low-cost titanium alloy to replace the heavy steel used in many weapon systems. Titanium is valued for military applications because of its high strength-to-weight ratio and its resistance to corrosion. At approximately $30 per pound, titanium alloys are too costly for large-scale military applications and are generally reserved for select aviation and space applications. DARPA, is sponsoring a program to develop an environmentally friendly production capability for a titanium alloy under $4 per pound. Another way to reduce fuel consumption is to use more unmanned aerial vehicles (UAV), which are inherently lighter than manned vehicles. The absence of an operator precludes the necessity of including on an aircraft many elements that increase its weight including added protective armor, seating, communications and other life-sustaining equipment. UAVs are becoming increasingly sought after by DOD for surveillance activities since they preclude having to put a service member in danger and are low-cost relative to the manned systems. UAV provide DOD with several advanced capabilities; however, they are less than universally applicable as many operations still call for the judgement and flexibility of on-scene human operators. DOD policy dictates a maximum take-off and landing weight for all aircraft based on their individual structural limitations. The weight for take-off and landing may be the same or an aircraft's landing weight may be less than that with which it may take off. The KC-135 refueling tanker has one of the most restrictive landing weight requirements in the Air Force fleet. If a KC-135 approaches a landing too heavy, the crew must rid the aircraft of excess fuel by either continuing to fly or by releasing it from the aircraft while in-flight. The Air Force recently, by changing their policy, increased the safe landing weight of a KC-135 thus allowing it to keep more fuel onboard when it lands. However, changing the landing weight is only an available options for some aircraft. The C-5, for example, one of the heavier fuel users in the Air Force fleet, has the same take off and landing weight negating the need to get rid of excess fuel weight. Simply changing a policy to negate the need to discard excess fuel is an expedient way to save. There may be other weapon systems for which a similar re-evaluation can be made. By simply changing a policy to allow an aircraft to land with more weight, the Air Force has accepted greater risk to the aircraft and its crew. The service has evidently made the decision that the greater risk is within acceptable limits, however, the long-term affects of the added wear and tear to the aircraft are unknown at this time. Using the most direct routes between points means flying shorter distances and burning less fuel. However, conditions such as military overflight restrictions imposed by some foreign governments may prevent DOD from using the most direct route between destinations. The Air Force is reviewing flight paths and re-evaluating where it may be able to use more direct routes. The service has claimed that by doing so it saved $46 million in Fiscal Year 2006. Saving fuel by eliminating unnecessary miles seems to one of the more simple efficiency measures: it requires no modification to the aircraft and can be put in place wherever applicable, regardless of the weapon system involved. It therefore makes sense to employ this method of cost-saving wherever possible. Routing aircraft on more direct flights may seem uncomplicated in theory but in practice other factors may make shortening routes less than optimally efficient. Circuitous routes may use more fuel than direct ones but circuitous flights may take advantage of other efficiencies. For example, a particular route structure, though perhaps circuitous, may exist to transport people and materiel between military locations and thus negate the need for multiple direct routes between points. Furthermore, direct routes may not always be possible due to weather and changes in diplomatic relations between the United States and other governments. Aircraft stationed close to the front lines require less fuel to reach the battlefield than those stationed at a distance. With fuel savings as a consideration, the Air Force repositioned B-1 Bombers supporting military operations in Iraq from a base in Diego Garcia to Al Udeid Air Base in Saudi Arabia. Assuming an approximate flying distance saved as 2400 nautical miles, an approximate cruising rate of 450 nautical miles per hour, and a fuel usage rate of 3,874 gallons per flying hour, the move saves over 40,000 gallons of fuel per sortie. Moving aircraft closer to the front lines is another way to decrease fuel use with out the expense of modifying aircraft and may be applied to a number of weapon systems. Fewer miles flown may also eliminate the need for refueling thus saving the cost of fuel and flying hours involved in the tanker refueling mission. In some cases, relocating aircraft may be costly. It may require changes to basing infrastructure and movement of personnel and accompanying support structure. Additionally, the cost to lease space may increase. Other, less tangible factors may also come into play such as the diplomatic and strategic value of maintaining a military installation in a particular country or region despite its distance from the front line. Rotating aircraft between the United States and bases supporting operations overseas takes a great deal of fuel—approximately 150,000-450,000 gallons of fuel per aircraft per rotation. The Air Force re-assessed the number of time certain Air Force Wings needed to rotate and concluded that fewer rotations would not adversely their ability to support combat operations. For some Air Force Wings, keeping the aircraft in theater longer while rotating personnel is an expedient way to conserve fuel and aircraft flying hours. One of the reasons aircraft get rotated back to the United States is for scheduled maintenance at large logistics centers located here. In a rapidly aging fleet, routine maintenance becomes increasingly important. Furthermore, the climate and environmental factors present in the current theater of operations causes intense wear and tear, increasing their need for upkeep. It is also worth pointing out that for some flying disciplines, flights between the forward bases and the permanent bases in the United States is not all wasted time. Those flights may, in some cases, be used to accumulate flight training hours needed by pilots to remain proficient in their aircraft. Many gallons of fuel are consumed by the necessary task of training new pilots and maintaining the proficiency of experienced ones. Although simulators have been used to train aviators for many years, actual cockpit training has always been preferred. The DOD Fiscal Year 2007 budget request included funding to study the extent to which flight simulators can and should substitute for training in the actual aircraft. The department estimates that increasing simulator use could save $1 billion a year. Language contained in the John Warner National Defense Authorization Act for Fiscal Year 2007 ( P.L. 109-364 ) may limit DOD's ability to aggressively pursue increased use of simulators. A September 2006 GAO study found that DOD use of its simulators fell short of what the department paid for under their service contracts. Congress subsequently passed legislation prohibiting DOD from entering into a service contract for military flight simulators, which will require DOD to acquire and operate simulators using in-house resources. DOD contends that contractors' ability to maintain and quickly update simulators results in better training and cautions that department-run simulators may not be as effective. Saving fuel and wear and tear on aircraft are the two advantages of using simulators. Simulators are also safer. They also, in theory, provide more flexible scheduling. Naturally factors such as availability of qualified simulator operators or working status of the equipment affect a simulators' availability. Air Force leaders have legitimate concerns over how much simulator training is the right amount. Although the quality of simulator software is constantly improving, the experience gained by sitting in a box in a room is significantly different from the experience gained in a real aircraft thousands of feet in the air with real dangers and real consequences. At present, the point at which too much simulator training reduces the operational effectiveness of a pilot is unknown. Winglets, relatively small vertical extensions attached to the end of an aircraft's wingtips, reduce drag and can increase an aircraft's fuel efficiency. The House Committee on Armed Services, in their report on the National Defense Authorization Act for Fiscal Year 2007 ( H.Rept. 109-452 of May 5, 2006. See Appendix for relevant legislative language.), discussed the merits of winglets and directed the Secretary of the Air Force to examine the feasibility of adding them to Air Force aircraft. As a result, the Air Force sponsored a study to assess the feasibility of applying winglets to large aircraft: refuelers, airlift, and intelligence, surveillance, and reconnaissance. The study was intended to determine the price of fuel at which applying winglets becomes cost-effective, their impact on maintenance and flight operations, and a possible investment strategy. Winglets may be a relatively inexpensive way to improve the fuel efficiency of even some of the larger aircraft in the Air Force fleet. Any time aircraft are taken out of the fleet for retrofitting, it is an additional expense and takes an aircraft out of commission for a period of time. Furthermore, it is possible that the cost of the research and development of winglets combined with their installation may be more than the actual savings. Other strategies may further reduce fuel use. One, borrowed from the commercial aviation industry, is to remove extraneous weight such as unnecessary or redundant gear and provisions. Another strategy is to instill awareness in the operational community of the necessity of using fuel smartly. In fall 2006, Air Force leadership communicated to its flying units the importance of adopting a fuel-saving culture and the service's goal of reducing aviation fuel consumption by 10% over the next five years. Removing excess items from aircraft and promoting fuel-saving within the department are cost-effective measures that are relatively easy to implement. Redundancy in potentially dangerous situations is not by itself negative. Commercial airlines have taken efforts to minimize the weight of their aircraft in order to conserve fuel and increase profits. The military is not concerned with profits but with ensuring the safety of its crew members. Maintaining a healthy supply of safety and other equipment onboard aircraft may reduce risk and increase the survivability of the crew. And although instilling fuel-saving awareness in DOD personnel is a worthy endeavor, the extent to which individual operators will make a difference in DOD fuel consumption remains to be seen and will be difficult to measure. DOD's efforts to explore greater use of alternative aviation fuel and to reduce its overall consumption of petroleum-based fuel have been lauded by many. However, the department's ability to follow through with its initiatives may be adversely affected by a number of factors. They include DOD organizational structure, funding, and external expectations for DOD in the nation's search for alternative fuel sources. The perception among many in DOD and others in the federal government seems to be that there are no clear organizational lines of responsibility to lead and manage the department's energy reduction efforts. This may adversely affect its ability to complete long-term projects that are underway and to fund or implement new ones. Many offices within DOD have responsibility for individual energy-related initiatives but the growing number and complexity of activities seem to have grown beyond the current capabilities of the organizational structure. The USD (AT&L) has been directed to ensure the implementation of President's Bush 2007 Executive Order and to "continue efforts of the Energy Security Task Force by implementing the findings and monitoring implementation" However, there does not appear to be a designated individual in that office to oversee a comprehensive department-wide energy strategy—to prioritize, coordinate, and advocate for the various ongoing projects. There are a number of other DOD offices that play an energy role to varying degrees. The Office of the Deputy Under Secretary of Defense for Installations & Environment (DUSD (I&E)) has traditionally had oversight of energy issues related to utilities and facilities, but does not have any oversight of fuel savings initiatives in the operational community. The office of DDR&E oversees research and engineering efforts for the department and its director, the Honorable John J. Young, Jr., frequently speaks for DOD's on its fuel reduction efforts. DARPA sponsors active research that turns new discoveries into useful military applications but does not develop policy for the department. And although these offices all fall under USD (AT&L), other relevant agencies that do not, including the individual military services, have ongoing projects that must also compete for a share of the DOD budget. Some believe the Air Force seems reluctant to use some additional operational funds for energy-efficiency improvements at this time. Government studies seem to indicate that the most cost-effective way to reduce reliance on petroleum-based fuel—absent leaps in technology that make synthetic fuel abundant and affordable—is to increase the energy-efficiency of current weapon systems. The Defense Science Task Force 2001 study specifically noted that the engines in the B-52H would be profitable candidates for upgrades. The DSB submitted that upgrading its engines would not only reduce fuel usage on the B-52H but that studies suggested it would also reduce tanker force structure requirements. However, amid debates over which and how many aircraft the Air Force should retire, the service seems reluctant to spend money upgrading aging aircraft. For example, in March 2007, media sources reported that the Air Force declined a proposal by engine manufacturer Pratt&Whitney to upgrade the B-52H bomber's TF-33 engines, some of the oldest in the service's inventory. (The B-52H is reportedly expected to remain in service until 2040. ) DOD's funding strategy for energy initiatives likely reflects the department's placement of energy in its priorities. According to DDR&E, $1.8 billion of DOD's FY2007-FY2011 budget is intended for energy related projects. Some may argue that $1.8 billion over five years is a small portion of a Research, Development, Test and Evaluation budget that received approximately $75.5 billion in just the FY2007 Defense Appropriations Act ( P.L. 109-289 ). However, others might contend that in the currently tight defense budget environment, limiting the amount spent on future concepts is a prudent decision. As a result, funding for energy efficiency and alternative fuel initiatives may continue to fall behind other priorities without a department-wide strategy that outlines goals and places energy within a larger set of DOD priorities. If DOD chooses not to allocate funding to energy-related research, Congress may elect to legislate certain funding strategies. For example, legislation proposed in January 2007( S. 154 , S. 155 , and H.R. 370 . See Appendix for relevant legislative language.) would provide $10,000,000 to the Air Force Research Laboratory to continue the testing, qualification, and procurement of synthetic jet aviation fuel from coal. Another issue is the degree to which DOD can take on an energy leadership role in the federal government. Uncertainly regarding DOD's role in a government energy strategy may contribute to the department's seeming reluctance to lay out its own strategy, and committing the necessary resources and organizational structure to carrying it out. Some outside DOD seem to view it as a potential leader in the effort to develop and use alternative forms of energy, particularly synthetic fuel. Although DOD's fuel purchasing power is small relative to the collective purchasing power of the commercial aviation industry, the department's tradition of being technologically forward-thinking is frequently cited as a basis for expecting leadership in the energy arena as well. However, DOD seems to eschew attempts to impose upon it a role beyond facilitator—a catalyst for the development of new technologies; a test-bed and potential market. When questioned by the House Armed Subcommittees on Terrorism, Unconventional Threats, and Capabilities and Readiness regarding DOD's role in developing new technologies for alternative fuels, DOD witnesses consistently responded in language that drew clear boundaries around DOD's role: Mr. John Young, DDR&E: So, across the board, I think the department is a partner with other agencies in the government and the commercial industry, which is helping to drive this space, and push the technology forward both on revolutionary spaces and then in areas where we see—or evolutionary spaces and then places where we see chances at a revolution... Mr. Philip Grone, DUSD (I&E): So I do think there's a synergy between activities of the department, activities of the broader federal family and industry, both in research and development and the actual application of the technologies, the vehicles, where we can have an effect on understanding and ultimately of markets in terms of demonstrating the viability of certain technologies. Mr. Michael Aimone, Deputy Chief of Staff, Air Force Installations, Logistics, and Mission Support: [The Air Force has] the ability to certify fuel for aviation airworthiness. Mr. Richard Connelly, Director, DESC: ...I think it's the role of the services and the department, DOD, to give us [DESC] the go ahead and the operational supply chain manager, to go ahead and move forward in these markets. You did mention, Mr. Chairman, earlier the percentage of domestic consumption. Internationally, that translates to something less than one-half of one percent of total fuel consumed. So while we are probably the biggest single purchaser of fuel in the world and certainly a voice to be heard in the marketplace, we're not going to move the market, but we can try to exhibit some leadership. Within DOD, the Air Force is viewed as being on the front-line in the development of alternative aviation fuel. The service has received much attention for its initiative to test and certify a synthetic fuel blend in its B-52 but even as it continues to announce its intention to acquire 50% of its domestically purchased fuel as a synthetic blend by 2016, the service remains steadfast that it needs the support of the commercial aviation industry. It is unclear to what extent the commercial aviation industry is prepared to expand its own role in developing synthetic aviation fuel. In her remarks to the 2007 Air Force Energy Forum, Ms. Marion Blakey, Administrator of the Federal Aviation Administration, stated, "It's clear that the military's energy security mission is something we're all going to have to be a part of." and later, acknowledging DOD's 2016 goal added, "And I want Secretary Wynne and all of you to know that the commercial side will be right there with you." Considering the issues discussed, there appear to be at least six options for Congress. These potential options may be mutually reinforcing and not "either/or" options. DOD's progress in energy security may be enhanced with clearer lines of authority. Currently, different offices within DOD share responsibility for the department's various energy related initiatives. The office of the Director, Defense Research and Engineering seems to have taken on something of a leadership role but, notwithstanding its leadership of the DOD Task Force on Energy Security, DDR&E's mission is to "ensure that the warfighters today and tomorrow have superior and affordable technology to support their missions, and to give them revolutionary war-winning capabilities." It's mission does not encompass many other possible aspects of energy strategy such as acquisitions, installations, finances, and operations. On the other hand, it may be argued that adding another layer of "bureaucracy" is unnecessary when functions are already in place to handle individual issues. There are also those who express concern that enthusiasm for recent energy initiatives will wane once a sense of urgency regarding energy availability and prices has subsided. Without a dedicated DOD focal point to ensure consistent progress of the various energy related activities within the department, this concern may have some merit. In light of the financial demands put on DOD by ongoing operations, it is possible that without a dedicated advocate, funding for energy related initiatives may be discontinued or postponed indefinitely. Conversely, others argue that the nature of today's energy "crisis" is unlike that which faced the nation in the 1970s and 1980s. Information available today regarding the contributions to greenhouse gas emissions made by fossil fuels and concerns about when world oil reserves may "peak," may keep attention focused on improving the energy efficiency of weapons and alternative energy. A second option for Congress would be to mandate improvements in energy efficiency for existing DOD aircraft. Precedent for this exists in requirements established for DOD facilities and that have existed for many years and were recently made more stringent with President Bush's 2005 Energy Policy Act. Furthermore, language in the Senate passed version of the FY2007 defense authorization bill ( S. 2766 ) and conference report ( H.Rept. 109-702 of September 29, 2006. See Appendix for relevant legislative language.) Calls for a DOD policy to improve the fuel efficiency of weapons systems and established the requirement for a report to Congress on the department's progress toward that goal. Guidance concerning specific weapon systems was not provided allowing DOD to implement the language at their discretion. A possible complication to this may be the continual deliberations over the most cost-effective way to spread a finite defense acquisition budget. Some contend that updating the oldest and largest of the Air Force inventory, such as the B-52, would save the most fuel. According to the Rocky Mountain Institute, re-engining one of the bombers would make it 35% more efficient. Others assert that modernizing more heavily used aircraft such as the C-5 transporters makes more sense. In reality, neither the B-52 nor the C-5 are likely to be upgraded soon. Pratt&Whitney, manufacturer of the B-52H's TF33 engines, has proposed engine upgrades to the Air Force but the service has thus far declined the offer. C-5 aircraft are currently the center of a debate over the relative cost-effectiveness of upgrading the large transporter versus purchasing smaller but more versatile C-17s. The Air Force has expressed a desire to retire some older C-5s while others feel that the need for a large transporter compels the service to modernize the aircraft and maintain it in the inventory. Modernization of the C-5 centers on overall aircraft reliability and not specifically energy efficiency. A third option for Congress is to mandate fuel efficiency as a key performance parameter (KPP) in all new DOD acquisitions. As discussed earlier in this report, a review of the contract proposal for DOD's most recent large new aircraft, the KC-X, disclosed a relatively non-specific requirement for "maximum fuel efficiency using current aviation technology." There are some reports that DOD has already altered its acquisition policies to include energy efficiency. According to DOD officials, a modified policy has not yet been created, but is in the planning stages. On April 10, 2007, the Honorable Kenneth Krieg, USD (AT&L), signed a memo directing the evaluation of fuel costs in the designs of three new DOD weapon systems: the Air Force's new long-range strike aircraft, the Army and Marine Corps Joint Light Tactical Vehicle, and the Navy's CG-X, its newest cruiser. In keeping with the recommendations of the Defense Science Board and the department's Energy Security Task Force, DOD will consider the "fully burdened" cost of fuel on the design of these systems figuring the costs of the entire fuel delivery system. This may be a first step to modifying acquisition guidelines. If DOD modifies its acquisition policies in such a manner, future evaluations of aircraft proposals could be based on the "fully burdened" cost of fuel leading to a closer examination of aspects of the aircraft, e.g. maintenance costs, weight, in addition to engine efficiency. A sixth option for Congress is to pass legislation that would grant DOD the authority to enter into a contract for fuel for more than five years. Recent proposed congressional legislation ( S. 154 , S. 155 , and H.R. 370 ) would allow DOD to enter into contracts for synthetic fuels for up to 25 years. This option may make it possible for DOD, through lengthy contracts, to provide potential synthetic fuel developers an incentive to invest in this capital intensive venture. On the other hand, the proposed legislation would not mandate that DOD use this contracting option and the department may not elect to do so. Solar powered aircraft are in the early stages of development. DOD through DARPA and the Air Force Research Laboratory at Wright-Patterson Air Force Base, Dayton, OH, has some solar-related research ongoing but, observers note, more could be done. Hydrogen fuel and fuel cells are two other areas where, observers suggest, DOD could fund further research. And finally, another option for Congress may be to mandate some amount of alternative aviation fuel that DOD will buy and the fuel's origin. The Air Force has already expressed the goal of using 50% synthetic fuel by 2016 but the service has not specified what kind of synthetic fuel it intends to use. Recent tests with Fischer-Tropsch Gas-To-Liquid (GTL) fuel might lead one to believe DOD is targeting coal- or gas-based synthetic fuel for its future purchases, an approach that would likely invite opposition from those who object to CTL and GTL plants because of their carbon emissions. However, DOD has also awarded a contract for the development of a synthetic aviation biofuel, which may eventually prove successful enough to make a mandate for the use of fuel from renewable sources a viable option. A possible drawback to a synthetic fuel mandate is that domestically produced alternative fuels may not be available for several years. The high cost of constructing the plants and the unresolved issue of how to address carbon emissions from them are two possible limitations. The fact that biofuels are not currently compatible with jet aircraft engines is another issue. Further, it is unclear that sufficient quantities of biofuel could be produced. The following is a list of provisions in FY2007 DOD authorization and appropriation legislation which contribute to DOD efforts to increase its efficient use of petroleum-based fuels and increases funding for DOD to develop possibilities for using alternative forms of energy. John Warner National Defense Authorization Act for Fiscal Year 2007 ( P.L. 109-364 ) Senate Section 354 of the Senate-passed version of the FY2007 defense authorization bill ( S. 2766 ) stated: SEC. 354. REPORT ON ACTIONS TO REDUCE DEPARTMENT OF DEFENSE CONSUMPTION OF PETROLEUM-BASED FUEL. (a) Report Required- Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall submit to the Committees on Armed Services of the Senate and the House of Representatives a report on the actions taken, and to be taken, by the Department of Defense to reduce the consumption by the Department of petroleum-based fuel. (b) Elements- The report shall include the status of implementation by the Department of the requirements of the following: (1) The Energy Policy Act of 2005 ( P.L. 109-58 ). (2) The Energy Policy Act of 1992. ( P.L. 102-486 ) (3) Executive Order 13123. (4) Executive Order 13149. (5) Any other law, regulation, or directive relating to the consumption by the Department of petroleum-based fuel. Section 375 of the Senate-passed version of S. 2766 stated: SEC. 375. ENERGY EFFICIENCY IN WEAPONS PLATFORMS. (a) Policy- It shall be the policy of the Department of Defense to improve the fuel efficiency of weapons platforms, consistent with mission requirements, in order to— (1) enhance platform performance; (2) reduce the size of the fuel logistics systems; (3) reduce the burden high fuel consumption places on agility; (4) reduce operating costs; and (5) dampen the financial impact of volatile oil prices. (b) Report Required- (1) IN GENERAL- Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall submit to the congressional defense committees a report on the progress of the Department of Defense in implementing the policy established by subsection (a). (2) ELEMENTS- The report shall include the following: (A) An assessment of the feasibility of designating a senior Department of Defense official to be responsible for implementing the policy established by subsection (a). (B) A summary of the recommendations made as of the time of the report by (i) the Energy Security Integrated Product Team established by the Secretary of Defense in April 2006; (ii) the Defense Science Board Task Force on Department of Defense Energy Strategy established by the Under Secretary of Defense for Acquisition, Technology and Logistics on May 2, 2006; and (iii) the January 2001 Defense Science Board Task Force report on Improving Fuel Efficiency of Weapons Platforms. (C) For each recommendation summarized under subparagraph (B)— (i) the steps that the Department has taken to implement such recommendation; (ii) any additional steps the Department plans to take to implement such recommendation; and (iii) for any recommendation that the Department does not plan to implement, the reasons for the decision not to implement such recommendation. (D) An assessment of the extent to which the research, development, acquisition, and logistics guidance and directives of the Department for weapons platforms are appropriately designed to address the policy established by subsection (a). (E) An assessment of the extent to which such guidance and directives are being carried out in the research, development, acquisition, and logistics programs of the Department. (F) A description of any additional actions that, in the view of the Secretary, may be needed to implement the policy established by subsection (a). Conference Report Section 358 ( P.L. 109-364 , conference report of September 29, 2006) states: SEC. 358. UTILIZATION OF FUEL CELLS AS BACK-UP POWER SYSTEMS IN DEPARTMENT OF DEFENSE OPERATIONS. The Secretary of Defense shall consider the utilization of fuel cells as replacements for current back-up power systems in a variety of Department of Defense operations and activities, including in telecommunications networks, perimeter security, individual equipment items, and remote facilities, in order to increase the operational longevity of back-up power systems and stand-by power systems in such operations and activities. Section 360 states: SEC. 360. ENERGY EFFICIENCY IN WEAPONS PLATFORMS. (a) Policy- It shall be the policy of the Department of Defense to improve the fuel efficiency of weapons platforms, consistent with mission requirements, in order to— (1) enhance platform performance; (2) reduce the size of the fuel logistics systems; (3) reduce the burden high fuel consumption places on agility; (4) reduce operating costs; and (5) dampen the financial impact of volatile oil prices. (b) Report Required- (1) IN GENERAL- Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall submit to the congressional defense committees a report on the progress of the Department of Defense in implementing the policy established by subsection (a). (2) ELEMENTS- The report shall include the following: (A) An assessment of the feasibility of designating a senior Department of Defense official to be responsible for implementing the policy established by subsection (a). (B) A summary of the recommendations made as of the time of the report by (i) the Energy Security Integrated Product Team established by the Secretary of Defense in April 2006; (ii) the Defense Science Board Task Force on Department of Defense Energy Strategy established by the Under Secretary of Defense for Acquisition, Technology and Logistics on May 2, 2006; and (iii) the January 2001 Defense Science Board Task Force report on Improving Fuel Efficiency of Weapons Platforms. (C) For each recommendation summarized under subparagraph (B)— (i) the steps that the Department has taken to implement such recommendation; (ii) any additional steps the Department plans to take to implement such recommendation; and (iii) for any recommendation that the Department does not plan to implement, the reasons for the decision not to implement such recommendation. (D) An assessment of the extent to which the research, development, acquisition, and logistics guidance and directives of the Department for weapons platforms are appropriately designed to address the policy established by subsection (a). (E) An assessment of the extent to which such guidance and directives are being carried out in the research, development, acquisition, and logistics programs of the Department. (F) A description of any additional actions that, in the view of the Secretary, may be needed to implement the policy established by subsection (a). The conference report stated: Report on actions to reduce Department of Defense consumption of petroleum-based fuel The Senate amendment contained a provision (sec. 354) that would require the Secretary of Defense to report on the actions taken, and to be taken, by the Department of Defense to reduce the consumption of petroleum-based fuels. The House bill contained no similar provision. The Senate recedes. The conferees note that the implementation of current legislation and regulatory guidance should facilitate reduction of petroleum-based fuels by the Department. Therefore, the conferees direct the Secretary to submit a report, not later than September 1, 2007, to the Committees on Armed Services of the Senate and the House of Representatives on the status of implementation by the Department of the requirements contained in the following: (1) Energy Policy Act of 2005 (Public Law 109—58); (2) Energy Policy Act of 1992 (Public Law 102—486); (3) Executive Order 13123; (4) Executive Order 13149; and (5) other regulations or directions relating to the Department's consumption of petroleum-based fuels. Furthermore, the conferees are concerned that although Flexible Fuel Vehicles (FFVs) are being introduced into the Department's vehicle inventory, little reduction in petroleum-based fuel is being realized because operators continue to fuel the FFVs with gasoline rather than E85 (85 percent ethanol with 15 percent gasoline) or M85 (85 percent methanol and 15 percent gasoline). Therefore, the conferees direct the Secretary to include in the report an analysis of the reduction of petroleum-based fuels since introduction of FFVs into the inventory and an assessment of how the Department might increase the consumption of E85 or M85 in FFVs. The House Committee on Armed Services, in its report ( H.Rept. 109-452 of May 5, 2006) on H.R. 5122 states: Winglets for in-service aircraft The committee commends the Air Force in its efforts to increase aircraft fuel efficiency and decrease fuel consumption. The committee notes that initiatives such as re-engining aircraft, modifying in-flight profiles, and revising aircraft ground operations contribute to decreased fuel consumption and increased life-cycle savings. The committee is aware that winglet technology exists for aircraft to increase fuel efficiency, improve take-off performance, increase cruise altitudes, and increase payload and range capability. The committee notes that winglets are currently used on commercial aircraft and result in a five to seven percent increase in fuel efficiency. On September 16, 1981, the National Aeronautics and Space Administration released the KC-135 Winglet Program Review on the incorporation of winglets for KC-135 aerial refueling aircraft. However, the Air Force concluded that the cost of adding winglets to the KC-135 did not provide sufficient payback in fuel savings or increased range to justify modification. Although the Air Force did conclude that modifying aircraft with winglets could increase fuel efficiency, the Air Force determined that re-engining the KC-135 aircraft produced a greater return on investment. The committee believes that incorporating winglets on military aircraft could increase fuel efficiency on certain platforms and that the Air Force should reexamine incorporating this technology onto its platforms. Therefore, the committee directs the Secretary of the Air Force to provide a report to the congressional defense committees by March 1, 2007, examining the feasibility of modifying Air Force aircraft with winglets. The report shall include a cost comparison analysis of the cost of winglet modification compared to the return on investment realized over time for each airlift, aerial refueling, and intelligence, surveillance, and reconnaissance aircraft in the Air Force inventory; the market price of aviation fuel at which incorporating winglets would be beneficial for each Air Force platform; all positive and negative impacts to aircraft maintenance and flight operations; and investment strategies the Air Force could implement with commercial partners to minimize Air Force capital investment and maximize investment return. FY2007 Defense Appropriations Act ( H.R. 5631 /P.L. 109-289) The Senate Appropriations Committee, in its report ( S.Rept. 109-292 of July 25, 2006) on H.R. 5631 states: The Committee notes the recent developments relating to the conversion of coal to liquid fuels. Demonstration projects in the United States have produced high-quality, ultra clean synthetic diesel fuels that provide improved efficiency and improved emissions compared to traditionally produced diesel fuel. The Committee encourages the Department of Defense to continue to explore the use of Fischer-Tropsch fuels as alternative sources for DOD's fuel requirements. Further, the Committee requests that the Under Secretary for Acquisition, Technology, and Logistics prepare a report for the congressional defense committees on the Defense Department's assessment, use, and plans to continue to explore the potential of synthetic fuels, to include fuels produced through the Fischer-Tropsch process. The House Appropriations Committee, in its report ( H.Rept. 109-504 of June 16, 2006) on H.R. 5631 states: C-32 WINGLET MODIFICATION The Committee recommends $5,198,000 for C-32 modifications, which is $5,006,000 more than the amount provided in fiscal year 2006, and $5,000,000 more than the request for fiscal year 2007. These funds shall be used to install Blended Winglets on the 4 C-32 aircraft operated by the United States Air Force to demonstrate potential fuel savings, and/or increased operating range. Not more than one year after the modification of the first C-32 aircraft, the Secretary of the Air Force shall submit a report to the congressional defense committees assessing the utility of the winglet and making a recommendation if the program should be expanded to other types of aircraft. Coal-to-Liquid Fuel Energy Act of 2007 ( S. 154 ) Section 5 of Senate Bill S. 154 of January 4, 2007 states: SEC. 5. LOCATION OF COAL-TO-LIQUID MANUFACTURING FACILITIES. The Secretary, in coordination with the head of any affected agency, shall promulgate such regulations as the Secretary determines to be necessary to support the development on Federal land (including land of the Department of Energy, military bases, and military installations closed or realigned under the defense base closure and realignment) of coal-to-liquid manufacturing facilities and associated infrastructure, including the capture, transportation, or sequestration of carbon dioxide. Section 7 states: SEC. 7. AUTHORIZATION TO CONDUCT RESEARCH, DEVELOPMENT, TESTING, AND EVALUATION OF ASSURED DOMESTIC FUELS. Of the amount authorized to be appropriated for the Air Force for research, development, testing, and evaluation, $10,000,000 may be made available for the Air Force Research Laboratory to continue support efforts to test, qualify, and procure synthetic fuels developed from coal for aviation jet use. Section 8 states: SEC. 8. COAL-TO-LIQUID LONG-TERM FUEL PROCUREMENT AND DEPARTMENT OF DEFENSE DEVELOPMENT. Section 2398a of title 10, United States Code is amended— (1) in subsection (b)— (A) by striking 'The Secretary' and inserting the following: (1) IN GENERAL- The Secretary'; and (B) by adding at the end the following: (2) COAL-TO-LIQUID PRODUCTION FACILITIES- (A) IN GENERAL- The Secretary of Defense may enter into contracts or other agreements with private companies or other entities to develop and operate coal-to-liquid facilities (as defined in section 2 of the Coal-to-Liquid Fuel Energy Act of 2007) on or near military installations. (B) CONSIDERATIONS- In entering into contracts and other agreements under subparagraph (A), the Secretary shall consider land availability, testing opportunities, and proximity to raw materials.'; (2) in subsection (d)— (A) by striking 'Subject to applicable provisions of law, any' and inserting Any'; and (B) by striking '1 or more years' and inserting 'up to 25 years'; and (3) by adding at the end the following: (f) Authorization of Appropriations- There are authorized to be appropriated such sums as are necessary to carry out this section. Section 9 states: SEC. 9. REPORT ON EMISSIONS OF FISCHER-TROPSCH PRODUCTS USED AS TRANSPORTATION FUELS. (a) In General- In cooperation with the Administrator of the Environmental Protection Agency, the Secretary of Defense, the Administrator of the Federal Aviation Administration, and the Secretary of Health and Human Services, the Secretary shall— (1) carry out a research and demonstration program to evaluate the emissions of the use of Fischer-Tropsch fuel for transportation, including diesel and jet fuel; (2) evaluate the effect of using Fischer-Tropsch transportation fuel on land and air engine exhaust emissions; and (3) in accordance with subsection (e), submit to Congress a report on the effect on air quality and public health of using Fischer-Tropsch fuel in the transportation sector. (b) Guidance and Technical Support- The Secretary shall issue any guidance or technical support documents necessary to facilitate the effective use of Fischer-Tropsch fuel and blends under this section. (c) Facilities- For the purpose of evaluating the emissions of Fischer-Tropsch transportation fuels, the Secretary shall— (1) support the use and capital modification of existing facilities and the construction of new facilities at the research centers designated in section 417 of the Energy Policy Act of 2005 (42 U.S.C. 15977); and (2) engage those research centers in the evaluation and preparation of the report required under subsection (a)(3). (d) Requirements- The program described in subsection (a)(1) shall consider— (1) the use of neat (100 percent) Fischer-Tropsch fuel and blends of Fischer-Tropsch fuels with conventional crude oil-derived fuel for heavy-duty and light-duty diesel engines and the aviation sector; and (2) the production costs associated with domestic production of those fuels and prices for consumers. (e) Reports- The Secretary shall submit to the Committee on Energy and Natural Resources of the Senate and the Committee on Energy and Commerce of the House of Representatives— (1) not later than 180 days after the date of enactment of this Act, an interim report on actions taken to carry out this section; and (2) not later than 1 year after the date of enactment of this Act, a final report on actions taken to carry out this section. (f) Authorization of Appropriations- There are authorized to be appropriated such sums as are necessary to carry out this section. Coal-to-Liquid Fuel Act of 2007 ( S. 155 ) Section 104 of Senate Bill S. 155 of January 4, 2007 states: SEC. 104. LOCATION OF COAL-TO-LIQUID MANUFACTURING FACILITIES. The Secretary, in coordination with the head of any affected agency, shall promulgate such regulations as the Secretary determines to be necessary to support the development on Federal land (including land of the Department of Energy, military bases, and military installations closed or realigned under the defense base closure and realignment) of coal-to-liquid manufacturing facilities and associated infrastructure, including the capture, transportation, or sequestration of carbon dioxide. Section 106 states: SEC. 106. AUTHORIZATION TO CONDUCT RESEARCH, DEVELOPMENT, TESTING, AND EVALUATION OF ASSURED DOMESTIC FUELS. Of the amount authorized to be appropriated for the Air Force for research, development, testing, and evaluation, $10,000,000 may be made available for the Air Force Research Laboratory to continue support efforts to test, qualify, and procure synthetic fuels developed from coal for aviation jet use. Section 107 states: SEC. 107. COAL-TO-LIQUID LONG-TERM FUEL PROCUREMENT AND DEPARTMENT OF DEFENSE DEVELOPMENT. Section 2398a of title 10, United States Code is amended— (1) in subsection (b)— (A) by striking 'The Secretary' and inserting the following: (1) IN GENERAL- The Secretary'; and (B) by adding at the end the following: (2) COAL-TO-LIQUID PRODUCTION FACILITIES- (A) IN GENERAL- The Secretary of Defense may enter into contracts or other agreements with private companies or other entities to develop and operate coal-to-liquid facilities (as defined in section 101 of the Coal-to-Liquid Fuel Promotion Act of 2007) on or near military installations. (B) CONSIDERATIONS- In entering into contracts and other agreements under subparagraph (A), the Secretary shall consider land availability, testing opportunities, and proximity to raw materials.'; (2) in subsection (d)— (A) by striking 'Subject to applicable provisions of law, any' and inserting Any'; and (B) by striking '1 or more years' and inserting 'up to 25 years'; and (3) by adding at the end the following: (f) Authorization of Appropriations- There are authorized to be appropriated such sums as are necessary to carry out this section.'. Section 108 states: SEC. 108. REPORT ON EMISSIONS OF FISCHER-TROPSCH PRODUCTS USED AS TRANSPORTATION FUELS. (a) In General- In cooperation with the Administrator of the Environmental Protection Agency, the Secretary of Defense, the Administrator of the Federal Aviation Administration, and the Secretary of Health and Human Services, the Secretary shall— (1) carry out a research and demonstration program to evaluate the emissions of the use of Fischer-Tropsch fuel for transportation, including diesel and jet fuel; (2) evaluate the effect of using Fischer-Tropsch transportation fuel on land and air engine exhaust emissions; and (3) in accordance with subsection (e), submit to Congress a report on the effect on air quality and public health of using Fischer-Tropsch fuel in the transportation sector. (b) Guidance and Technical Support- The Secretary shall issue any guidance or technical support documents necessary to facilitate the effective use of Fischer-Tropsch fuel and blends under this section. (c) Facilities- For the purpose of evaluating the emissions of Fischer-Tropsch transportation fuels, the Secretary shall— (1) support the use and capital modification of existing facilities and the construction of new facilities at the research centers designated in section 417 of the Energy Policy Act of 2005 (42 U.S.C. 15977); and (2) engage those research centers in the evaluation and preparation of the report required under subsection (a)(3). (d) Requirements- The program described in subsection (a)(1) shall consider— (1) the use of neat (100 percent) Fischer-Tropsch fuel and blends of Fischer-Tropsch fuels with conventional crude oil-derived fuel for heavy-duty and light-duty diesel engines and the aviation sector; and (2) the production costs associated with domestic production of those fuels and prices for consumers. (e) Reports- The Secretary shall submit to the Committee on Energy and Natural Resources of the Senate and the Committee on Energy and Commerce of the House of Representatives— (1) not later than 180 days after the date of enactment of this Act, an interim report on actions taken to carry out this section; and (2) not later than 1 year after the date of enactment of this Act, a final report on actions taken to carry out this section. (f) Authorization of Appropriations- There are authorized to be appropriated such sums as are necessary to carry out this section. Coal-to-Liquid Fuel Promotion Act of 2007 ( H.R. 370 ) Section 104 of House Bill H.R. 370 of January 10, 2007 states: SEC. 104. LOCATION OF COAL-TO-LIQUID MANUFACTURING FACILITIES. The Secretary, in coordination with the head of any affected agency, shall promulgate such regulations as the Secretary determines to be necessary to support the development on Federal land (including land of the Department of Energy, military bases, and military installations closed or realigned under the defense base closure and realignment) of coal-to-liquid manufacturing facilities and associated infrastructure, including the capture, transportation, or sequestration of carbon dioxide. Section 105 states: Section 106 states: SEC. 106. AUTHORIZATION TO CONDUCT RESEARCH, DEVELOPMENT, TESTING, AND EVALUATION OF ASSURED DOMESTIC FUELS. Of the amount authorized to be appropriated for the Air Force for research, development, testing, and evaluation, $10,000,000 may be made available for the Air Force Research Laboratory to continue support efforts to test, qualify, and procure synthetic fuels developed from coal for aviation jet use. Section 107 states: Section 107 states: SEC. 107. COAL-TO-LIQUID LONG-TERM FUEL PROCUREMENT AND DEPARTMENT OF DEFENSE DEVELOPMENT. Section 2398a of title 10, United States Code is amended— (1) in subsection (b)— (A) by striking 'The Secretary' and inserting the following: (1) IN GENERAL- The Secretary'; and (B) by adding at the end the following: (2) COAL-TO-LIQUID PRODUCTION FACILITIES- (A) IN GENERAL- The Secretary of Defense may enter into contracts or other agreements with private companies or other entities to develop and operate coal-to-liquid facilities (as defined in section 101 of the Coal-to-Liquid Fuel Promotion Act of 2007) on or near military installations. (B) CONSIDERATIONS- In entering into contracts and other agreements under subparagraph (A), the Secretary shall consider land availability, testing opportunities, and proximity to raw materials.'; (2) in subsection (d)— (A) by striking 'Subject to applicable provisions of law, any' and inserting Any'; and (B) by striking '1 or more years' and inserting 'up to 25 years'; and (3) by adding at the end the following: (f) Authorization of Appropriations- There are authorized to be appropriated such sums as are necessary to carry out this section.'. Section 108 states: Section 108 states: SEC. 108. REPORT ON EMISSIONS OF FISCHER-TROPSCH PRODUCTS USED AS TRANSPORTATION FUELS. (a) In General- In cooperation with the Administrator of the Environmental Protection Agency, the Secretary of Defense, the Administrator of the Federal Aviation Administration, and the Secretary of Health and Human Services, the Secretary shall— (1) carry out a research and demonstration program to evaluate the emissions of the use of Fischer-Tropsch fuel for transportation, including diesel and jet fuel; (2) evaluate the effect of using Fischer-Tropsch transportation fuel on land and air engine exhaust emissions; and (3) in accordance with subsection (e), submit to Congress a report on the effect on air quality and public health of using Fischer-Tropsch fuel in the transportation sector. (b) Guidance and Technical Support- The Secretary shall issue any guidance or technical support documents necessary to facilitate the effective use of Fischer-Tropsch fuel and blends under this section. (c) Facilities- For the purpose of evaluating the emissions of Fischer-Tropsch transportation fuels, the Secretary shall— (1) support the use and capital modification of existing facilities and the construction of new facilities at the research centers designated in section 417 of the Energy Policy Act of 2005 (42 U.S.C. 15977); and (2) engage those research centers in the evaluation and preparation of the report required under subsection (a)(3). (d) Requirements- The program described in subsection (a)(1) shall consider— (1) the use of neat (100 percent) Fischer-Tropsch fuel and blends of Fischer-Tropsch fuels with conventional crude oil-derived fuel for heavy-duty and light-duty diesel engines and the aviation sector; and (2) the production costs associated with domestic production of those fuels and prices for consumers. (e) Reports- The Secretary shall submit to the Committee on Energy and Natural Resources of the Senate and the Committee on Energy and Commerce of the House of Representatives— (1) not later than 180 days after the date of enactment of this Act, an interim report on actions taken to carry out this section; and (2) not later than 1 year after the date of enactment of this Act, a final report on actions taken to carry out this section. (f) Authorization of Appropriations- There are authorized to be appropriated such sums as are necessary to carry out this section.

The Department of Defense (DOD) is a factor in the nation's discussion about national energy security. As the largest single consumer of fuel in the United States, DOD has the potential to make important contributions to the national effort to reduce the use of and reliance on fossil fuel. Aviation fuel makes up the largest portion of fossil fuel consumed by DOD and therefore represents the area of greatest potential energy savings. This report examines DOD's use of aviation fuel and possibilities to reduce that use by examining related issues and presenting options Congress may choose to consider. Reducing DOD's consumption of aviation fuel could by itself significantly reduce the department's overall reliance on fossil fuel. In Fiscal Year 2005, DOD consumed roughly 125 million barrels of oil—approximately 1.2% of the nation's total. About 74% of that was used to power mobility vehicles—Air Force aircraft, Navy ships, and Army ground vehicles. Over half (roughly 52% ) was aviation fuel. (Note: aviation fuel is also used in "non-aircraft" systems such as tanks and generators in order to reduce logistics requirements on the battlefield. There are several ways in which DOD can reduce its use of fossil-based aviation fuel. Each has advantages and disadvantages and no single option provides the perfect solution. Advanced technologies, such as synthetic fuels, offer potential alternatives but further development and study are required before DOD can employ them on a large scale. DOD can also take measures to decrease its use of fuel. Possible options include upgrading aircraft engines and modifying operational procedures. Many of these measures, however, are costly and must compete for funding with other operational priorities. Congress also recognizes that DOD has a role to play in the nation's quest for alternative energy sources. Language contained in the FY2007 Defense Authorization and Appropriations Acts requires DOD to report to Congress on their actions to reduce consumption of fossil fuel, increase the energy efficiency of their weapon platforms, and explore the use of synthetic fuel made from coal. Additional proposed legislation would require DOD to further study coal as a fuel source and would remove certain DOD contracting restrictions viewed as a potential obstacle to synthetic fuel development. DOD has publically expressed its intention to devote resources to this issue; Air Force leadership has stated a goal of using domestically produced synthetic fuel for half of its domestic aviation fuel by 2016. At the present time, however, DOD does not seem to have a comprehensive long-term energy strategy or centralized leadership focused on energy issues for the department. This may affect the department's ability to achieve its long-term energy goals. This report will not be updated.

Budgeting has been defined as the allocation of scarce resources. It involves choices about how to raise revenues and allocate resources among alternative purposes, locations, and recipients. These choices frequently are made in an environment of competing views about the public interest, leading one scholar to conclude that "conflict is endemic to budgeting." Conflict may arise, for example, because federal policy makers often have different priorities about the sources and uses of public funds. Some priorities may be based on policy makers' views on the proper role of government, the offices and positions in government they hold, or the constituencies they represent. Policy makers also may have different views on "who decides." In the federal budget process, one such area of budgetary conflict has concerned "earmarking." Specific definitions for the term earmark (and related terms, like congressional earmark and presidential earmark ) vary considerably and are controversial. Nevertheless, all of the terms relate to the use of discretion to allocate funding or other benefits to one or more specific purposes, entities, or geographic areas. During the 110 th Congress, the House of Representatives, the Senate, and the George W. Bush Administration defined the terms congressional earmark , congressionally directed spending item , and earmark , respectively. In addition, the House, Senate, and President provided directions for how congressionally originated earmarks are to be handled during the budget process. In January 2008, for example, the President announced he would veto future appropriations bills that did not cut the number and funding of Administration-defined and -identified earmarks by half, relative to FY2008. The President also issued Executive Order (E.O.) 13457, which directed that agencies "should not" fund non-statutory earmarks, except under some conditions. OMB subsequently directed agencies on how to implement the E.O. after enactment of FY2009 continuing and regular appropriations. These are the latest in a series of developments that began in early 2007, when the President made proposals regarding earmarks originated by Congress, and the Office of Management and Budget (OMB) issued a series of memoranda and took corresponding actions to implement the President's policy. This report provides an analysis of Bush Administration policy regarding congressionally originated earmarks, focusing primarily on the veto threat and E.O., and related issues for Congress. To provide context and an analytical foundation, the report first discusses conceptual definitions of earmark-related terms. It then examines potential explanations of why earmarking might occur and several concerns that have been expressed about earmarking. Because the Bush Administration expressed interest in congressionally originated earmarks before the 110 th Congress, the report briefly reviews previous Administration policy statements and proposals. Subsequent sections discuss and analyze the Administration's veto threat and executive order. The report culminates with potential issues for Congress, including the potential for developments to affect the roles of Congress and the President in the budget process. Because the E.O. formally will remain in effect unless it is revoked, some of these issues may continue to be relevant after the swearing in of the next President. Furthermore, because Bush Administration policy was articulated in some detail, aspects of the policy may be relevant to future discussion of federal budgeting and earmarking issues. Any discussion of earmarks cannot escape the matter of definitions. As noted earlier, specific definitions for the term earmark (and related terms, like congressional earmark , congressional directive , presidential earmark , administration earmark , executive branch earmark , and directed spending ) vary considerably and are controversial. Nevertheless, all of the terms relate to the use of discretion to allocate particularized benefits—subsets of funding or other resources or benefits—through law, non-statutory direction (e.g., report language, which is not legally binding), or administrative action (e.g., making a budget proposal or awarding a contract or grant) to one or more specific purposes, entities, or geographic areas. Practices like earmarking have been used for decades, if not centuries, to make decisions regarding the allocation of public resources, but concerns also have been expressed. At the same time, Congress, its Members, and Presidents have asserted the prerogatives of their respective constitutional and statutory authorities and pursued their budget policy preferences. Earmarks, or similar practices that result in functionally equivalent outcomes, might be originated by Members of Congress, the President, or agencies, or possibly jointly. Earmarks may be included by the House or Senate, or at the initiative of a Member or committee of Congress, in appropriations, authorization, or revenue bills, which, when enacted, have the force of law. Many appropriations-related earmarks commonly are included in report language and joint explanatory statements. The latter documents do not have the force of law, but typically accompany legislation and communicate to agencies congressional intent, expectations, directions, understandings, exhortations, and warnings. In some instances, provisions within report language and joint explanatory statements may be incorporated expressly, or by reference, into the text of a statute, making them legally binding. Presidential and agency earmarking may be less familiar than congressional activity, yet appears to be functionally equivalent. For example, a former OMB official reportedly said that "[a]s he recalls, presidents use earmarks much as members of Congress do...." Presidentially or agency-originated earmarks may be (1) requested explicitly within a budget proposal to Congress; (2) embedded within an agency's spending plan before or after enactment of the agency's appropriations; (3) effected during a fiscal year by a decision to allocate and obligate funds for a specific contract, grant, initiative, or program; or (4) facilitated by using discretion to make entities or geographic areas eligible to receive benefits. The President, political appointees, career civil servants, or combinations thereof may be involved in any of these activities. During and after the FY2008 appropriations process, for instance, some Members of Congress reportedly have viewed actions by the President and executive agencies as amounting to earmarks. An earmark may be included in a bill or report language at the prompting of the White House or an agency at any point in the legislative process. Joint origination also may occur with regard to a President's or agency's plans and actions for budget execution (e.g., after discussions between Members of Congress and agency officials or the President). Instances such as these might raise questions about whether an earmark should then be considered congressionally or presidentially originated or, alternatively, be considered a hybrid. The concept of a joint or hybrid earmark suggests that it may not be a simple matter to categorize earmarking decisions definitively as the exclusive domain of one branch of government or another. During the 110 th Congress, the House, Senate, and Bush Administration have defined terms like congressional earmark , congressionally directed spending item , and earmark , and provided some direction for how congressionally originated earmarks, according to these definitions, are to be handled in the budget process. Various definitions developed by the House, Senate, and Bush Administration are listed in Table 1 . Some of the definitions are discussed later in this report. There are several potential explanations of why Congress, the President, or an agency might earmark resources or benefits. These could include Members of Congress representing constituents in their electoral jurisdictions; Congress fulfilling its constitutional obligation to exercise the power of the purse and sometimes to prevent encroachment by other branches of government; Congress defining or constraining the scope of an agency's or the President's ability to exercise control of the allocation of public funds and resources; Congress providing flexibility to agencies to adapt to changing conditions by not prescribing earmarked allocations in law and instead earmarking through report language; Congress inviting and facilitating interbranch communications about congressional intent and expectations, agency needs, etc.; Congress, the President, or an agency supplementing or supplanting funding provided by nonfederal sources for activities or projects; Congress, the President, or an agency accomplishing public policy goals, either at a generalized level or with particularized benefits or remediation for some entities or persons; Congress, the President, or an agency earmarking to assist with legislative compromise on related or unrelated issues; an agency utilizing discretion provided by law to engage expertise to help the agency accomplish its mission(s) and goals; the President representing a broad or narrow interest, or pursuing his or her policy preferences; and the President at his or her own discretion, exercising constitutional authority to propose for Congress's consideration measures he or she believes to be necessary or suitable for accomplishing a given end. The explanations listed above are not necessarily comprehensive or mutually exclusive. Each potential function of earmarking might be interpreted to have advantages or disadvantages, depending on one's views regarding the proper definition, functions, process, and extent of earmarking. Some concerns about earmarking have involved perceptions of inefficiency and insufficient transparency and scrutiny. With regard to earmarks originated by Congress, concerns were expressed, for example, in a hearing in 2006, during the 109 th Congress. According to the views of those giving statements or providing testimony, "Congressional leaders and appropriators use earmarks as a leverage to get members to vote their way—often for monstrous spending bills that a member otherwise might oppose"; when "[Congress legislates] by report rather than actual legislation, we [Members] have given up our ability to challenge individual spending items"; and "[e]armarking ... is done in many instances for good and sufficient policy reasons ... [b]ut in more recent years, the amount of earmarking ... has virtually exploded, and the motivation behind the earmarks, the nature of the earmarks has become more parochial and more political, rather than based on legitimate policy differences between the two branches of government." Concerns and questions about activities that some observers see as presidential or executive agency earmarking include an "explosion in contracting being engaged in by the Administration, especially contracting that is sole-sourced or not fully competitive," and "rapid growth in no-bid and limited-competition contracts" in recent years, reportedly from $67.5 billion in 2000 to $206.9 billion in 2006; perceived comparative lack of transparency for presidential earmarks, because "[t]he information is hard to get. For all the talk of bringing transparency to Congress's work, its earmarks—compared with the president's—are relatively simple to find in spending bills and their companion committee reports"; and concerns about the use of discretion to allocate funds in ways not approved by Congress, such as House Appropriations Committee concerns expressed about the Department of Homeland Security (DHS) financing a facility using an "approach [that] represents a violation of the spirit, if not the letter" of certain reprogramming restrictions and notification requirements. Prior to the 110 th Congress, the Administration had shown interest in congressionally originated earmarks. For example, the President's budget proposal for FY2002 proposed to "curtail congressional earmarking, especially for special interest spending." The next year, the President's budget proposal for FY2003 devoted considerable attention to earmarks originated by Congress, stating "congressional earmarking mars merit-based processes for distributing the American people's resources." The Budget volume contained agency-specific discussions of the subject. In addition, it contained general statements characterizing the Administration's views on the use of budgetary discretion by the President and agency officials, on one hand, versus the use of budgetary discretion by Congress on the other. The Administration appeared to put less emphasis on earmarks in its budget proposal for FY2004. In subsequent years, under its Program Assessment Rating Tool (PART) initiative, the Administration focused on congressionally originated earmarks in specific areas. In the PART's first year, for example, an illustrative Administration statement was that "earmarked funding will not contribute to the [program's] long-term goals," as set by the Administration. During the 110 th Congress, the subjects of congressionally originated earmarks and, more generally, the use of discretion in budgetary decision making garnered significant attention from both Congress and the Bush Administration. The House of Representatives amended House Rule XXI on January 5, 2007, to define the term congressional earmark , and the Senate established a new Rule XLIV on September 14, 2007, to define congressionally directed spending item (see Table 1 ). Both chambers also adopted requirements for the disclosure of congressionally originated earmarks. Coinciding with these congressional developments, the articulation and evolution of Bush Administration policy began in January 2007. In various forums during January and February 2007, the President proposed that congressionally originated earmarks should be cut by at least 50% in number and funding in FY2008 appropriations, relative to FY2005, and no longer included in non-statutory report language. OMB subsequently issued several memoranda to the heads of executive branch agencies that articulated Administration policies, defined the term earmark in several iterations, and required agencies to take certain actions. Specifically, an OMB January 2007 memorandum provided an official Administration definition for the term earmark (see Table 1 ). In addition to the definition, the memorandum's Attachment B provided a full page of "additional guidance" on the definition, which arguably was an inseparable part of the definition. For example, Attachment B said congressional direction that "places restrictions on some portion of [Administration-requested] funding" would count as an earmark . Nevertheless, terms and expressions in the definition, including circumvents , merit-based , competitive , otherwise curtails , and control critical aspects , were left undefined or partially defined. The memorandum also directed agencies and OMB to identify and publicize information about congressionally originated earmarks on the Internet in order to call on Congress to reduce earmark numbers and funding relative to FY2005. Three weeks later, an OMB February 2007 memorandum instructed agencies on how to handle non-statutory congressionally originated earmarks for the FY2007 budget, based on OMB's interpretation of the full-year continuing resolution for FY2007. According to the chairmen of the House and Senate Appropriations Committees, the full-year measure was "free of earmarks." Agencies were instructed by Section I of OMB's memorandum that they "should not" fund non-statutory earmarks, but also told "the Administration welcomes input to help make informed decisions." In the absence of non-statutory earmarks, Section II of the memorandum told agencies to apply "authorized discretion" using "transparent and merit-based determinations to achieve program objectives, consistent with the purpose of the statute and Administration policy (including the President's Budget)." Viewed in concert with the OMB January 2007 memorandum, the February 2007 memorandum's use of terms may have had implications for how to understand the Administration's definition of earmark (in the January 2007 memorandum) and the Administration's characterizations of its own budgetary decision making. Among other things, Section II appeared to leave open the possibility of overlap between the terms merit-based and consistent with Administration policy in some contexts. Starting in March 2007, OMB followed up on its January 2007 memorandum by establishing an "Earmarks" website. In succeeding months, the website presented an expanding database of Administration-defined and -identified earmarks corresponding to FY2005 appropriations, FY2008 appropriations, FY2009 appropriations, and several past authorization measures. The website's explicit purposes were, among others, to establish a "benchmark" for measuring whether Congress "achieve[d] the President's cut in half goal" for FY2008, and to "encourage and inform the debate over how taxpayers' money is spent." The homepage of the website also included as its first paragraph a somewhat different definition of earmark from the one published in January 2007 (see Table 1 ). With the posting of individual earmarks in OMB's database, it became possible to observe how the Administration's definition of earmark was implemented in practice. Many of the Administration's designations of items as earmarks focused on congressional specification, in bill or report language, of a receiving entity or geographic location. Congressionally specified items that previously had been requested by the Administration did not appear to be included in the database. Other items in the database fell outside the category of specifying a recipient or geographic location, however. For example, the datasets of FY2005 appropriations- and authorization-related earmarks include items that reportedly were made by telephone call, made through language in the Congressional Record , and modified from bill or report language through what OMB appears to call "congressional letters of intent." It is not clear, however, if all such instances are included in the database. A May 2007 memorandum provided another, somewhat different Administration definition of earmark (see Table 1 ). The May memorandum instructed agencies to closely track earmarks during the FY2008 appropriations process to measure whether Congress met the President's goal. Final action on FY2008 appropriations occurred in late 2007, with enactment of the Department of Defense Appropriations Act, 2008 ( P.L. 110-116 ) and the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ). On January 29, 2008, OMB posted a summary tally of Administration-identified FY2008 earmark numbers and funding: 11,737 earmarks and $16.872 billion. In July 2008, the FY2008 figures were changed to identify 11,510 earmarks and $16.569 billion in associated funding. In September 2008, the FY2008 figures were changed again to identify 11,524 earmarks and $16.502 billion in associated funding. That compared with the OMB FY2005 tally of 13,492 earmarks and $18.944 billion. Following enactment of FY2008 omnibus appropriations, the President announced in his January 2008 State of the Union Message that he would veto FY2009 appropriations bills if Congress did not cut earmark numbers and funding by half relative to FY2008. The President also announced he would issue an executive order directing agencies to ignore future earmarks "not voted on [in a law] by Congress" (i.e., non-statutory earmarks). Issued the next day, E.O. 13457 outlines what appear to be three explicit purposes: (1) reducing the number and funding of earmarks originated by Congress; (2) making "their origin and purposes ... transparent"; and (3) including congressionally originated earmarks in the text of bills instead of other documents. E.O. 13457 then instructs that agencies "should not" fund non-statutory earmarks, "except when required by law or when an agency has itself determined a project, program, activity, grant, or other transaction to have merit under statutory criteria or other merit-based decisionmaking." The order also provides a new definition of earmark . This time, however, the definition was provided in a document with binding force on agencies (see also Table 1 ): [T]he term ''earmark'' means funds provided by the Congress for projects, programs, or grants where the purported congressional direction (whether in statutory text, report language, or other communication) circumvents otherwise applicable merit-based or competitive allocation processes, or specifies the location or recipient, or otherwise curtails the ability of the executive branch to manage its statutory and constitutional responsibilities pertaining to the funds allocation process. For all legislation enacted after January 29, 2008, E.O. 13457 requires agency heads to take "all necessary steps to ensure that" agency funding decisions for "any earmark" are "based on the text of laws" and not based on a variety of non-statutory means, including "any other non-statutory statement or indication of views of the Congress, or a House, committee, Member, officer, or staff thereof"; agency funding decisions for "any earmark" are "based on authorized, transparent, statutory criteria and merit-based decision making"; and "no oral or written communications concerning earmarks shall supersede statutory criteria, competitive awards, or merit-based decisionmaking." The executive order also outlines the process by which agency heads are required to handle congressional communications about non-statutory earmarks. Communications are required to be received in writing in order to be considered. In addition, they are required to be posted on the Internet by the receiving agency within 30 days, unless "otherwise specifically directed by the head of the agency, without delegation, after consultation with the Director of the Office of Management and Budget." E.O. 13457, taken in the context of other Administration action related to earmarking policies, appears to reflect a comprehensive articulation of the Administration's (1) definition of earmark and (2) views on the appropriate roles of Congress and the President in the allocation of resources and benefits for public purposes. Among other things, it could be argued that the executive order reflects a view that congressional allocation of resources and benefits for public purposes "often lead[s] to wasteful spending" if it does not leave to the President and his Administration discretion to make certain funding allocations based on its interpretations of merit, competition, and statutory criteria. In this view, congressional direction that would fully limit the President's or an agency's discretion—for example, congressional specification of a location or recipient in statute or report language—would appear to be automatically considered an earmark . It could also be argued that the Administration's various definitions have used terms such as control and manage to mean the Administration's use of discretion to allocate funds in ways that comport with the Administration's views of competition and merit, without certain restrictions . Terms such as merit and restrictions are left undefined or partially defined. However, the Administration has not explicitly articulated its position on the appropriate roles of Congress and the President in the allocation of resources and benefits for public purposes. A number of more specific observations might be offered about aspects of E.O. 13457, both when viewed alone and in combination with the President's veto threat in the 2008 State of the Union speech. If agencies comply with E.O. 13457 as written, the E.O. might alter the effectiveness of non-statutory earmarking by Congress. Agencies typically have felt an obligation to comply with these congressional directives. In place of these practices, the E.O. could be used to attempt to reverse roles, with Members who seek non-statutory earmarks making formal requests of agencies, and possibly the White House. According to the E.O., agency funding decisions (but not necessarily White House decisions) are to be made "in the manner set forth" in Section II of the OMB February 2007 memorandum. Under the memorandum, decisions are required to be based on (1) "statutory criteria, such as funding formulas, eligibility standards, and merit-based decision-making," which often leave considerable discretion, and (2) in areas of significant discretion, "merit-based determinations." The basis for "merit-based determinations" is not further defined in the E.O. or February 2007 memorandum, except that decisions in areas of significant discretion would be required to be consistent with the "purpose of the statute" and "Administration policy (including the President's Budget)." Given various estimates of the extent of earmarking originated by Congress, the resources involved are considerable, likely amounting to billions of dollars. At the same time, the resources constitute only a small percentage (less than 1%) of the annual federal budget (nearly $3 trillion in estimated outlays for FY2008). When viewing the E.O. and veto threat in combination, one could argue that the Administration appears to be calling on Congress to both (1) legislate in detail, in statute, when allocating resources and benefits, instead of providing general lump sums in law and then being more specific in report language; and at the same time, (2) not legislate in detail too much, or risk a veto. It could also be argued that the process described in E.O. 13457 might strengthen the President's discretion, influence, and control over agency decision making, which may change the relationship between Congress and the executive agencies. In combination, the E.O. backed up by presidential vetoes, if effective , could be used in an attempt to limit Congress's legislative activities that concern resource allocation to only statutory text. Such a scenario also may leave uncertain the efficacy of many, if not most, other means that Congress has developed for overseeing and influencing agency resource allocation activities. It is not possible to predict how E.O. 13457 might be used in practice or might change interbranch dynamics, should it be strictly implemented. The E.O.'s framework, however, appears to allow the White House to become the arbiter of decisions about whether to honor non-statutory earmarks, if it wished to do so. For example, OMB could influence the processes for deciding the "merit" of non-statutory earmarks. The OMB Director has a role in determining whether to publicly disclose congressional requests or recommendations on the Internet and is provided the authority in the E.O. to issue additional, but unspecified, "instructions" to agency heads. It is conceivable that the E.O., if it increases White House influence in agency decision making, might be used by a President as leverage at any point in the legislative process, regarding presidential nominations, or in other realms of interaction among Congress, agencies, the President, and perhaps also nonfederal actors. Public disclosure or non-disclosure of non-statutory earmark requests, and by implication, the prospect of agency or Administration decisions on the requests, could also occur only after "consultation" with the OMB Director. As the E.O. is implemented over time, however, experience might provide information on what OMB's role, or roles, will be in practice. E.O. 13457 does not require agencies to disregard non-statutory earmarks. Rather, the E.O. states that agencies " should not commit, obligate, or expend funds on the basis of earmarks included in any non-statutory source" (italics added). Even if an agency viewed a non-statutory earmark as having no merit under two explicit circumstances—"statutory criteria" or "other merit-based decisionmaking"—the E.O. does not strictly prohibit the agency from funding the non-statutory earmark. Therefore, these two explicit exceptions to the direction that agencies "should not commit, obligate, or expend funds" would appear to be only a subset of the potential exceptions to the Administration's policy about whether or not to fund a non-statutory earmark. For example, if a non-statutory earmark were considered by an agency to have no merit, it appears that a decision to fund the earmark might still be made on the basis of "Administration policy (including the President's budget)" (pursuant to Section 2(a)(ii)'s citation of the OMB February 2007 memorandum), or in response to input from OMB or the White House received under the E.O.'s Section 2(b) and 2(c) provisions. The E.O.'s definition of earmark is not precise. Congressional direction that "specifies the location or recipient" appears to be clear in how it has been and would continue to be applied. Other language in the definition, however, relies on largely undefined terms and expressions that might allow for an expansive interpretation, if the Administration wished to use one. Specifically, the E.O. definition provides two additional criteria that would classify "purported congressional direction (whether in statutory text, report language, or other communication)" to be an earmark . The additional criteria are "congressional direction" that (1) "circumvents otherwise applicable merit-based or competitive allocation processes," or (2) "otherwise curtails the ability of the executive branch to manage its statutory and constitutional responsibilities pertaining to the funds allocation process." With regard to the first, OMB has made statements that formulation of the President's budget proposal is a merit-based and competitive allocation process. A statement during a press briefing by OMB Director Jim Nussle, in which he compared Administration budget formulation with congressional earmarking, is illustrative: [W]e're very transparent about all our proposals. They're out there for the world to see, now on the Internet especially. These proposals are justified, with a number of detailed evidence [sic] behind them to justify exactly why we want to spend the programs where we want to spend them. They're also merit-based and often competitively bid—most often, competitively bid. And they have the ability for Congress to pick and choose. Unfortunately, Congress doesn't always do that with its earmarking process. There are many that are air-dropped in into report language and nobody sees until the last moment, that Congress hasn't even voted on or doesn't even consider in open forum or open hearing. So I think it's a much different situation. And we have scrubbed through our budget for those kinds of situations and have removed them where we thought that was the case. But we believe that the Congress needs to change its ways on earmarking. If the E.O. definition of earmark as "congressional direction ... [that] circumvents otherwise applicable merit-based or competitive allocation processes" were interpreted in light of such Administration statements, the definition might leave open the possibility of an expansive interpretation being applied. For example, it may be that the definition could include within its ambit congressional direction that diverges from the President's annual budget request. The second criterion, relating to congressional direction that "curtails the ability of the executive branch to manage its statutory and constitutional responsibilities pertaining to the funds allocation process," also is not precise and could be interpreted expansively, if the Administration wished to do so. It is not clear what impact, if any, E.O. 13457 would have on non-statutory reprogramming directions imposed by Congress on agencies. Reprogramming typically refers to an agency shifting funds among activities within an appropriations account's lump sum, resulting in an allocation different from what was contemplated at the time appropriations were enacted (e.g., based on agency budget justification documents and other representations). Congressional reprogramming directions (e.g., limiting how much can be shifted from one activity to another, requiring congressional notification or approval) are often included in report language and, as such, may not be legally binding. Appropriations committees have used reprogramming for decades to maintain oversight of agency activities and ensure that agencies allocate resources consistently with congressional intentions, while at the same time balancing an additional priority of giving agencies flexibility to adapt to changing circumstances rather than embed restrictions in law, which might be difficult and cumbersome to change in a timely way. It is not clear whether the Administration's definition of earmark could be applied to reprogramming requirements and restrictions. On September 30, 2008, the President signed H.R. 2638 , the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, into law. The act included 3 of the 12 regular appropriations acts for FY2009, a long-term continuing appropriations resolution (CR) for the remaining 9 regular appropriations acts (providing funds through March 6, 2009), and a supplemental appropriations act for disaster relief and recovery. Leading up to enactment, the President did not make any specific veto threats to FY2009 appropriations bills in Statements of Administration Policy (SAPs) on the basis of Administration-defined earmarks . Three weeks after enactment of the legislation, on October 23, 2008, OMB issued instructions to the heads of executive agencies on how to implement the FY2009 consolidated appropriations act "in accordance with" E.O. 13457. OMB's memorandum addressed several subjects. First, the memorandum told agencies that in implementing the Continuing Appropriations Resolution, 2009 (Division A of the law), agencies are legally obligated to fund an earmark , as defined under the E.O., only under certain conditions. [I]n implementing the Continuing Appropriations Resolution, 2009 (the "FY09 CR") agencies are legally obligated to fund an earmark only if the project, program, or grant is an earmark that meets all three of the following criteria: (1) was in the statutory text of the FY08-enacted appropriation (including earmarks that were statutorily incorporated by reference); (2) was of a continuing nature (rather than of a one-time, non-recurring nature); and (3) could not be carried out by funding the earmark in the remainder of FY09 (following the expiration of the FY09 CR) if Congress ultimately decides to provide continued funding in FY09 for that earmark. The memorandum explained that if an earmark does not meet all three criteria, "then during the FY09 CR period an agency must only fund the earmark if the agency has itself determined that it has merit under statutory criteria or other merit-based decisionmaking." This instruction referred to the E.O. and its incorporation, by reference, of directions included in Section II of the OMB February 2007 memorandum. The memorandum further explained OMB's third criterion, which directed agencies to be restrictive in how they fund statutory earmarks . [S]ince Congress has directed agencies in Section 110 [of the FY2009 CR] to implement "only the most limited funding action of that permitted," agencies shall not fund during the FY09 CR period those FY08 statutory earmarks that were of a continuing nature if such earmarks could still be funded in the remainder of FY09 (following the expiration of the FY09 CR) if Congress ultimately decides to provide continued funding in FY09 for those FY08-earmarked projects and activities (in other words, if an agency were to fund such FY08 earmarks during the FY09 CR period, then the agency would be infringing upon the prerogative of Congress in the coming months to set full-year FY09 funding levels). In this regard, Congress in the FY09 CR did not direct agencies to fund the FY08 statutory earmarks during the FY09 CR period. For purposes of the FY2009 long-term CR, the memorandum also addressed non-statutory earmarks "that were in the reports and other non-statutory materials that concerned either the FY08 appropriations Acts or the (not yet enacted) full-year FY09 appropriations bills for those activities and programs that are funded by the FY09 CR." The memorandum cited Supreme Court opinions that non-statutory earmarks are not legally binding. In addition, the memorandum told agencies that in "accordance" with provisions of both E.O. 13457 and the CR, they "shall not fund [non-statutory] earmarks during the FY09 CR period." Instead, the memorandum directed agencies to follow the requirements of the E.O. The memorandum concluded its discussion of the CR by noting that the FY2009 long-term CR included language prohibiting "new starts." OMB suggested this prohibition would apply to some earmarks . The memorandum also directly addressed statutory and non-statutory earmarks contained in the supplemental and three regular appropriations acts. Funding in these acts was not subject to the long-term CR's various restrictions. For statutory earmarks , OMB stated that agencies shall implement them "in a manner consistent with applicable law," quoting the E.O. For non-statutory earmarks , the memorandum recited provisions of the E.O. that agencies are required to follow. In the latter case, it is not clear how or when agencies will work with OMB to determine which non-statutory earmarks will be made publicly available on the Internet, per the E.O.'s requirements, and which will remain undisclosed by the executive branch, subsequent to the E.O.'s required consultation between an agency head and the Director of OMB. The articulation and evolution of Bush Administration policy regarding congressionally originated earmarks may have implications for congressional budgeting and earmarking practices, working relations between Congress and the President, and working relations between Congress and agencies. The policy, therefore, may raise several general and specific issues for Congress, including the following: What are the appropriate budgetary roles and responsibilities for Congress, the President, agencies, and the public in the U.S. political system? How should earmarks be defined, identified, and overseen? What are the implications for Congress of the Bush Administration's Executive Order 13457? What are the implications for Congress of the OMB "Earmarks" website and database of congressionally originated earmarks? Might Administration actions have consequences for congressional representational activities? Congress, the President, and individual agencies all have roles in the federal budget process, sometimes working together and sometimes at cross-purposes. The Constitution establishes a basic framework for this interaction. The Framers of the Constitution intended for Congress, the President, and the courts to work together, but also to jealously guard their own prerogatives, in order to better achieve the varied purposes set forth in the preamble to the Constitution. In the words of James Madison, there would be under the Constitution a "separation of the departments of power." Rather than a complete separation of these "departments," however, the principle called for connectedness and a blending: [U]nless these departments be so far connected and blended as to give to each a constitutional control over the others, the degree of separation which the maxim [of separation of the departments of power] requires, as essential to a free government, can never in practice be duly maintained. Under the Constitution, for example, Congress may use its power of the purse to specify through law, in greater or lesser detail, the process of how resources are to be allocated and distributed. Congress can also communicate to agencies through non-statutory means, such as report language. For example, Congress might communicate its intent concerning how resources are to be allocated in circumstances when legislating in detail might become unwieldy, galvanize opposition, or constrain the ability of agencies to adapt to changing circumstances. In taking either of these actions—statutory or non-statutory—Congress may affect the decisions that the President and individual agencies make by (1) expanding or diminishing opportunities to use discretion; (2) increasing or decreasing transparency of presidential decisions or actions; and (3) increasing or decreasing the independence of federal agencies from presidential influence and policy preferences. The congressional decisions and processes might also leave greater or lesser amounts of discretion to agencies in executing the law and allocating resources. The President, in turn, could potentially influence congressional decision making through tools such as the veto power, annual spending proposals that are required by law, arguably superior access to and control over information from agencies, and the ability to influence public opinion. The President may also influence decisions made by agencies through appointments of senior officials (subject to Senate confirmation) and the use, at times, of other levers to control agency decisions, which at times have been restricted by Congress. In some respects, agencies are sometimes "caught in the middle" between Congress and the President in their efforts to control and influence the purpose, design, and implementation of public policy. From another perspective, agencies also sometimes wield influence or autonomy in constraining and helping to shape the actions of Congress and the President, in concert with coalitions of diverse stakeholders in the broader political system. The Administration has stated that "[congressionally originated] [e]armarks are awarded through a Congressional political process, favoring those who have direct access to elected officials or indirect access through lobbyists." The Administration has juxtaposed this perspective with a view of presidential and agency decision making that is "subject to a competitive or merit-based process to ensure higher priorities are funded first." This raises other questions. For example, is budgetary decision making in the White House, among political appointees, or among career civil servants less "political" than in Congress? Or is it "political" in a different way? What role does access to elected or appointed officials, either directly or through lobbyists, play in budgetary decision making in the executive branch? Given the apparent room for the exercise of discretion by Congress, the President, and agency officials at various points in the budget process, how should constitutional obligations and powers be reconciled with practical considerations and concerns? How may diverse views about representation, constitutionally prescribed responsibilities, effectiveness, efficiency, equity, transparency, ethics, and accountability be reconciled? In addition, the President proposed that Congress stop including earmarks in report language and instead place them in statute. He expressed his intention to enforce the proposal with his executive order. Congress and agencies have a long history of using report language to guide agency decisions, facilitate communications and accountability, and provide more specificity in expectations about actions or funding. Interaction with agencies through report language at times may provide flexibility to agencies that would not be available if provisions were included in statute. Some observers see report language as allowing insufficient scrutiny in the legislative process, as the Administration has argued. Others, however, see report language as facilitating two-way communication between Congress and agencies. One analyst judged that "controls" in report language have "proved to be a helpful device in permitting the delegation of discretionary authority to the agencies while at the same time retaining close legislative review." What implications does the President's executive order have for Congress, the President, and agencies, in terms of control over the design and implementation of public policies? What are the potential consequences for relations and communications between appropriations committees and agencies? If agencies ignore expressions of congressional intent related to earmarks under orders from the President, will that have implications for how executive agencies respond to other communications contained in report language? Debates over earmark definitions and transparency have taken place for some time, but no generally accepted definitions of earmark-related terms appear to have been established. Over time, however, a particular definition of earmark could become so widely used by observers that it becomes regarded as the authoritative definition, notwithstanding other definitions. If a definition were broadly regarded as authoritative, future developments and debate on earmarks might be influenced accordingly, with resource allocation activities that fall under the definition more likely to be subjected to discussion and public scrutiny than activities that are excluded. From this perspective, it could be argued that if the Administration's definition of earmarking as a solely congressional activity is widely accepted, future discourse and policy proposals may focus more and more on congressionally originated earmarks as opposed to earmarking by the President, political appointees, or career civil servants. Moreover, potential interpretations and connotations of the definitions might also come to be viewed as widely accepted (e.g., relating to concepts of merit and the appropriate processes for allocations of resources). Members of Congress, several Presidents, and interest groups have expressed diverse views regarding (1) the perceived merit of earmarking activities and (2) which actors in the U.S. system of government should make decisions on how to allocate specific funds. The definition of the term earmark has the potential to change the terms of debate and the options considered. The evolution of the debate over earmark definitions, therefore, may have implications for the institutional capacities of Congress and the President to carry out their constitutional responsibilities and advance their policy or procedural preferences. In that light, Congress might consider the implications various definitions of earmark could have, if they were widely accepted, for (1) affecting the institutional capacities of Congress, the President, and agencies to function effectively in the U.S. system of government and (2) setting the terms of debate. The President and agency officials can, and often do, make allocation and earmark decisions largely outside public view. For example, decisions oftentimes are made during budget formulation or during the budget execution process that may or may not be presented in agency budget justifications and reports to Congress. Difficult issues—such as whether any presidential or Administration decisions to restrict, link, or condition awards of contract or grant funding to nongovernmental entities on the basis of their compliance or cooperation with presidential or Administration policy preferences constitutes a form of earmarking—may arise. With regard to resource allocation, transparency in both decision-making processes and decision outcomes arguably would allow for scrutiny. Scrutiny, in turn, might confer some perception of merit for budget allocations that are able to withstand the scrutiny. It is not clear if the Administration has included in its online database all instances of earmarks that agencies and the White House received through "other communication." Pursuing that option might provide insight into how the Administration and agencies respond to congressionally originated earmarks that are not contained in bill or report language and whether items were included on a selective basis. On the other hand, it would not necessarily always be in the interest of agencies, the White House, or Members of Congress to disclose telephone-, letter-, and in-person-directed earmarks in the context of legislative negotiations among Congress, the President, and agencies. Currently, there is no publicly available, comprehensive source of information on whether, or the extent to which, congressionally originated earmarks are actually funded by agencies. Some information on this topic might be forthcoming in response to a non-statutory congressional directive to OMB that was approved in the explanatory statement associated with the Consolidated Appropriations Act, 2008, which provided appropriations to OMB. Specifically, in its report for the FY2008 Financial Services and General Government appropriations bill, the Senate Appropriations Committee directed OMB to report to Congress no later than March 1, 2009, regarding the extent to which executive departments and agencies that administer directed funding allocate the designated amounts to intended recipients at a level less than the amount specified in any enacted bill or accompanying report describing such directed funding. The Senate report language was subsequently approved in the explanatory statement corresponding to the FY2008 omnibus appropriations measure. Past research suggests that, if OMB complies with the committee's directive, the resulting information may cite several kinds of instances in which congressionally directed spending items , or congressional earmarks , are not provided in the full amount to a recipient, including (1) if the President, OMB, or an agency decides not to allocate funds to a recipient (i.e., disregards the congressional directive or earmark); (2) if the President, OMB, or an agency decides to reduce a designated amount in light of set-aside requirements or administrative fees; or (3) if the President, OMB, or an agency is unable to identify or find a recipient or finds the recipient legally ineligible to receive funds. E.O. 13457, both alone and in combination with the President's veto threat in the 2008 State of the Union Message, may have implications for the congressional appropriations process and potentially other legislative activities. It is not possible to predict how the E.O. will operate or be used in practice by the President, OMB, and heads of agencies, or whether the Administration might seek to use the E.O.'s framework as a source of leverage in bargaining in the legislative process. If the E.O. were a topic of congressional interest, several general options might be explored. Given the undefined nature of some terms in the Administration's overall definition of earmark , as well as uncertainty how some aspects of the E.O. will operate or be used in practice, Congress could consider holding hearings or engaging in other information exchanges to clarify any questions of interest. In response to the E.O., Congress could include in statutory text what otherwise would have been non-statutory earmarks. Alternatively, Congress could incorporate by reference in statutory text any items contained in non-statutory documents. If Congress wished to strengthen, weaken, prevent, repeal, or otherwise alter the directions specified in the E.O. or the E.O. itself, or influence the practices called for by the E.O., Congress could consider legislating on the topic, possibly using approaches such as negotiation, appropriations limitations, revocation, or delay of final action on FY2009 appropriations until after a new President takes office. Two factors that may influence whether a given definition of earmark becomes more widely accepted or used include (1) ease of access to corresponding earmark data and (2) the extent of data that are made available. OMB's "Earmarks" website and database, which contain data on what the Administration views to be congressionally originated earmarks, are publicly accessible and are frequently cited in media stories on earmark issues. The OMB website gained further visibility after the Administration announced that the website's FY2005 appropriations data would serve as the baseline for measuring progress toward the President's goal of reducing earmarks for FY2008, and after the Administration began to include language about earmarks prominently in its Statements of Administration Policy regarding appropriations legislation. The FY2008 disclosure lists of earmarks published in House and Senate Appropriations Committee reports also have attracted considerable media attention. Data from the congressional reports, however, have not been aggregated by federal entities in a way similar to the presentation on the OMB website. Separately, a searchable website of funding for federal grant, contract, and loan awards that Congress required OMB to establish under the Federal Funding Accountability and Transparency Act of 2006 (FFATA) became operational in December 2007 as USAspending.gov . In the absence of supplementary information, however, it is not clear that users of the FFATA-required website would be able to determine whether an award was earmarked by Congress. The databases that feed into the website do not contain information to separate awards corresponding to congressionally originated earmarks (according to congressional or Administration definitions) from awards that were originated by the President or agency officials. If the FFATA-required website does not include earmark information, then OMB's "Earmarks" website would appear to be the only federal government resource providing aggregate information on congressionally originated earmarks that is available to the public online, versus accessing individual committee reports, joint explanatory statements, and managers' statements. OMB may then be in a position to set some parameters for public debate on earmarks. Because the OMB website is the most visible federal government resource for tracking aggregated totals of congressionally originated earmarks, many observers may regard it as the authoritative source of information on earmarks generally, reinforcing the perception that the Administration's definition is the standard for public debate. If Congress considered these matters to be of interest, it could consider several options along with their advantages and disadvantages. The OMB "Earmarks" website and database presumably would continue to provide information to the public that reflects the Administration's perspective on what does, and does not, constitute an earmark . In light of Administration statements that the website's purpose is, in part, to "encourage and inform the debate over how taxpayers' money is spent," some would view it as a means for the President to advocate his policy and budget process preferences, and facilitate the actions of nongovernmental actors (e.g., the media and public interest groups) to exercise scrutiny over Congress by performing additional analysis on the earmark data. Congress could consider the advantages and disadvantages of assembling its own centralized, aggregated database. In effect, pursuing this option would present the public with an alternative source of earmark information, in addition to the OMB "Earmarks" website, based on congressional definitions of earmark-related terms and congressional disclosure lists. Congress could require OMB to adopt a different definition of earmark for use in collecting information from agencies and posting data on the OMB "Earmarks" website. This option could allow for establishment of a definition more in concert with the definitions in each chamber's rules, in order to provide greater consistency in terms of data collection, debate, and analysis of earmarks across branches of government. The option also might constrain the President's ability to use OMB and agency budget offices and personnel to advance his proposals regarding congressionally originated earmarks. Critics of earmarking might argue that congressional definitions and practices do not allow for adequate scrutiny of congressional actions. Therefore, critics of earmarking might support the President's use of OMB and agency resources to establish the Administration's own definition and efforts to decrease the extent of congressionally originated earmarks. Some observers may also raise separation of powers questions if Congress required OMB to adopt a different definition of earmark . Another option might involve limiting or cutting off funds for the OMB website and database. Pursuing this option might be perceived to bring advantages and disadvantages similar to the codification option. It also might engender a negative reaction from the media and, possibly, the public. Information about congressionally originated earmarks might be made accessible through the FFATA-required website. For example, Congress could consider the advantages and disadvantages of amending the FFATA to require OMB to incorporate its "Earmarks" data into USAspending.gov. Integrating the data might address two objectives: to provide the public with as much information as possible about federal awards, and to enable the public to access that information from a single website. On the other hand, by mandating that USAspending.gov include data from the OMB "Earmarks" database, Congress might be perceived as accepting OMB's definition of earmark . Alternatively, Congress could consider amending the FFATA to require incorporation of data from OMB's "Earmarks" website, while also requiring that OMB adopt congressional definitions of earmark-related terms. This option, with advantages and disadvantages similar to those discussed above, might provide Congress more control over the earmark data provided to the public through USAspending.gov. Finally, Congress could pursue an option of requiring the FFATA website to include congressionally defined and identified earmarks without addressing the OMB website. This option is explicit in legislation that has been introduced. Pursuit of the option would result in two federal, online sources of earmark information that might differ in part because of different underlying definitions. In addition, the FFATA website would not necessarily capture all congressionally originated earmarks as defined by House and Senate rules, if any were not associated with federal awards such as grants, contracts, or loans. Administration efforts to track congressionally originated earmarks and use the machinery of executive agencies to publicize its policy preferences arguably might affect Congress's abilities to carry out representational activities that are an implicit component of its constitutional responsibilities. The Framers believed that the federal government needed to provide layers of representation that could incorporate national, state level, and more localized interests, while providing institutional checks and balances between Congress and the President. In the federal government, Members of Congress represent localized constituencies with interests and policy preferences that might or might not be perceived as aligned with broader, national interests. Members of Congress also act (1) individually, (2) in their respective chambers, and (3) between chambers, through deliberation and the legislative process, to come together to make laws for the Nation. A President proposes his or her preferred program of policies and takes care that laws passed by Congress are faithfully executed. In doing so, a President may use discretion sometimes to advance his or her policy preferences. The presidency has also been seen by many as representing broad national interests. The combination of layered representation and interbranch checks and balances arguably assures that the preferences of national and local constituencies are addressed in the national policymaking process. Preferences may be addressed sometimes through broad laws, and other times through the use of specific laws, non-statutory earmarks of benefits and resources, and administrative decisions targeted to areas of congressional or presidential policy preference. The requirements of E.O. 13457, and the OMB "Earmarks" website and database, arguably subject the representational focus of Congress to greater scrutiny than the President's representational activities. When viewed in isolation, this might be seen as an attempt to pursue transparency in government funding decisions, a goal that has been advanced by some congressional and executive branch leaders. Depending upon how one perceives the executive order and the OMB website fitting into the larger design of checks and balances, however, one might or might not see the long-term representational capacity of Congress as being affected or impaired if the executive order were fully implemented, or the OMB website were continued in its current format.

During the 110th Congress, the House of Representatives, the Senate, and the George W. Bush Administration have defined terms like congressional earmark, congressionally directed spending item, and earmark, and have provided some direction for how congressionally originated earmarks, according to these definitions, are to be handled. This report focuses on Bush Administration policy regarding earmarks originated by Congress and related issues. Specific definitions for the term earmark (and related terms, like congressional earmark, presidential earmark, and others) vary considerably and are controversial. Nevertheless, all of the terms relate to the use of discretion to allocate particularized benefits to one or more specific purposes, entities, or geographic areas. Some earmarks have the force of law, and others do not. Practices like earmarking have been used for decades, if not centuries, to make decisions regarding the allocation of public resources, but concerns also have been expressed. At the same time, Congress, its Members, and Presidents have asserted the prerogatives of their constitutional and statutory authorities and pursued their budget policy preferences. In January 2008, the President announced he would veto future appropriations bills that did not cut the number and funding of Administration-defined earmarks by half, relative to FY2008. The President also issued Executive Order (E.O.) 13457, which directed that agencies "should not" fund non-statutory earmarks, except under some conditions. OMB subsequently directed agencies on how to implement the E.O. after enactment of FY2009 continuing and regular appropriations. These are the latest in a series of developments that began in January 2007, when the President proposed that Congress should (1) cut the number and funding of congressionally originated earmarks by at least half for FY2008 appropriations, relative to FY2005, and (2) place them only in statutory text, not report language. In January 2007, the Administration issued its own definition of earmark, whose language (and perhaps meaning) evolved over time in Office of Management and Budget (OMB) memoranda. A final definition appears to have been established in E.O. 13457, but its meaning probably is informed by the evolution and contents of previously articulated definitions. Later, OMB established an "Earmarks" website, containing a database of Administration-identified earmarks, to track congressional action. Potential related issues for Congress involve, generally, roles and responsibilities for Congress, the President, agencies, and the public in the U.S. political system; defining, identifying, and overseeing earmarks; the executive order; the "Earmarks" website and database; and potential representational consequences. This report emphasizes analysis of E.O. 13457. For a legal analysis of E.O. 13457, see CRS Report RL34373, Earmarks Executive Order: Legal Issues, by [author name scrubbed] and [author name scrubbed]. This report will be updated as warranted and at the conclusion of the George W. Bush Administration.

Agricultural conservation has been a public policy issue for more than 60 years, an issue repeatedly recast as new problems have emerged or old problems have resurfaced. Early conservation efforts were focused on two themes—reducing high levels of soil erosion and providing water to agriculture in quantities and quality that enhanced farm production. Congress responded repeatedly to these themes by creating or revising programs designed to reduce resource problems on the farm. By the early 1980s, however, concern was growing that these programs were not adequately dealing with environmental problems resulting from agricultural activities (especially off the farm). Publicized instances of significant problems, especially high soil erosion rates said to rival the dust bowl era, increased awareness and intensified the policy debate. In 1985, conservation policy took a new direction when Congress enacted four major new conservation programs in the conservation title of the Food Security Act of 1985 ( P.L. 99-198 ): the Conservation Reserve Program (CRP), Sodbuster, Conservation Compliance, and Swampbuster. These programs, all administered by the U.S. Department of Agriculture (USDA), were the first conservation programs designed to deal with environmental problems related to the off-farm impacts of agricultural activities. Provisions enacted in subsequent farm bills, including in 1990, 1996, 2002, and 2008, reflect a rapid evolution of the conservation agenda, including the growing influence of environmentalists and other non-agricultural interests in the formulation of conservation policy, and a recognition that agriculture was not treated like other business sectors in many environmental laws. Congress also began funding many of these new programs through mandatory spending for the first time, using the borrowing authority of USDA's Commodity Credit Corporation (CCC) as the funding mechanism instead of annual appropriations. In addition to the original soil erosion and water quality and quantity issues, the conservation agenda has continued to expand to address other natural resource concerns such as wildlife habitat, air quality, wetlands restoration and protection, energy efficiency, and sustainable agriculture. Many conservation programs receive continued support among producers and Congress, as evidenced by the recent reauthorization and expansion of existing programs and creation of new ones in the most recent farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246 ). The enacted bill addressed several emerging issues, such as payment structure, geographic targeting, program complexity, the importance of large-scale conservation efforts, and measurement of costs and effectiveness. Funding also played a large role in the 2008 farm bill debate as a pronounced domestic budget constraint caused several conservation groups to compete with other farming interests for the necessary resources to expand and continue many conservation programs. Many of these general policy issues were central to outcomes in the enacted conservation title of the farm bill. USDA's conservation efforts have centered in recent years on implementing conservation programs that target working lands, remove land from production (also known as retiring land) or create conservation easements, and provide technical assistance. Funding for the overall conservation effort has grown significantly since the 2002 farm bill ( P.L. 107-171 ) and many reauthorized programs received increases in funding in the 2008 farm bill. Recent trends in policy for the suite of conservation programs include less emphasis on land retirement and on land producing row crops, and more attention to conservation on land in other agricultural uses and to livestock producers. Congress in the 2008 farm bill expanded many program benefits to include specialty crop producers, producers transitioning to organic production, forested and managed lands, pollinator habitat and protection, and nutrient and pest management. Lead agricultural conservation agencies within USDA are the Natural Resources Conservation Service (NRCS), which provides technical assistance and administers most programs, and the Farm Service Agency (FSA), which administers the largest program, CRP. These agencies are supported by others in USDA that supply research and educational assistance, including the Agricultural Research Service, the Forest Service, and the Economic Research Service. In addition, the conservation effort involves a very large array of partners, including other federal agencies, state and local governments, and private organizations, among others, who provide funds, expertise, and other forms of assistance to the conservation effort. There are currently more than 20 USDA agricultural conservation programs that assist private landowners with natural resource concerns. Conservation programs are grouped into working land programs, land retirement and easement programs, watershed programs, and other programs. For a brief description of the individual USDA agricultural conservation programs, see CRS Report R40763, Agricultural Conservation: A Guide to Programs , and for program funding levels, see the Appendix . Figure 1 illustrates the estimated amount of funding in FY2009 for each group of programs. Working lands conservation programs are typically classified as programs that allow private land to remain in production, while implementing various conservation practices to address natural resource concerns specific to the area. The largest of these programs is the Environmental Quality Incentives Program (EQIP), currently authorized at a total of $7.3 billion between FY2008 and FY2012. Others, such as the Wildlife Habitat Incentives Program (WHIP), Agricultural Management Assistance (AMA), and Agricultural Water Enhancement Program (AWEP), operate similarly to EQIP; however, they target specific resource concerns or geographic areas. The new Conservation Stewardship Program (CSP) replaces the Conservation Security Program and is designed to encourage producers to address specific resource concerns in a comprehensive manner. Land retirement programs provide federal payments to private agricultural landowners for temporary changes in land use or management to achieve environmental benefits. Conversely, conservation easements impose a permanent land-use restriction that is voluntarily placed on the land in exchange for a government payment. The largest land retirement program is the Conservation Reserve Program (CRP), which removes land from production and is authorized to enroll up to 32 million acres. Other programs such as the Wetlands Reserve Program (WRP) and the Grasslands Reserve Program (GRP) use a combination of long-term or permanent easements as well as restoration contracts to protect wetlands and grasslands from production. The Farmland Protection Program (FPP) also uses easements; unlike the aforementioned programs, however, it does not remove land from production, but rather restricts productive farmland from being developed for non-farm purposes. Watershed and Flood Prevention Operations (P.L. 83-566 and P.L. 78-534) are two separate program authorities that have almost identical objectives and operations. These programs are sometimes referred to as the Small Watershed Programs. Through these programs, NRCS partners with local sponsors to carry out activities for soil conservation; flood prevention; conservation, development, utilization and disposal of water; and conservation and proper utilization of land. The Watershed Rehabilitation program was authorized in 2000 ( P.L. 106-472 ) to rehabilitate watershed structures created under the Watershed and Flood Prevention Operations programs that have reached or exceeded their design life. USDA administers several other conservation programs. Technical assistance programs, such as Conservation Operations (including Conservation Technical Assistance, Survey, Soil Survey, Grazing Lands Conservation Initiative, and the Plant Materials Centers) provide landowners with science-based conservation information and technical expertise (e.g., engineering and biological) unique to the region and land-use type. USDA also administers compliance programs such as Sodbuster, Swampbuster, conservation compliance, and Sodsaver, which halt a producer's access to many federal farm program benefits if they do not meet conservation program requirements for highly erodible lands and wetlands. Programs such as the Emergency Conservation Program (ECP) and the Emergency Watershed Program (EWP) provide disaster assistance for farmland rehabilitation and impairments to watersheds, and are funded on an ad-hoc emergency basis. The Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 ), the 2008 farm bill, reauthorizes almost all existing conservation programs, modifies several programs, and creates various new conservation programs. The changes address eligibility requirements, program definitions, enrollment and payment limits, contract terms, evaluation and application ranking criteria, among other administrative issues. Following the passage of the 2008 farm bill, USDA has taken steps toward implementation of many conservation programs. In the 111 th Congress, lawmakers' attention likely will be focused on USDA's implementation of these provisions. The following sections provide a brief description of implementation issues within some larger conservation programs and provisions. The 2008 farm bill reauthorized CRP and reduced the maximum acreage cap to 32 million acres, down from a cap of 39.2 million acres established in the 2002 farm bill. There are two types of sign-ups for enrolling land in the CRP: general and continuous. General sign-ups are specified enrollment periods during which landowners compete nationally to enroll their land in the CRP. Following the expiration of acres in 2009, which reduced the total enrolled acres below the 32 million acre cap, a general sign-up was expected to enroll additional acres. During a June 2010 hearing before the House Committee on Agriculture, USDA was questioned about the delay in offering a CRP general sign-up. In response, USDA indicated that an executive branch control on mandatory program spending, often referred to as administrative PAYGO, resulted in delayed implementation of CRP, including enrolling additional acres. While Congress may have the understanding that it has given USDA statutory authority and access to mandatory funding to enroll 32 million acres, as well as the expectation that the authority would be used, the process outlined by the Office of Management and Budget (OMB) appears to have prevented USDA from reaching that goal, at least for a time. USDA eventually announced a new general sign-up in August 2010 (sign-up number 39). Unlike continuous sign-up, general sign-up is always competitive. Approximately 85% of CRP acreage (26.7 million of 31.3 million acres) is currently enrolled through general sign-up. For this most recent general sign-up, FSA enrolled 4.3 million acres of 4.8 million acres offered. Over half the acreage enrolled (over 2.7 million acres, or 57%) was set to expire on September 30, 2010, or had expired in 2009. States with the most offers accepted during the 39 th sign-up were Texas (858,436 acres), Colorado (739,467 acres), and Kansas (618,905 acres). As of August 2010, there is a total of 31.3 million acres enrolled in CRP. According to USDA, the remaining acres below the 32 million-acre cap are reserved for continuous sign-up and other sign-up efforts. Approximately 4.4 million acres are set to expire on September 30, 2011, possibly creating room for another general sign-up. Future general sign-ups, however, could be further impacted by administrative PAYGO if no congressional action is taken and OMB continues to enforce its current policies. With the 111 th Congress experiencing continued budget constraints, EQIP could face similar challenges, with a potential reduction in mandatory funding levels and a continuing backlog of unfunded applications. The 2008 farm bill continued an increase in authorized mandatory funding that began with the 2002 farm bill. Mandatory funding for EQIP has grown substantially from its FY2002 level of $200 million, to the authorized level of $1.75 billion in FY2012. Despite this significant increase in authorized mandatory funding, annual appropriations acts have reduced the actual funding levels by a total of nearly $1.16 billion from FY2005 through FY2010. Some of this reduction has come at the request of both the current and previous Administrations. The number of pending applications continues to exceed the amount of available funding ( Table 1 ). In 2009, 37% of eligible applications were funded. Many conservation groups are concerned that this has deterred producers from applying and enrolling in the program. Others point out that despite reductions from the authorized level, total funding continues to increase. This issue will likely intensify if annual appropriations continue to reduce actual funding for EQIP below authorized mandatory levels. The original Conservation Security Program, established in the 2002 farm bill ( P.L. 107-171 ), faced numerous implementation challenges, drawing criticism by many in Congress. The 2008 farm bill established the new Conservation Stewardship Program (CSP) to restructure and replace the old CSP. NRCS implements CSP through a final rule published in the Federal Register on June 3, 2010. Applications for CSP are accepted on a continuous basis and ranked and funded based on established cut-off dates. During the first sign-up period in FY2010, NRCS funded over 10,600 contracts enrolling approximately 12.7 million acres. States enrolling the most applications were Missouri (1,007), Minnesota (906), and Iowa (729). One possible implementation issue with the new CSP could be similar to one faced by the old CSP—cost restrictions. NRCS argued that because the 2002 farm bill placed a statutory 15% limit on technical assistance cost to administer CSP, program implementation was constrained. The new CSP could face similar implementation concerns owing to a 2008 farm bill requirement that the program achieve a national average program cost of $18 per acre. This per-acre cost includes all financial assistance paid to the producer, technical assistance, and any other expense associated with enrollment or participation in the program. Depending on the cost of implementing CSP, the total per-acre payment offer to producers during a sign-up could be reduced in order to meet the average $18 per-acre cost requirement. This lower per-acre funding level could also impact the type of acres enrolled if NRCS must enroll 12.7 million acres annually. For example, following the FY2010 sign-up period, 62% of enrolled acres are range, pasture, and non-industrial private forest land, which have a lower per-acre payment than cropland ( Figure 2 ). The 2008 farm bill placed new limitations on lands eligible for enrollment in WHIP, which will likely reduce the number of eligible acres in traditionally high participation states. Language was added requiring WHIP to be used "for the development of wildlife habitat on private agricultural land, nonindustrial private forest land, and tribal lands." The addition of this language reverses the previous interpretation by NRCS, which extended eligibility to all privately owned land, tribal land, state/local government land, or federal land. By previously offering support for wildlife habitat projects on all land and aquatic areas, WHIP provided an assistance option to landowners who were unable to meet the specific eligibility requirements of other USDA conservation programs. The new requirement of agricultural production could shift financial assistance for WHIP contracts away from the traditionally large-allocation states in the Northeast to more agriculturally intensive states in the West and Midwest. For example, in FY2007, prior to the agricultural production requirement, states that received large WHIP allocations were Rhode Island, Alaska, Hawaii, Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, and Vermont. In FY2009, following the agricultural production requirement, states that received large WHIP allocations were Texas, Alaska, California, New Hampshire, and Florida. The 2008 farm bill reauthorized WRP and increased the maximum enrollment to 3,041,200 acres, an increase of 766,200 acres above the previous cap established in the 2002 farm bill. The program receives mandatory funding through the Commodity Credit Corporation (CCC) and is estimated at $441 million for FY2009. Between FY2003 and FY2007, WRP enrollment was reduced through annual appropriations bills. As Congress faces continued budget constraints, WRP could see similar reductions in the future. One provision in the 2008 farm bill has generated considerable response from the environmental and conservation communities. Under Section 2203, Congress extended the length of time required to own the land before an applicant is eligible for the program from one year to seven years. The bill retained the exemptions to the ownership requirement, allowing a landowner to enroll land owned for less than seven years if the land was obtained (1) through inheritance; (2) through foreclosure; or (3) for any reason that gives NRCS assurance that the property was obtained for a purpose other than placing it in WRP. An investigation, conducted by the House Agriculture Committee, prior to the seven-year requirement found that NRCS "routinely ignored, or excluded its non-compliance with, the twelve-month ownership requirement" when in many cases partnering organizations would purchase the land for the explicit purpose of enrolling it into a WRP easement. Many environmental organizations believe the seven-year requirement is excessive and will reduce the number of eligible lands and discourage enrollment. Supporters of the requirement point to the results of the House Agriculture Committee's investigation, which stated that NRCS "became a cash cow enabling partner organizations to acquire private lands at discount prices." The 2008 farm bill ( P.L. 110-246 , Sec. 2401) reauthorized FPP and made significant changes. The enacted bill changes the program's purpose from protecting topsoil to protecting the land's agricultural use by limiting nonagricultural uses and including lands that promote state and local farmland protection. It also restructures the program to emphasize longer-term and renewable cooperative agreements, and changes the authority of the Secretary from purchasing conservation easements to facilitating the purchase of conservation easements. Some conservation organizations have praised the increased authority for partners, while others have expressed concerns that it could create inconsistencies within the program. In addition to the changes made to existing agricultural conservation programs, the enacted 2008 farm bill also expands the range of USDA conservation activities by creating several new programs, including a program expanding conservation activities in the Chesapeake Bay region, a new state grants program, a provision to limit production on native sod, and a provision promoting market-based approaches to conservation. The progress USDA has made in implementing these new programs varies and could be of interest for congressional oversight. This program (Sec. 2605) is targeted at conserving and protecting the Chesapeake Bay and the water sources that make up the watershed. The bill authorizes $188 million in mandatory funding (FY2009-FY2012) to be used through existing conservation programs. Targeting funding to specific geographic regions was debated during the 2008 farm bill. The effectiveness of targeting federal conservation spending through identified states, regions, or watersheds is still a question when developing conservation policy. The Chesapeake Bay Watershed Program has received widespread support indicating that similar programs targeting other watersheds could be created by Congress in the future. Also referred to as the "Open Fields" program, this program authorizes state grants to encourage landowners to provide public access for wildlife-dependent recreation. The bill provides $50 million in mandatory funds (FY2009-FY2012) for the program. The Farm Service Agency (FSA) implements the program through an interim rule published in the Federal Register on July 8, 2010. Only state and tribal governments are eligible for grants under this program. Funds may be used to either expand existing public access programs or create new public access programs, or to provide incentives to improve habitat on enrolled program lands. It is unclear how program funding will be divided among these two program objectives. This 2008 farm bill provision (Sec. 12020) makes producers that plant an insurable crop (over 5 acres) on native sod ineligible for crop insurance and the noninsured crop disaster assistance (NAP) program for the first five years of planting. The conference agreement states that this provision may apply to virgin prairie converted to cropland in the Prairie Pothole National Priority Area ( Figure 3 ), if elected by the state. USDA established a sign-up date of February 15, 2009, in which no governors opted to participate in the program. Additional opportunities to participate are possible though thought unlikely if the program remains voluntary. The 2008 farm bill also included a new conservation provision intended to facilitate the participation of farmers and ranchers in emerging carbon and emissions trading markets by directing USDA to establish guidelines for standards, accounting procedures, reporting protocols, and verification processes for carbon storage and other types of environmental services markets (this is discussed further in the section on " Ecosystem Services Markets ," below). This provision was also intended to help address some of the measurement and quantification issues surrounding agricultural and forestry carbon credits, as well as to expand existing voluntary conservation and other farm bill programs, provide incentives that could accelerate opportunities for agriculture and forestry to reduce emissions associated with climate change, adopt energy efficiency measures, and produce renewable energy feedstocks. In December 2008, USDA announced it would create a federal government-wide Conservation and Land Management Environmental Services Board to assist USDA with the "development of new technical guidelines and science-based methods to assess environmental service benefits which will in turn promote markets for ecosystem services including carbon trading to mitigate climate change." A federally chartered public advisory committee will advise the board, and will include farmers, ranchers, forest landowners, and tribal representatives, as well as representatives from state natural resource and environmental agencies, agriculture departments, and conservation and environmental organizations. USDA's press release also announced that USDA was establishing a new Office of Ecosystem Services and Markets, which would provide administrative and technical assistance in developing the uniform guidelines and tools needed to create and expand markets for ecosystem services in the farming and forestry sectors. In March 2010, USDA announced that the office's title had changed to the Office of Environmental Markets (OEM), and its functions were moved to the USDA Natural Resources and Environment (NRE) mission area. No additional information has been provided on either the board's or the office's activities. Two types of payment limits exist for conservation programs. One sets the maximum amount of conservation program payments that a person or legal entity can receive during a specified period of time. The other (known as the adjusted gross income or AGI limit) sets the maximum amount of income that an individual can earn and still remain eligible for conservation program benefits. Limitations on payments received through conservation programs were expanded in the 2008 farm bill. Prior to the 2008 farm bill, most conservation programs were affected by an income limitation, not a limitation on payments. Now, most programs are affected by both (see Table 2 ). Payment limits are the maximum amount of conservation program funding that a person or legal entity can receive during a specified period of time. As with commodity programs, payment limits for conservation programs are controversial because of issues relating to the size of operations receiving support and who should receive payments. The effect of payment limits varies by program and the conservation practices implemented. Most conservation programs with higher payments tend to be skewed to farms and ranches with larger acreage because payments for many conservation practices are scaled by the number of acres on which that practice is applied. Supporters of payment limits are often advocates for smaller farms and opponents of large animal feeding operations. Most conservation programs provide a percentage of the cost to install conservation practices (known as cost-share) or implement site-specific management practices. As noted above, most of these payments are made on a per-acre applied basis, thereby skewing larger payments to contracts with more acres enrolled. Small farm advocates claim that this disproportionately benefits large agricultural producers by making less money available for small producers. Also, in the case of EQIP, cost-share assistance is provided for more expensive practices such as animal waste storage facilities in concentrated animal feeding operations (CAFOs). Opponents of these animal operations cite the higher payment limit as "further subsidizing an environmentally destructive method of production." Those who oppose payment limits (or support higher limits) for conservation programs counter that conservation programs should focus on land with the greatest environmental need and not be limited to a price per participant. They argue that higher payment limits allow for greater environmental stewardship on farms and ranches, particularly larger operations with a greater land base, which may have greater natural resource concerns. Others claim that payment limits on restoration agreements could create a disincentive to enroll larger conservation easements, which are the most desirable. Because most conservation easement programs, namely WRP and GRP, enroll land that will also require restoration, a limit on restoration payments could reduce the enrollment of large acre tracts. The AGI limit sets a maximum amount of income that an individual can earn and still remain eligible for program benefits. The 2008 farm bill made the AGI limitation for conservation programs higher than the AGI limitation for the commodity farm support programs; however, income limitations on conservation programs have been somewhat controversial. Previously, the AGI limit for both conservation and commodities programs was set at $2.5 million and had an exception if three-fourths of AGI was earned from farming sources. Now, if the three-year average of non-farm income AGI exceeds $1,000,000, no conservation program benefits are allowed. The exception to this limit is if two-thirds of the three-year AGI was earned from farming sources. In addition, this limitation may be waived by USDA on a case-by-case basis for the protection of environmentally sensitive land of special significance. In general, the AGI limit for conservation programs is higher than that for commodity programs to encourage environmental stewardship on farms and ranches, particularly larger operations that may have greater natural resource problems. Supporters of AGI limits believe that tighter limits benefit small producers and gain additional public support for all agricultural programs through fiscal responsibility. Opponents of AGI limits on conservation programs believe that if there are greater conservation benefits provided to the general public, then, irrespective of wealth, a producer's enrollment is good for the general public. The majority of conservation program funding is mandatory and funded through the Commodity Credit Corporation (CCC). Other conservation programs, mostly technical assistance, are discretionary and funded through annual appropriations. Reductions in mandatory funding and an increase in earmarks within discretionary funding, as well as fund accountability and quantifying environmental benefits of conservation practices, could be issues for Congress. The 2002 farm bill authorized significant increases in mandatory funding for many conservation programs. Unlike the discretionary conservation programs, which must be funded through the annual appropriations process, mandatory programs have an authorized level of funding (or acreage enrollment) that is available unless reduced to smaller amounts in the appropriations process. If appropriators do not set a spending limit or reduce the authorized level, then the program receives the authorized level of funding. Mandatory conservation programs are usually authorized through omnibus farm bills for four to five years. Mandatory funds are provided by the CCC, USDA's financing entity for many other agricultural programs and export subsidies. Despite the increase in mandatory funding authority, many conservation programs have been reduced or capped through annual appropriations acts since FY2003. Many of these spending reductions were at the request of the Bush Administration. The mix of programs and amounts of reduction have varied from year to year. Some programs, such as the CRP, have not been reduced by appropriators in recent years, while others, such as EQIP, have been repeatedly reduced below authorized levels. EQIP's authorized mandatory funding was reduced by almost $1.16 billion from FY2005 through FY2010. Even with these reductions, total mandatory funding for conservation programs has remained relatively constant at a total over $4 billion annually. For more information about reductions in mandatory program spending, see CRS Report R41245, Reductions in Mandatory Agriculture Program Spending . Although some titles in the 2008 farm bill received a reduction in funding over the next five to ten years, the conservation title received increased funding. Many supporters of conservation programs viewed this as a victory during the farm bill debate and were surprised to see that the FY2010 President's budget requested a reduction of over $500 million in mandatory funding from many conservation programs. While the FY2010 Agriculture appropriations bill ( P.L. 111-80 ) did not include many of these reductions (with the exception of EQIP), the FY2011 President's budget again requested multiple reductions in mandatory conservation funding. Advocates for these programs contend that these limitations are significant changes from the intent of the farm bill, which they say compromise the programs' ability to provide the anticipated magnitude of benefits to producers and the environment. Others, including those interested in reducing agricultural expenditures or in spending the funds for other agriculture purposes, counter that, even with these reductions, overall funding for conservation has not been reduced. With the 111 th Congress facing tighter budget constraints, it is possible for conservation programs to face spending reductions either in the appropriations process or if budget reconciliation is required. The Watershed and Flood Prevention Operations program has received discretionary funding for an increasing number of congressionally directed projects (commonly referred to as earmarks). The program is not authorized at a specified amount. Annual appropriations reached a high of $200 million, including a $94 million supplemental, in FY2002 and have declined steadily to $30 million in FY2010. The program also received $145 million as part of the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ). As appropriated funding decreased, the number of earmarks increased, reaching 97% of appropriated funding in FY2009 and 74% in FY2010. The past five presidential budget requests, including the FY2011 request, have sought zero funding for the program, citing the number of earmarks. Currently there are approximately 300 unfunded authorized watershed projects totaling over $1 billion. Two issues associated with technical assistance have been whether NRCS has the capacity to meet the growing technical assistance demand and how technical assistance costs should be funded for mandatory programs. The 2002 farm bill ( P.L. 107-171 , Sec. 2701) dramatically increased financial assistance in conservation programs. This increase in financial assistance also led to an increased demand for technical assistance. The 2002 farm bill allowed NRCS to augment its technical assistance capacity by allowing producers to use approved third parties to provide assistance. As of February 2010, approximately 1,140 individuals and businesses were certified and registered as third-party providers with NRCS. Despite this increase in capacity, NRCS, like other organizations, is facing personnel attrition in "mission critical occupations" (most of which provide technical assistance). The 2008 farm bill further increased funding for mandatory conservation programs, which could cause the demand for technical assistance to increase, placing additional strain on the current capacity. Congress has addressed the issue of how to fund technical assistance in mandatory programs in the past and will likely do so again in the future. The central issue is whether NRCS has the authority to pay for technical assistance for mandatory programs using the mandatory programs' funding. Previous conflicting interpretations by the Office of Management and Budget resulted in Congress providing clarifying language through enacted legislation in 2002, 2005, and 2008. The clarifying language appeared to resolve the issue until recently. The 2008 farm bill reauthorized and amended other mandatory conservation programs not originally authorized under the 1985 farm bill. Because previous language only addressed those programs authorized under the 1985 farm bill, the issue of where technical assistance funding should originate for non-1985 farm bill programs was once again raised. On February 17, 2009, Congress enacted clarifying language for this issue in Section 103 of the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). The new language allows all mandatory programs established or amended in the 2008 farm bill, excluding those in Title I, to use CCC funds for administrative expenses and technical assistance. Congress will likely need to address this issue again because the new language only covers FY2009 and FY2010, while funding authority for most farm bill programs expires at the end of FY2012. Most USDA agencies are covered by a consolidated financial statement audit for the entire department. In FY2007, the OMB required NRCS to conduct a stand-alone audit for the FY2008 financial statement. In FY2008, NRCS contracted with a private auditing firm, KPMG, to review the agency's financial statements in its first stand-alone audit. KPMG was unable to provide an opinion on the agency's financial statements because NRCS could not document or support its transactions or account balances. The FY2008 audit was NRCS's first attempt at a comprehensive financial statement audit. The lack of an opinion from the auditing firm was a result of several problems—namely, NRCS was unable to provide material in support of transactions and account balances with respect to obligations, accrued expenses and undeliverable orders, and unfilled customer orders. According to NRCS, the agency has taken corrective actions to address the deficiencies found in the audit, including training over 300 employees in accounting principles, developing an automated tool for general ledger accounts, and performing quality assurance reviews on over 160,000 open obligations. Despite these corrective actions, a FY2009 audit of the NRCS financial statements returned a similar no-opinion result. The auditing firm again cited NRCS's inability to provide material in support of transactions and account balances. The 111 th Congress continues to take action on this issue. On March 25, 2009, the House Committee on Agriculture's Subcommittee on Conservation, Credit, Energy, and Research held a hearing to review the administration of conservation contracts. A similar hearing to review the delivery of conservation programs conducted by the same subcommittee was held on July 1, 2010. Also, in the FY2009 Omnibus Appropriations Act, Congress provided $10 million in Conservation Technical Assistance (CTA) funds to "strengthen the agency's program and financial management capabilities." According to the committee print, NRCS is expected to use the funds to enhance the agency's budgeting, accounting, contracting, and information technology systems. The agency is expected to issue a report to Congress detailing the use of these funds. The committee print also requires NRCS to issue a report to Congress regarding the 2008 audit and any corrective actions being taken. Following the significant increase in funding for conservation programs in the 2002 farm bill, USDA initiated a project to measure the environmental benefits of many of these programs. The project is a multi-agency effort known as the Conservation Effects Assessment Project (CEAP). CEAP's stated purpose is to aid policymakers in developing new conservation programs and help existing conservation program managers implement programs more effectively and efficiently to meet the goals of Congress and the Administration. Now in its seventh year at USDA, CEAP continues to be supported by many in the conservation community as a much-needed evaluation system to ensure that conservation programs produce the desired environmental and production outcomes. Although the project is not legislatively mandated, many believe its potential outcomes could prove useful in shaping future policy debates surrounding environmental issues in the 111 th Congress, namely environmental services markets. Despite some of the strides made to quantify the environmental benefits of conservation practices through CEAP, there are possible limitations to its use, namely the availability of data. To date, the depth of information gathered through this project is enormous, yet very little has been made available to the public or to other federal agencies. Despite some frustration generated by reporting delays, some in the scientific community support what they say is a meticulous in-depth assessment and evaluation system, claiming it is necessary for statistical credibility. Only a few initial results are currently available based on cropland in the upper Mississippi river basin. Initial findings show beneficial effects from conservation practices as well as additional application needs. Many conservation programs offer financial assistance to producers to implement many of the conservation practices analyzed in the CEAP assessment; however, the assessment does not correlate the effects and benefits of conservation practice to any one federal program. Emerging and continuing issues for agricultural conservation in the 111 th Congress revolve around ecosystem services markets, climate change, and bioenergy. The evolving debate over climate change legislation has provoked several questions regarding the role of agriculture and forestry. Other environmental concerns for agriculture, such as concentrated animal feeding operation (CAFO) regulations, greenhouse gas emission reporting for livestock producers, and wetlands mitigation, could lead to expanded opportunities for many conservation efforts. Production pressures generated by corn-based ethanol have also had an ongoing impact on certain conservation programs. The participation of agriculture and forestry in emerging ecosystem services markets is gaining wide support within the farm community and its supporting organizations and agencies, as well as among the regulatory agencies and some environmental groups. Market-based approaches are often viewed as encompassing broader societal benefits by complementing existing agricultural conservation programs and evolving regulatory approaches intended to address environmental improvements in the farm and forestry sectors. Among the principal questions regarding the inclusion of ecosystem services provisions as part of any major legislative initiative is whether the agriculture and forestry sectors can effectively provide environmental goods and services along with the more traditional food, fiber, and other services these sectors already provide. Ecosystem goods and services are the benefits society obtains from the environment and ecosystems, both natural and managed, such as water filtration, flood control, provision of habitat, carbon storage, and many others. In most cases, these constitute "free services," since landowners and managers are not compensated in the marketplace. The continued degradation of these services over time has generated interest in creating markets, developed either through regulation or voluntarily, so that providers of ecosystem services can be compensated in private markets for the services they provide. This could offer a potential business opportunity to the agriculture and forestry sectors, which may be able to provide for such services and participate in the market, for example, by creating, restoring, and preserving function and value in a natural resources area, or by capturing and storing carbon before gases that contribute to global climate change are released into the atmosphere. These services would be in addition to the food and fiber services traditionally supplied by the agriculture and forestry sectors. Conservation practices on agricultural land provide one of the main vehicles through which producers may develop environmental credits and benefits to be sold or traded in a market-based system. Many existing USDA conservation programs offer incentives through financial and technical assistance to implement these practices. For example, cropland tillage practices such as reduced/medium-till, no-till, and ridge/strip-till practices sequester carbon that could be sold through a carbon offset program. Conservation programs such as EQIP, AMA, CSP, and CTA provide incentives for farmers to install these practices. Programs such as WRP offer incentives for wetland restoration, the benefits of which could then be used in a wetlands mitigation program. Other conservation practices such as riparian buffers, setbacks, wind breaks, and buffer strips offered under EQIP, CRP, CSP and WHIP create water quality improvements that could be traded in local water quality credit programs. The inclusion of these market provisions in legislation has raised procedural and implementation questions as Congress continues to consider the role of the agriculture and forestry sectors in environmental legislation. One key question is how USDA will respond to several existing barriers that may prevent the development of ecosystem goods and services markets involving the farm and forestry sectors, such as participation challenges, and issues of measuring and valuing credits, monitoring, and enforcement, among others. It is also unclear how USDA will bridge existing conservation program benefits with ecosystem services markets, and what direct role the new USDA Office of Ecosystem Service Markets (see " Environmental Services Markets ," above) plans to play. Among the many questions for Congress regarding the topic of climate change is what role the agriculture and forestry sectors will play; and, if they are allowed to participate, how concerns regarding their participation will be resolved. Farm and forestry activities both emit and sequester greenhouse gases (GHG) from the atmosphere. As reported by the Environmental Protection Agency (EPA), the agriculture and forestry sectors currently account for 6%-8% of estimated total U.S. GHG emissions annually. However, combined carbon sequestration on farm and forested lands is currently estimated to mitigate about 11% of total annual GHG emissions in the United States. The potential to reduce emissions and sequester carbon on agricultural lands is reportedly much greater than current rates. Congress is considering a range of climate change policy options, including greenhouse gas (GHG) emission reduction programs that would either mandate or authorize a cap-and-trade program to reduce GHG emissions. In general, the current legislative proposals would not require emission reductions in the agriculture and forestry sectors. The drafters of some proposals are reluctant to include opportunities for agriculture and forestry participation due to uncertainties regarding measuring, monitoring, and permanence of agriculture and forestry activities. Others in Congress would like a GHG program to include provisions allowing farm and forestry landowners to receive emissions allowances (or credits) to generate carbon offsets. Most land management and farm conservation practices can help reduce GHG emissions and/or sequester carbon, including land retirement, conservation tillage, soil management, and manure and animal feed management, among other practices. Many of these practices are encouraged under existing USDA conservation programs that provide financial and technical assistance to farmers, such as EQIP, CRP, CSP, CTA, and WHIP, among others. However, uncertainties are associated with implementing these types of practices depending on site-specific conditions, the type of practice, how well it is implemented, the length of time a practice is undertaken, and available funding, among other factors. USDA has already expanded some of its existing conservation programs to further encourage emission reductions and carbon sequestration. For example, many of the practices encouraged under EQIP and CSP reduce net emissions. Programs such as CTA, AMA, EQIP, and CSP list a reduction in emissions as a national priority for the program, which affects the funding and ranking of projects. Under CRP, USDA has modified how it scores and ranks offers to enroll land in CRP in order to place greater weight on installing vegetative covers that sequester carbon. USDA also has an initiative under CRP's continuous enrollment provision to plant up to 500,000 acres of bottomland hardwoods, which are among the most productive U.S. lands for sequestering carbon. Recently, USDA has recognized the potential credits generated by these conservation programs and has removed any claim on the credits through recent changes to many of the program rules. Whether or not benefits generated from existing conservation programs would be considered eligible carbon offsets under current legislative proposals varies. Congress has already taken steps to address some of the challenges associated with measuring carbon changes from forested and agricultural lands and practices. The 2008 farm bill includes provisions that could expand the scope of existing land-based conservation and other farm bill programs by providing incentives to encourage farmers and landowners to sequester carbon and reduce emissions associated with climate change and participate in markets for carbon storage (see " Environmental Services Markets " section, above). The Energy Independence and Security Act of 2007 ( P.L. 110-140 , Sec. 712) directs the Secretary of the Interior to develop a methodology to assess carbon sequestration and emissions from ecosystems. This methodology is to cover measuring, monitoring, and quantifying GHG emissions and reductions, and provide estimates of sequestration capacity and the mitigation potential of different ecosystem management practices. Congress continues to face the question of whether its current authorized activities (and proposed activities) provide adequate and sufficient guidelines for accurately measuring carbon levels from forest and agricultural activities. On June 29, 2009, the House passed H.R. 2454 , which includes a new program for agriculture- and forestry-related GHG offsets within USDA. The so-called "Peterson amendment" was added to H.R. 2454 just prior to the floor debate, following negotiations between the Chairmen of the House Energy and Commerce Committee and the House Agriculture Committee. The Energy Committee's June 26, 2009, manager's amendment included a new Title V to H.R. 2454 —"Agriculture and Forestry Related Offsets." Among other provisions, the Peterson amendment allowed for certain agricultural and forestry activities to become eligible to participate in a carbon offset program, established that this program would be implemented by USDA (rather than EPA), addressed concerns in the agricultural community about existing and evolving renewable energy and certain biomass requirements, and also recognized certain early actions that have already been taken by farmers and landowners to reduce emissions and sequester carbon. For the most part, the provisions in Title V are similar to those found in Title III of H.R. 2454 , with the most notable exception being the difference in implementing agencies. Similar action was taken in the Senate, where S. 1733 allows for agriculture and forestry offsets as part of a cap-and-trade scheme. S. 1733 differed from H.R. 2454 in terms of the types of projects and activities allowed, the total allowable quantity of domestic versus international offsets, and agency administration of the program, among other differences. The Clean Energy Partnerships Act of 2009 ( S. 2729 ) was introduced by Senator Stabenow shortly after the Senate EPW Committee completed work on S. 1733 . This bill (often referred to as the "Stabenow amendment") is not comprehensive and only expands on the agricultural and forestry carbon offset provisions in these climate bills and also allows for certain other provisions benefitting U.S. farmers and landowners. Renewable energy and energy conservation continue to be topics of concern as Congress seeks to reduce the national use of fossil fuels. Renewable energy is energy generated through natural means, including wind, solar, geothermal, hydroelectric, and biomass, among others. With each renewable energy source comes benefits and consequences. Energy sources closely tied to the agriculture and forestry sectors are biofuels derived from corn-based ethanol and cellulosic feedstock. Federal support for ethanol through mandated levels of consumption, grants and loan guarantees, tax credits, tariffs on imports, and research and development projects has generated some controversy. Critics say that important and unwanted environmental consequences resulting from the production of biofuels should be considered when evaluating renewable energy options. A continued expansion of corn-based ethanol production could have significant consequences for traditional U.S. agricultural crop production and rural economies. Supporters of an expanded renewable fuels standard (RFS, the statutorily required use of renewable fuels) claim that increased biofuels production and use would produce enormous agricultural and rural economic benefits by increasing farm and rural incomes and generating substantial rural employment opportunities. However, large-scale shifts in agricultural production activities will likely also have important regional economic consequences that have yet to be fully considered or understood. As corn prices rise, so too does the incentive to expand corn production to more marginal soil environments. Further, corn production is among the most energy-intensive of the major field crops. This shift could have important and unwanted environmental consequences due to possible increases in fertilizer and chemical use and soil erosion. Ethanol and biodiesel produced from cellulosic feedstocks, such as prairie grasses and fast-growing trees, have the potential to improve the energy and environmental effects of U.S. biofuels. A key potential benefit of cellulosic feedstocks is that they can be grown without the need for chemicals. Reducing or eliminating the need for chemical fertilizers could address one of the largest energy inputs for corn-based ethanol production. However, additional concerns about cellulosic feedstocks exist, including concerns that required increases in per-acre yields to obtain economic feasibility could require the use of fertilizers; that availability of sufficient feedstock supply is limited and expansion could generate additional land use pressures for expanded production; and that development of harvesting machinery and technology lags behind that of traditional corn-based ethanol production. In addition to these concerns, some groups say that other potential environmental drawbacks associated with cellulosic fuels should be addressed, such as the potential for soil erosion, increased runoff, the spread of invasive species, and disruption of wildlife habitat. Although the 2008 farm bill expands many existing agricultural conservation programs to encourage producers to adopt energy efficiency measures and produce renewable energy feedstocks, it does not address the potential environmental consequences that could result from biofuels production. Expanding existing conservation efforts or creating new ones can serve as a potential countermeasure to the increased environmental pressures generated by biofuel production. The extent to which this is or could be done is not clear. The EPA has proposed changes to the RFS program, as required by the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140 ). Two areas of this proposed rulemaking have caused concerns among those in the U.S. agriculture sector: the EISA biomass definition and the requirement that EPA consider so-called "indirect land use" effects when calculating GHG emissions associated with advanced biofuels. Amendments to the Waxman/Markey climate change and energy legislation ( H.R. 2454 ) would change the EISA biomass definition to the definition in the 2008 farm bill ( P.L. 110-246 ) and prevent EPA (for at least six years) from including emissions from international indirect land use changes when weighing biofuels' carbon footprint under the 2007 RFS.

Agricultural conservation has been a public policy issue for more than 60 years. Congress has repeatedly taken action on the issue through water and soil legislation, often as part of omnibus farm bills. Early policy decisions were directed at addressing natural resource concerns on the farm, primarily reducing high levels of soil erosion and providing water to agriculture in quantities and quality that enhanced farm production. In more recent years, conservation policy has shifted to concerns about the off-farm impacts of agricultural activities. The latest farm bill, the Food, Conservation, and Energy Act of 2008 (P.L. 110-246), reauthorized most existing conservation programs, modified several programs, and created a few new programs. The U.S. Department of Agriculture's (USDA's) conservation efforts have centered on implementing these conservation programs through working land conservation practices, retiring land from production or establishing conservation easements, and providing technical assistance. Program implementation controversies could lead to congressional oversight or action, especially given the recent financial statement audit reports on conservation program payments at USDA. Other emerging issues in the 111th Congress could have a significant impact on agricultural conservation. The climate change debate and use of ecosystem services markets has brought conservation to the forefront of discussion on the role of agriculture in reducing greenhouse gas emissions. Also, the effect of ethanol production on natural resources and changes in land use is an ongoing concern in the area of biofuels policy. Other environmental issues for agriculture such as concentrated animal feeding operation regulations, greenhouse gas emission reporting for livestock producers, and wetlands mitigation could lead to expanded opportunities and challenges for many conservation efforts. Appropriations and budget issues continue to influence conservation programs and policy. Conservation programs with mandatory funding have been routinely reduced through annual appropriation bills. In FY2009 and FY2010, the reductions were limited to a handful of programs, with the Environmental Quality Incentives Program (EQIP) receiving the largest reductions, including $270 million in FY2009 and FY2010. The watershed programs have experienced an increase in congressionally directed projects through appropriations, with Watershed and Flood Prevention Operations being 97% earmarked in FY2009 and 74% in FY2010. The ongoing issue of funding for conservation technical assistance in mandatory programs will likely be raised again due to an expiring authority. Other issues of potential interest in the 111th Congress include implementation of conservation program payment and income limitations, use of the Conservation Effects Assessment Project, and recent financial audits and conservation contract administration concerns.

On July 29, Secretary of State John Kerry and Secretary of Commerce Penny Pritzker traveled to New Delhi for the 5 th U.S.-India Strategic Dialogue, where they met with newly-seated Indian Prime Minister Narendra Modi and External Affairs Minister Sushma Swaraj, among others. In a joint statement, the two sides reviewed bilateral dialogues and working groups on issues ranging from science and technology to regional security and counterterrorism. Post-dialogue press interactions suggested that the bulk of the dialogue focused on trade and investment, energy, and climate change. The two sides intend to re-convene the moribund U.S.-India Trade Policy Forum, and to expand the framework of dialogue on commercial ties and technology exchange. They established a new Joint Working Group on Climate Change with the stated goal of laying the foundation for an "ambitious climate change agreement for the post-2020 period." Secretary of Defense Chuck Hagel will travel to India in August to attempt to reinvigorate the defense partnership. On July 10, new Indian Finance Minister Arun Jaitley presented a partial-year national budget, widely seen as an early measure of the new government's interest in pursuing substantive new economic reforms. Most independent observers were cautiously optimistic about the outlook for such reforms, although some expressed disappointment that the government did not lay out a clear path toward its stated goals of opening markets and attracting new investment, and did not address the issue of intellectual property rights protection. The budget did not touch major subsidy and social welfare programs initiated by the preceding government, highlighting the constraints of India's historical tendency toward populist initiatives meant to safeguard the poor. The new budget does, however, pledge to raise foreign direct investment caps in the insurance and defense sectors up from 26% to 49%, but still falls short of the majority allowance that many Indian and international business interests had hoped for. On July 31, New Delhi blocked a World Trade Organization (WTO) trade facilitation agreement that was negotiated among 160 countries, including India, in Bali in December 2013. the Indian government insisted on extending the negotiating period, citing its displeasure with the pace of separate negotiations over a so-called peace clause for its food security programs, which would preclude a challenge to these programs on subsidy grounds. Some analysts suspect that Prime Minister Modi is giving a nod to the interests of his country's hundreds of millions of farmers, a demographic not typically supportive of his ruling party. Member governments saw the trade facilitation deal as a breakthrough in the drawn-out Doha Round of multilateral negotiations, and some worry that its obstruction could delegitimize the WTO. Following Secretary Kerry's meeting with Modi, a senior State Department official said that Indian decision "sends a confusing wrong signal and undermines the very message that India is seeking to send." New Delhi has expressed hope that differences can be resolved when the WTO reconvenes in September. India—South Asia's dominant actor with more than 1.2 billion citizens and Asia's third-largest economy—often is characterized as a nascent great power and "indispensable partner" of the United States, one that many analysts view as a potential counterweight to China. For the past decade, Washington and New Delhi have been pursuing a "strategic partnership" based on shared values and apparently convergent geopolitical interests. Numerous economic, security, and global initiatives are underway. In 2005, the United States and India signed a 10-year defense framework agreement to expand bilateral security cooperation. The two countries since have engaged in numerous and combined military exercises, and major U.S. arms sales to India are underway. The value of all bilateral trade has grown significantly, although the recent global economic downturn has stunted that growth. Bilateral trade in goods and services was worth more than $97 billion in 2013; a total that has been fairly static for two years. Two-way investment also flourishes. Indians receive about two-thirds of all H1-B (nonimmigrant work) U.S. visas, and some 100,000 Indian students are attending American universities. The influence of a relatively wealthy and outspoken Indian-American community of roughly three million is reflected in Congress's largest country-specific Senate and House caucuses. President Barack Obama's Administration has sought to build upon the deepened U.S. engagement with India begun by President Bill Clinton in 2000 and expanded during much of the previous decade under President George W. Bush. A bilateral Strategic Dialogue forum, established in 2009, met for the fourth time in New Delhi in June 2013; a fifth meeting, also in New Delhi concluded on July 31, 2014. Still, independent analysts in both countries worry that the partnership has lost momentum in recent years. Some saw a notable cooling of U.S.-India ties in 2013 with the serious diplomatic dispute triggered by the December arrest of Indian consular official Devyani Khobragade in New York. And there are longer-running and more serious disagreements over intellectual property rights protection; market access; U.S. immigration law; and stalled efforts to initiate civil nuclear cooperation, among others. In May 2014, India's national election resulted in a convincing and historic win for the Bharatiya Janata Party (BJP or "Indian Peoples Party") and its prime ministerial candidate, then-Gujarat state Chief Minister Narendra Modi. The new Indian leader is known as a strong-willed and effective, if perhaps autocratic, administrator. His reputation has been burnished by Gujarat's impressive economic performance during his 15-year tenure—the state accounts for more than 20% of all Indian exports while being home to only 5% of the population. Garnering an outright majority in Parliament for the first time in 30 years, Modi's new government promises fresh U.S. engagement with an Indian leader reputed to be more pro-trade and pro-business than the socialist-oriented ones of the past, and who vows to implement a more assertive Indian foreign policy that could see the country shift away from its traditional "non-alignment" approach to global politics. President Obama and other top U.S. officials have expressed an interest in revitalizing bilateral fora so as to further boost trade and investment flows, deepen security cooperation, and otherwise solidify the geopolitical alignment with India. One area of potential friction relates to a guiding ideology of the new Indian government: the BJP was born in 1980 as the political wing of the Rashtriya Swayamsevak Sangh (RSS or "National Volunteer Organization") a militant Hindu and social service group (roughly 82% of Indians are Hindu and another 14% Muslim). Prime Minister Modi—himself a longtime RSS member—and his party maintain a firmly Hindu nationalist perspective. He also is a controversial and—among some—even reviled figure due to persistent suspicions about his possible role in horrific communal rioting in Gujarat in 2002 that left up to 2,000 people dead, most of them Muslims. Although multiple high-level investigations into Modi's alleged role have resulted in no formal charges, human rights groups and other analysts still widely accuse him of being complicit in the anti-Muslim violence, or at least showing gross dereliction of duty in his response. Such accusations led the Bush Administration to deny Modi a visa in 2005, and the U.S. government subsequently had no official contacts with Modi until he met with the U.S. ambassador to India in late 2013. Some Members of Congress have continued to express deep concerns about Modi's past and his commitment to religious freedom. Many observers warn that a BJP-majority government could have dire consequences for human and civil rights in India, especially if it chooses to implement openly Hindu majoritarian policies. However, President Obama wasted no time in ending speculation on the visa issue by immediately inviting Prime Minister Modi to visit Washington, DC (Secretary of State John Kerry subsequently told an Indian audience that there is no doubt that the Indian leader will receive a U.S. visa). Modi is set to visit the U.S. capital in late September. Following the election, Secretary Kerry congratulated India for the successful democratic exercise and Modi for his victory while calling the bilateral friendship "absolutely vital." On Capitol Hill, Members of both chambers took positive note of India's democratic exercise and its new government, and expressed recognition of the importance of the bilateral relationship. To date, 88 House Members are signatories to a letter asking congressional leadership to convene a Joint Session for the Indian leader to address. Committees in both the Senate and House held hearings on U.S.-India relations in July. In D.C. policy circles, there is no consensus view on India's new government beyond a general agreement that Prime Minister Modi must confront a multitude of difficult problems and choices, and that the domestic Indian expectations of their new leader are so broad and so high that they are very unlikely to be met. Most agree that it will be exceedingly difficult, if not virtually impossible, for Modi to fulfill voters' economic aspirations given the significant restraints presented by India's federal system, by still widespread resistance to fiscal stimulus in an environment of high deficits, and by an expectation of potentially decisive political opposition in Parliament's upper chamber. One U.S.-based commentator characterized Washington's reaction to India's election results as "a mix of curiosity, hope, and concern." In this view, the interest is evoked by the strong electoral win of a Delhi outsider, the optimism emanates mainly from the business community, which anticipates a stronger reform impulse, and the worries are about the potentially negative effects of past U.S. shunning of Modi, as well as his record of taking a hardline posture toward India's religious minorities. On this last point, another analyst contends that the trajectory of U.S.-India relations transcends any single leader and that there have been no signs that Modi will rock this boat as prime minister. Notably, Modi never appeared to discriminate against any U.S. firms in Gujarat during the post-2005 visa ban period. A minority view contends that conceiving of the United States and India as "natural partners" is misguided. In this account, New Delhi's implicit approval of Russia's early 2014 aggression in Ukraine—strongly opposing sanctions on Moscow and calling its interests in Crimea "legitimate"—is a recent demonstration that U.S. and Indian strategic interests can and do continue to diverge. In the words of two prominent observers, "[T]he linkages between the United States and India remain more aspirational than accomplished, with many unfulfilled expectations." Meanwhile, a senior Indian analyst conveys a perspective among some that recent changes in regional and global circumstances—especially those that have Washington focused on crises in regions where New Delhi plays a negligible role—have "tended to lower the salience of this 'indispensable partnership' in the eyes of both partners." While the chances for a "dramatic resuscitation" of bilateral ties may be poor in the short-run, many analysts continue to urge Washington to view a stronger India as being in America's interests. Undergirding this argument is the assumption that New Delhi's future economic and security policies are highly likely to take courses that benefit the United States, even if indirectly. U.S. officials thus are encouraged to demonstrate full openness to working with the Modi government, in part as a means of ameliorating the raw sensitivities many Indians appear to have about national respect, sensitivities that were exposed by the Khobragade incident in a fierce reaction that surprised many observers in the United States. These analysts also offer that Washington can demonstrate for New Delhi that U.S. leaders are serious about the rebalance to Asia and that India can play a vital role in such policy, perhaps especially in the area of maritime security and codes of conduct. In April and May of 2014, India once again broke its own record by conducting the largest democratic exercise in human history: Of its 815 million eligible voters in 29 states and 7 union territories, a record 66.4% turned out to seat a new Lok Sabha (House of the People)—the lower chamber of Parliament and the locus of national power—and, with it, a new prime minister. The outcome was historic in numerous ways. The victorious BJP won a majority of the body's 543 seats, becoming the first party to do so since 1984 and the first-ever non-Indian National Congress Party to rule India's federal government without coalition partners (the dynastic, Nehru/Gandhi Congress Party suffered what was by far its worst-ever national defeat, although it continues to lead 11 state governments). The BJP's 282 seats allowed the party to elevate Modi to the prime minister's seat, and he was sworn in to office on May 26. Modi is India's first-ever lower-caste prime minister, the first born after the country's 1947 independence, and the first not to have been steeped in Delhi's rarified political circles—an "outsider" in more ways than one. India's smaller upper parliamentary chamber of a maximum 250 seats, the Rajya Sabha (Council of States), is on a different election schedule from that of the Lok Sabha. This body may review, but not veto, revenue legislation, and has no power over the prime minister or his/her cabinet. Still, the BJP's governance agenda can be impeded in the Rajya Sabha, where the former incumbent Congress Party holds a plurality of seats (68) and can align with other BJP opponents to block certain legislation. Moreover, many key reforms that may be pursued by the new government—including in tax policy, labor laws, land acquisition, subsidy cuts, and infrastructure project clearance—will be dependent on the participation of state governments, only eight of which are currently controlled by the BJP or its allies. Analysts identify convincing reasons to believe that the Indian electorate did not elect Narendra Modi for his bold Hindu nationalism. Instead, Modi's mandate most likely derived from the electorate's acute desire to see uncorrupt governance in New Delhi and a repaired economy with plentiful jobs, and not from support for any parochial agenda. Moreover, with Muslim votes split between the numerous "secular" alternatives to the BJP, Modi's electoral outlook was much improved. Winning a majority of seats with less than one-third of votes cast (the BJP won 31% of the popular vote) was possible only through a significant splintering of the country's "anti-BJP vote." This leads some to argue against the "historic election" narrative: More than two-thirds of votes were cast for non-BJP candidates, the BJP continued to fare poorly in most of the country's south and east, and regional parties continued to account for roughly half of all votes cast. Prime Minister Modi has pared down the size of the cabinet considerably, from 71 ministers under the previous government to 44 today. Key officials include recent BJP President and current Home Minister Rajnath Singh; External Affairs Minister and Overseas Indian Affairs Minister Sushma Swaraj, a BJP parliamentary stalwart; and Arun Jaitley a corporate lawyer now serving as Finance Minister, Defense Minister, and Corporate Affairs Minister. Modi's longtime lieutenant and home minister in Gujarat, Amit Shah, is the new BJP chief. Skeptical observers found in Modi's cabinet picks signs of "business as usual" in India's often venal political culture: 13 cabinet ministers are said to be facing sometimes serious criminal charges and most are over 60-years-old, belying Modi's campaign claims to be a champion of the country's youth. Among the sea of commentaries on Modi are numerous negative portrayals of his personality. While his millions of supporters see in Modi a strong-willed, incorruptible, and effective leader who will defend and enrich the nation, critics take a darker view. Their arguments commonly portray Modi as having a ruthless and dictatorial style of governance. By some accounts, Modi has welcomed being the focus of a cult of personality and has consciously cultivated an autocratic image. Detractors also identify a disregard for rule of law in Gujarat under Modi, including allegations that Gujarati authorities staged at least 20 extrajudicial killings from 2003-2006. The impressive growth of Indian national wealth, especially that occurring in the middle years of the last decade, has been central to the country's newfound visibility and importance in global political calculations. Most observers foresee India becoming the world's third largest economy by 2030; in purchasing power parity terms, India already has supplanted Japan in share of global GDP. However, India's economic growth rate is at a ten-year low, and fiscal and current account deficits have widened significantly. The country today is in the midst of its worst economic slowdown since the 1980s, with two full years of sub-5% annual growth and persistently high inflation. Experts generally agree that, for India's international influence to continue to grow—and thus further boost its attractiveness as a U.S. partner—the country's negative economic trends need to be reversed. Modi is widely viewed in Washington as being good for business, especially through efforts to create a more stable and tax-friendly investment climate. Foreign investors, anticipating Modi's win, were seen to be behind the roughly 25% surge in the value of India's top stock index in the 8 months leading up to the election. When the results were announced, another rally led to a new record high and propelled the Mumbai stock market into the world's top ten for the first time ever. During the election campaign, Arun Jaitley, now finance minister, said that luring both foreign and domestic investment into fast-tracked major projects in infrastructure and skills development would be the primary goal of the new government. This tack has been central to the "Gujarat miracle" that Modi may seek to recreate at the national level. Although generally favored by the domestic and international business community, the BJP hardly is a party of "free traders," but rather is home to stiff debate over "pro-market" versus "protectionist" policies. India remains a mostly socialist country with an embedded tradition of state-led welfare initiatives. Thus, predicting future BJP economic policy can be difficult, and, while new space will be opened for private sector initiatives, and within an improved investment climate, a D.C.-based expert contends that this "will not automatically translate into a free rise for either 'India, Inc.' or corporate America." Moreover, even if Modi does move energetically to lure investment and fast-track projects in the country, India's federal system provides state governments with considerable say over reforms in key sectors such as energy infrastructure; in some cases this extends to veto power. Indeed, experts agree that state bureaucracies can present major obstacles to reinvigorating India's investment climate; one recent study revealed that 40 of India's top 50 stalled projects were being held up by red tape at the state level. Along with an array of urgent domestic priorities, Modi faces a busy foreign policy schedule to include appearances at five multilateral summit meetings before year's end: the BRICS (Brazil, Russia, India, China, South Africa) summit in July; the UN General Assembly meeting in September; the concurrent East Asian and India-Association of Southeast Nations (ASEAN) summits in November; followed by the G20 and South Asian Association for Regional Cooperation (SAARC) summits later that month. As a campaigner, Prime Minister Modi said little about what kinds of foreign policies he would pursue, and the BJP Manifesto devoted only 1 of its 42 pages to foreign policy discussion, notably vowing a shift toward active alliance-seeking ("a web of alliances"). Modi has, however, lauded the pragmatic approach to foreign relations taken by the previous BJP-led government, which was in power from 1999-2004, and is widely seen as most likely to pursue economic growth through non-confrontational engagement with India's neighbors. This assumption holds even as aides reportedly have promised that an India under Modi's leadership will take a tougher line on territorial disputes with Beijing and rivalry with Islamabad. By inviting the six other SAARC leaders to attend his inauguration in person, Modi was seen to be emphasizing India's relations with its immediate neighbors, including Pakistan. SAARC accounts for all of India's contiguous neighbors but for China. South Asian regionalism is poorly developed, having long been hindered by India-Pakistan antagonisms. Yet New Delhi's recent signals that it will prioritize near relations are lauded by independent analysts and could lead to a more promising environment for economic growth. As a campaigner, Modi singled out Bangladesh as a source of migrant Muslim "infiltrators" while being welcoming of its Hindu "refugees." And Bangladesh's long border with India's West Bengal state gives the Kolkata-based government an outsized role in India-Bangladesh relations. Likewise, the presence of a large ethnic Tamil community in the southern Tamil Nadu state causes the Chennai-based government to monitor the status of the Tamil minority in Sinhala-dominated Sri Lanka. China has been viewed warily by Indians ever since Beijing launched a brief, but bloody 1962 war that created what is still the world's longest disputed border. China long has been a major supporter of Pakistan and is increasing its presence in the Indian Ocean Region in ways that could constrain India's regional influence. The Chinese also are irked by the presence of the Dalai Lama and the Central Tibetan Administration on Indian soil. As an unapologetic nationalist, many prognosticators see Prime Minister Modi as eager to demonstrate his bona fides vis-a-vis Beijing. Yet China has also emerged as India's largest trade partner in recent years. As chief minister, Modi made four business-oriented trips to China and eagerly developed commercial links between Gujarat and China. Greater Chinese investment capital (especially in the vital infrastructure sector), technology, and management skills are welcomed by many in India. Pakistan for decades has confounded India by fueling a separatist insurgency in India's Jammu & Kashmir state, employing Islamist proxy groups that conduct terrorist attacks on Indian soil and overseas interests, and obstructing New Delhi's access to Afghanistan and Central Asia. Prime Minister Modi's leadership, and his status as a Hindu nationalist with a record of hardline rhetoric toward both Pakistan and Muslims, could increase the risk of greater tensions and even open conflict with Pakistan, especially if another major terrorist attack in India is traced to Pakistani soil such as that in 2008 when 163 people were killed in Mumbai, 7 Americans among them. Some such concerns dissipated when Modi invited the Pakistani prime minister to New Delhi to witness his swearing-in. And, here again, experts say Modi likely will seek to balance mutual antagonism with his need to expand the Indian economy, a goal that would only benefit from an increase in what is now relatively miniscule bilateral trade with Pakistan. Japan , according to many analysts, may be the country most ripe for rapidly deepened relations with an India under Narendra Modi, who made two business trips to Japan as Gujarat chief minister. Modi is said to have a warm personal relationship with Japanese Prime Minister Shinzo Abe and Japanese companies have made major investments in Gujarat over the past decade. Abe's firm stance on Chinese expansionism and greater emphasis on the role of Japanese military power may make Japan an increasingly attractive partner for India. Modi describes the two countries as sharing fundamental identity of values, interests and priorities. Afghanistan plays a key role in India's regional policy, and Indian leaders envisage a peaceful Afghanistan that can serve as a hub for regional trade and energy flows. By many accounts, India and Pakistan are vigorously jockeying for influence in Afghanistan, and high-visibility Indian targets have come under attack there, allegedly from Pakistan-based and possibly -supported militants. Prime Minister Modi likely will seek ways to remain deeply engaged with the next Kabul government while avoiding any additional conflict with Islamabad over the Indian presence there. Israel did not receive formal recognition from India until 1992. Yet bilateral relations have blossomed in the 21 st century, with booming trade driven mainly by gemstones and defense wares. Israel now roughly equals Russia in the value of defense exports to India. Prime Minister Modi, with reportedly close ties to Israeli business leaders, visited Israel as chief minister. New Delhi has thus far maintained a studied neutral position on the current conflict in Gaza, and has joined the United States in calling upon both sides to exercise maximum restraint. Iran has had long-standing positive relations with India, but frictions have arisen in the 21 st century as New Delhi has grown closer to Washington. Most recently, India fully cooperated with U.S.-led sanctions by significantly reducing its importation of Iranian oil, at some cost to its relationship with Tehran. Yet Iran remains a key source of hydrocarbons to meet India's growing energy needs, and New Delhi has continued to develop Iran's Chabahar port, in large part to provide India with access to Central Asian markets bypassing Pakistan. Prime Minister Modi's emerging posture toward Iran could be telling, as he may find himself facing mutually exclusive choices between cooperating with Iran or cooperating with those countries seeking to isolate the Islamic theocracy due to its controversial nuclear program. Because Hinduism does not have a specific sacred text to which conformity can be demanded, "Hindu fundamentalist" is not an apt term to describe a purveyor of "Hindutva" or "Hindu-ness." Moreover, for parties such as the BJP and its antecedents, Hinduism as a concept almost always is concurrent with nationalism, the core belief being that India is an inherently Hindu nation, even if establishment of a strictly Hindu state is not a goal. In this regard, proselytizing religions—Islam and Christianity, in particular—can be characterized as a threat to the "Hindu nation." Hindu nationalists have a relatively short, but long-standing list of political goals. Leading Hindutva and widely-held RSS aspirations include scaling back laws and government programs designed to benefit the religious minorities, Muslims in particular; establishing a Uniform Civil Code (to replace current personal law based on religious customs and thus standardizing all national laws regarding such topics as marriage, divorce, and inheritance); repealing Article 370 of the Constitution, which grants limited autonomy to the Muslim-majority state of Jammu & Kashmir (a step that, if implemented, would allow citizens from other Indian states to buy property in J&K); redrafting public school textbooks to remove what are alleged to be insults to Hindu gods and excessive praise of the subcontinent's past Muslim rulers; constructing a Ram temple on the site of the Babri Mosque that was razed in 1992 (a policy endorsed in the BJP's 2014 Manifesto); and preventing cow slaughter (cows are deeply revered animals in Hinduism). Along with the economic, security, and human rights issues discussed below, the United States and India engage closely on myriad other global and multilateral issues, including science and technology; space; healthcare; education; and sustainable growth, energy, and climate change, among others. India, a non-signatory to the Nuclear Nonproliferation Treaty, maintains a nuclear arsenal of an estimated 90-110 warheads, and apparently is working to develop that arsenal's size and sophistication. With the signing of the U.S.-India Civil Nuclear Agreement in 2005, and Congress's 2008 endorsement of that deal, the issue of Indian nuclear weapons has receded from the top-tier position it previously occupied in the relationship. The Administration currently supports India's "phased entry" into several multilateral arms control organizations. The U.S. government aspires to reach $500 billion in annual bilateral trade with India by 2024, a more than five-fold increase from the $97 billion total in 2013. According to the lead U.S. diplomat for the region, the most immediate need in this regard is to complete Bilateral Investment Treaty (BIT) negotiations to finalize a pact that will "help us move past the choppiness that comes from not having an overarching investment framework" (American foreign direct investment into India topped $28 billion in 2013, and cumulative Indian investment into the United States grew from under $100 million in 2000 to more than $5 billion in 2012). The Obama Administration also continues to raise concerns about the lack of "investment diversity" and urges India to create a "transparent, straightforward way of attracting foreign investment, offering private capital a way to share in India's opportunity." This will entail a setting in which contracts are "upheld and honored across jurisdictions, and perhaps most importantly, intellectual property rights (IPR)—based on international norms—must be recognized." The U.S. Trade Representative's annual "Special 301 Report" on the Administration's IPR concerns has listed India every year since its 1989 inception. Currently appearing with nine other countries on the "Priority Watch List," India is singled for its "challenging environment for IPR protection and enforcement." The 2014 report reviews "issues of concern to U.S. and other stakeholders" that include exceptionally high rates of audiovisual piracy, counterfeit pharmaceuticals, high tariffs on medicines, and a weak IPR legal framework and enforcement system. It cites an industry study's finding that rights holders lost sales worth nearly $12 billion in 2012. An "Out-of-Cycle Review" for India, expected to be complete in September, is a tool to boost engagement with certain trading partners so as to address and remedy U.S. concerns. The Obama Administration continues to maintain that India—and its economic connectivity with neighbors to both its east and west—is vital to the prosperity and stability of the entire region. To facilitate connectivity, the Administration seeks to advance initiatives that better link India with Central Asia (via a "New Silk Road") and with Southeast Asia (via the "Indo-Pacific Economic Corridor"). Combined with Modi's more strident nationalism, the new Indian government could, in the view of some analysts, serve to assist the U.S. policy of rebalancing toward Asia. Washington is widely urged to take a pragmatic stance with New Delhi and focus especially on finding ways to resolve outstanding trade-related disputes, perhaps through a reinvigoration of the bilateral Trade Policy Forum, which has not met since 2010. Longer-range goals could be bringing India into wider multilateral trade groupings in the Indo-Pacific region. New Delhi also is eager to import natural gas from the United States. Prime Minister Modi—who ran a campaign that promised rapid infrastructural improvements, including in the energy sector—has emphasized the role of renewable fuels, but India's soaring demand will require it to rely on carbon-based fuels for the foreseeable future. Proponents of exporting liquefied natural gas (LNG) to India argue that doing so would help cement the bilateral partnership while not subjecting U.S. consumers to significantly higher prices. The United States views defense cooperation with India in the context of "common principles and shared national interests" such as defeating terrorism, preventing weapons proliferation, and maintaining maritime security and regional stability. Many analysts view increased U.S.-India security ties as providing an alleged hedge against or counterbalance to growing Chinese influence in Asia, although both Washington and New Delhi routinely downplay such motives. India is in the midst of transforming its military into one with global reach, particularly with a blue-water navy, and the issue of U.S. arms sales to India has taken a much higher profile in the new century, with India planning to spend up to $100 billion over the next decade to update its mostly Soviet-era arsenal. No less significant are bilateral military-to-military contacts. Since 2002, the United States and India have held a series of combined exercises involving all military services. Such relations have been a key aspect of U.S.-India relations in recent years—India now conducts more exercises and personnel exchanges with the United States than with any other country. Navy-to-navy collaboration appears to be the most robust in terms of exercises and personnel exchanges. The Pentagon is reported to be eager to expand maritime cooperation with New Delhi's new government. Another key facet of the emerging partnership between the United States and India is greatly increased intelligence and counterterrorism (CT) cooperation. Despite meaningful progress in this realm, there appears to be an asymmetry in the willingness of the two governments to move forward: Washington wants more cooperation from India and is willing to give more in return, but officials in New Delhi remain hesitant and their aspirations are more modest. Indian wariness is rooted in lingering distrust of U.S. intentions. New Delhi's rancor at reports of U.S. spying on the BJP is the most recent expression of this. Serious structural impediments to future cooperation also exist in the view of observers in both countries. Chief among these is the fact that, in India, state governments are the primary domestic security actors and there is no effective national-level body with which the U.S. government can engage and coordinate. While in Asia in May, Secretary of Defense Chuck Hagel emphasized the Administration's view that India is a key global partner and that the United States welcomes its increasingly active role in regional institutions. For many observers, reform of India's defense procurement and management systems—including an opening of Indian firms to more effective co-production and technology sharing initiatives—is key to continued bilateral security cooperation, making high-level engagement on the Defense Trade and Technology Initiative (DTTI) a priority. Independent proponents of robust U.S.-India defense links have expressed optimism that Modi may seek and be able to effect further changes in India's FDI caps and offsets policies that currently deter international defense firms from engaging in joint projects. Some also urge the drafting of a revamped formal framework for bilateral defense engagement (the current document, inked in 2005, expires next year), along with a greater diplomatic push to engage the Modi government on regional security matters, Afghanistan perhaps leading among them. Many of India's citizens suffer from human rights abuses. According to the State Department's Country Reports on Human Rights Practices for 2013 , the most significant of these include police and security force abuses, including extrajudicial killings, torture, and rape; widespread corruption at all levels of government, leading to denial of justice; and separatist, insurgent, and societal violence. ... The law in some states restricts religious conversion, and there were reports of arrests but no reports of convictions under those laws. ... Rape, domestic violence, dowry-related deaths, honor killings, sexual harassment, and discrimination against women remained serious problems. Child abuse and forced and early marriage were problems. Trafficking in persons, including widespread bonded and forced labor of children and adults, and sex trafficking of children and adults for prostitution were serious problems. Caste-based discrimination and violence continued, as did discrimination against persons with disabilities and indigenous persons. ... Religiously based societal violence remained a problem. Religious freedom may represent the single most fraught issue-area, one with the potential to produce serious differences in the bilateral relationship if Modi seeks to move forward with the emotive, Hindutva initiatives promised in the BJP Manifesto. Domestically, the BJP victory could empower Hindu nationalists in ways that may lead to increased domestic communal frictions and violence. Human rights groups reportedly may find their activities constrained under a Modi government, and they express concerns about Modi's commitment to minority rights, his past willingness to tolerate suppression of free expression , and the vigor with which some of his supporters have quashed dissent. Experts agree that, when it comes to fears of new communal violence, Modi's actual performance in power is key, and to date he appears to understand that domestic divisiveness will only serve to hamper his economic and political ambitions. If India's economic woes substantively continue into next year and beyond, Modi might choose to revert to seeking political support through religious politics, as he did earlier in his career.

The United States and India have been pursuing a "strategic partnership" since 2004, and a 5 th Strategic Dialogue session was held in New Delhi in late July 2014. A May 2014 national election seated a new Indian government led by the Hindu nationalist Bharatiya Janata Party (BJP) and new Prime Minister Narendra Modi. Top U.S. officials express eagerness to engage India's new leadership and re-energize what some see as a relationship flagging in recent years. High hopes for the engagement have become moderated as expectations held in both capitals remain unmet, in part due to a global economic downturn that has dampened commercial activity. Yet the two countries, estranged through the Cold War period, have now routinized cooperative efforts through myriad working groups on an array of bilateral and global issues. Prime Minister Modi is known as an able administrator, having overseen impressive economic development in 15 years as chief minister of India's Gujarat state. But he also is a controversial figure for his Hindu nationalist views and for communal rioting that killed up to 2,000 people, most of them Muslims, in Gujarat in 2002. His BJP made history by becoming the first party to win an outright parliamentary majority in 30 years, meaning India's federal government is no longer constrained by the vagaries of coalition politics. Domestic and international proponents of Modi's business-friendly policies are hopeful that these circumstances will make for more effective governance and streamlined economic reforms. Detractors, concerned about protecting India's inherently secular nature under a Hindu nationalist government, and worry about future respect for India's freedoms of religion and expression. This report reviews the major current issues in U.S.-India relations, including areas of both cooperation and contention, the latter most visible in trade and economic engagement in recent years. For a brief review of the election, as well as key government officials and parties, see CRS In Focus IF00037, India's Domestic Political Setting , by [author name scrubbed].

On October 22, 1999, the President signed into law the FY2000 appropriationsact for the U.S. Department of Agriculture and related agencies ( P.L. 106-78 , H.R. 1906 ). P.L. 106-78 contains $60.56 billion in regular(non-emergency) appropriations and $8.7 billion in emergency spending for farmincome and disaster assistance. On November 29, 1999, the President signed into law a consolidated appropriations act for FY2000 ( P.L. 106-113 ) which contains several provisionsaffecting agricultural programs, including: 1) an additional $576 million inemergency farm assistance; 2) a two-year extension of the Northeast dairy compactuntil September 30, 2001 and 3) a requirement that USDA adopt a fluid farm milkpricing option (1A) supported by Eastern and Southern milk producers that is closeto current pricing policy. The measure also includes a 0.38% across-the-board cutin total discretionary budget authority for FY2000. This will require a $49 millioncut within USDA and a $4 million cut in FDA programs funded by P.L. 106-78 , withspecific cuts to be determined by the Administration. The U.S. Department of Agriculture (USDA) carries out its widely variedresponsibilities through approximately 30 separate internal agencies staffed by some100,000 employees. USDA is responsible for many activities outside of theagriculture budget function. Hence, spending for USDA is not synonymous withspending for farmers, nor with the agriculture appropriations bill, which includesfunds for non-USDA programs, notably the Food and Drug Administration (FDA). USDA outlays for the most recently completed fiscal year (FY1999) were $63.9 billion. By far the largest outlay within the Department, $32.3 billion, or one-half of total outlays in FY1999, was for its food and nutrition programs, primarily thefood stamp program (the costliest of all USDA programs), various child nutritionprograms, and the Women, Infants and Children (WIC) program. Total FY1999outlays also include $22.2 billion, or just over one-third of total outlays, for farm andforeign agricultural services. Within this mission area of USDA are the programsfunded through the Commodity Credit Corporation (e.g., commodity supportpayments, the conservation reserve program, and certain trade programs), cropinsurance, farm loans, and foreign food aid programs. Another $4.4 billion (7%) wasspent in FY1999 on an array of natural resource and environment programs, nearlythree-fourths of which funded the Forest Service (which is funded through theInterior appropriations bill, not the agriculture appropriations bill), and the balancefor a number of conservation programs for farm producers. USDA programs forresearch and education ($1.89 billion in outlays for FY1999), rural development($527 million), marketing and regulatory activities ($1.645 billion), and meat andpoultry inspection ($604 million) account for most of the balance of USDA spending. Approximately three-fourths of total USDA spending is classified as mandatory, which by definition occurs outside the control of annual appropriations. Eligibilityfor mandatory programs is usually written into authorizing law, and any individualor entity that meets the eligibility requirements is entitled to the benefits authorizedby the law. Currently accounting for the vast majority of USDA mandatory spendingare the food stamp program (which accounts for nearly one-half of total USDAmandatory spending); child nutrition programs; the farm commodity price andincome support programs; the federal crop insurance program; and the conservationreserve program (CRP). Although they have mandatory status, the food and nutrition programs are funded by an annual appropriation based on projected spending needs. Supplementalappropriations generally are made if and when these estimates fall short of requiredspending. An annual appropriation is also made to reimburse the Commodity CreditCorporation for losses it incurs in financing the commodity support programs and thevarious other programs it finances. Historically, the farm commodity supportprograms were a larger portion of the USDA budget than they are currently. Spending levels among these programs were erratic and unpredictable, making totalUSDA spending highly variable. Some of this unpredictability was lessened by theenactment of the 1996 farm bill, which fixes the level of spending on direct paymentsto program crop producers, and no longer ties these payments to market conditions. However, emergency provisions in both the FY1999 omnibus appropriations act( P.L.105-277 ) and the FY2000 agriculture appropriations act ( P.L. 106-78 ) made available a total of $14.6 billion in additional funding to farmers to help them recover fromlow commodity price and natural disasters. Table 1. U.S. Department of Agriculture and Related Agencies Appropriations, FY1993 to FY2000 (budgetauthority in billions of dollars) Note: Includes funding for all of USDA except the Forest Service. Also includes the Food and Drug Administration, and the Commodity Futures Trading Commission.Emergency or supplemental spending is not included. Source: House Appropriations Committee. The other 25% of the USDA budget is for discretionary programs, which are determined by funding in annual appropriations acts. Among the major discretionaryprograms within USDA that are funded by the annual agriculture appropriations actare its rural development programs, research and education programs, agriculturalcredit, the supplemental nutrition program for women, infants, and children (WIC),the Public Law (P.L.) 480 international food aid program, meat and poultryinspection, and food marketing and regulatory programs. FY2000 funding levels forall USDA discretionary programs (except for the Forest Service) is provided by theFY2000 appropriations act ( P.L. 106-78 ). The President's budget for FY2000 submitted to Congress on February 1, 1999 requested appropriations of $62.5 billion for all programs funded through theFY2000 agriculture and related agencies appropriations bill. The total requestincluded $61.2 billion for all of USDA (excluding the Forest Service), and $1.2billion for the Food and Drug Administration and other agencies. The $62.4 billionrequest was $7.8 billion below the regular FY1999 appropriation, mainly because thereimbursement for the realized losses of the Commodity Credit Corporation issignificantly higher than what was made available in FY1999. (1) Table 2. Congressional Action on FY2000 Appropriations for the U.S. Department of Agriculture and RelatedAgencies * The Senate passed S. 1233 , as amended, on 8/4/99. Subsequently, the Senate passed H.R. 1906 (the House version of FY2000 appropriations)after striking all of the House text and inserting the complete text of S. 1233 , as passed.. ** Subsequent to enactment of P.L. 106-78 , a consolidated appropriations act for FY2000 ( P.L. 106-113 ) was enacted on November 29, 1999, which provided anadditional $576 million in emergency funding to USDA programs. The full House approved its version of the FY2000 agriculture appropriations bill ( H.R. 1906 ) on June 8, 1999 by a vote of 246-183. TheHouse-passed measure provided a total of $60.96 billion in budget authority toUSDA and related agencies, which was $1.5 billion below the Administration requestand $6.3 billion above the FY1999 regular (non-emergency) appropriations. Of the$60.96 billion provided in H.R. 1906 , $13.88 billion was fordiscretionary programs, a level that was $637 million below the Administrationrequest, $190 million above the FY1999 annual appropriation, and $106 millionbelow the $13.988 billion allocation given to the House agriculture subcommittee forits FY2000 appropriations bill. H.R. 1906 was first debated on the House floor on May 25 and 26, 1999. Two amendments were adopted -- a Sanders amendment that increasedfunding for elderly nutrition programs by $10 million, offset by a $13 millionreduction in Agricultural Research Service programs, and a Coburn amendment toreduce funding for USDA's Chief Information Officer by $500,000. More than 100other amendments were offered which would have reduced funding below the levelin H.R. 1906 for numerous programs and agencies within USDA, whichcaused House leadership to suspend further consideration of the measure. Acompromise was reached leading to the approval on June 8 of a floor amendmentsponsored by the chairman of the Appropriations Committee which trimmed $102.5million from discretionary accounts. Of this amount, $70.5 million was taken fromUSDA buildings and facilities accounts and $20 million from FDA salaries andexpenses. A separate Coburn amendment also was agreed to by a 217-214 votewhich prevents FDA from using any FY2000 funds for the approval of RU-486, orany other drug to induce abortion. The Senate version was first approved on June 15, 1999, by the Appropriations Committee's Subcommittee on Agriculture, Rural Development, and RelatedAgencies. The full committee then marked up and reported the bill ( S. 1233 ; S.Rept. 106-80 ) on June 17, 1999. The bill contained new budget authority of$61.04 billion. Of this amount, $13.98 billion was for discretionary programs, a levelthat was equal to the allocation given to the subcommittee. This level was about$535 million below the President's request for such programs, but $292 million above the FY1999 level. Floor debate on S. 1233 began during the week ofJune 21, when most of the debate focused on proposed health care amendments thatwere not related to the USDA funding measure. Debate resumed in early August,when the Senate adopted a Republican leadership-sponsored amendment providing$7.4 billion in emergency funding to help farmers recover from low farm commodityprices. The Senate-passed bill also included an amendment that would haveexempted agricultural and medical products from current unilateral sanctions andrequired congressional approval for future sanction on these products. A proposedamendment to require certain changes in federal milk pricing policy supported byEastern and Southern dairy farmers was withdrawn because of a filibuster threat byUpper Midwest senators opposed to the amendment. After contentious debate over whether to include dairy provisions, an exemption of exports on agricultural products from trade sanctions, and additional emergencyassistance for farmers, a conference agreement to H.R. 1906 wasreported on September 30, 1999. The conference agreement contains $60.559 billion in regular (non-emergency) FY2000 appropriations for USDA and related agenciesand $8.7 billion in emergency spending for economic and disaster assistance forfarmers. It did not contain an exemption of agricultural products from tradesanctions or any mandated changes in dairy pricing policy. The $8.7 billion inemergency funding includes $1.2 billion in disaster payments, which was added byconferees. The House passed the conference report on H.R. 1906 measure by a vote of 240-175 on October 1. The Senate passed the measure by avote of 74-26 on October 13. Senate consideration was delayed by a threatenedfilibuster by Eastern senators who were concerned that the agreement did not includeadequate funding for natural disaster assistance or an extension of authority for theNortheast dairy compact. A motion to invoke cloture was adopted on October 12 bya vote of 79-20. The President signed H.R. 1906 into law on October22, 1999, as P.L. 106-78 . Subsequent to enactment of P.L. 106-78 , Congressional leaders and the Administration reached agreement on the five FY2000 appropriations bills that werestill pending in November. Within this FY2000 consolidated appropriations act( P.L. 106-113 , H.R. 3194 ) are a number of provisions affectingagricultural programs, including additional emergency USDA funding of $576million, primarily in response to damage caused by Hurricane Floyd in the Southeast,a two-year extension of the Northeast dairy compact until September 30, 2001, anda requirement that USDA adopt a federal milk pricing option (1A) supported byEastern and Southern dairy farmers, but opposed by dairy processors and UpperMidwest dairy farmers. P.L. 106-113 also includes a 0.38% across-the-board cut intotal discretionary budget authority for FY2000, which will require a $49 million cutwithin USDA and a $4 million cut in FDA programs funded through P.L. 106-78 , with specific cuts to be determined by the Administration. H.R. 3194 was approved by the House on November 18, 1999. The Senate approved themeasure on November 19, following a cloture vote that ended a filibuster by UpperMidwest senators who strongly opposed the dairy provisions. The President signedthe measure into law on November 29, 1999. The following is a review of the major provisions of P.L. 106-78 compared with the House- and Senate- passed versions of H.R. 1906 , theAdministration request, and the FY1999 levels. Also included in the discussion arethe agricultural provisions in the consolidated appropriations act for FY2000 ( P.L.106-113 ). Much of the debate in the House and Senate appropriations committees focused on whether the FY2000 agriculture appropriations bill adequately responds to thefinancial needs of the farm sector given the current state of the farm economy (lowcommodity prices and farm income for major commodities). P.L. 106-78 contains$8.7 billion in emergency farm spending, compared with $7.65 billion in theSenate-passed bill and no emergency funding in the House-passed bill. The maindifference between the Senate measure and the final conference agreement was theaddition of $1.2 billion in disaster payments. Some members contended that the $1.2billion was not adequate to compensate farmers for 1999 commodity lossesassociated with hurricanes, drought, floods, and other disasters. Consequently, theomnibus budget agreement reached between Congressional leaders and theAdministration on November 17 provides an additional $576 million in USDAemergency assistance to farmers and rural areas. Emergency Provisions in P.L. 106-78. Included in the emergency provisions of P.L. 106-78 is:$5.544 billion in direct payments to grain and cotton farmers; $1.2 billion in directdisaster payments, $475 million to soybean and other oilseed crop growers; $400million for additional premium subsidies to encourage producers to purchase cropinsurance in 2000; $328 million in direct payments to tobacco growers; $200 millionin livestock assistance, $125 million in dairy income assistance; $201 million inincentive payments for U.S. exporters and processors to purchase domestic cotton;$42 million for peanut growers; and the suspension of a marketing assessment onsugar, which will save the industry $42 million. For more details on the emergencyprovisions in P.L. 106-78 , see CRS Report RS20389, Emergency Farm Assistancein the FY2000 Agriculture Appropriations Act ( P.L. 106-78 ). Emergency Provisions in the FY2000 Consolidated Appropriations Act (P.L. 106-113). The agreementreached by Congressional leaders and the Administration as part of a comprehensiveFY2000 spending bill contains a total of $576 million in additional USDA disasterassistance. Although this additional emergency assistance is being provided inresponse to agricultural damage caused by Hurricane Floyd in the Southeast, most ofthe assistance is not limited to hurricane victims, but is available to any eligiblefarmer or rural area. Included in the total is $186 million in farm disaster paymentsand $10 million in livestock assistance added to the $1.2 billion in disaster paymentsand $200 million in livestock assistance provided by P.L. 106-78 . It also provides$80 million for the Watershed and Flood Prevention Program and $50 million for theEmergency Conservation Program to help restore flooded farmlands. Also includedare an additional $178.6 million to support an additional $2.5 billion in USDA farmloans; $11.2 million to support $70 million in USDA rural housing loans; and $14.5million in rural housing grants. An additional $20 million is provided to thenoninsured assistance program (NAP), a permanent disaster payment program thatmakes direct disaster payments to farmers who grow a crop not eligible for cropinsurance. The agreement waives the statutory requirement that the area in which thefarmer operates must experience a 35% crop loss before a farmer can becomeeligible for a payment. This waiver applies to any county that has been declared adisaster area by the President or the Secretary of Agriculture. In FY1999, two emergency spending packages were enacted, including $6 billion provided in October 1998 in the FY1999 omnibus appropriations act ( P.L.105-277 ) and $574 million in a supplemental appropriations act ( P.L. 106-31 in May1999. For more information on these and other past emergency spending bills foragriculture, see CRS Report 98-952(pdf) , Emergency Agricultural Provisions in theFY1999 Omnibus Appropriations Act ( P.L. 105-277 ) ; and CRS Report RS20269, Emergency Funding for Agriculture: A Brief History of Congressional Action,1988-June 1999. Three dairy issues have been addressed in this year's appropriations debate -- federal milk marketing order pricing policy, an extension of authority for theNortheast dairy compact, and reauthorization of the dairy price support program. (2) The FY2000 agriculture appropriations act ( P.L. 106-78 ) extends the authority for thedairy price support program by one year through 2000, and also provides $125million in emergency assistance to dairy farmers, as discussed above. P.L. 106-78 did not include any provisions relating to federal milk marketing orders, nor does itaddress the extension of authority for the Northeast compact, although these topicswere subject to contentious regional debate. The subsequent consolidated appropriations act for FY2000 ( P.L. 106-113 ) signed into law on November 29, 1999 contains provisions ( H.R. 3428 )that cause changes to both milk marketing orders and the Northeast dairy compact.Among these provisions, supported by Eastern and Southern dairy farm groups andopposed by dairy processors and Upper Midwest dairy farmers, is the extension ofauthority for the Northeast dairy compact for 2 years through September 30, 2001 anda requirement that USDA adopt an alternative milk pricing policy that wouldmaintain minimum fluid farm milk prices close to current levels (option 1A). The 1996 farm law ( P.L. 104-127 ) required USDA to implement a final decision for milk marketing order reforms on October 1, 1999, and also temporarilyauthorized the operation of the Northeast compact until the final rule is implemented.USDA recently issued a final rule for amending milk marketing order pricing policywhich, if implemented, would reduce minimum farm prices for fluid milk in manyregions of the country, particularly in the East and the South. However, a temporaryrestraining order issued by a judge in Vermont indefinitely postponed implementationof the final rule, and in effect extended the life of the Northeast compact as well. Wisconsin and Minnesota Senators strongly opposed the dairy provisions in the consolidated budget agreement. A cloture motion to cut off a filibuster by thesemembers was adopted on November 19, 1999, and was followed by Senate approvalof the measure, which the President signed into law on November 29. (For more ondairy issues, see CRS Issue Brief IB97011, Dairy Policy Issues .) Outlays for the farm commodity programs, farm disaster payments and certain farm export and conservation programs are funded through USDA's CommodityCredit Corporation (CCC). The CCC is a revolving financing mechanism withinUSDA, through which it supports more than a dozen specified commodities,including grains, cotton, milk, sugar, peanuts, and tobacco. The formulas thatdetermine payments under these programs are determined by statutes, with benefits provided to any qualifying producer. (3) The CCC receives its annual funding from a $30 billion line of credit with the U.S. Treasury. Therefore, the CCC does not require an annual appropriation, per se,to fund its financing activities. However, because CCC outstanding borrowingcannot exceed $30 billion, the annual appropriations bill usually contains funding fora "reimbursement of CCC net realized losses" so that the CCC can repay its debt tothe Treasury and not exhaust its borrowing authority. This reimbursement iscategorized as a mandatory expense and is not included toward the discretionaryspending allocation given to the appropriations subcommittees. As a general rule, the annual appropriation request for CCC is not a reflection of how much CCC spending will be in the appropriation year, but rather how muchCCC losses were in the most recently completed fiscal year (i.e, the FY2000appropriation would cover FY1998 losses.) However, USDA requested, and P.L.106-78 provides $14.368 billion to the CCC for FY2000, an amount that more thancovers previous losses. Of this amount, USDA estimates that $9.3 billion willreimburse the CCC for its actual FY1998 operating losses, and $5 billion is requiredto partially cover anticipated FY1999 losses, so that the CCC does not deplete its $30billion line of credit with the Treasury. Without an appropriation in FY2000 tocompensate for some of the FY1999 CCC spending, USDA estimates that CCCborrowing authority would be exhausted before the end of FY2000. CCC spendingin FY1999 was $18.4 billion, the highest level in 12 years, mainly because farmcommodity prices have been depressed, which prompted the authorization of nearly$6 billion in CCC-funded emergency income-support and disaster assistancepayments in the FY1999 omnibus appropriations act. (See CRS Report 98-952(pdf) , TheEmergency Agricultural Provisions in the FY1999 Omnibus Appropriations Act formore details.) CCC spending in FY2000 could exceed $22 billion since most of the$8.7 billion in emergency spending for farmers contained in P.L. 106-78 initially willbe funded through the borrowing authority of the CCC. The federal crop insurance program is administered by USDA's Risk Management Agency (RMA). It offers basically free catastrophic insurance toproducers who grow an insurable crop. Producers who opt for this coverage have the opportunity to purchase additional insurance coverage at a subsidized rate. Mostpolicies are sold and completely serviced through approved private insurancecompanies that have their program losses reinsured by USDA. There are basically four sources of federal expenditures for the crop insurance program -- USDA absorbs a large percentage of the program losses, compensatesthe reinsured companies for a portion of their delivery expenses, subsidizes thepremium paid by participating producers, and pays the salaries and expenses of itsadministering agency within USDA. The program losses, premium subsidy, anddelivery expense reimbursement to the private companies are mandatoryexpenditures funded through USDA's Federal Crop Insurance Fund, which receives"such sums as are necessary" annually to fund the program. The salaries andexpenses of the RMA are a discretionary expense, and are dependent on annualappropriations. The Administration estimates that the program will cost $1.7 billion in FY2000, compared with an estimated $1.6 billion in FY1999 and actual expenditures of $1.75billion in FY1998. Of the $1.7 billion estimated for FY2000, an appropriation of$997 million is required for the Crop Insurance Fund (which is provided in theFY2000 agriculture appropriations act ( P.L. 106-78 ) within its mandatory accounts);$640 million of the total will be funded through a carryover of unobligated fundsfrom previous years. A separate appropriation of $70.7 million was requested by theAdministration for RMA's salaries and expenses. P.L. 106-78 freezes RMA salariesand expenses at the FY1999 level of $64.0 million. Separate from the regular annualappropriations made to the crop insurance program, the emergency provisions in H.R. 1906 include $400 million for USDA to offer discounts on thepremium paid by farmers in the 2000 crop year, which will be funded through theCommodity Credit Corporation. Despite major legislative reforms to the program in 1994, farmer dissatisfaction with the program, especially among those who have incurred multiple years ofdisasters, has grown in recent years. The enactment of nearly $6 billion in ad hocemergency disaster and price relief payments in the omnibus FY1999 appropriationsact also spurred the Administration and Congress to seek new ways to enhance thecrop insurance program. Several bills for enhancing the crop insurance program have been introduced. The House passed a comprehensive measure( H.R. 2559 )in late September. Senate action is pending. For more onthe federal crop insurance program, see CRS Issue Brief IB10033, Federal CropInsurance: Reform Issues in the 106th Congress . Through its Farm Service Agency (FSA), USDA serves as a lender of last resort for family farmers unable to obtain credit from a commercial lender. USDA providesdirect farm loans and also guarantees qualified loans from commercial lenders, whichare used to finance the purchase of farm real estate, help producers meet theiroperating expenses, and financially recover from natural disasters. Some of the loansare made at a subsidized interest rate. Under budget rules adopted in 1990, federal agencies are required to estimate the cost of making a direct or guaranteed loan and record that cost as a budget outlayfor the loan. The cost of making a loan is directly related to any interest rate subsidyprovided by the government, as well as a projection of anticipated loan losses causedby farmer non-repayment of the loans. The conference agreement on the FY2000 agriculture appropriations bill ( P.L. 106-78 ) concurs with the Senate-passed bill and provides an appropriation of $82million to support $3.08 billion in direct and guaranteed FSA farm loans for FY2000. Within the FSA farm loan programs, the only difference between the FY2000conference agreement and the Administration's request is that the conferenceagreement provides funding to support $200 million in guaranteed unsubsidized farmoperating loans, compared with a request for $97 million. For all farm loan programs, P.L. 106-78 provides $800 million in loan authority above what was provided in the FY1999 regular appropriation, but $825 millionbelow the FY1999 level when supplementals are included. A three-partappropriation for farm loans was made for FY1999 loan programs-- a regularappropriation of $89.7 million to support $2.285 billion in direct and guaranteedloans, and emergency supplemental funding of $140.4 million to support anadditional $1.54 billion in loans. The supplementals were provided to remedy thebacklog of applications for loans, which occurred because of a shortage of funds andstrong demand for subsidized credit caused by the weak farm economy. TotalFY1999 appropriations (both regular and supplemental) were $230.1 million tosupport $3.825 billion in FSA farm loans. Conservation programs are administered by USDA's Natural Resources Conservation Service (NRCS) and Farm Service Agency (FSA). A portion of theNRCS funds are provided through annual appropriations. The remaining NRCSprograms and the FSA conservation programs are funded through the borrowingauthority of USDA's Commodity Credit Corporation. The FY2000 agriculture appropriations act ( P.L. 106-78 ) makes minor changes to the amounts in the House and Senate-passed FY2000 appropriations bills, whichwere similar. P.L. 106-78 provides $813 million for conservation programs, whichis more than either the House or the Senate provided, $800 million and $808 million,respectively. It is also an increase from the $793 million provided in FY1999, butless than the $866.1 million that the Administration had requested for FY2000. TheAct does not provide the $50 million requested by the Administration for theFarmland Protection Program, and generally rejects the Administration proposals for initiatives including the Clean Water Action Plan and the Lands Legacy Initiative. NRCS. Within NRCS, the primary source of technical assistance to producers and landowners is ConservationOperations (CO). P.L. 106-78 provides $661 million, which is more than the $656million approved by the House or $656 million approved by the Senate. Reportsaccompanying both bills included numerous funding recommendations. Both billsrejected Administration proposals for new or redirected spending, including requeststo support its global climate change activities ($15 million)and its Clean WaterAction Plan ($34 million). These costs would have been partially offset by a savingsof $31 million for combining support services with other USDA agencies at the fieldlevel, which Congress also rejected. P.L. 106-78 does identify a number of earmarks;among the larger ones were $17 million for the grazing lands initiative instead of $15million as approved in both the House and Senate, and $7.9 million for animalfeeding operations, instead of $5 million as approved in the Senate. As recommended by both the House and Senate bills, P.L. 106-78 provides $99 million for Watershed and Flood Prevention Operations, which funds smallwatershed projects. Both bills had rejected the Administration-proposed reductionto $83 million. Conferees concurred with the House and Senate provision to placea limit of $47 million on spending for technical assistance from this account, so thata majority would go to projects. The Senate bill called for a detailed analysis of agingflood control structures, with recommendations for Congress. P.L. 106-78 specifies that $8 million be made available for pilot rehabilitation projects of aging projectsin four specified states, and that no more than $1 million can be spent implementingthe Endangered Species Act. (These provisions do not affect an additional $95million provided in the FY1999 emergency supplemental appropriations act ( P.L.106-31 ) approved in May 1999.) Regarding several smaller programs, P.L. 106-78 rejects an Administration proposal transferring $50 million from the Land and Water Conservation Fund to theFarmland Protection Program as a part of its Lands Legacy Initiative. The actprovides $6.3 million for the Forestry Incentives Program, although theAdministration had requested no funding for the program. Five NRCS programs are funded through the CCC, and are not subject to annual appropriations. The Administration requested in FY2000: $300 million for theEnvironmental Quality Incentives Program (EQIP) (+$126 million from FY1999);$209 million for the Wetlands Reserve Program (WRP) (+$77 million); $28 millionfor the Farmland Protection Program (FPP) (up from $0); and $10 million for theWildlife Habitat Incentives Program (WHIP) (-$14 million). P.L. 106-78 rejectedall of the Administration requests for increased funding for mandatory conservationprograms, mainly because authorizing legislation would have been required to effectsuch increases. The Act does limit FY2000 spending on three mandatoryconservation programs to levels below their authorized level-- 1) EQIP is limited to $174 million (-$26 million from the FY2000 authorization); 2) WRP acreage islimited to 150,000 acres (instead of the 200,000 acres estimated by theAdministration, for savings of $49 million; 3) All funding ($35 million) for theConservation Farm Option is prohibited, as requested by the Administration topartially offset requested increases in other mandatory conservation programs . The Administration budget proposals and related changes in NRCS and FSA conservation programs included an anticipated reduction in NRCS staffing ofapproximately 10%, or an estimated 1,055 positions. In April, NRCS temporarilyhalted technical assistance in support of new enrollments into the CRP, while itreviewed its funding and staffing situation. The emergency supplementalappropriations act for FY1999 ( P.L. 106-31 ) enacted in May included $28 millionfor NRCS in FY1999 and $35 million in FY2000, which will allow it to fully supportCRP enrollment for these two fiscal years without significant reductions in field staff,according to an agency analysis. This topic was not, therefore, addressed in theFY2000 appropriations act. FSA Conservation Programs. FSA administers the largest conservation program, the Conservation ReserveProgram (CRP). CRP, which is funded through the CCC, offers multi-year rentalagreements to producers who retire highly erodible and other environmentallysensitive lands from production. P.L. 106-78 includes three general provisions onthe CRP which limit funding for certain components. Neither the House nor theSenate commented on the Administration's CRP proposal, but the HouseAppropriations Subcommittee did approve an amendment to extend the deadline forthinning pines planted on CRP lands. The Administration had requested in increaseof $20 million in FY2000, to $1.596 billion, stating that enrolled acreage would growfrom 31.1 million acres in FY1999 to 34.4 million acres in FY2000, and thatenrollment of buffers under a continuous enrollment option would grow from 2.4million acres at the end of FY1999 to 3.5 million acres in FY2000. Conservation funding could be affected by provisions in the FY2000 Interior Appropriations bill associated with the Administration's Lands Legacy Initiative. Neither the House nor Senate versions of the FY2000 Interior bill provide anyfunding for this initiative. As proposed, it would provide just over $1 billion forresource protection, including $268 million for USDA programs. Agricultureprograms that would receive increased funding include the Forest Legacy Program(to acquire easements on private lands), the Urban and Community Forestry Program(to provides grants to states and localities for urban and community forests andrelated green spaces), a new smart growth partnership loan program (a revolving loanprogram to subsidize land acquisition and management), Forest Service landacquisitions, and a portion of the funding for the FPP, mentioned above. (See CRS Report RL30206 for the latest information on the FY2000 Interior bill.) Congress also rejected an Administration proposal to provide USDA with an increase of $262 million for USDA programs that would be a part of the CleanWater Action Plan. Of this proposed increase, Forest Service programs wouldreceive $89 million while NRCS would receive $169 million, primarily through theproposed increase of $126 million for the EQIP and $34 million for ConservationOperations described above. The international activities of USDA include programs that provide foreign food aid, guarantee the commercial financing of U.S. agricultural exports, subsidize U.S.agricultural exports, and support the development of overseas markets for U.S.agricultural products. Direct appropriations are required for some or some portionof these programs, while others are carried out with funds from the CommodityCredit Corporation, appropriations for which are handled separately. (4) The programssubject to annual appropriations include P.L. 480 foreign food aid, salaries andexpenses incurred in administering export credit guarantees, and the salaries andexpenses of USDA's Foreign Agricultural Service, which administers USDA'sinternational activities. Programs funded by the Commodity Credit Corporationinclude separately authorized foreign food aid programs and USDA's export subsidyand market development programs. (5) Appropriated Programs. For the international programs requiring direct appropriations, the FY2000 agricultureappropriations act ( P.L. 106-78 ) provides an appropriation of $1.063 billion.Although the Act provides the same amount as the the Senate-passed bill, it is notidentical to the Senate bill. P.L. 106-78 increases food aid, but by less than theHouse-passed bill, and reduces funding available to the Foreign Agricultural Service. The Administration had requested FY2000 budget authority of $1.057 billion which would support a program level of $5.563 billion. Program level exceedsbudget authority because, for federal credit programs, which are a substantialcomponent of USDA's activities, only administrative expenses and loan subsidies,not the value of the loan or guarantee, require an appropriation. The budget authorityrequested for these programs in FY2000 was $139.9 million below FY1999. Thesupported program level would be $1.3 billion less than the estimated program levelfor FY1999 of $6.853 billion. The larger FY1999 program levels derive from theaugmentation of P.L. 480 Title I with borrowing from the CCC to help financeexpanded food aid to Russia, and larger than usual export credit guarantees toeconomically depressed Asian markets. P.L. 480. The usual source of foreign food aid is P.L. 480 or the Food for Peace Program. Food aid is providedthrough three program authorities. Title I provides for sales of U.S. agriculturalcommodities to developing countries through concessional financing, i.e., long-term, low interest loans. Title II provides for commodity donations for feeding programsor in response to extraordinary relief requirements. Title III provides for bilateralgrants of food aid to be used for development activities in least-developed countries. Title I is administered by USDA, while Titles II and III are administered by the U.S.Agency for International Development. P.L. 106-78 provides an appropriation of $951 million for P.L. 480 which supports a program level of $976 million. Title I funding is set at $149 million; TitleII donations are funded at $800 million; and no funds are provided for Title III. ThePresident had requested an appropriation of $915 million for P.L. 480 in FY2000,which includes $128 million for Title I, $787 million for Title II, and no funds forTitle III. As originally passed by the House, H.R. 1906 would have provided an FY2000 appropriation for P.L. 480 of $1.015 billion, $100 million more thanrequested by the President. The bill did not concur with the President's request forTitle II, which would have reduced funding for that program by $100 million inFY2000, but instead kept Title II funding at the FY1999 enacted level of $837million. The House-passed bill did concur with the President's request to eliminatefunding for Title III. The House committee report notes the inclusion in its bill oflanguage that would allow transfers of funds, not to exceed 15% among Titles I, II,and III of P.L. 480. The Senate-passed version provides an appropriation of $922.9million (program level of $946 million) for P.L. 480. The Senate-passed bill was $8 million above the President's request for Title I funding, and concurred with the President's request to reduce Title II funding by $50million. Despite this cut the Senate Appropriations Committee expects that thebudget authority recommended, together with carryovers, will enable USDA tomaintain P.L. 480 program levels in FY2000 at the FY1999 level. TheSenate-passed bill also eliminates funding for Title III commodity grants. Not included in FY1999 totals is emergency funding of $149 million for Title II commodity donations provided in supplemental appropriations. These funds aredesignated for humanitarian food relief for Kosovar refugees. Export Credit Guarantees. The two most important export credit guarantee programs, which guarantee payment forcommercial financing of U.S. agricultural exports, are the GSM-102 (short-termguarantees) and GSM-103 (intermediate-term guarantees) programs. TheAdministration had requested a program level of $4.5 billion for the CCC exportcredit programs in FY2000. Although the FY2000 estimate is $200 million below theFY1999 estimate, guarantees to finance exports to financially strapped Asiancountries would remain at a high level in FY2000. Budget authority of $4.085million was requested for salaries and expenses of FAS and the Farm ServiceAgency (FSA), the administering agencies for CCC credit guarantees. P.L. 106-78 concurs with the Senate-passed bill and provides $3.82 million for administrativeexpenses in FY2000, the same as the FY1999 level. The Senate bill had estimatedthat this appropriation, although smaller than the request, would still support therequested program level of $4.5 billion for export credit guarantees. FAS. USDA's Foreign Agricultural Service (FAS) implements the international programs. P.L. 106-78 reduces FASspending to $109 million in FY2000, which is $27 million below the FY1999 leveland the Senate level, and $28.5 million below the Administration request and theHouse level. The House committee report calls upon FAS to "allocate all resourcesnecessary to advance the interests of American farmers, ranchers and consumers inthe next round of trade negotiations under the framework of the World TradeOrganization negotiations...(including) the reallocation of current spending, ifnecessary." CCC-Funded Programs. International programs for which separate budget authority is not required inappropriations legislation but which also are administered by FAS include: theseparately authorized Food for Progress Program and Section 416 (of theAgricultural Act of 1949) commodity donations; two direct subsidy programs, theExport Enhancement Program (EEP) and the Dairy Export Incentive Program(DEIP); and the Market Access Program (MAP) which funds overseas developmentof export markets. Funding for these programs is from the CCC. For theseactivities, however, the President's budget includes program level estimates. Theestimated program level for these activities in FY2000 is $777 million which is $776million less than the estimated program level of $1.554 billion for the same set ofactivities in FY1999, (excluding the costs of approximately $695 million of wheatand wheat products purchased by the CCC under its surplus removal authority andmade available for donation under Section 416). In the past, limits on program levels for CCC-funded programs have been included in general provisions of appropriations legislation. P.L. 106-78 contains norestrictions on CCC-funded international activities. Conferees deleted a Senateprovision that would have prohibited any MAP spending on the export of wine or anyother alcoholic beverages. An amendment to prohibit all funding for MAP wasdefeated on the House floor when H.R. 1906 was first passed. Section 416. , a prominent component of the President's Food Aid Initiative in FY1999, would fall from $1.47 billion(commodity value plus ocean freight and overseas distribution costs) to $49 millionin FY2000. Food for Progress (FFP), which provides U.S. farm commodities todeveloping countries that promote free enterprise, would spend an estimated $91million for commodities and transportation services in FY2000. FFP was estimatedat $133 million in FY1999. Export Enhancement Program. The budget proposes limiting EEP to $494 million, $85 million less than authorized inthe FAIR Act. The "savings" would be used to offset increased mandatory spendingfor other, unspecified agricultural programs. Although EEP spending is estimatedat $494 million in FY2000, it is important to note that EEP spending was only $2million in FY1998 and just over $1 million in EEP bonuses were awarded inFY1999. Moreover, USDA has indicated its reluctance to use EEP in the currenteconomic environment for fear that using it might further depress export prices,especially if used for wheat and feed grains. FY2000 DEIP subsidies are estimatedat $99 million, nearly the same level estimated for FY1999. The Market Access Program. MAP uses CCC funds to help finance overseas marketing activities of various groups,including private companies that qualify as small businesses under the SmallBusiness Act. The budget proposed FY2000 funding at the maximum authorizedlevel, $90 million, the same level as in FY1999. MAP has been a frequent butunsuccessful target of budget cutters in search of funds to offset increased spendingfor other programs. A Chabot amendment that would have prohibited any MAPfunding in FY2000 was defeated on the House floor during debate on the earlierHouse-passed bill by a vote of 72-355. A Thurmond floor amendment to theSenate-passed bill prohibited the use of MAP funds for the exporting of all alcoholicbeverages, including wine, but was deleted by conferees. Approximately $3.6million of the total MAP funding of $90 million in FY1999 was allocated toalcoholic beverages. A second export market activity, the Foreign Market Development Program (FMDP), or Cooperator Program, has been funded out of direct appropriations forFAS. FMDP supports market development for generic commodities by nonprofitcommodity and agricultural trade associations. The budget proposes a program levelof $27.5 million of CCC funds for FMDP in FY2000. Funding FMDP with CCCfunds would remove the program from the list of those requiring the enactment ofbudget authority. The House Appropriations Committee report, noting USDA'sproposed funding change for FMDP, directed the Department to notify it beforemaking such a change. Sanctions Reform. P.L. 106-78 does not include a provision that would have exempted agricultural exports fromeconomic sanctions that the United States imposes on certain countries for foreignpolicy reasons. The Senate had included an Ashcroft-sponsored floor amendment inits bill to exempt commercial sales of agricultural and medical products from currentunilateral sanctions, and require congressional approval for future sanctionsannounced by the President on these products. Because this provision effectivelywould have allowed sales to occur to the Cuban government, thus partially breaking the long-standing U.S. trade embargo on that country, strong opposition by someHouse members to this proposed foreign policy change contributed to the stalematethat developed in conference. The Administration also signaled its opposition,arguing that to require the President to secure congressional approval of a futuresanctions' decision which included these products would limit his flexibility to usesanctions as a tool to advance foreign policy and other national security objectives. Both House and Senate leadership agreed to drop the Ashcroft amendment in thefinal conference report. In reaction, a number of Senators expressed their strongdisapproval of the way this issue was finally decided. Earlier, in House Appropriations Committee markup of the FY2000 agriculture appropriations bill, a Nethercutt amendment was offered to exempt food andmedicine from unilaterally imposed U.S. economic sanctions, or trade embargoes. A DeLay amendment to the amendment, later withdrawn, would have precludedCuba from benefitting from any such exemption. The Nethercutt amendment wasdefeated in committee, reintroduced during House floor debate on H.R. 1906 , but subsequently withdrawn. For more on this issue, see CRS Report RL30108(pdf) , Economic Sanctions and U.S. Agricultural Exports. The FY2000 agriculture appropriations act ( P.L. 106-78 ) includes just over $2 billion for USDA's four research, education, and economics (REE) agencies, whichis approximately $34 million more than the Senate version, $100 million more thanthe House version, $20 million more than the Administration request, and $70million more than FY1999. P.L. 106-78 does not provide funds in FY2000 for theInitiative for Future Agriculture and Food Systems that was authorized in theAgricultural Research, Extension, and Education Reform Act of 1998 ( P.L. 105-185 ),or for the Fund for Rural America. The FY1999 omnibus appropriations act ( P.L.105-277 ) also prohibited expenditures on both the Initiative and the Fund for RuralAmerica. Four agencies carry out USDA's REE function. The Department's in-house research agency is the Agricultural Research Service (ARS), which providesscientific support to USDA's action and regulatory agencies and conducts long term,high risk, basic and applied research on subjects of national and regional importance.The National Agricultural Library merged with ARS in the 1994 USDAreorganization. The Cooperative State Research, Education, and Extension Service(CSREES) is USDA's liaison with state-level research, education and extensionprograms at the land grant Colleges of Agriculture. The Economic Research Service(ERS) provides economic analysis of agriculture issues using its databases as wellas data collected by the National Agricultural Statistics Service (NASS). ARS,CSREES, ERS, and NASS are under the Undersecretary for Research, Education,and Economics. Agricultural Research Service (ARS). P.L. 106-78 provides $886.8 million for the AgriculturalResearch Service. Of that amount, $834.3 million would support ARS's researchprograms and $52.5 million would pay for the renovation and construction of ARSbuildings and facilities. The House-passed bill would have provided $823.4 millionfor ARS, all of which would support research (zero funding for facilitiesconstruction). The Senate-passed version would have provided $862.5 million, ofwhich $53 million would be for buildings and facilities. The Administration had proposed several research projects for termination in order to target a $76 million increase to certain high-priority research areas, including human nutrition, food safety, global climate change, and others. P.L. 106-78 continues the FY1999 level of funding for all research projects targeted fortermination in the President's budget, as did the House-passed measure. TheSenate-passed bill would have redirected $7.3 million from terminated projects to thepriority projects that the Administration requested, and specifically allocated $10million of increased ARS funds to projects in support of the President's Initiative onFood Safety. (Conferees designated $11 million in increased ARS funds to be usedfor the initiative; a total of nearly $52 million in food safety initiative increases areallocated among various USDA agencies plus the Food and Drug Administration.) Cooperative State Research, Education, and Extension Service (CSREES). P.L. 106-78 provides $950.1 millionfor CSREES. Of the total, $485.6 million would support the agency's research andeducation program in the states, $424.9 million would support the education andoutreach programs of the Cooperative Extension System, and $39.5 million wouldsupport a program of integrated research and extension programs authorized underthe Agricultural Research, Education, and Extension Reform Act of 1998. TheSenate-passed bill would have provided $931.5 million for CSREES, including$473.4 million to support state research and education programs, $422.6 to supportExtension activities, and $35.5 million to support the integrated programs authorizedin 1998. The House bill would have appropriated $906.3 million for CSREES. Ofthat amount, the House measure would have provided $467.3 million for researchand education program in the states and $439 million for Extension programs, withno funds for integrated activities. Economic Research Service (ERS) and National Agricultural Statistics Service (NASS). P.L. 106-78 provides $65.4million for ERS. This amount is just below the FY1999 appropriation of $65.8million. The Senate-passed bill would have provided $63.4 million in funding forERS for FY2000; the House-passed bill would have provided $70.3 million. Of thetotal provided, the P.L. 106-78 earmarks $12.2 million for studies and evaluationsof the child nutrition, WIC, and food stamp programs. Conferees agreed on $99.4million for NASS, which includes up to $16.5 million for the Census of Agriculture. The House-passed bill contained $100.6 million for NASS, and the Senate bill $99.4million. The mission of USDA's marketing and regulatory programs -- administered by three agencies, the Agricultural Marketing Service (AMS), the Animal and PlantHealth Inspection Service (APHIS), and the Grain Inspection, Packers, andStockyards Administration (GIPSA) -- is to "facilitate the domestic and internationalmarketing of U.S. agricultural products and to ensure the health and care of animalsand plants while improving market competitiveness and the economy for the overallbenefit of both consumers and American agriculture," according to USDA. APHISspending accounts for most of the marketing and regulatory program budget. Animal and Plant Health Inspection Service. The FY2000 agriculture appropriations act ( P.L. 106-78 ) provides a total of $446.5 million for APHIS, of which $441.3 million would supportthe agency's programs to protect U.S. agriculture from foreign diseases and pests, and$5.2 million would be used to renovate APHIS facilities. User fees would provideanother $87 million for APHIS activities. (The Administration proposal to increasecertain other APHIS user fees was not endorsed.) The Senate-passed version would have provided a total of $444.6 million for APHIS, including $439.4 million to support the agency's programs, and $5.2 millionfor renovation of APHIS facilities, and would have permitted another $90 million inuser fees. The House bill would have appropriated $444 million for salaries andexpenses, $7.2 million for facilities, and permit an additional $87 million in user feesto support agency activities. APHIS's FY1999 appropriation is $425.8 for programs,$7.7 million for facilities, and provides for the expenditure of $88 million in userfees. Agricultural Marketing Service. P.L. 106-78 increases AMS's total funding for FY2000 by more than $4 million(compared with FY1999), to $65.3 million. The Senate-passed bill also would haveincreased AMS's total funding by about $4 million, to $64.9 million, while theHouse-passed version called for a $1.8 million increase, to $62.8 million. Of thesetotals, $51.6 million in P.L. 106-78 are annually appropriated funds for AMS'sprograms, while $12.4 million is to be transferred to AMS for strengthening markets,income, and supply (Section 32 funds). P.L. 106-78 earmarks $2.4 million of theAMS appropriation to support the agency's Pesticide Data Program, which samplesfood products for residues at or near the point of purchase, plus $321,000 forenhancing market opportunities for small farmers. Grain Inspection, Packers, and Stockyards Administration. P.L. 106-78 funds GIPSA programs at theHouse-passed and Administration-requested level of $26.4 million, compared withthe Senate bill level of $26.3 million. FY1999 funding was $26.8 million. GIPSAhas been working to improve monitoring of the livestock markets, whereconcentration over the past several years has raised concerns about decreasingcompetition, inadequate price information, and other market access issues for farmersand ranchers. The final measure assumes that GIPSA will collect $42.6 million inuser fees for its grain weighing and inspection services, resulting in a program levelof approximately $69 million. Mandatory Reporting of Livestock Prices. P.L. 106-78 includes the price reporting legislation( S. 1672 ; S.Rept. 106-168 ) approved July 29, 1999, by the SenateAgriculture Committee. That measure, effective for 5 years, imposes new dailyreporting requirements on the largest 10% of cattle and hog packing plants(representing 94% of market transactions), subjects those who violate therequirements to civil financial penalties, and requires USDA (either AMS or GIPSA)to collect and publish the data on a frequent basis, among other things. A specificappropriation for the price reporting program is not included in P.L. 106-78 . Somelawmakers are urging the Secretary to fund the program with existing funds. TheSecretary contends that a separate appropriation is required. Prior to P.L. 106-78 , packers and processors are not required to report the prices they pay for animals, although AMS does collect and report this data under anextensive voluntary system. Some farm organizations have backed proposals formandatory price reporting, arguing that meat industry consolidation, and the lesspublic marketing arrangements that have resulted, make it difficult for producers todetermine a "fair" market price. Opponents argue that such proposals will be costlyfor government and industry, raise privacy concerns, and not cure the low livestockprices that have helped fuel interest in the idea. (For more information, see CRS Report RS20079(pdf) , Livestock Price Reporting Issues .) Food safety is among the three goals that USDA Secretary Dan Glickman has set forth for the Department under the Government Performance and Results Act. In addition, USDA is a key agency in the President's Food Safety Initiative, whichwas launched in 1997. In order to elevate the Department's role in this mission area,the Administration in 1995 established an Office of the Under Secretary for FoodSafety. The Food Safety and Inspection Service (FSIS) is the only agency in USDA'sfood safety mission area. FSIS is responsible for the mandatory inspection of meat,poultry and processed egg products to ensure their safety, wholesomeness, and properlabeling. FSIS and the industry are now implementing a comprehensive new system to reduce pathogens in meat and poultry products through a preventive approach knownas hazard analysis critical control point, or HACCP. This system is to supplement,not replace, existing inspection procedures. Some observers are concerned aboutFSIS's ability to properly implement and enforce HACCP, arguing that the agency'sbudget already is under pressure to meet its traditional inspection obligations with theannual appropriation it receives from Congress. Food Safety and Inspection Service. P.L. 106-78 provides $649.4 million for FSIS in FY2000,an increase over the FY1999 appropriation, which was $617 million. TheSenate-passed bill would have provided $638.4 million for FSIS in FY2000. TheHouse-passed version had concurred with the Administration's request of $653million. P.L. 106-78 reflects the House and Senate assumption that the agency willcollect an estimated $89 million in user fees for overtime and holiday inspectionservices. The conference bill includes the $2.9 million that was in both the Senate-and House-passed bills to support FSIS's activities under the President's Food SafetyInitiative. House report language requests FSIS to deliver a report on the authorityand operations of the agency's meat product recall coordinator by the end of January2000. The conference report asks FSIS to provide the Appropriations Committeeswith an analysis, by February 15, 2000, of agency staffing needs and recruitmentactivities. USDA makes available rural development assistance to states, local governments, businesses, cooperatives, and individuals through programsadministered by three agencies: Rural Utilities Service (telecommunications, waterquality, electricity, and solid and waste water disposal), Rural Housing Service(housing and community facilities), and the Rural Business-Cooperative Service(rural business loans and grants). For all rural development programs, the FY2000 agriculture appropriations act ( P.L. 106-78 ) provides a total appropriation of $2.213 billion, a 1.7% increase abovethe FY1999 appropriation of $2.175 billion. P.L. 106-78 provides slightly higherfunding than proposed by the Administration ($2.194 billion), or what was providedinitially in the Senate-passed ($2.184 billion) or the House-passed ($2.134 billion)bills. The agreement provides approximately $217 million in subsidies to supportestimated direct and guaranteed loan amounts of $7.629 billion. TheAdministration's budget request included $215 million in subsidies in support of$6.087 billion in direct and guaranteed loans. For FY2000, P.L. 106-78 provides $1.332 billion for activities administered by the Rural Housing Service. This, in part, would support RHS loan authority of $4.589billion. The Administration's proposal included $1.146 billion in funds for RHSactivities and expenses in support of $4.575 billion in loan authority. P.L. 106-78 provides $107.3 million in Rural Utilities Service assistance, which includes $19.1 million in loan subsidies in support of $2.896 billion in loan authority. The FY2000 loan subsidy level of $19.1 million is substantially below the $47.6million subsidy level provided in FY1999. P.L. 106-78 provides no funding forFY2000 for the Alternative Agriculture Research and CommercializationCorporation (AARCC) revolving fund. An earlier version of the bill passed by theHouse recommended transferring AARCC from the Rural Business-CooperativeService to RUS, but would provide no new funding for FY2000. The Senate billwould have provided the Corporation with $3.5 million for FY2000 activities, thesame amount as FY1999, but below the Administration request of $10 million. P.L.106-78 also prohibits the expenditure of $60 million in mandatory funding for theFund for Rural America. P.L. 106-78 provides $54 million in budget authority for the Rural Business-Cooperative Service. This is a marginal increase above the amountappropriated in FY1999 ($52.6 million). In addition, conferees provided $53 million in loan authority in support of business and job creation and retention efforts in ruralAmerica. P.L. 106-78 also appropriates $20 million in loan subsidy to supportbusinesses in rural areas. A portion of the funds allocated to the three rural development agencies are made available under USDA's Rural Community Advancement Program (RCAP).This program gives USDA the flexibility of reallocating up to 25% of each state'srural development funding among certain RCAP-linked programs. P.L. 106-78 provides $718 million for RCAP, which is the same amount recommended by theSenate. The House bill recommended $669.1 million for RCAP activities. RCAP'sFY1999 allocation totaled $722.7 million. RCAP includes water and waste disposalloans, loan guarantees, and grants; solid waste management grants; communityfacilities grants, direct loans, and loan guarantees; business and industry loans andloan guarantees; rural business opportunity grants; and rural business enterprisegrants. The President's budget for FY2000 requested budget authority of $41.382 billion for USDA domestic food assistance programs, an increase of $6.6. billionover the FY1999 amount. This included funding for the food stamp program, thelargest of all food assistance programs, for meal programs in schools and child caringfacilities (e.g. school lunch and breakfast, child care food and summer food, andspecial milk programs), and for supplemental feeding programs for low-incomewomen, infants, and children (WIC). It also covered spending for commodityassistance programs serving the elderly, needy, and homeless, and the costs of federalsalaries and expenses and program administration. The FY2000 agricultureappropriations act ( P.L. 106-78 ) provides $35.04 billion for food and nutritionprograms, or $6.3 billion less than the Administration request. This is $227 millionmore than the $34.8 appropriated for these programs for FY1999. The amount in P.L.106-78 is lower than both the House and Senate level primarily because of a"downward re-estimate" of required funding for the food stamp program. Most of the $6.3 billion differences between the Administration request andwhat is provided in P.L. 106-78 is related to the congressional rejection of the $4.8billion in advance funds requested by the Administration for the food stamp programfor FY2001 (in case appropriations are not enacted prior to the beginning of thatyear), and a $100 million contingency reserve fund for food stamps in P.L. 106-78 , instead of the $1 billion reserve fund requested by the Administration. For the food stamp and related programs , the Administration budget proposed $27.3 billion; the House- and Senate-passed bills recommended $21.6 billion. P.L.106-78 provides: (1) $19.6 billion for food stamp expenses, which is $500 millionbelow the original request, and reflects a re-estimate of the needs of the program; (2)$100 million for the food stamp contingency reserve, instead of the $1 billionproposed by the Administration; (3) no advance funding for FY2001 (compared with$4.8 billion proposed by the Administration); and (4) $1.27 billion, the same as theAdministration and the House and Senate bills for Nutrition Assistance for PuertoRico. P.L. 106-78 allows $98 million to be spent on Emergency Food AssistanceProgram mandatory commodities, splitting the difference between the $97 millionin the House bill and $99 million in the Senate bill. Conferees deleted Senatelanguage that would have required the Economic Research Service to conduct a studywithin 6 months of enactment on the reasons for the decline in food stampparticipation, and to identify any obstacles that households with eligible children have experienced in obtaining food stamps. No major policy changes were proposed by the Administration for child nutrition programs (including the school lunch, breakfast, child and adult care,summer and special milk programs). P.L. 106-78 provides $9.554 billion for theseprograms, close to the Administration request for $9.565 billion. Over 90% of theappropriated funds are expected to be used to fund the school lunch program ($5.48billion), the school breakfast program ($1.42 billion) and the child and adult carefood program ($1.76 billion). The level in P.L. 106-78 for child nutrition programs($9.56 billion) is about $377 million more than projected FY1999 spending for theseprograms, and is $6 million less than was recommended by the Senate appropriationsbill and $7 million more than the House appropriation measure. The difference is theresult of the decision to provide $7 million for the school breakfast pilot project,instead of nothing proposed by the House, and $13 million proposed by the Senate. P.L. 106-78 also continues language (originally added in FY1999 appropriations) requiring the USDA to use so-called "bonus commodities" (6) to helpmake up the difference between the per meal commodity assistance rate mandatedfor school lunches, and the requirement that not less than 12% of federal schoollunch assistance be in the form of commodities. For several years, the per lunchcommodity reimbursement did not total to an amount equal to 12% of federal schoollunch aid, and the USDA had to use child nutrition funds to buy commodities tomake up the difference. Last year, the Congress added a provision to FY1999agriculture appropriations law requiring the Secretary to use "bonus commodities"when necessary to meet the 12% requirement. This resulted in savings for the USDA(projected at $40 million) because they could use commodities already acquired forfarm support or surplus removal reasons to meet this obligation. (7) House and Senatenegotiators trying to forge an acceptable budget package that merges the severalremaining FY2000 appropriations bills reportedly have agreed to make permanentthe "12% solution" so they can use the $55 million in savings to offset some of thenew spending in the consolidated budget package. The Administration proposed $4.105 billion for the special supplemental nutrition program for women, infants and children (WIC) in FY2000. P.L. 106-78 funds WIC at $ 4.032 billion, which is $108 million more than the amount providedin FY1999, and $73.5 million less than the Administration request. TheSenate-passed bill would have funded WIC at $4.038 billion, or about $33 millionmore than the House bill. Responding to renewed pressure to permit natural sugarcontained in fruits to be exempted from the sugar limits established for cerealsapproved for WIC program use, the conference report to P.L. 106-78 containslanguage directing that USDA make no exception to the current sugar limit. Neitherthe House nor Senate bills approved the Administration request to fund the Farmers'Market Nutrition Program (FMNP) from Commodity Assistance Program (CAP)funds instead of WIC funds, and continue to require that $10 million of WIC fundingbe used within 45 days of enactment for the FMNP. The FMNP provides WICparticipants in some areas with vouchers to buy fresh foods at farmers markets. TheHouse and Senate bills assumed that there will be $125 million in unexpended, orcarryover funds from FY1999 available for the program in FY2000, and that this,together with the appropriated funds will be sufficient to maintain a monthly averageWIC caseload of 7.4 million participants. The Administration proposed to fund Commodity Assistance Programs (CAPs) at a total of $155.2 million for FY2000, $20 million of which was to go for theFMNP (described above). The remainder would have provided $90.2 million for thecommodity supplemental food program (CSFP), $4.2 million more than the FY1999appropriation, and $45 million for state administrative grants for the emergency foodassistance program (EFAP), the same amount as in FY1999. P.L. 106-78 adopted$133.3 million in spending for CAPs for FY2000, $2.3 million more than FY1999funding, and $2 million less than that requested for these programs by theAdministration. The House originally approved version of the bill included a totalof $151 million for CAPs, $20 million more than FY1999 spending; theSenate-passed bill provided $131 million for CAPs, $20 million less than the House.As mentioned above, neither chamber approved funding WIC farmers marketcoupons under this budget category. Food donations programs for selected groups (the elderly and needy families) would receive $151.1 million in FY2000 under the Administration proposal, $10million more than was provided in FY1999. P.L. 106-78 provides the same amountas that recommended by both the House- and Senate-passed measures - $141.1,which is the same amount as in FY1999. The Food and Drug Administration (FDA) is funded through both congressionalappropriations and user fees whose total level of collections is set each year by theUSDA and related agencies appropriations act. For FY2000, the FY2000 agricultureappropriations act ( P.L. 106-78 ) provides an appropriation of $1.052 billion for FDA,which is $90 million below the Administration request, $33 million below theHouse-passed level, $8 million above the Senate-passed level, and nearly $70 millionabove the FY1999 appropriated level. Included in P.L. 106-78 is $1.04 billion forFDA salaries and expenses for activities such as pre-market approval of drugs anddevices, collecting reports of injury from products under FDA regulatory jurisdiction,and carrying out food safety efforts. The balance of the FDA appropriation is $11.35million for FDA's buildings and facilities. The buildings and facilities funding is $20million below the Administration request and the House-passed level, and $3 millionabove the Senate level. Conferees deleted a provision in the House-passed bill that would have prohibited FDA from using any of its FY2000 funds for "testing, development, orapproval of any drug for the chemical inducement of abortion." In September 1996,FDA had issued a "conditional approval" to the Population Council for the drugmifepristone, or RU-486, to be used for the termination of early pregnancy. In doingthis, FDA concluded that mifepristone is safe and effective, but additionalinformation on issues such as manufacturing and labeling must be submitted andevaluated before the agency determines whether or not the drug can be marketed inthe United States. FDA has yet to make its determination. P.L. 106-78 approved the requested $3 million to be used towards completion of the final phase of the renovations at the National Center for ToxicologicalResearch in Jefferson, Arkansas. The conferees prohibited any closing, relocations,or changes to occur in the St. Louis, Missouri FDA Division of Drug Analysis, theMichigan District Office Laboratory, or in the FDA Detroit, Michigan District Office.The conferees specified that for FY2000, FDA may not reduce funding and staffingfor the Detroit Office below the level found in the Office as of July 31, 1999. P.L. 106-78 provides FDA with $188 million or $30 million in additional funds over FY1999 levels for the President's food safety initiative. With this additionalfunding, the Act requires that $3 million go to the National Center for Food Safetyand Technology, and the accompanying committee report directs FDA to report, byMarch 1, 2000, on the activities the agency has taken to improve the coordination andcooperation with the U.S. Customs Service over imported foods. With this increase,the conferees want FDA to use $250,000 to continue support for cooperative researchon molluscan shellfish safety, and for FDA's education program to decreaseconsumption of raw shellfish. The conferees also directed USDA and FDA todevelop by December 1, 1999, a plan of action to achieve the goal of reassuring thepublic on the safety of the U.S. food supply, to educate Americans on foodproduction, and to identify ongoing or proposed activities to achieve this goal. P.L. 106-78 also gives FDA $100,000 to fund a design contest to find solutions to microbial contamination of ground water use and treatment by theWaste-Management Education and Research Consortium (WERC). Also, theconference report requires FDA to publish, by March 2000, a feasibility study onappropriate methods of informing consumers of bottled water contents. The conference agreement also mentions the development of resistance in food borne and other bacteria to antibiotics used to treat humans and used for livestockproduction. The agreement requires FDA to report, by January 2000, on the status ofFDA's development of regulations on electronic data submission requirements on theuse of growth promoting antibiotics in animals that may compromise humantherapies and on alternatives to this practice. The agreement report directs FDA andUSDA to develop a joint strategy for addressing resistance and to report to thecommittee by January 2000 on that strategy. The strategy is to include a time frameand cost of a risk assessment that would compare the level of risk posed by other usesto the level of risk posed by using antibiotics on the farm. The conferees increased funding by $11.4 million for the food additive petition review program of which $5.4 million is for food additive petition review, and $6million to implement the food contact substances program as authorized in currentlaw. Report language requests FDA to negotiate with the industry to proposelegislation to authorize user fees to fund this food contact substance notificationprogram and to submit a proposal to the House Commerce Committee, so that theprogram can be implemented in FY2000. After FDA receives a food additive petition requesting the use of irradiation on ready-to-eat meats and poultry, and fruits and vegetables, P.L. 106-78 requires FDAto propose a rule within six months and to issue a final rule within twelve months ofreceipt of the petition. The conferees believed that agencies with jurisdiction over meat, poultry and food products should have consistent recall protocols. By January 30, 2000, the conferees expect FDA's recall coordinator to report to Congress on its authorities,operating procedures, budget, and a description of actions taken during recent recalls. The conference report questioned whether the agency had used "sound science" in a proposed 1997 rule on the use of ephedrine alkaloids (naturally occurringchemical stimulants) in dietary supplements. Report language asks FDA to postponefinalizing the proposed rule until the agency provides more scientific evidence toensure strict compliance with the Dietary Supplement Health and Education Act. Italso directed the agency to report back within six months on the methodology theagency would use to enforce this proposed rule. Within the next 5 years, the Office of Generic Drugs expects a heavier work load when about $22 billion of brand name drugs come off patent and are likely tobecome generic drugs. P.L. 106-78 provides $1.9 million so the office can hire atleast 11 more reviewers to process these applications. The conferees also agreed thatFDA use $200,000 of the $1.6 million appropriations increase to hire two newfull-time employees in the Center of Veterinary Medicine to review aquaculture drugapplications. In August 1992, Congress authorized an FDA-administered program for training in clinical pharmacology at medical schools without such a program. The conferenceagreement provides FDA with $500,000, about $200,000 below the FY1999 level offunding, for clinical pharmacology grants awarded on a competitive basis. P.L. 106-78 prohibits FDA from developing, establishing, or operating any "general user fee" program. The report language explains that the Administrationshould submit legislative proposals to the appropriate authorizing committees. The conferees agreed that of the $154 million FY2000 appropriation for the Center for Devices and Radiological Health, $1 million is to be used in oversightactivities regarding reprocessed medical devices, and $55.5 million and 522 full-timeemployees are to be used for pre-market application review activities to meetstatutorily-set review deadlines. Report language notes that FDA failed to meet the June 1, 1999, deadline for publication of a rule concerning the use of foreign marketing data in review of newsunscreen active ingredients in the sunscreen over-the-counter drug monograph. Theconferees direct the FDA to propose a rule, not later than sixty days after enactmentof this Act, and finalize such a rule twelve months after enactment. P.L. 106-78 maintains for FY2000 a funding level of $34 million for the President's youth tobacco prevention activities. In addition, the conferees directedFDA to submit a report, within 180 days of the date of enactment of the Act, on theeffects of reducing illegal tobacco sales to minors and the effect on compliance of theuse of automated identification systems. The conference report also encourages FDA to enforce good manufacturing practices and work with interested people, including the Centers for Disease Controland Prevention (CDC) and the National Hemophilia Foundation, to investigatepossible contamination of blood and blood products. FDA is expected to report toCongress, by March 1, 2000, on actions it has taken to respond to this public healthconcern. Table 3. U.S. Department of Agriculture and Related Agencies Appropriations, FY1999 vs. FY2000 ($ inmillions) Note: An item with an asterisk (*) represents the total amount of direct and guaranteed loans that can be made given the requested or appropriated loan subsidylevel. Only the subsidy level is included in the totals. NA = Not yet available. (1) The Administration total does not include an advance appropriation request of $4.8 billion for the food stamp program for FY2001, or a $200 million request forrural housing programs. (2) Scorekeeping adjustments reflect the savings or costs of provisions that affectmandatory programs, plus the permanent annual appropriation made to USDA'sSection 32 program. (3) FY2000 enacted levels do not reflect a 0.38% rescission required by P.L. 106-113 on total discretionary spending for FY2000. This will require total spending cuts ofapproximately $49 million from USDA , $4 million from FDA , and $240,000 fromCFTC, for programs funded by P.L. 106-78 , with specific cuts to be determined bythe Administration. Source: House Appropriations Committee

The FY2000 appropriations bill ( P.L. 106-78 , H.R. 1906 ) for the U.S. Department of Agriculture (USDA) and related agencies was signed into law on October 22, 1999. P.L. 106-78 contains regular (non-emergency) appropriations of $60.559 billion, which is $2 billion below theAdministration request, but nearly $6 billion above the FY1999 level. Just over three-fourths($46.57 billion) of the total amount in the act is classified as mandatory spending (primarily foodstamps and farm programs funded through USDA's Commodity Credit Corporation), which inessence is governed by authorizing statutes and is out of the direct control of appropriators. Theremaining spending of $13.988 billion is for discretionary programs, which require an annualappropriation. In addition to the regular appropriations, P.L. 106-78 provides $8.7 billion in emergency spending for farm income and disaster assistance, including $5.5 billion in direct payments to grainand cotton farmers and $1.2 billion in natural disaster assistance. An additional $576 million in farmdisaster assistance, primarily in response to damage caused by Hurricane Floyd, is included in theFY2000 consolidated appropriations act ( P.L. 106-113 , H.R. 3194 ) signed into law onNovember 29, 1999. Controversial dairy policy provisions that were considered but not included in P.L. 106-78 are part of P.L. 106-113 , including a 2-year extension of the Northeast dairy compactand a mandate that USDA adopt a milk pricing scheme for fluid farm milk that is close to currentprice levels. P.L. 106-113 also includes a 0.38% across-the-board cut in total discretionary budgetauthority for FY2000, which will require a $49 million cut within USDA and a $4 million cut inFDA programs, with specific cuts to be determined by the Administration. Exclusive of the FY2000 emergency spending provisions, most of the difference between the FY1999 and FY2000 enacted levels in P.L. 106-78 is explained by a $5.9 billion increase in therequested appropriation for the Commodity Credit Corporation (CCC). The CCC is the fundingmechanism for the commodity support programs and farm disaster assistance. It borrows directlyfrom the Treasury and subsequently requests an appropriation for a reimbursement of its net losses. CCC spending was at a 12-year high in FY1999, because of a weak farm economy and regionalnatural disasters, and some $6 billion in supplemental spending approved by the Congress in FY1999for emergency assistance to farmers. To stay within the measure's allocation for discretionary spending, P.L. 106-78 contains spending restrictions for several mandatory programs, including a new research program, certainconservation programs, and the Fund for Rural America. Separately, conferees deleted a provisionin the House bill that would have prevented FDA from using any FY2000 funds for the approvalof RU-486, or any other drug to induce abortion. P.L. 106-78 also does not include a Senate-passedprovision that would have exempted the export of agricultural and medical products from currentand future unilateral trade sanctions on Cuba and other countries. Key Policy Staff Division abbreviations: RSI = Resources, Science and Industry; G&F = Government and Finance; DSP= Domestic Social Policy.

This report provides a chronology of events relevant to U.S. relations with North Korea in 2005 and is a continuation of CRS Report RL32743, North Korea: A Chronology of Events, October 2002-December 2004 , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. The chronology includes significant meetings, events, and statements that shed light on the issues surrounding North Korea's nuclear weapons program. An introductory analysis highlights the key developments and notes other significant regional dynamics. Particular attention is paid to the Six-Party Talks, inter-Korean relations, key U.S. officials in charge of North Korean policy, Chinas leadership in the negotiations, Japans relationship with its neighbors, and contact with North Korea outside of the executive branch, including a Congressional delegation. In the chronology, key events are marked by bold text. The year 2005 saw little progress in resolving the North Korea nuclear issue. Although adjustments were made, such as changes to senior U.S. officials in charge of policy in East Asia and the addition of human rights and criminal activities to the agenda of items to cover with North Korea, overall relationships and regional trends saw no major reversals or breakthroughs. In the first half of 2005, North Korea escalated the security situation on the Korean peninsula through words and actions. On February 10, Pyongyang officials announced that North Korea had nuclear weapons and would indefinitely suspend its participation in the Six-Party Talks, the multilateral negotiation forum dedicated to the peaceful denuclearization of North Korea made up of the United States, China, Japan, North Korea, South Korea, and Russia. North Korean officials followed up in April with the assertion that the focus of the negotiations should adjust to regional disarmament talks given its status as a nuclear weapons state. Reports of preparations for a possible nuclear test in April further escalated the sense of urgency. In May, North Korea announced that it had removed 8,000 fuel rods from the Yongbyon reactor for reprocessing; experts estimate that the reprocessed plutonium could provide enough material for an additional six to eight nuclear bombs. Later that month, North Korea launched a short-range missile into the East Sea. After nearly a year without meeting, negotiators from the six nations re-convened in Beijing in late July 2005 for a fourth round of talks. The outcome, a joint statement of principles agreed to in September by all parties, was hailed as a major breakthrough. The key statement committed North Korea to abandoning all nuclear weapons and existing nuclear programs and returning at any early date to the treaty on the proliferation of nuclear weapons and to the International Atomic Energy Agency (IAEA) safeguards. In exchange, North Korea was provided with security assurances; South Korea committed to provide 2 million kilowatts of electricity; and the U.S. and Japan pledged to take steps toward normalization of relations with Pyongyang. A crucial disagreement during the talks involved North Korea's right to develop peaceful nuclear energy programs; as a compromise, the United States and North Korea agreed to discuss Pyongyangs right to such a program and its demand for light-water reactors (LWRs) at an appropriate time. The accomplishment proved to be short-lived, however, as, just a day after the statement was issued, a North Korean spokesman asserted that North Korea would return to the IAEAs Nonproliferation Treaty (NPT) only after it received an LWR from the United States. Secretary Rice dismissed the claim, but the sense of significant progress diminished, and additional talks were not held in 2005. After the Six-Party Talks stalled again, hostile rhetoric between Washington and Pyongyang intensified. Incoming U.S. Ambassador to South Korea Alexander Vershbow labeled North Korea a criminal regime and likened the state to Nazi Germany for its criminal activities. The same week, Jay Lefkowitz, the Special Envoy for Human Rights in North Korea appointed under the North Korean Human Rights Act, visited North Korea and called it a deeply oppressive nation while attending a human rights conference in Seoul. The escalated attacks were met with a torrent of hostile responses from North Korean sources. At a brief reconvening of the Six-Party Talks in November, the counterfeiting issue became the main focus: the North Koreans insisted that the imposition of sanctions on a Macau bank for its alleged role in helping North Korea launder counterfeit U.S. dollars constituted a hostile action that made implementation of the Beijing joint statement impossible. Criticism of North Korea's human rights record became more prominent on the U.S. agenda in 2005. Jay Lefkowitz was appointed as the Special Envoy for Human Rights in North Korea, a position created by the North Korean Human Rights Act of 2004. His public statements on the situation facing refugees and North Korean citizens, paired with a high-profile meeting in the White House between President Bush and a prominent North Korean defector and author, amplified the Administrations concern about North Korea's human rights record. Emphasizing this record drew attention to the gap between the United States and South Korea in dealing with the Norths human rights abuses: in order to avoid provoking Pyongyang, Seoul abstained from voting on resolutions condemning North Korea at the United Nations Commission on Human Rights conference and the United Nations General Assembly meeting in 2005. In addition to human rights, North Korea's criminal activities began receiving heightened attention in late 2005. In September, American officials imposed penalties on Banco Delta Asia, a Macau bank that allegedly allowed the laundering of U.S. dollars counterfeited by North Korea. Noting the chilling effect on the Six-Party Talks, some analysts question the timing of the announcement, but Treasury officials insist that the issue is a law-enforcement activity and in no way related to the multilateral negotiations. South Korea has distanced itself from the U.S. accusations and reiterated its stance that raising such matters causes unnecessary friction with Pyongyang and jeopardizes the resolution of the nuclear issue. China, warned by the United States to crack down on illegal North Korean transaction in its banks, has taken some steps to curb such activity, but U.S. officials say it is unclear how aggressively Chinese authorities are moving. Beijing has also urged Pyongyang not to use the issue as a reason to boycott the Six-Party Talks. In December, the U.S. Treasury Department also put out an advisory warning U.S. financial institutions to be wary of financial relationships with North Korea that could be exploited for the purposes of illicit activities. In August 2005, the North Korean government announced it would no longer need humanitarian assistance from the United Nations, including from the World Food Program (WFP), the primary channel for U.S. food aid. In response, the WFP shut down its operations in December 2005 and the United States suspended its shipments of food aid. North Korea also asked all resident foreigners from the dozen or so aid NGOs operating in Pyongyang to leave the country. In November 2005, Pyongyang decided to reject aid from the European Union (EU) after the EU proposed a U.N. resolution on human rights in North Korea. Part of Pyongyangs motivation appears to be have been a desire to negotiate a less intrusive foreign presence, particularly the WFPs fairly extensive monitoring system. Officially, the North Korean government has attributed its decisions to an improved harvest, the decline in WFP food shipments, a desire to end dependence on food assistance, and its unhappiness with the United States and EUs raising the human rights issue. Apparently, North Korea will continue to accept direct food shipments from South Korea and China, and many have accused these countries with undermining the WFPs negotiating leverage with Pyongyang. China, which provides all of its assistance directly to North Korea, is widely believed to have provided even more food than the United States. Since 2001, South Korea has emerged as a major provider of food assistance, perhaps surpassing China in importance in some years. Almost 90% of Seouls food shipments from 2001-2005 have been provided bilaterally to Pyongyang. Notably, China apparently does not monitor its food assistance, and South Korea has a small monitoring system. Several key officials in charge of U.S. policy toward North Korea were reshuffled in 2005. Critics of earlier U.S. policy were optimistic that Condoleezza Rices confirmation as Secretary of State in January would bring a greater degree of coherence to U.S. policy because of her reputation as one of President Bushs most trusted confidantes. U.S. Ambassador to South Korea Christopher Hill, a career foreign service officer with a reputation as a strong negotiator, was selected to be Assistant Secretary for East Asia and the Pacific, as well as the chief envoy for the Six-Party Talks. As Rice began her post at the State Department, policy analysts studied her language for clues about the U.S. approach to North Korea. During her confirmation hearing, Rice included North Korea among the list of outposts of tyranny, thereby appearing to signal a tough approach to the North. However, her declaration during a March swing through Asia that North Korea was a sovereign state was interpreted as a willingness to negotiate with Pyongyang. Apparently operating with more authority than his predecessor, Hill engaged the North Koreans in bilateral meetings and, eventually, in the Six-Party Talks. Two figures that appeared later in the year, however, were seen by many in the policy community as delivering a more hardline message to the North Koreans: Alexander Vershbow, the incoming U.S. Ambassador to South Korea, and Jay Lefkowitz, Special Envoy for Human Rights in North Korea. (See statements above.) Pyongyang-Seoul relations, though typically moving in fits and starts, overall definitively advanced toward stronger cooperation. Major progress was achieved in developing the Kaesong Industrial Zone, an inter-Korean project of 15 South Korean firms employing about 6,000 North Korean workers. South Korea started electricity flows to firms operating in the zone, located in North Korea territory north of the Demilitarized Zone (DMZ). Tourism numbers ballooned (although all from South Korea to North Korea, and only in controlled areas), and inter-Korean trade topped $1 billion in 2005. Ministerial talks, the first in over a year, were held in June, a military hotline was established, and a variety of negotiations, if not concrete results, on joint river surveys, fishing, farming, and transportation went forward. Significantly, the South Korean Defense White Paper decided not to label North Korea as its main enemy, and instead designated it as substantial military threat. North Korea demanded 500,000 tons of fertilizer from the South, but Seoul officials only provided 200,000 tons because of Pyongyangs refusal to return to the Six-Party Talks. Ties between Washington and Seoul were often strained by the capitals different approaches to North Korea, despite official declarations that they shared the same goal of eliminating North Korea's nuclear weapons program through a diplomatic process. The Roh Administrations public embrace of a framework aimed at balancing the nuclear issue with North-South reconciliation contributed to the impression in many corners that South Korea was asserting a distinctly independent foreign policy stance, sometimes at odds with stated U.S. goals. A disagreement between the U.S. military command in Korea and the South Korean Defense Ministry on the contingency plan, known as OPLAN 5029, to respond to an internal crisis in North Korea, was diffused, if not fully resolved. Despite these tensions, Presidents Bush and Roh held a summits in June and November in which they reiterated their shared strategic goal but declined to work out tactical differences. Indicating a need to strengthen the bilateral relationship, the two leaders announced a new strategic dialogue and the intention to move forward with possible Free Trade Agreement (FTA) negotiations at their meeting preceding the November Asia-Pacific Economic Cooperation (APEC) summit in Busan, Korea. Though the North Korea nuclear issue remains unresolved, China has burnished its leadership credentials as host of the process. Beijing was praised as an effective broker and drafter of the breakthrough joint statement issued at the fourth round of Six-Party Talks. As the party viewed with having the most leverage over Pyongyang, China was called upon to re-engage North Korea after the February 10 announcement that it possessed nuclear weapons. Beijing officials have carefully timed their high-level visits to the Koreas, with an eye on balancing their interests with both. Chinese President Hu Jintaos visit to Pyongyang in October highlighted the consolidation of strong political and economic relations between the nations, and provided a significant counterweight to his visit to Seoul for the APEC summit the following month. Many analysts view Chinas strategy as largely successful in serving its national interests: avoiding major diplomatic crises, preventing the collapse of North Korea, strengthening its economic relations with South Korea, deflecting potential U.S. criticism on other issues such as human rights because of its leverage over North Korea, and enhancing its own reputation as a major diplomatic power. Apart from the dynamics surrounding the on-again, off-again Six-Party Talks, historical issues continued to simmer in Northeast Asia, generally at Japans expense. Early in the year, a dispute over the historical claims to the Tokdo/Takeshima islands, a set of small uninhabited rocks now controlled by South Korea, erupted between Seoul and Tokyo. Most observers saw the controversy as inflamed by domestic politics on both sides; as a result, a relatively minor issue derailed major diplomatic initiatives. Japanese Prime Minister Koizumis fifth visit to the Yasukuni Shrine in October prompted outraged responses from both Beijing and Seoul, and both canceled upcoming summits with Tokyo in protest. Japans attempts at moving the normalization process forward with North Korea also faltered. The appointment of Taro Aso as foreign minister and Shinzo Abe as chief cabinet secretary, both known as conservative figures who support the Yasukuni visits, was viewed by many in the region as an indication of Japans drift toward the right. Regional leaders voiced opposition to Japans bid for a permanent place on the United Nations Security Council. On the whole, Japans relations with the region declined as long-standing historical resentments and ascendant suspicions of Japans intentions hurt bilateral relationships with its neighbors. U.S.-Japan relations, meanwhile, continued to advance as leaders announced a major revamping of the military alliance that calls for Japan to take a more active role in contributing to regional stability. North Korea continued to allow periodic visits by non-Administration officials and specialists; some observers viewed the receptions as part of Pyongyangs strategy of creating divisions and distractions within the U.S. policy community. In January, Representative Curt Weldon led a congressional delegation to Pyongyang. After trying to assure senior North Korean officials that the United States was sincere about wanting to peacefully resolve the nuclear weapons issue, Weldon reported back that North Korea was ready to rejoin the Six-Party Talks. He also revealed that the North Koreans claimed to have nuclear weapons, a claim that later was announced publicly and which contributed to an increase in tension and delayed return to the Talks. High-level North Korean officials also received Selig Harrison, a North Korea specialist known for his pro-engagement views, and impressed upon him that Pyongyang was unwilling to dismantle its nuclear weapons program until the United States moved to normalize relations. This message from the North Koreans reinforced their repeated demand that they receive assurances and assistance at the front end of any exchange, while the United States maintained that any deal was predicated on first the elimination of all nuclear programs in North Korea. Stanford University professor John Lewis and former Los Alamos National Lab Director Sig Hecker also visited Pyongyang and delivered messages about the status of North Korea's nuclear program back to the Administration. Finally, former Clinton Administration official and New Mexico Governor Bill Richardson met with officials in Pyongyang in October in between sessions of the Six-Party Talks. CRS Report RL32743, North Korea: A Chronology of Events, October 2002-December 2004 , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Issue Brief IB98045, Korea: U.S.-Korean Relations Issues for Congress , by [author name scrubbed]. CRS Issue Brief IB91141, North Korea's Nuclear Weapons Program , by [author name scrubbed]. CRS Report RL31696, North Korea: Economic Sanctions Prior to Removal from Terrorism Designation , by [author name scrubbed]. CRS Report RS21834, U.S. Assistance to North Korea: Fact Sheet , by [author name scrubbed]. CRS Report RL31785, Foreign Assistance to North Korea , by [author name scrubbed]. CRS Report RL32493, North Korea: Economic Leverage and Policy Analysis , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21391, North Korea's Nuclear Weapons: Latest Developments , by [author name scrubbed]. CRS Report RS21473, North Korean Ballistic Missile Threat to the United States , by [author name scrubbed]. CRS Report RL32167, Drug Trafficking and North Korea: Issues for U.S. Policy , by [author name scrubbed]. DMZ - demilitarized zone dividing North and South Korea DPRK - Democratic Peoples Republic of Korea EU - European Union GNP - gross national product HEU - highly enriched uranium IAEA - International Atomic Energy Agency KCNA - Korea Central News Agency (North Korea's official news agency) KEDO - Korea Peninsula Energy Development Organization NGO - non-governmental organization NLL - Northern Limit Line NPT - Nuclear Non-Proliferation Treaty PRC - Peoples Republic of China PSI - Proliferation Security Initiative ROK - Republic of Korea TCOG - Trilateral Coordination and Oversight Group (United States, Japan, and South Korea)

This report provides a chronology of events relevant to U.S. relations with North Korea in 2005 and is a continuation of CRS Report RL32743, North Korea: A Chronology of Events, October 2002-December 2004, by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. The chronology includes significant meetings, events, and statements that shed light on the issues surrounding North Korea's nuclear weapons program. An introductory analysis highlights the key developments and notes other significant regional dynamics. Particular attention is paid to the Six-Party Talks, inter-Korean relations, key U.S. officials in charge of North Korean policy, China's leadership in the negotiations, Japan's relationship with its neighbors, and contact with North Korea outside of the executive branch, including a Congressional delegation. Information for this report came from a variety of news articles, scholarly publications, government materials, and other sources, the accuracy of which CRS has not verified. This report will not be updated.

On August 22, 2008, Federal Reserve Board Chairman Ben S. Bernanke spoke about systemic risk and raised the issue of having the authority to conduct macroprudential oversight. Similarly, Timothy F. Geithner, while president of the Federal Reserve Bank of New York, also spoke about the need for expanding current prudential supervision of individual financial institutions. Both Federal Reserve officials spoke in the context of growing discussions among academics and central bankers concerning the adoption of a macroprudential policy perspective. Systemic risk may be defined as risk that cannot be avoid ed through diversification. Systemic risk may also be defined in a similar manner to contagion, in which liquidity and payment problems that affect one or a few financial entities will spread and disrupt financial activity more widely in the system. Systemic risk can increase as a result of financial innovation that enhances capital mobility and provides access to additional sources of capital outside of the confines of regulated financial institutions. Although the financial system increases its capacity to provide credit, market expectations grow in importance, which may increase the fragility of the system. Systemic events occur with sudden shifts in the expectations and subsequent reactions of financial market participants. A panic, liquidity disruption, or decline in asset prices may cause sudden and unpredictable reactions by market participants that overwhelm even those regulated financial institutions with sound risk management practices. Consequently, a popular characterization of systemic risk as financial institutions that are "too-big-to-fail" is misleading because it fails to capture the importance of impulsive reactions to various financial events that can be magnified into systemic risk events. Macroprudential supervision or oversight refers to the monitoring of the entire financial system and its vulnerability to systemic risk. Macroprudential oversight arguably complements regulatory structures for individual financial institutions. In addition to monitoring for systemic risk, other tasks fall under the scope of macroprudential oversight. Administrators would be responsible for the development of early warning systems of financial distress, such as a composite index of leading indicators. System-wide stress-testing exercises, which involve introducing some extreme financial disruption into a model of the financial system or various components to evaluate the impact on asset portfolios, would be conducted. Finally, macroprudential policy administrators would also be able to provide advice to other regulatory agencies on matters related to financial stability. This report begins by briefly summarizing how recent innovations in finance, while increasing the capacity to borrow and lend, also resulted in a large volume of banking transactions occurring outside of traditional banking institutions. Monitoring these institutions for safety and soundness, which is referred to as microprudential oversight, does not directly address the challenges posed by systemic risk. Hence, the benefits and limitations of macroprudential policy will be discussed. Financial intermediation is the process of matching borrowers with lenders. The typical intermediation transaction made by banks consists of providing loans to borrowers at higher rates than it costs banks to borrow the funds from savers, who are the ultimate lenders. In other words, long-term loans that banks originate to borrowers are funded by short-term loans made to banks, usually in the form of savings deposits. Banks profit from the spread between the rates they receive and the rates they pay. Banks also earn income from various fees and service charges. The intermediation transaction carries a variety of risks. Banks face the risk of borrower default on the long-term loans. Banks face liquidity and interest rate risks on the short-term funding side of the transaction. Until the long-term loan is fully repaid, banks must continue to attract short-term savers. A bank must continuously be able to roll over or renew its short-term funding (loans) because the funds used to originate the long-term loan have been disbursed to the borrower. It is possible that banks could find themselves low on deposits, perhaps due to a sudden demand for cash or changes in economic conditions. Financial market conditions could also change such that short-term rates rise higher than long-term rates, and continued funding of long-term loans becomes costly. Given the default and funding liquidity risks associated with the intermediation transaction, banks and other financial institutions are always looking for innovative ways to reduce risk, which ultimately facilitates the expansion of intermediation and credit availability. Although the intermediation transaction remains the same conceptually over time, its means of execution has evolved and diversified, which is considered financial innovation. Financial innovations include securitization, growth of the commercial paper market, automated underwriting, derivative markets, and nontraditional mortgage products, which allow the long-term borrower and lender to share the risk of fluctuating long rates. These developments arguably facilitated intermediation in terms of reducing or managing the risks associated with supplying credit, which increased lending capacity. In fact, financial innovation in the mortgage market during the 1990s arguably enhanced homeownership by reducing loan origination costs and increasing the array and variety of mortgage products that could be offered to borrowers. Such financial innovation also allowed aspects of the intermediation transactions to occur outside of what is considered traditional banking institutions. For example, some businesses, rather than obtaining traditional short-term loans from depository institutions, may issue their own debt in the form of commercial paper. Commercial paper issuances are typically unsecured, short-term promissory notes or bonds that investors (savers) can hold in their portfolios and, upon maturity, roll the proceeds into newer commercial paper issuances. Hedge funds, pension funds, and other financial entities may decide to purchase long-term, less liquid assets with funds obtained from their issuances of commercial paper. The commercial paper is the liability of the issuing firms, and the long-term assets (loans) acquired were not funded by liabilities (deposits) of a traditional depository institution. Securitization is another example of a financial innovation that allowed aspects of the intermediation transaction to occur off bank balance sheets. Securitizers are entities that purchase long-term loans, then use the payment streams to create short-term securities (similar in nature to commercial paper with a variety of risk-return options) to investors, which fund the loan purchases. During the 2000s, many subprime loans were originated by non-bank lenders that did not hold deposits. These loans were then funded via the securitization process with funds raised from commercial paper or similar issuances. Consequently, intermediation transactions were no longer limited to taking place inside traditional banks; they could now occur in the broader financial markets. A microprudential regulatory approach focuses on the safety and soundness of individual financial institutions. This regulatory approach monitors lending by supervised institutions and attempts to encourage prudent behavior. Microprudential regulators evaluate bank data against Basel I and II capital ratios and CAMELS rating criteria. The objective of microprudential oversight is to increase the protection of the deposits in these institutions. The microprudential approach to regulation, however, cannot completely prevent bank failures. The market value of bank assets or loans can suddenly decline with sudden increases in unemployment, which is indicative of future repayment problems, even though the loans were prudently originated before the shift in local financial conditions. This vulnerability applies especially to small banks whose loans are tied to the local economy. Larger banks may be less susceptible to regional economic conditions if they are geographically diversified, but they remain vulnerable to systemic risk, which falls outside the scope of microprudential regulation. Financial innovation may expand the financial system such that more intermediation transactions can take place outside of more traditional banking institutions, but the risks have not disappeared. The risks, rather than being borne by a particular institution, are spread among a multitude of financial market participants. Furthermore, the transfer of risk to financial markets may increase the interconnectivity among all financial market participants, causing the entire financial system to be vulnerable to unanticipated payments disruptions or sudden declines in asset values. For example, suppose banking institutions used derivatives instruments to reduce the default and interest rate risks associated with the intermediation transaction. These instruments would have transferred these risks to another counterparty, perhaps outside of the banking system, willing to sell protection against such risks. If, however, the counterparty finds itself having to make higher than anticipated payments following some unforeseen event, all financial market participants may question the ability of other market participants to repay commitments. Such erosion of confidence may be considered systemic and have harmful consequences on other participants even though only one counterparty was late or completely defaulted on a payment. Hence, the transfer of risk led to an increase in the interconnectivity of financial market participants. Moreover, microprudential oversight, which is limited to the regulation of the risk management practices of individual institutions, would not eliminate the systemic risk in this scenario largely because financial market expectations are impossible to regulate. Central banks are generally tasked with "lender-of-last-resort" responsibilities to ensure that regulated depository institutions reliably have access to short-term loans. This access ensures that healthy but illiquid banks continue funding long-term loans without disruption. Under a traditional banking model where regulated institutions originate long-term loans and fund them with short-term deposits, a central bank may assist banks in a short-term funding crunch, perhaps because of a bank run, as part of its normal course of activities. Consequently, central banks may be considered systemic risk managers for supervised banks, and they have typically been involved in macroprudential policy oversight, even if that role has not been formalized by legislation. Macroprudential oversight structures have typically been set up inside of central banks. H.R. 4173 , the Wall Street Reform and Consumer Protection Act of 2009 (Representative Barney Frank), proposes to establish a Financial Services Oversight Council (FSOC), which would consist of the heads of the federal financial regulatory agencies, to provide macroprudential oversight of the U.S. financial system. A formal approach to macroprudential oversight arguably complements existing microprudential oversight to reduce systemic risks. Suppose an agency conducting macroprudential oversight were to ask microprudential supervisors to require increased transparency for a specific intermediation activity from their supervised institutions. Disclosure of such information to the entire financial system may increase overall confidence. Furthermore, if such policy actions were taken under normal conditions when financial markets are not in distress, then implementation may be more likely to boost rather than erode the confidence of financial market participants. H.R. 4173 would require the FSOC to facilitate information sharing and coordination among its members with respect to financial services policy development, rulemakings, examinations, reporting requirements, and enforcement actions. A regulatory body specifically tasked with macroprudential oversight would try to guard against bubbles and overleveraging. The regulator would also monitor stress-testing activities as well as the extent to which financial market participants are becoming more interconnected by risks. When asset values are rising, the balance sheets of financial institutions are likely to appear healthier. Financial institutions may decide to increase their lending in such an environment. As long as financial institutions maintain capital risk ratios at or above safety thresholds, the increase in lending activity would still fall within the guidelines of safety and soundness set by microprudential oversight. A rise in asset market prices, however, may be indicative of a speculative bubble. An agency responsible for macroprudential oversight may warn or even attempt to curtail the level of risk taking activity when related asset prices appear to rise rapidly at what may be considered an unsustainable pace. The macroprudential objective would be to build up safety buffers during good times that can be used as a cushion during unstable times. A limitation or drawback of macroprudential policy is its countercyclical nature, which means the policy impact will dampen business cycle activity and restrain the economy during boom times. As stated in the previous example, procyclical microprudential policy would be less likely to curtail lending activities for banking institutions when collateral asset values are rising. Macroprudential administrators, however, may perceive rising asset prices as evidence of a bubble and call for banks to raise capital or reduce lending. Although this macroprudential response may help reduce the likelihood or impact of a systemic risk event, it may also restrain short-run banking profits, economic activity, and economic growth. Consider the debate about the existence of a housing market bubble. The substantial decline in mortgage interest rates during the 1990s, resulting in part from securitization reducing the funding costs of lending, helped lower the cost of homeownership relative to renting. Changing demographic trends also affected changes in housing demand. On the other hand, the rise in home prices and use of mortgage credit levels was interpreted by some as evidence of a bubble in the housing market. Consequently, it would have been problematic to determine with certainty whether the rise in the demand for homes, which would be reflected in house price increases, was due to a rise in underlying fundamentals or speculative behavior, since both occurred simultaneously. Even when the market is characterized by speculation, speculative trading helps to provide liquidity for assets. Speculation increases the number of transactions, which makes it easier to price and sell assets. Hence, identifying bubbles would still present a challenge for macroprudential oversight. Not only would it be difficult to determine how much financial market activity would be the result of speculation, but it would also be difficult to determine how much speculation can be reduced without compromising overall asset market liquidity. Furthermore, as financial markets become more globalized, it becomes more challenging for a macroprudential regulator in one country to track and influence global expectations. Despite the problems of identifying and managing speculative behavior, macroprudential regulators would be tasked with responding to conditions that suggest the presence of a bubble given the systemic risks to financial markets when it deflates. A macroprudential response, however, may be at odds with other policy goals in which the primary focus is not safety and soundness. Some policy goals are aimed at increasing credit access to low and moderate income households and households living in underserved areas. It may be easier for financial institutions to facilitate more lending to those individuals covered by policy goals at times when collateral assets are rising and there is expanded lending capacity. Macroprudential oversight, however, might encourage a reduction of lending at a time when asset values are rising and financial conditions would be better suited to facilitate the achievement of other policy goals. A macroprudential oversight regulator may also find itself in the middle of occasional conflicts between regulators. For example, consider a case that occurred in the mid-1990s. A regulator concerned with the adequate capitalization of banks preferred that banks adopt conservative accounting practices that would result in the reporting of higher loan loss allowances. Higher loan loss allowances would indicate the ability of banks to avoid severe financial distress when unexpected loan losses occur. Another regulator, concerned with the accurate reporting of income to investors, preferred adoption of accounting practices that would reduce the reported amount of loan-loss allowances. Overstatement of loan loss allowances reduce bank net income and retained earnings on paper. Investors may interpret large loan-loss allowances as evidence of high-risk lending practices, which may reduce bank profitability, and that could translate into a decline in the bank's value or stock price. In addition, a reporting of higher loan-loss allowances may result in an initial understatement of assets and overstatement of bank income in future periods, which would translate into overly optimistic information being reported to investors in subsequent periods. A macroprudential regulator may be more inclined to support regulations that foster increased safety and soundness. Given that regulators can always require banks to provide any critical information, such disputes may be settled in favor of investor needs. If, in the particular case above, a regulator responsible for macroprudential oversight combined efforts with the regulator in favor of more conservative accounting practices, the collective efforts possibly may have had a greater influence on the outcome. In H.R. 4173 , the FSOC would be given the task of resolving disputes that might arise among federal financial regulatory agencies.

Recent innovations in finance, while increasing the capacity to borrow and lend, resulted in a large volume of banking transactions occurring outside of traditional banking institutions. Also, even though existing regulators supervise individual banks for safety and soundness, there are risks that do not reside with those institutions but may still adversely affect the banking system as a whole. Macroprudential policy refers to a variety of tasks designed to defend the broad financial system against threats to its stability. Responsibilities include monitoring the system for systemic risk vulnerabilities; developing early warning systems of financial distress; conducting stress-testing exercises; and advising other regulatory agencies on matters related to financial stability. H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009 (Representative Barney Frank), establishes a Financial Services Oversight Council with macroprudential regulatory responsibilities. On March 22, 2010, the Senate Banking Committee ordered reported the Restoring American Financial Stability Act of 2010 (Senator Christopher Dodd), which also would establish a Financial Services Oversight Council with similar responsibilities. This report provides background and discusses the potential benefits and limitations of macroprudential policy efforts. This report will be updated as events warrant.

The current dispute, as discussed above, has its origins in the 1960s. The new chapter of thislong running discussion is primarily the result of events that have occurred since the Fall of 2004.First, Delta Airlines decided in October 2004 to pull most of its service out of Dallas- Ft. WorthInternational Airport (DFW). Next, DFW asked Southwest Airlines to consider operating longdistance flights out of DFW. Southwest rejected the DFW offer and instead announced in November2004 that it intended to seek legislative relief from the Wright/Shelby Amendments. Thisannouncement ended what was regarded as a long standing truce on this issue between Southwestand DFW. Since November, DFW, joined by other parties such as American Airlines (American),have lobbied extensively in favor of retaining the existing Wright/Shelby restrictions on airlineoperations at Love Field. Southwest, and others, have, at the same time, presented their ownarguments as to why these restrictions should be removed. This section of the report will discuss the major claims and counterclaims made by each sidein this discussion. The subjects chosen for examination are those most frequently discussed in publicforums on this subject. (48) Additional background information will also be detailed toprovide a context for these discussions. Until very recently there has been a minimal level of public interest in this issue outside ofthe Dallas-Ft. Worth area. A few articles about the Wright/Shelby Amendments have appeared inthe national press since last November, but they have been few and far between. The aviation tradepress has taken a slightly greater interest, but here too the treatment of the issue dwells primarily onthe local aspects of the issue. The Dallas-Ft. Worth region is served by one large hub airport, DFW, and one medium hubairport, Love Field. (49) Respectively they rank 4th and 55th nationally in terms of total passenger enplanements. In FY2003,DFW enplaned 24.6 million passengers while enplanements at Love Field stood at around 2.8million. Commercial aircraft operations totaled 751,546 versus 126,313 respectively during thesame period. (50) Both airports are important components of the regional economy. Each airport can claim tobe the home of one of the nation's 10 largest airlines, with American based at DFW and Southwestbased at Love Field. American is the nation's largest airline having an almost 18% share of the U.S.market in February 2005. (51) Southwest, which controls about 7.5% of the U.S. market, is thenation's most profitable airline, being one of a very small number of airlines that has remainedprofitable throughout the post-September 11th period. Southwest had revenues of $6.5 billion in2004 and a net profit of $313 million. For the same period American had revenues of $18.6 billionand a net loss of $761 million. (52) American is clearly the dominant air carrier at DFW. In 2003, just over 71% of allpassengers at DFW boarded American and American regional air carrier flights (17,990,193enplanements). (53) Delta, and Delta regional carriers, accounted for about a 17% share of DFW traffic (4,314,445enplanements). The next largest major air carrier share was United Airline's 2%. At Love Field,Southwest had a market share of almost 97% in 2004 (2,945,588 enplanements). (54) Continental Expressaccounted for most of the remaining 3% of passengers. There are no other significant air carriercompetitors at the airport at this time. As can be seen from the above, most of the airline traffic in the regional market is controlledby a small number of air carriers. There are some major differences affecting how these air carriersoperate in the current marketplace, however. Southwest is the most successful air carrier in the era since deregulation of the industry in1978. It has been corporately based in Dallas for its entire existence. It has also been profitable formost of its existence, which is a rather unique situation in the U.S. airline industry. It has done thisby offering low, or lower, fares, while at the same time maintaining relatively low operating costs.Southwest is the prototypical low cost carrier (LCC) and its operating structure has been imitatedat least to some degree by many new air carriers formed since deregulation (imitating Southwest hasnot guaranteed success, however). For much of the 1980s, Southwest was primarily viewed as aniche carrier with an uncontested regional market based out of Love Field. During the later 1980sand especially in the 1990s, Southwest has expanded dramatically with a route system that becamenational in scope. Southwest does not operate hub-and-spoke service, hence Love Field is notreferred to as a hub. Rather, Southwest operates primarily as a point-to-point air carrier. Becausethe Wright/Shelby Amendments limit direct service from Love Field to 7 states, it has not beenpossible for Southwest to compete directly with DFW-based air carriers in many major nationalairline markets. This does not mean that Southwest travelers originating in Dallas have been unableto reach other Southwest cities such as Baltimore. A passenger can reach these destinations, butcannot be through ticketed and must change planes at some other destination such as New Orleans. Over time, Southwest has faced very limited competition at Love Field. At the present timethe only other airline providing service from the airport is Express Jet, which is a ContinentalAirline's affiliate. All of this service is between Love Field and Houston Bush International. Becauseof the regional air carrier exemption to the Wright/Shelby Amendments, any service beyond the 7state restriction must be performed by an aircraft with 56 seats or less. The now defunct LegendAirlines unsuccessfully tried to provide service to multiple national destinations in the late 1990s.No airline provides such service at present. American Airlines is one of the nation's oldest air carriers. It is one of the air carriers knownin industry parlance as a legacy carrier. It operates international service from DFW and otherlocations, and operates multiple hubs - Chicago, Miami, and to a lesser extent New York. FromDFW, American can take a passenger almost anywhere in the world on a single ticket. It providesservice to most major U.S. cities either on American aircraft or on affiliated American regional aircarriers. American was not originally headquartered at DFW, having moved there from New Yorkafter the airport was completed in the mid-1970s. Like most other legacy air carriers, American haslost money consistently since September 11th. At some points in the 1990s and 1980s, however, itwas one of the most financially successful of U.S. air carriers. Delta has a history similar in many respects to that of American. Its corporate base isAtlanta. Its now reduced foray into DFW met with limited success initially, but, especially sinceSeptember 11th, it has consistently lost money at the airport, according to industry analysts. Otherair carriers at DFW serve the airport primarily as a feeder to their own hub-and-spoke systems, e.g.United service to Chicago or Denver, Continental service to Houston. DFW has sought to encourageservice to the airport by other LCC air carriers such as Airtran and Jet Blue. Airtran has a growingpresence at the airport, but is not yet viewed as a replacement air carrier for Delta's lost service. Delta Airlines maintained a hub at DFW airport for some years, but as can be seen from themarket share figures discussed above, it was dramatically smaller than its American counterpart. InOctober 2004, Delta announced that it was restructuring system-wide in order to stave off abankruptcy filing. Delta announced its intention to cut up to 7,000 jobs, reduce wages, close its DFWhub, and make major operating changes throughout the remainder of its system. Its DFW hub, nowclosed, ended operation earlier this year. Delta continues to provide service at the airport, thoughat a much more modest level: 21 departures per day versus the 258 departures per day in October2004. In its new configuration, Delta now uses 4 gates at the airport versus the 28 it previouslyoccupied. Since deregulation began in 1978 there have been several instances in which more than oneairline tried to operate a hub at the same airport. In most instances these multiple airline hubs, forexample, Miami and St. Louis, have either become single airline hubs (Miami) or stopped beinghubs altogether (St. Louis). A very few multiple airline hubs still exist, e.g. Chicago O'Hare andAtlanta Hartsfield Jackson. Many airline industry observers believed from the establishment of itshub at DFW that Delta would be unable to compete with American on its home turf. They expected,correctly, that Delta would eventually scale down or abandon its hub at DFW. Delta's withdrawal comes at what the airport views as an inopportune time. DFW is currentlyconstructing/completing several major capital projects, including a new international terminal ($1.09billion) and a new internal people mover system ($885 million). In total, its ongoing capitalimprovement program will cost $2.7 billion and raise airport debt levels to $3.8 billion. Delta'spresence had been an important part of DFW's decision to initiate its capital improvement programand Delta's landing fees and other related revenues were expected to make a major contribution topaying off the bond issues floated to pay for the improvements. DFW now expects that thewithdrawal of Delta will decrease its revenue stream by $50 million annually and that it will needto find new revenues to compensate for this loss in order to avoid problems paying off its debts. In January 2005, DFW announced that it would provide significant financial incentives foran air carrier willing to initiate new service at the airport and take over at least 10 of the gates madeavailable by Delta's departure. These incentives included a year's free rent on airport facilities andup to $22 million in other aid. To date there have been no takers. DFW contends that Southwest'smove to eliminate the Wright/Shelby Amendments is a major reason for this situation. DFWcontends that no carrier is currently willing to take a gamble until there is some certainty about thefuture of the Wright/Shelby Amendments. DFW's argument could explain some of the reluctance of new carriers to locate at the airport,but does not take into consideration other factors that might be more important in the market at themoment. The current financial state of the airline industry makes it almost impossible for all but afew LCCs to significantly expand service to new airports. At the moment, no legacy airline is knownto be contemplating the creation of a new hub. LCCs, as mentioned earlier, do not normally createhubs. The DFW argument also fails to fully acknowledge American's competitive position at theairport. American has always been a fierce competitor and is likely to remain one, its financialproblems notwithstanding. There are not many airlines who are willing to compete head-to-headwith American's well established hub at the airport, especially when they have other options. There are a number of major cities that have more than one major airport successfullyoperating in relative proximity to each other. Examples include Chicago, New York, Los Angeles,San Francisco/Oakland/San Jose, Washington/Baltimore, and Houston. Southwest contends that thisnational experience could easily be replicated in the Dallas Ft.Worth region and that any negativeeffects on DFW of increasing flights out of Love Field would be of relatively short duration asregional growth continued to create new opportunities for both airports. DFW goes to some length in its briefing materials to argue that the Houston model inparticular would be a bad model for the Dallas-Ft. Worth region. DFW argues that it alreadyprovides more service out of DFW alone than Houston does out of two airports. It also argues thatits fares are as low, and in some cases are lower, than those prevalent in the Houston region. Again,DFW repeats the argument that it would be inefficient for the region's resources to be split betweentwo airports. DFW Initiated Work. As part of its presentationon why the Wright/Shelby amendments need to be retained, DFW hired economists at the Universityof North Texas to perform an economic analysis of what the Delta hub closure means to the airportand the local economy. (55) The specific findings of this analysis are that the Delta pulloutwill result in a $782 million per year decrease in regional economic activity, the loss of more than7,000 jobs, a decrease in wages and salaries of $344 million per year, an annual loss of tax and otherrevenues collected by state and local governments of $58 million, and, in 2005, a $35 million lossto the airport as a result of diminished landing fees, concession fees, etc. The authors conclude theirassessment by stating that: ...the airport will be severely pressed to fill the 24 gatesleft vacant by Delta. Given Southwest Airlines' decision not to move flights to DFW, and thereluctance of other discount carriers to serve DFW with Southwest making noises about expandingservice from Love Field, it may be many years before DFW's gates and terminals are fullyutilized. (56) The type of economic analysis utilized by the authors, input-output analysis, is a standard toolemployed to show the benefit or loss that might accrue to a community as a result of some sort ofaction. For example, new stadium and other large public works project proposals are frequentlyaccompanied by economic analyses of this type. It is not uncommon for opponents of stadiums, etc.to hire their own economists to provide an alternative view using the same basic methodology,which, as will be seen in the next section, is the situation here. As is sometimes the case, the assumptions that go into the input-output process are oftenquestioned. For example, some of the observations in the report, while sounding quite dramatic,are much less so when put in the perspective of the greater regional economy. The Dallas-Ft. Worthregion had total wage and salary disbursements in 2003 of $116.4 billion. (57) This represents a year overyear increase of $524 million, or roughly a 0.5% increase over the previous year's level. The $344million in wages and salaries associated with Delta's pullback equates to less then 3/10ths of onepercent of total local salaries and wages. Less than eight months' growth in the regional economyat current growth rates would, therefore, overshadow the regional effects of Delta's departure(individuals and businesses, however, may continue to suffer from the pullout for a much longerperiod). DFW commissioned a second study by aviation consulting firm SH&E that focuses on howaviation activity in the region might change as a result of repeal of the Wright/Shelby amendments. The study does not express its findings in dollar terms, but rather tries to demonstrate that repealwould redistribute air service in a manner that would be bad for DFW and for the regional economy. This second study works from the premise that Southwest would greatly expand its activity at LoveField to major destinations outside of the seven states to which service is currently restricted undertwo growth scenarios. (58) The study, assuming a worst case outcome from the perspective of DFW, presents several majorfindings, among these are: that air traffic at Love Field could triple, (59) that international trafficat DFW would be reduced, that the number of domestic destinations served from DFW would alsobe reduced, and that DFW would lose up to 35% of its annual passengers. Against this backdropSH&E comes to the conclusion that the best option for the region would be the retention of theWright/Shelby amendments because it would concentrate future aviation growth at DFW whereinfrastructure is readily available. Otherwise SH&E predicts DFW would be underutilized withsignificant financial implications for the region, which at the same time might need to pay forexpensive new public infrastructure at Love Field. There are many assumptions in the SH&E study that can be questioned, which is the normalsituation for a study of this type. One assumption open to question is the prediction that Americanand other DFW-based airlines can only compete with Southwest successfully by moving and/orcreating new service at Love Field. Although certainly possible, this would seem to be in conflictwith the experience in other multi-airport metropolitan areas where airlines successfully competeusing different airports. Southwest Airlines Initiated Work. Southwesthas contracted for its own study of the effects of repealing the Wright/Shelby amendments. Thestudy by the Campbell-Hill Aviation Group takes a very different approach from the DFW initiatedstudies. (60) Campbell-Hill contends that the Wright/Shelby amendments impose an economic penalty on NorthTexas of $2.4 billion and on the nation as a whole of $4.2 billion. This penalty, in the view of thestudy's authors, is the result of limited competition at DFW that results in above market fares tomany destinations. The figures in the study are derived from a detailed regression analysis thatassumes that Southwest would be able to compete in 15 city-pair markets from which it is currentlyexcluded. A Southwest able to compete in the regional market, it is assumed, will offer lower faresin these city-pairs then those currently available at DFW from American or other airlines. The studyalso assumes that lower fares will attract considerable new airline traffic to North Texas and thateach visitor will have a positive economic for the region as a whole. There are of course several issues that a study of this type cannot and is not designed toanswer. For example, the study does not discuss the issue of offsetting investments in new infrastructure that might accrue to facilitate this increased traffic, especially at Love Field. American Airlines Initiated Work. AmericanAirlines' has also commissioned a study supporting the DFW position. (61) The study, done by EclatConsulting, suggests that the Southwest supported Campbell-Hill study is flawed and considerablyoverstates the regional benefits of increased Southwest service at Love Field. Eliminating theWright/Shelby restrictions would, also in this view, cause significant changes in American's DFWhub system and lead to reduced/eliminated service to numerous small cities and some internationaldestinations. As with the other studies mentioned above, the authors of this report made a numberof assumptions as a basis for analysis. Primary among them in this case is that American wouldmove a significant amount of service from DFW to Love Field. All of the above mentioned studies provide insights into the relative merits and demerits ofrepealing the Wright/Shelby amendments. None, however, give a complete picture and each is builton assumptions that can and will be called into question. DFW is legitimately concerned that it will have a tough time paying off its bondedindebtedness if it loses airline service as a result of a Wright/Shelby restriction repeal. It is, asdiscussed earlier, a principal argument made by the airport for retention of the restrictions. Whetherthese effects would be short-term or long-term in nature, however, is debatable. Also debatable iswhether DFW's potential financial plight vis-a-vis Love Field should be a matter of congressionalconcern. In the last two decades numerous airports have seen large reductions in air service. In someinstances the reductions were far greater then what appears to be the case at DFW. Several airports,for example, have lost a hub carrier. Atlanta and Miami both went through some rough times afterthe collapse of Eastern Airlines. Indianapolis is currently dealing with the loss of ATA as a majorpresence at the airport. Many other examples could be detailed. The experience in each case hasbeen similar. There have been no major bond failures at any of these airports. In most majormarkets, replacement air carriers, or growth by the incumbent air carrier, has over time, restored theairport to economic health. In light of the experience of other cities, DFW would not be expected toexperience serious long-term economic repercussions as a result of the dynamic nature of theDallas-Ft. Worth regional marketplace. In the short-term, however, DFW may go through some hardtimes. The biggest threat to the financial health of DFW is the long-term financial health ofAmerican Airlines. American is not just the largest air carrier at the airport, its route system and itsfuture aspirations are largely the rationale for much of the infrastructure at the airport. As suggestedabove, the move of a significant number of American flights to Love Field would hurt DFWfinancially. An American business failure would have much more serious repercussions. It couldbe argued, therefore, that DFW's campaign to save the Wright/Shelby Amendments is as muchconcerned with protecting American's market position as it is with trying to retain its overallpreeminent position in the North Texas aviation market. And from the airport's perspective this isa common sense position. A 2001 Master Plan adopted by Love Field limits service to 34 gates, and makes no plansfor runway or other airside expansion. Love Field is physically constrained by surroundingdevelopment that includes several residential neighborhoods. Noise issues are important to the localcommunity and noise concerns played an important role in the adoption of the Master Plan. Southwest contends that its potential expansion of service at Love Field can be easily handledwithin the context of the Master Plan. Further, they contend that their fleet of relatively quiet Boeing737-700 aircraft ensures that increased noise will not be a factor in any ramp-up of service.Southwest has consistently stated that it welcomes new competitors at the airport, so long aseveryone has to abide by the same rules. Unclear, however, is how a relaxation of the Wright/Shelby Amendments might play outamongst Southwest's competitors. American has suggested that termination of the existingrestrictions would force them to open a hub at Love Field as a competitive response. (62) American perceives,possibly correctly, that it could lose significant amounts of Dallas originating traffic if Southwestwere able to provide national service from the downtown airport without direct competition.American currently owns three gates at Love Field although it does not use them. At this point it isfar from clear whether American could in fact create a parallel, but smaller hub operation at LoveField. By their own admission, serving two airports in close proximity would be inefficient. Sucha move could certainly have at least short-term negative financial implications for DFW. So far, no other major air carrier has publicly stated an intention to serve Love Field ifrestrictions are withdrawn. Many industry observers would question the idea that some carrier wouldwant to go head-to-head with Southwest on its home turf. More likely is that additional airlinesmight wish to add regional or even large jet service at the airport to serve their own hub-and-spokeor point-to-point route systems. American contends in its statements that it views the Love Field Master Plan as moot in theevent of a Wright/Shelby repeal. This is not a view shared by either Southwest or the City of Dallas. It is likely that this issue would become very important locally in the event that the Amendmentswere repealed. As mentioned above, there is considerable sensitivity in the surroundingcommunities to increased noise and other activities at and around the airport. As a result, theremight be considerable local opposition to the increase in airport activity that might accompanyAmendment repeal. The large populations of American and Southwest employees in the region, by itself, almostguarantees that this subject will generate considerable local debate. It is not surprising, therefore,that regional opinions appear to be mixed. A perusal of the websites created by DFW and Southwestto promote their respective positions details local support for both protagonist's positions. (63) Local newspapers havealso weighed in on the subject, providing extensive coverage of the debate over Wright/Shelby. (64) Again, coverage wouldseem to indicate that broad consensus on the question of repeal is absent. Local politicians are also weighing in on the subject. Notably, the Mayor of Dallas nowseems to be seeking an as of yet undefined compromise on the issue. (65) In addition, Members of the region's congressional delegation are weighing in on the subject, withtwo Members supporting repeal and several others opposing the idea. In the 108th Congress, several members of the Tennessee congressional delegation introducedlegislation that would have allowed direct air service between Love Field and airports in Tennessee( H.R. 5187 ). The bill received no further congressional consideration. Comparablelegislation has now been introduced in the 109th Congress ( H.R. 2932 , RepresentativeMarsha Blackburn, June 16, 2005). The bill has been referred to the House Committee onTransportation and Infrastructure, Subcommittee on Aviation. At this point no further action on thelegislation has been taken. Legislation that would repeal the Wright/Shelby Amendments has been introduced in the109th Congress ( H.R. 2646 , Representative Jeb Hensarling, May 26, 2005). Thislegislation has also been referred to the Subcommittee on Aviation. No further action on thelegislation has been taken. As of this writing, three pieces of legislation have been introduced in the Senate that wouldimpact the Wright/Shelby Amendments. The first of these would have the practical effect ofeliminating the existing restrictions, but does so, not by repealing the Wright/Shelby Amendments,but by amending the existing provisions to include the 43 states not currently named in theAmendments as allowable service points (Puerto Rico is also added)( S. 1424 , SenatorJohn Ensign, July 19, 2005). A second bill, opposed to lifting the Wright/Shelby restrictions, wouldrequire the closure of Love Field three years after the date of enactment ( S. 1425 ,Senator James Inhofe, July 19, 2005) (66) . A final piece of legislation is a provision in the Senate-passedversion of the Transportation, Treasury, the Judiciary, Housing and Urban Development, and RelatedAgencies Appropriations Bill, 2006 ( H.R. 3058 as amended, October 20, 2005). Thisprovision would appear to permanently add Missouri to the existing list of states eligible for directservice to Love Field. The Senate Committee on Commerce, Science and Transportation has scheduled a November10, 2005 Hearing on the Love Field dispute. It is unclear whether action, other then on theappropriations bill, will be take on any of these bills during the remainder of the 1st Session of the109th Congress. It is unknown whether the Senate appropriation's provision concerning Love Fieldwill survive, or be modified by, the Conference Committee considering the legislation. In its November 2005 announcement, Southwest contended that H.R. 5187 inthe 108th Congress clearly showed a desire on the part of Congress to expand direct service to LoveField beyond the 7 states allowed service by the Wright/Shelby Amendments. Southwest believesthat the legislation introduced in the 109th Congress, excluding S. 1425 , bolsters thisposition. Southwest also contends that the departure of Delta from the regional market provided aneed for additional service in the market, especially low fare service, and that with relief from theWright/Shelby restrictions, Southwest is in the best position to provide it. DFW, obviously, takes a very different view. From their perspective, Southwest should either offer long distance service from DFW, or live with the Wright/Shelby Amendmentrestrictions. Giving Southwest authority to fly beyond the seven states it can now serve would, intheir opinion, have a chilling effect on DFW's ability to attract new air carriers to replace Delta. Byextension, such a move could also diminish the economic vibrancy of the airport and the region(Love Field, in this view, is not seen as a regional asset, but rather as a Dallas City asset). The DFW arguments are primarily couched in the politics, legalities, and history of theregional compact that created the airport that are discussed more fully earlier in this report. Therationales for retaining the Amendments are primarily of local interest and origin, e.g. protectinginvestments and markets at DFW. Many industry observers, including some outside the Dallas/Ft.Worth region, believe that Wright/Shelby repeal or modification is a local issue, and should bedecided in the context of local aviation needs. Since its 1978 deregulation, the airline industry has become very competitive. Airlines moveservice in and out of airports as their marketing strategies change. This is mostly done irrespectiveof the financial and other needs of the airports they serve. There are still a few other airports withoperating restrictions; Reagan Washington National and New York La Guardia are the two mostcommonly mentioned. But the restrictions in each instance are far less constraining than they areat Love Field, and the reasons for these restrictions are completely unrelated to those at issue here. The rationale for removing Wright/Shelby restrictions, therefore, is the rationale for deregulation inthe first place: the unrestricted flow of air commerce. A question for policymakers, then, is shouldthe exceptions to deregulation that are the Wright/Shelby Amendments be retained in the context ofthe existing national aviation system or should local concerns be the primary determinant as to thedesirability of repeal and/or modification?

The history of the Wright Amendment dates back to the 1960s when the now defunct CivilAeronautics Board (CAB) proposed the creation of a single regional airport in the Dallas-Fort Worth(DFW) area. To construct the new airport, the two cities entered into an agreement that required thephasing out of separate existing airports in Dallas and Ft. Worth and transferring air service to thenew DFW Airport, which opened in 1974. During this time, Southwest Airlines began operating outof Dallas's Love Field as a purely intrastate air carrier. As such, Southwest was not subject to CABregulation. Congress's subsequent passage of the Airline Deregulation Act of 1978, resulted inSouthwest being allowed to operate interstate flights from Love Field, and prompted concerns frommany local officials about DFW's financial stability. The Wright Amendment represents a compromise that was designed to protect the interestsof both DFW Airport and Southwest Airlines. The Wright Amendment contains a generalprohibition on interstate commercial aviation to or from Love Field subject to exceptions thatpermits Southwest's continued operations in a regional four state market. In addition, the ShelbyAmendment, enacted in 1997, further expands the scope of the regional market to three additionalstates, but nevertheless retains the basic compromise and structure of the original WrightAmendment. The language of the Wright Amendment has been the focus of several administrativeinterpretations by the Department of Transportation, as well as litigation at both at the state andfederal level. Each court decision to date has affirmed the DOT's interpretation of the WrightAmendment. The newest iteration of this long running issue is primarily the result of events that haveoccurred since the Fall of 2004. First, Delta Airlines decided in October 2004 to pull most of itsservice out of Dallas Ft. Worth International Airport (DFW). Next, DFW asked Southwest Airlinesto consider operating long distance flights out of DFW. Southwest rejected the DFW offer andinstead announced in November 2004 that it intended to seek legislative relief from theWright/Shelby Amendments. This announcement ended what was regarded as a long standing truceon this issue. In the period since November, DFW, joined by other parties such as AmericanAirlines, have lobbied in favor of retaining the existing Wright/Shelby restrictions on airlineoperations at Love Field. Southwest, and others, have, at the same time, presented their ownarguments as to why these restrictions should be removed. The DFW arguments are primarily couched in the politics, legalities, and history of theregional compact that created the airport. The rationales for retaining the Amendments are primarilyof local interest and origin, e.g. protecting investments and markets at DFW. The rationale forremoving the restrictions is the rationale for deregulation in the first place, the unrestricted flow ofair commerce. A question for policymakers then is should the exceptions to deregulation that are theWright/Shelby Amendments be retained in the context of the existing national aviation system?Legislation affecting the Wright/Shelby restrictions has been introduced in the 109th Congress; H.R. 2932 , H.R. 2646 , H.R. 3058 , H.R. 3383 , S. 1424 , and S. 1425 . This report will be updated as warranted by events.

A common theme in controversies over the Endangered Species Act (ESA) is that a conflict is triggered by the need for the same dwindling resources by humans and a listed species. The parties to the debate often have struggled for years over the basic allocation of those resources, from the Tellico River, to prairie grasslands, to the California Delta. The debate over ESA and species protection typically signals an intensification of an underlying and usually much larger struggle. Sagebrush habitat in the West is diminishing and becoming fragmented due to urbanization, global climate change, roads, fences, grazing, energy development, water scarcity, power lines, etc. While the remaining habitat is vast, its fragmentation presents special problems, especially for sage grouse, which need large treeless areas to discourage the roosting of additional avian predators. Thus, fences, roads, and utility poles can produce a very substantial change in the sagebrush habitat, even though the actual surface disturbance is minimal. Loss of habitat is the most common factor leading to species' decline. The story of listing the sage grouse under the ESA is a tale of petitions, missed deadlines, and lawsuits. Petitions have been filed under the ESA to protect the Gunnison grouse, the greater sage grouse, a western subspecies of the greater sage grouse, the Bi-State population, and the Columbia River Basin population. To date, no member of this genus has been listed at any taxonomic level. However, on January 11, 2013, the Fish and Wildlife Service (FWS or Service) proposed listing the Gunnison grouse as endangered. In a court settlement, FWS agreed to decide whether to list the Bi-State population by the end of FY2013 and the Columbia sage grouse population and the greater sage grouse by the end of FY2015. The ESA is intended to protect plants and animals from becoming extinct. It authorizes creating a list of protected species, either endangered (defined as being in danger of extinction) or threatened (defined as likely to become endangered in the foreseeable future). The ESA also prohibits taking these species, with limited exceptions. In addition, federal agencies are prohibited from destroying or adversely modifying their designated critical habitats. FWS is the federal agency that manages most species under the ESA. (The National Marine Fisheries Service (NMFS) supervises most marine mammals and oceanic species.) The Secretary of the Interior, acting through FWS (or the Secretary of Commerce, through NMFS, where relevant), is charged with the decision of whether to list a species. The listing decision is based on five criteria: habitat loss, over-harvesting, disease, inadequacy of existing regulatory protection, and other factors affecting its existence. In making the determination, FWS is charged with relying "solely on the basis of the best scientific and commercial data available." FWS may list a species independently, or citizens may petition the agency to make a listing. When a petition is filed, certain deadlines are imposed by statute. FWS must determine and publish a decision in the Federal Register within 90 days of the filing of the petition on whether the petition presents substantial evidence in support of a listing. Within 12 months of filing the petition, FWS must publish whether listing is warranted or not. A final decision must be made one year after the 12-month notice. FWS receives more petitions than it has resources to address, and has the option of publishing a determination at the time of a 12-month finding that a listing is "warranted but precluded" due to limited FWS resources. Failure to meet the deadlines can be a basis for suit. In addition to listing entire species, the ESA authorizes listing distinct population segments (DPS) of vertebrates. This term refers to a portion of a listed species separated from the rest of the species by genetic distinction and range. According to FWS policy established in 1996, in order to be designated a DPS, a population must be discrete (separated as a consequence of physical, physiological, ecological, or behavioral factors) and significant (meaning its demise would be an important loss of genetic diversity). Under the ESA, the species for which a warranted but precluded determination has been made are listed and ranked based on their priority for listing. The list, known as a candidate notice of review, is issued annually, with the Service reviewing those species' status. Each species is given a listing priority number (LPN) indicating how FWS has ranked the importance of listing to the survival of that species, subspecies, or DPS, ranging from one to 12. The lower the number, the higher the priority that species has. The Service works to resolve listing on candidates with the lowest numbers first. The ESA does not restrict activities affecting species for which a warranted but precluded determination is made, such as would occur if the sage grouse were found to be threatened or endangered. However, the species' status as a candidate could mean federal agencies will pay greater attention to its conservation. In the late 1990s, FWS developed a program to encourage nonfederal landowners to take conservation measures to protect species at risk. The Candidate Conservation Agreement with Assurances (CCAA) policy was designed to encourage nonfederal landowners (including state and local governments) to manage their property in ways that helped vulnerable species before they became listed under the ESA. According to FWS, the policy was motivated by the practice of property owners doing things to keep certain species from their land so that if that species became listed later, their property would not be subject to any associated restrictions. A CCAA rewards land management practices that aid species by assuring cooperating landowners that changes in federal policy would not impose additional burdens on them. The Service said, "the ultimate goal of Candidate Conservation Agreements with Assurances is to remove enough threats to the covered species to preclude any need to list them," but to do this, the substantive requirements of the CCAA must be performed by a significant fraction of the landowners in a species' range, and must provide noticeable improvement. In exchange for landowners' agreements to manage property for the benefit of a species, FWS issues assurances in the form of incidental take permits, excusing landowners from prosecution if their actions should take a listed species in the course of an otherwise lawful action. This permit can include species not currently listed, so that if they are listed later, the landowner would not face liability. The sage grouse ( C. urophasianus ) is the largest North American grouse: males weigh up to 7 pounds, and females up to 5 pounds. It is a squat, feathered, chicken-like bird, grayish with a black belly and spiky tail feathers, and highly prized by hunters. Its winter diet of sage leaves gives the flesh a strong sage flavor. It remains a game bird in many western states. Sage grouse have one of the lowest reproductive rates of any North American game bird. Because of this, "its populations are not able to recover from low numbers as quickly as many other upland game bird species." During winter snows, grouse shelter under sagebrush. Sage grouse feed on sage leaves throughout the year, but particularly in winter. They also eat leaves, flowers, and seeds from other plants, plus insects. Young grouse are dependent on insects for rapid growth. Male grouse of both species gather in the spring year after year in the same areas, called leks . The leks are found in open sagebrush areas, usually on broad ridges or valley floors where visibility is excellent and noise will travel well. There, the males strut, raise and lower their wings, fan their tail feathers, and make loud booming noises with the aid of bright yellow inflatable air sacs in their necks. Under optimal conditions, these sounds carry for hundreds of yards. Dozens or even hundreds of these males attract the attention of resident females, who survey the spectacular offerings of the displaying males, make their choices, and mate. Once mating has occurred, females leave the lek to nest, sometimes at a distance of several miles. Females raise their offspring alone, without help from males. The sage grouse is particularly vulnerable to changes in its habitat. Grazing, oil and gas development, communication towers, roads, utility poles, and wind turbines all pose a threat to sage grouse habitat. The roads provide ingress for invasive species such as cheatgrass; the fences interrupt migration to and from leks; and both fences and power lines provide perches for avian predators. While the grouse can fly, they do not fly long distances. They escape their predators through concealment, short flights to cover, or running under rocky outcrops or brush. Sage grouse are subject to predation by hawks, and avoid areas near tall objects that afford hawks a perch from which they can easily swoop down to attack an unwary bird. Cheatgrass is the primary invasive species threat to sagebrush habitat. It appears after an area has been grazed or when roads are developed. The nonnative grass spreads quickly, is disliked as forage by grazing mammals and grouse, and burns much more readily than native plants. Both the number of fires and the total area burned in sage grouse habitat have increased dramatically in the last decade when compared to the past 100 years. Drought and global climate change could accelerate the loss of sagebrush by facilitating cheatgrass invasion, increasing the likelihood and severity of fires. Additionally, many types of development introduce standing pools of water into an environment where none had existed. Coal bed methane production and oil wells both involve a footprint with a pond of some sort. This introduces mosquitoes into the habitat, and mosquitoes can carry the West Nile Virus. According to the U.S. Geological Survey (USGS), the federal agency responsible for tracking wildlife disease, the West Nile Virus is always fatal for the grouse. According to a 2006 report by USGS, West Nile Virus has been reported among sage grouse in every state of the grouse's range except for Washington. Because habitats are becoming fragmented, grouse populations are becoming genetically isolated, leaving them more vulnerable. It is hardly surprising that sagebrush and sage grouse habitat seem virtually synonymous. Yet they are not, because much of the West where sagebrush is still dominant is no longer suitable for these birds. The addition of a transmission line or a long fence can make the area too dangerous. The sage grouse was once abundant in 16 western states. Now its current range includes portions of 11 states: North Dakota, South Dakota, Colorado, Wyoming, Montana, Idaho, Washington, Oregon, Utah, Nevada, and California. It is agreed that the number of sage grouse has declined severely; FWS estimates that sage-grouse population numbers may have declined between 69% and 99% from historic to recent times. It cites data from the Western States Sage and Columbia Sharp-Tailed Grouse Technical Committee, which estimated the decline between historic times and 1999 to have been about 86%. According to a team assembled by FWS to study the sage grouse, habitat loss is severely affecting the viability of the species: The primary threat to greater sage grouse is fragmentation. Large expanses of intact sagebrush habitat are necessary to maintain viable sage grouse populations. Only two areas in the 11 state range currently provide such expanses and both are already heavily fragmented and are projected to experience additional significant fragmentation in the foreseeable future. Dramatic population declines and local extirpations have already occurred and future fragmentation and habitat degradation is expected to result in remnant, isolated, and dysfunctional populations of greater sage grouse that are in danger of extinction in the foreseeable future. There are several species of grouse in the West, but the group that dominates the sagebrush habitat belongs to the genus Centrocercus . Within this genus, there are two recognized species: the Gunnison grouse ( Centrocercus minimus ) and the sage grouse ( Centrocercus urophasianus ). Understanding of relationships among birds in the genus Centrocercus has expanded in recent years. In 1980, there was thought to be only one species, the sage grouse ( Centrocercus urophasianus (hereinafter C. urophasianus )), the largest grouse in North America. Most birds in the genus are "sage grouse," but further study and field data caused the American Ornithological Union (AOU), the major scientific society for the study of birds, to recognize a second species, the Gunnison grouse. Some scientists and litigants have argued that subspecies and/or distinct populations also should be recognized. Because the ESA allows protection not only of species and subspecies, but also of DPS, each of these groups could be eligible for listing. However, for the most part, FWS does not recognize proposed subspecies of grouse as valid taxonomic units (see below), but does recognize certain geographically isolated populations known under the ESA as DPS. A difficulty in objectively determining the scientific validity of any taxonomic distinction at the subspecies level is that the AOU stopped distinguishing any category below the species level in 1983. Thus, a major scientific referee for these determinations is not available, and FWS must review primary and sometimes conflicting scientific literature. Three petitions were received to list the sage grouse between 2002 and 2003. In 2004, FWS found that the petitions presented substantial evidence in support of the listing. In the 12-month finding in 2005, however, FWS determined that listing was not warranted. This determination was challenged, questioning the scientific basis for the decision not to list the species. The District Court for the District of Idaho held that the Deputy Assistant Secretary of the Department of the Interior wrongfully interfered with the listing decision and that FWS did not use the best science as required by the ESA. The action was remanded to the agency. FWS issued a notice of status review for the sage grouse in 2008. In 2010, FWS determined that listing the greater sage grouse was warranted, but precluded by higher listing priorities. FWS assigned the species a listing priority number (LPN) of 8 (with 1 being the highest priority). In a separate court settlement in 2011, FWS agreed to make a decision whether to list the greater sage grouse by the end of FY2015. A plaintiff not involved in that settlement sued, arguing that FWS was not making expeditious progress in listing the species, as required under the ESA, but the court held otherwise. That plaintiff, Western Watersheds Group, had sued to force listing of the grouse prior to the compromise deadline, but the court held that "despite troubling aspects of the FWS decision process," the warranted but precluded finding was not arbitrary or capricious. Until 2000, all sage grouse in the United States were considered a single species. But with more information, scientists reached a consensus that the sage grouse of the Four Corners area—Utah, Colorado, New Mexico, and Arizona—differed in several respects from birds in the rest of the range. These birds, known as the Gunnison grouse, are consistently about two-thirds as big as their relatives; males have different markings and behaviors; birds with these characteristics do not breed with the larger birds; and these birds occupy only this particular part of the western sagebrush area. Genetic studies showed that the DNA of birds of this region is distinct. As a result, in 2000 the AOU recognized the grouse of that area as a separate species ( Centrocercus minimus ), and in 2006 the International Ornithological Congress recommended the common name "Gunnison grouse" and that the remainder of the species be called simply "sage grouse." The Gunnison grouse was once abundant in its four-state range. (See Figure B -1 for historic distribution in Colorado.) It is now confined to seven populations in Colorado, plus a very limited number of birds in Utah. (See Figure B -2 .) According to FWS, the current range of the Gunnison grouse is 7% of its historic range, a reduction from its 2006 estimate. The great majority of the remaining population is found in the Gunnison Basin in Colorado; birds in the smaller populations constitute an important source of genetic diversity, as well as a safety valve should the main population be devastated by disease, invasive species, new predators, etc. Populations have declined, although there is no consensus as to the extent of the decline, or whether it is part of a natural cycle. (See Table B -1 for population estimates.) In January 2000, citizen organizations petitioned FWS to list the Gunnison grouse, and in December 2000, FWS published a notice designating the Gunnison grouse as a candidate species, finding that listing was warranted but precluded due to resource constraints on the service. This effectively halted the listing process for the Gunnison grouse until a suit was filed. Pursuant to a settlement in 2005, FWS agreed to publish a listing determination by March 31, 2006. On April 18, 2006, FWS announced that no listing was appropriate. In November 2007, several groups filed another suit alleging that the failure to list violated the ESA. The parties agreed in August 2009 that FWS would make a listing decision by June 30, 2010. In September 2010, FWS determined that listing the species was warranted but precluded, giving the Gunnison grouse an LPN of two, the second-highest priority. In 2012, the LPN remained at two. On January 11, 2013, FWS proposed listing the Gunnison grouse as endangered. Some believe the sage grouse can be divided into subspecies, such as an eastern subspecies: the Institute for Wildlife Protection filed a petition to list an eastern subspecies of the sage grouse under the ESA. In response, FWS concluded there was a lack of evidence showing that eastern sage grouse formed either a subspecies or a distinct population segment, noting that the birds moved between eastern and western parts of the range, and there were no known genetic distinctions. A western subspecies of sage grouse ( C. u. phaios ) was recognized by the AOU in 1957. Compared to the greater sage grouse population, western birds have reduced white markings and darker grayish-brown feathering, resulting in a more dusky overall appearance. To date, no genetic distinction between western sage grouse and other sage grouse has been found. In fact, the 1957 AOU analysis has not been updated, and the Integrated Taxonomic Information System (ITIS) now considers the subspecies designation "invalid." FWS does not recognize a western sage grouse DPS, although others argue that morphological and behavioral differences are sufficient to support a separate designation. The historic distribution of sage grouse proposed for designation as a separate western subspecies extended from south-central British Columbia south through eastern Washington and Oregon, except in extreme southeastern Oregon near the Idaho/Nevada borders. Populations in northern California and western Nevada are thought to represent an intermediate form between the proposed western and eastern subspecies of sage grouse. The proposed western subspecies occupies central and southern Oregon and two relatively small areas in central Washington. The question of the validity of a western subspecies was not litigation-free. In 2003, in response to a petition to list a western subspecies, and after suit was filed to compel a response, FWS issued a 90-day finding that there was not substantial evidence to support the conclusion that this group of grouse was actually a subspecies. The Ninth Circuit held the FWS finding was arbitrary and capricious because FWS did not provide adequate justification for reversing its earlier position. In its 2010 Federal Register notice of the warranted but precluded determination for the sage grouse, FWS acted on the remand to reconsider the subspecies listing. FWS concluded that the geographical, morphological, behavioral, and genetic evidence did not support recognition of a western subspecies. In 2001, FWS agreed that the remaining sage grouse in the Columbia River Basin constituted a DPS. The two populations of sage grouse in Washington total approximately 1,000 birds, making up what FWS has designated the Columbia River Basin DPS. The northern subpopulation occurs primarily on private and state-owned lands in Douglas County (roughly 650 birds); the southern subpopulation occurs at the U.S. Army Yakima Training Center in Kittitas and Yakima Counties (roughly 350 birds). This is down from the historic levels that supported annual state hunting quotas of roughly 1,800 birds from 1951 to 1973. It is estimated that sage grouse in the west once numbered between 200,000 and 2 million, and that the population has declined by an estimated 66% to 99% from its historical high. Unlike the listing petitions for the other sage grouse groups, the Columbia River Basin DPS did not result in a lawsuit, perhaps because the agency initially agreed with the petition. In 2001, FWS gave the DPS a low priority for listing (9 on a 12-point scale), and held that its listing was "warranted but precluded" by species in more urgent need of protection. In 2002, the Columbia River Basin population was determined to be sufficiently at risk to warrant moving its priority from a 9 to a 6, on the basis of threats from military training near one population and from encroaching agricultural lands near the other. However, FWS said that those threats were not imminent and so did not warrant listing. In 2003, FWS complicated matters further by holding that western sage grouse are not sufficiently different to constitute a subspecies—a determination that did not erase the DPS status of the Columbia River Basin population. Instead, the Columbia River Basin DPS is a population of the greater sage grouse. In 2012, FWS issued an LPN of 6 for the DPS. In a court settlement, FWS agreed to decide whether to list the Columbia River Basin DPS by the end of FY2015. Some groups hold that the sage grouse population in the area around Mono Lake (in California and Nevada) constitutes a DPS of sage grouse. FWS referred to this group as the Mono Basin population until 2010, when it began calling it the Bi-State population. In 2002, two groups petitioned FWS for an emergency listing of the Bi-State population, but the petition was denied. FWS argued that morphological information did not indicate that the Bi-State population was distinct, nor did behavioral observations show any differences. The Ninth Circuit affirmed that FWS complied with all statutory deadlines. A 2005 petition by multiple groups sought DPS status for the Bi-State population as well as listing under the ESA. In 2006, FWS found genetic differences justifying the designation of a Bi-State DPS. But after the agency examined all of the separate criteria that are considered in a decision to list a species (habitat loss, overuse, disease or predation, inadequacy of existing regulation, and other natural or manmade factors), it did not find a sufficient threat to justify listing. In 2008, FWS initiated a second status review of this population, asking for any new data on threats to the DPS. In 2010, FWS determined that listing the Bi-State DPS was warranted but precluded, giving it an LPN of 3, meaning its listing is a higher priority than that of the species as a whole (which has an LPN of 8). In 2012, the LPN for the Bi-State DPS remained 3. In a court settlement, FWS agreed to decide whether to list the Bi-State DPS by the end of FY2013. As noted above, one consideration in an ESA listing determination is whether existing regulatory mechanisms are adequate to conserve the species. Strong conservation programs at the federal, state, local, or private level may be sufficient to avoid listing a species. Existing conservation programs at these levels for sage grouse and Gunnison grouse are described below (see Appendix A and Appendix B ). These programs help illustrate another issue in sage grouse management: until a species is listed under federal law, it is managed under state law, even on federal lands. The federal role can be limited to habitat protection on those lands. The Bureau of Land Management (BLM) manages more than half of the 57 million acres of sagebrush habitat, with 40 million of those acres either current grouse habitat (30 million acres) or suitable for habitat (10 million acres). This authority is significant, as efforts to accelerate development of federal land for energy advance projects across more federal land. Even alternative energy sources create conflict in sagebrush habitat. Under BLM policy, species that are listed, proposed for listing, or candidate species under the ESA are known as special status species. All sage grouse and Gunnison grouse fit under one of these categories. The special status species policy dictates that BLM manages its lands to "minimize the likelihood of and need for listing" the species and to "conserve and/or recover ESA-listed species and the ecosystems on which they depend so that ESA protections are no longer needed." This language very nearly matches the statutory obligations within the ESA. This is a change from previous policy language that had expanded the statutory obligations to include extra responsibilities toward protecting species at risk. Prior to December 12, 2008, Section 6840.02 of the BLM Manual had required the agency to (1) conserve listed species and their ecosystems and (2) "ensure that actions requiring authorization or approval by [BLM] are consistent with the conservation needs of special status species and do not contribute to the need to list any special status species." The policy after that date appears to be the somewhat less demanding goal of ensuring that BLM actions do not contribute to a species being listed versus one of minimizing the likelihood of a listing. The new language also allows BLM to prioritize how it manages sensitive species based on other issues, including financial resources. The policy is applied in BLM land use planning. In 2004, BLM issued a National Sage-Grouse Habitat Conservation Strategy. It is not clear that the strategy includes any numeric goals regarding acres of habitat protected or any enforceable obligations. Instead, it sets goals and objectives for BLM land management processes, such as using the best available science when developing conservation efforts, or ensuring that conservation strategies are consistent with existing laws, and updating land management plans when appropriate with full public participation. In short, it does not appear that the Habitat Conservation Strategy does more than already required under existing laws such as the ESA and the Federal Land Policy and Management Act. However, the Habitat Conservation Strategy may serve the purpose of harmonizing BLM land use planning when sagebrush habitat is involved. In addition to the nationwide sage grouse policy, BLM developed a Gunnison Sage Grouse Conservation Plan with many stakeholders in the area. A stated goal of the plan was to increase the population of the Gunnison grouse, not merely avoid further losses. The plan was to be implemented by the different stakeholders in five phases across 15 years, starting in 2005. It does not appear that any parts of the agreement are mandatory. When it is making a listing determination, FWS is required to consider whether there are adequate regulatory mechanisms in place such that additional protection under the ESA is not needed. In evaluating whether to list the sage grouse, FWS considered BLM policies, and suggested that they did not provide much additional protection in practice. It found that under the 2008 policy, BLM had the authority to address sage grouse threats to protect the bird. However, FWS found the application of the policies was inconsistent, especially in the area of energy development, including oil and gas: "BLM's current application of these authorities in some areas falls short of meeting the conservation needs of the species." In fact, FWS said some BLM practices were "exacerbating the effects of threats" to the sage grouse. It refused to rely on BLM's policies as a regulatory practice that would obviate the need to list the species. Since then, the District Court for Idaho has found in two key cases that BLM does not follow its own laws for protecting the bird. One case examined how BLM develops resource management plans for BLM lands, which are used by the agency to evaluate what activities should occur on what lands. The other lawsuit challenged BLM's review of grazing permit renewals. These are two significant areas of review for sage grouse habitat. In both cases, the court held that BLM was not acting to protect the species despite having laws and policy in place to do so. What this could indicate is that when FWS evaluates existing regulatory practices in determining whether the sage grouse needs protection under the ESA, it could find BLM policy may not amount to adequate existing regulatory measures that provide sufficient protection such that additional federal protection is not needed. However, in an earlier case, that same court held that BLM adequately considered the impacts on sage grouse of its fire management amendments to BLM resource management plans. Energy development in the Powder River Basin was challenged on the grounds that BLM did not consider the adverse effects on sage grouse and prairie dogs when it decided that multiple reviews under the National Environmental Policy Act (NEPA) would be performed for each coalbed methane gas site rather than one overarching document for the whole area. The court supported BLM, holding that BLM's system of developing a programmatic environmental impact statement for which individual sites could be tiered was adequate under NEPA. Similarly, in 2010, the District Court for the District of Columbia held that BLM adequately considered the impacts on the sage grouse of oil and gas development in southwest Wyoming. While the Forest Service does not manage as much sage grouse habitat as BLM, parts of its grazing lands include sagebrush. The Forest Service has a policy in which regional foresters designate those species in their areas that show a downward trend in population viability or habitat capability. This is called the Sensitive Species Policy. Like the former BLM policy for Special Status Species, an objective is for the Forest Service to develop management practices to "ensure that species do not become threatened or endangered because of Forest Service actions." Additionally, under Department of Agriculture Departmental Regulation 9500-4, the Forest Service is directed to avoid actions that "may cause a species to become threatened or endangered." The Forest Service is also directed to help protect wildlife. According to the FWS listing determination regarding the sage grouse, the impact of the Forest Service policy on sage grouse protection is uncertain and inconsistent. FWS stated in the Federal Register notice regarding its warranted but precluded determination that there was not enough information available to evaluate the efficacy of the Forest Service's policies regarding sage grouse. FWS indicated that habitat protection on grazing lands varied depending on the plan. FWS could not rely on Forest Service policy as an adequate regulatory mechanism that would avoid the need to list the sage grouse under the ESA. The sage grouse continues to be listed as a game species in most states. Some of these states, while allowing hunting the bird, have acted to protect it and its habitat to avoid further reductions in numbers. Washington lists the bird as a threatened species, but also includes it in its list of game birds. California, Colorado, Idaho, Nevada, Wyoming, and Montana all have issued conservation plans. Additionally, Colorado has entered into a Candidate Conservation Agreement with Assurances (CCAA) with FWS regarding the Gunnison grouse, and FWS has issued a proposed CCAA for the state of Idaho. The Western Association of Fish and Wildlife Agencies (WAFWA) has addressed sage grouse health and signed Memoranda of Understanding with federal agencies and developed guidelines for best practices for managing sage grouse habitat. Some local governments have also taken conservation measures (see Appendix B ). Because listing additional species, subspecies, or populations might affect land use, especially on federal lands, states and local governments have some incentive to conserve species to avoid listing, and thereby to avoid potential restrictions on energy development, grazing, urban development, and other activities. Discussions of some of these state and local plans are included as appendices to this report. As mentioned, one goal of a CCAA or other form of conservation agreement with FWS is to establish such protection for a species that federal protection is not deemed necessary. The ESA provides that the Service may find that listing is not needed if adequate regulatory mechanisms exist. Courts have looked at three things in determining the existence of adequate regulatory mechanisms: 1. Courts have found that "voluntary" actions are not regulatory; the protections must be enforceable. 2. Courts define "adequate" as sufficient to keep populations at a level such that listing will not prove necessary. 3. Existing means the plans for protection must be in place and are not future or speculative. Courts have reviewed CCAAs and other conservation agreements in challenges to listing decisions. No court has deemed voluntary state actions as a regulatory action sufficient to avoid federal listing. Even the Ninth Circuit, which found there were adequate regulatory measures to remove the grizzly bear from the threatened species list, reached the decision not because the voluntary state measures amounted to regulation, but because there was so much federal land in the grizzly's range that the plan was sufficient. It expressly ignored the state voluntary actions: "For the purposes of the [existing adequate regulatory mechanisms] determination, however, we need not, and do not consider those [state] measures, some or all of which may not be binding." The second criterion is whether the measures are adequate . Adequate can mean sufficient to keep populations at a level such that listing will not prove necessary. Courts have typically looked at the size of areas being protected as a way of finding adequacy, in addition to looking at the types of measures being taken. For example, in the case of listing steelhead trout, the Northern District of California found that the state plans of Oregon and California were voluntary and so they did not count as a regulatory measure, and that the federal plan would only cover 64% of habitat, which was not enough to prevent species' further decline. Therefore, the regulatory measure affecting federal habitat was not adequate to prevent the need for listing. On the other hand, the Ninth Circuit held that a plan that would have the force of law on federal lands but be voluntary on other lands was adequate to protect the grizzly bear because federal lands constituted 98% of the grizzly's primary conservation area. The third criterion is that the regulatory mechanisms be in place and not be future or speculative. One court said it would not consider a new agreement to be an adequate regulatory mechanism, requiring a conservation agreement to have a record of two years to be sufficient. As development proceeds in sagebrush territory, habitat for sage grouse and Gunnison grouse diminishes. This habitat loss in combination with increased fire threats from cheatgrass and climate change could put the sage grouse at risk of extinction. FWS has been petitioned on many occasions to review the statutory factors to determine whether Gunnison grouse, sage grouse, and/or its subspecies, and populations, should be listed under the ESA, and, following litigation, has found that listing was warranted but precluded for all of these groups. States are taking action to protect the sage grouse, in part to protect a game bird, but also to forestall the listing that many see as an obstruction to development of the sagebrush territory that covers so much of the western United States. Congressional pushes for more energy development, both for oil and gas and for green energy such as wind farms and solar collectors, may end up conflicting with the grouse and the protections offered by the ESA. Wyoming Sage Grouse Policy Regarding Core Population Areas While the sage grouse in Wyoming is classified as a game bird, the state is attempting to protect it. A 2011 executive order from the Wyoming governor replaced 2008 and 2010 executive orders directed at sage grouse protection. The 2011 order continues the 2008 practice of using Core Population Areas identified by the governor's Sage Grouse Implementation Team. The 2011 order affects up to two-thirds of the state's sage grouse habitat and is intended to direct energy production to those areas with the highest predicted yields and lowest numbers of sage grouse. The 2011 order alters the 2008 order, however, by specifically approving certain energy corridors through core habitat areas, provided construction occurs within established dates. The state of Wyoming appears to have no general description of its sage grouse plan under the 2013 Sage Grouse Executive Order (SGEO), but it has published a list of frequently asked questions (FAQs). Below are extracts from that document with minor modifications for clarity. What Activities Are Affected by the SGEO? Letters from the Wyoming Game and Fish Department will determine whether a project complies with the process and stipulations outlined in the SGEO, and may provide recommendations on whether the permit should be issued and/or recommendations on how impacts to the bird may be minimized. These recommendations may be accepted by the permitting agency and incorporated in the conditions of the permit. If there are changes to the project, the proponent should complete the Density and Disturbance Calculation Tool (DDCT) review process again. What Counts as Suitable Sage Grouse Habitat? "Suitable" sage-grouse habitat (nesting, breeding, brood-rearing, or winter) is within the mapped occupied range of sage-grouse, and it 1. has 5% or greater sagebrush canopy cover (for nesting, brood-rearing and/or winter) as measured by the point intercept method. "Sagebrush" includes all species and subspecies of the genus Artemisia except the mat-forming sub-shrub species: frigida (fringed) and pedatifida (birdfoot); 2. is riparian, wet meadow (native or introduced) or areas of alfalfa or other suitable forbs (brood rearing habitat) within 275 meters of sagebrush habitat with 5% or greater sagebrush canopy cover (for roosting/loafing); 3. is reclaimed habitat containing at least two native grasses (at least one bunchgrass) and two native forbs (see "reclamation" in Attachment B of the SGEO) and no point within the grass/forb habitat is more than 60 meters from adjacent 5% or greater sagebrush cover; or 4. is "transitional" sage-grouse habitat, which is land that has been treated or burned prior to 2011, resulting in < 5% sagebrush cover but is actively managed to meet a minimum of 5% sagebrush canopy cover with associated grasses and forbs by 2021 (as determined by analysis of local condition and trend) and may or may not be considered "disturbed." Land that does not meet the above vegetation criteria by 2021 should be considered disturbed. What Counts as a Surface Disturbance? Any anthropogenic development activity or wildfire event that results in removal of sagebrush vegetation or loss of sage-grouse habitat is considered surface disturbance in the DDCT calculation. Surface disturbance includes, but is not limited to, roads, well pads, mining operations, agricultural fields, buildings, some vegetation treatments, wind turbines, power lines, pipelines, or other oil and gas infrastructure. Some linear features are considered exempt from DDCT calculations. Is There a De Minimis Exemption? For What? Activities that are designated as de minimis, and exempted from the plan's requirements, include the following: 1. Existing animal husbandry practices (including branding, docking, herding, trailing, etc.). 2. Existing farming practices (excluding conversion of sagebrush/grassland to agricultural lands). 3. Existing grazing operations that utilize recognized rangeland management practices (allotment management plans, Natural Resource Conservation Service grazing plans, prescribed grazing plans, etc.). 4. Construction of agricultural reservoirs and aquatic habitat improvements less than 10 surface acres and drilling of agriculture and residential water wells (including installation of tanks, water windmills and solar water pumps) more than 0.6 miles from the perimeter of the lek. Within 0.6 miles from leks, no review is required if construction does not occur March 15 to June 30 and construction does not occur on the lek. All water tanks shall have escape ramps. Any terrestrial habitat improvements <10 acres will require compliance with the SGEO. 5. Agricultural and residential electrical distribution lines more than 0.6 miles from leks. Within 0.6 miles from leks no review is required if construction does not occur March 15 to June 30 and construction does not occur on the lek. Raptor perching deterrents shall be installed on all poles within 0.6 miles from leks. 6. Agricultural water pipelines if construction activities are more than 0.6 miles from leks. Within 0.6 miles from leks no review is required if construction does not occur March 15 to June 30 and construction is reclaimed. 7. Pole fences. Wire fences if fitted with visibility markers where high potential for collisions has been documented. 8. Irrigation (excluding the conversion of sagebrush/grassland to new irrigated lands). 9. Spring development if the spring is protected with fencing and enough water remains at the site to provide mesic (wet) vegetation. 10. Herbicide use within existing road, pipeline, and power line rights-of-way. Herbicide application using spot treatment. Grasshopper/Mormon cricket control following Reduced Agent-Area Treatments protocol. 11. Existing county road maintenance. 12. Cultural resource pedestrian surveys. 13. Emergency response. What Are the Core Population Areas, as Defined by the 2011 SGEO, and How Do They Differ from Areas Mapped in 2008? A map of the core population areas is shown below, with comparison of the 2008 core areas (Version 2), and the more recent 2011 areas (Version 3). What Are the Stipulations on Activities Regarding Sage Grouse? These stipulations are complex and include both general stipulations and industry-specific stipulations. The most comprehensive source is found in Attachment B of the governor's executive order: These stipulations are designed to maintain existing suitable sage-grouse habitat by permitting development activities in core areas in a way that will not cause declines in sage-grouse populations. General stipulations are recommended to apply to all activities in core areas, with the exception of exempt ("de minimis") actions defined herein (Attachment C of the SGEO) or specifically identified activities. The specific industry stipulations are considered in addition to the general stipulations. Greater detail on both general and industry-specific stipulations are also in Attachment B of the SGEO. Plans Affecting the Gunnison Grouse The Gunnison grouse's known range is the Gunnison Basin in western Colorado and eastern Utah. (See Table B -1 , Figure B -1 , and Figure B -2 .) Multiple conservation plans at the federal, state, and local levels have addressed grouse protection. Both loss and fragmentation of habitat affect this species: Low genetic diversity, genetic drift from small population sizes, habitat issues ... the interaction of these with predator communities, and impacts of drought are the most significant threats facing Gunnison sage-grouse. Of these, by far the greatest threat is the permanent loss, and associated fragmentation and degradation of sagebrush habitat associated with urban development and/or conversion. Multi-Party Conservation Plan In 2005, state and federal agencies completed a Gunnison Sage-Grouse Rangewide Conservation Plan (Rangewide Conservation Plan). According to the plan, its purpose is "to identify measures and strategies to achieve the goal of protecting, enhancing, and conserving [Gunnison sage grouse] and their habitats." The plan integrates local strategies as well as range-wide goals. The primary goal is to prevent permanent habitat loss in occupied areas. Grazing management practices, wildfire management, and minimizing impacts from mining, oil and gas production, power lines, and utilities are all addressed. State Conservation Efforts Under Colorado law, the species is not protected as a threatened or endangered species. Nor is it listed as a species of concern in the state's Sagebrush and Sage Species Conservation Strategy. Instead, the Gunnison grouse is listed as a game bird, although it has no hunting season and the bag limit is set at zero. The Colorado Department of Wildlife (CDOW) entered into a Candidate Conservation Agreement with Assurances (CCAA) issued by FWS for the Gunnison grouse. According to the agreement, "The conservation goal of this Agreement is to achieve the protection and management necessary to preclude listing by obtaining agreements for grouse habitat protection and/or enhancements on private lands." However, as noted earlier in this report, FWS has proposed listing the Gunnison grouse as endangered. In the Gunnison grouse CCAA, CDOW and other cooperating landowners agreed to take conservation measures as outlined in the Rangewide Conservation Plan. The measures include modifying grazing practices and preventing invasive species by landowners, and habitat improvement and monitoring for the government entities. Participating landowners are covered from incidental takes by the Incidental Take Permit issued by FWS to CDOW. Also, the CCAA provides ESA regulatory assurances for participating landowners. According to the agreement, "There will be a significant measure of security for participating landowners in the knowledge that they will not incur additional land use restrictions if the species is listed under the ESA in the future." Those assurances may prove necessary in light of the proposed listing and critical habitat designation of January 2013. Under the CCAA, the state of Colorado will also take conservation steps. For example, CDOW plans to monitor predators and manage recreational uses, as well as establish a captive breeding facility in case grouse populations need to be augmented. Local Efforts In addition to actions by private landowners covered in the state agreement discussed above, other local efforts target Gunnison grouse protection. Gunnison County, CO, in which the largest population of the grouse lives, has local legislation addressing habitat issues. A 2007 resolution addressed multiple activities that could disturb the grouse, including domestic pets, lighting and noise, recreation, fencing, utility lines, and land use projects. The law added Gunnison Sage-Grouse Lek and Occupied Habitat maps to those maps the county must consider when reviewing a Land Use Change Permit application. The lek map shows private lands within 0.6 miles of known leks. This is the key radius for the other restrictions in the law. While for the Occupied Habitat map, occupied habitat is defined as an area "of suitable habitat as delineated within the Gunnison Sage-grouse Rangewide Conservation Plan (RCP) and known to be used by Gunnison Sage-grouse within the last 10 years from the date of mapping." On February 17, 2009, the county adopted the Gunnison Basin Sage-Grouse Strategic Plan (Strategic Plan). The Strategic Plan referred to the RCP as the "overarching document for Gunnison sage-grouse efforts" and also provided additional detail for county planning. The county requires land use change permits for projects located on a parcel "wholly or partially within a 0.60-mile radius of a Gunnison Sage-grouse lek." This includes building permits, individual sewage system permits, access permits, and reclamation permits. Projects having major or minor impacts on wildlife will be referred to CDOW for consultation. Construction and recreational activities will be limited when mating, nesting, or brood rearing is occurring on lands within that radius. Additionally, the 2007 resolution directs the county to recognize perpetual conservation easements and other documented management agreements that are beneficial to the grouse. To satisfy county law, the conservation easement must have sufficient restrictions to show that adverse impacts are "substantially or wholly mitigated" by the easement.

Western states have seen conflicts over natural resources for more than a century, involving issues such as grazing, roads, fences, oil and gas development, urban expansion, spread of invasive species, water rights, timber harvest, and pollution. In many cases, the conflicts involve the protection of endangered and threatened species, often with one group seeing listed species as an obstacle to their development goals or property rights, and another group advocating protection in line with their environmental, scientific, or economic goals. One such controversy is developing in 11 western states over sage grouse, whose numbers can be threatened by roads, fences, power lines, urban expansion, and energy development. This report describes the state of knowledge about these birds, history of efforts to protect them, and current controversies. The sage grouse, once abundant in western sagebrush habitat in 16 states, has dropped in numbers, and is now found in 11 states. Its decline can be attributed to several factors—increased use of sage grouse habitat by ranching and energy development, decreased sagebrush due to noxious invasive species, and loss of habitat due to more frequent fires. However, the extent of the decline is not certain, and some dispute that the sage grouse is in peril. There is some discussion over how many species of grouse there are and how they may be related. Currently, two closely related species are recognized by scientists: the Gunnison grouse (Centrocercus minimus) and the sage grouse (Centrocercus urophasianus), sometimes referred to as the greater sage grouse. At one time, the U.S. Fish and Wildlife Service (FWS or Service) also recognized two subspecies—the eastern sage grouse (Centrocercus urophasianus urophasianus) and the western sage grouse (Centrocercus urophasianus phaios)—but FWS reversed that position. In addition, FWS has designated distinct population segments (DPS) of sage grouse under the Endangered Species Act (ESA). Parties have filed petitions seeking to protect these birds under the ESA by having them listed as threatened or endangered, but none are listed under the act. On January 11, 2013, however, FWS proposed listing the Gunnison grouse as endangered. In July 2011, FWS reached a settlement in several lawsuits regarding delays in listing species, include the sage grouse. According to the settlement agreement, a proposed listing rule or a decision that listing is not warranted is due for the Mono Basin sage grouse DPS by the end of FY2013, and for the Columbia River Basin sage grouse DPS and the greater sage grouse by the end of FY2015. At present, those grouses' protection under the ESA has been deemed warranted but precluded by higher protection priorities. Thus, the sage grouse is treated as a candidate species and does not have the protections that a listed species would have. One factor in making a listing decision is whether other regulations are in place to provide adequate protection of a species so that federal listing is not necessary to prevent extinction. States in primary sage grouse habitat have taken action to forestall an endangered species listing, which some believe would inhibit energy development on vast amounts of public and private property. Additionally, the Bureau of Land Management (BLM) and the Forest Service have policies to protect the grouse on their lands, although courts have found those policies lacking. These issues are at the forefront as Congress considers increased energy development on federal lands, while balancing the mission of the ESA.

Congress and President Bush devoted considerable attention to how the nation can best prevent, prepare for, respond to, and recover from natural and human-caused disasters. Events such as the terrorist attacks of September 11, 2001, and Hurricane Katrina of August 2005, prompted Congress and President Bush to require the development of a plan for how government at all levels, and also the nongovernmental sector, should respond to all types of emergencies and disasters. Pursuant to statutory requirements and presidential directives, the Federal Emergency Management Agency (FEMA), an agency located within the Department of Homeland Security (DHS), issued such a plan in March 2008 with publication of the National Response Framework (NRF). The NRF is the end product of a long history. Prior to the terrorist attacks of September 11, 2001, the structure for responding to emergencies and disasters resided in at least 5 separate plans. With the Homeland Security Act of 2002 ( P.L. 107-296 ) and Sections 15 and 16 of the Homeland Security Presidential Directive 5 (hereafter HSPD-5), Congress and President Bush directed DHS to consolidate these plans and create a single, overarching, integrated, and coordinated national response plan, and to develop a National Incident Management System (NIMS). These efforts culminated in the initial National Response Plan (NRP) on October 10, 2003, followed by the release of NIMS on March 1, 2004. In August 2005, Hurricane Katrina made landfall, followed shortly by Hurricanes Rita and Wilma. A number of studies on the responses to these hurricanes found shortcomings in the NRP itself and its implementation. DHS made the decision to revise the NRP partially based on these reports. The revision of the NRP was also due to mandates in the Post-Katrina Emergency Management Reform Act of 2006 ( P.L. 109-295 , hereafter the Post-Katrina Act). In January 2008, DHS issued the NRF, which took effect in March 2008. Since that time, the NRF has been the nation's core response document, providing a structure for the response to such disasters as the 2008 Midwest floods and California wildfires, as well as Hurricanes Gustav and Ike. This report reviews selected statutory provisions related to the NRF and provides an overview of the document. It discusses some of the reasons the Bush Administration revised the NRP, as well as some controversial aspects of the review process. The report also summarizes selected pending legislation concerning national response planning and concludes with a discussion of issues over which Congress might consider exercising oversight. Authority for the creation of the NRF emanates from numerous sources. FEMA has described the NRF as being guided by 15 "principal emergency authorities," 48 other statutory authorities and regulations, 17 executive orders, and 20 presidential directives. This report does not offer an exhaustive overview of these authorities. Rather, this section discusses some of the major authorities establishing the NRF, legislation that shaped the development of the NRF, and legislation tied to congressional oversight. The Robert T. Stafford Disaster Relief and Emergency Assistance Act (hereafter the Stafford Act) establishes the programs and processes by which the federal government provides emergency and major disaster assistance to states and localities, individuals, and qualified private nonprofit organizations. Section 611 of the Stafford Act authorizes the Director of FEMA to prepare federal response plans and programs and to coordinate these plans with state efforts. Consistent with this authorization, FEMA released the Federal Response Plan in April 1992. The primary purpose of the Federal Response Plan was to maximize the availability of federal resources to support response and recovery efforts taken by state and local emergency officials. After the terrorist attacks of September 11, Congress passed the Homeland Security Act of 2002 ( P.L. 107-296 ). Subsection 502(6) required the consolidation of "existing federal government emergency response plans into a single, coordinated national response plan." The Homeland Security Act also created DHS, consolidating over 20 agencies, including FEMA, into a single department. Under DHS, FEMA retained both its authority to administer the provisions of the Stafford Act and its designation as the lead agency for the nation's response plan. On February 28, 2003, President Bush issued HSPD-5. Section 16 of HSPD-5 directed the Secretary to develop and submit for review to the Homeland Security Council a national response plan. Section 16 also mandated that the plan use an "all-discipline" and "all-hazards" approach in preparing for, responding to, and recovering from domestic incidents. In December 2004, through the primary guidance and authorization of the Stafford Act, the Homeland Security Act, and HSPD-5, DHS issued a successor to the Federal Response Plan , which was entitled the National Response Plan (NRP). The NRP was in place and implemented for the Hurricane Katrina response in August 2005. The problems that arose from Hurricane Katrina prompted numerous studies. Some of these studies attributed the poor response, in part, to the implementation of the NRP. Concerned by perceived deficiencies in the NRP, Congress sought a remedy through legislation in the Post-Katrina Act. The Post-Katrina Act provides the most comprehensive legislation concerning the NRP (or any subsequent plans) by mandating numerous adjustments to the NRP as well as mechanisms for oversight. Section 642 amended the Stafford Act and the Homeland Security Act to mandate that the President develop a national preparedness system. Section 643 further establishes that the President shall, through the Administrator of FEMA "complete, revise, and update, as necessary, a national preparedness goal... to ensure the Nation's ability to prevent, respond to, recover from, and mitigate against natural disasters, acts of terrorism, and other man-made disasters." It further states that the national preparedness goal, to the extent possible, should be consistent with NIMS and the NRP. Section 649(b) of the Post-Katrina Act requires that the national preparedness goal, NIMS, and the NRP be subjected to clear and quantifiable performance measures to ensure they are continuously revised and updated. Section 652 of the act establishes annual reporting requirements concerning preparedness capabilities. Section 652(c) requires the reporting of state compliance with the NRP. Finally, Section 653 requires the president to ensure that federal agencies assigned with responsibilities in the NRP have the capability to meet the national preparedness goal, and develop plans to "respond effectively to natural disasters, acts of terrorism, and other man-made disasters in support of the National Response Plan to ensure a coordinated federal response." In response to the Post-Katrina legislation and perceived problems with the implementation of the NRP, DHS revised the plan and issued the NRF. The following section describes the various components of the document. The NRF is part of a national strategy for homeland security. It provides the doctrine and guiding principles for a unified response from all levels of government, and all sectors of communities, to all types of hazards regardless of their origin. Although the primary focus of the NRF is on response and short-term recovery, the document also defines the roles and responsibilities of the various actors involved in all phases of emergency management. The NRF is not an operational plan that dictates a step-by-step process for responding to hazards. Rather, the NRF appears to be an attempt to build flexibility into response efforts by setting up a framework that DHS believes is necessary for responding to hazards. Within this framework, the NRF gives users a degree of discretion as to how they choose to respond to the incident. The NRF is organized into five parts. The introductory chapter presents an overview of the entire document and explains the evolution of the NRF, and identifies the various actors involved in emergency and disaster response. The chapter also discusses the concepts undergirding emergency preparedness and response by providing a list of what DHS describes as the "five key principles" of response doctrine. The first chapter of the NRF, entitled "Roles and Responsibilities," provides an overview of the roles and responsibilities of federal, state, and local governments, the nonprofit and private sectors, and individuals and households. The first chapter also discusses the roles and responsibilities of those who hold various positions within these entities. The second chapter, entitled "Response Actions," describes and outlines key tasks as they pertain to what DHS calls the "three phases of effective response." These phases include "prepare," "respond," and "recover." Preparing includes planning, organizing, equipping, training, exercising, and conducting evaluations. Activities related to responding include gaining and maintaining situational awareness, activating and deploying resources and capabilities, coordinating response actions, and demobilizing. "Recover" activities are broken down into two broad categories. These are short-term and long-term recovery. The third chapter of the NRF, entitled "Response Organization," discusses the organizational structure and staffing used to implement response actions, all of which are based on NIMS and ICS. The NRF describes the organization and staffing structure of every entity responsible for preparedness and response in detail. The fourth chapter, entitled "Planning," describes the process of planning as it pertains to national preparedness and summarizes planning structures relative to the NRF. The chapter describes the criteria for successful planning and offers example scenarios for planning. The fifth and final chapter of the NRF, entitled "Additional Resources," describes the 15 Emergency Support Function (ESF) Annexes to the NRF, eight Support Annexes, and seven Incident Annexes. These annexes are listed in Table A-1 and Table A-2 of this report. The final chapter also explains that the NRF and its annexes are posted online through the NRF Resource Center, which allows for ongoing revisions to the document. As mentioned earlier in the report, several studies attributed the problematic response to Hurricane Katrina partly to the implementation of the NRP. Although the NRP was used for smaller emergencies and disasters prior to Hurricane Katrina, the hurricane marked the first time the NRP was used for a catastrophic incident. The section that follows discusses how some of the changes in the NRF have addressed these criticisms. The NRP was widely criticized as complicated and overly bureaucratic. Some said it was long and weighed down with technical language. Additionally, users of the NRP reported that the document failed to clarify roles and responsibilities and that the federal chain of command was confusing. It was further pointed out that the name "National Response Plan" was a misnomer (and hence misleading) because it was not a true operational plan in the sense that it did not provide a step-by-step process for responding to an incident. The NRF uses less technical language than the NRP, and attempts to make the roles and responsibilities more transparent. The NRF is also shorter. Whereas the NRP contained over 400 pages, the NRF is roughly 80 pages. Still, some have contested the clarity of the NRF. This will be discussed in greater detail later in the report. Despite efforts to make the NRP a nationwide response plan, the NRP was widely seen as not sufficiently national in its focus because it emphasized federal preparedness and response. Some have further argued that the process of creating the plan excluded nonfederal stakeholders, such as states and localities. According to DHS, the NRF more clearly articulates the roles and responsibilities of nonfederal entities. Additionally, when drafting the NRF, DHS held outreach sessions to solicit the feedback of nonfederal partners. The extent of nonfederal participation in the creation of the NRF has been questioned and is discussed later in this report. Several emergencies and disasters have taken place since implementation of the NRF. In general, responses to the NRF have been mixed. Some have indicated that its implementation has been successful. One observer stated that coordination among federal, state, and local governments has improved. In the case of Hurricanes Gustav and Ike, officials in Texas related that the federal response to the hurricanes was good. Other officials have been ambivalent regarding implementation of the NRF, noting that the scale of recent disasters has not warranted enough federal involvement to understand how well the NRF works. A review of various reports may hint at some problems, however. For instance, during Hurricanes Gustav and Ike, state officials in Texas said it was the local government's responsibility to set up distribution points for supplies. However, the local government claimed it was unaware of this responsibility. Such confusion may indicate that the NRF still does not clearly articulate the roles and responsibilities of state and local governments during emergencies and disasters. Other, more serious criticisms of the NRF have surfaced since its implementation. A report issued by the Inspector General of DHS stated that some of the decisions made by FEMA during the response to Hurricane Ike did not adhere to certain principles set forth in the NRF. The following section discusses these in greater depth and highlights issues Congress might examine or policy options it might consider. One frequent criticism of the NRF is the ambiguity surrounding the relationship and role of the Federal Coordinating Officer (FCO) and the Principle Federal Officer (PFO). The FCO determines the types of relief most urgently needed, establishes field offices, and coordinates relief efforts. The FCO position is authorized by the Stafford Act. Immediately upon declaring a major disaster, Section 302(a) of the Stafford Act requires the President to appoint an FCO. The PFO, on the other hand, is not a legislatively authorized position. Rather, the PFO position was created by DHS in the NRP. The PFO is designated by the Secretary of DHS, represents the Secretary as the leading federal official, and serves as the primary point of contact for state and local officials. During Hurricane Katrina, Michael Brown, who was serving as the Director of FEMA, was additionally designated as the PFO. William Lokey served as the FCO for Louisiana. To some observers (such as the Inspector general for DHS), these roles created a great deal of confusion during Hurricane Katrina, because it appeared that two people were in charge of the relief operations. Despite criticisms of the position, DHS made the decision to retain the PFO in the NRF. The decision spurred congressional concern prompting several attempts to clarify or abolish the PFO position. For example, Section 526 of the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ) states that "none of the funds provided by this or previous appropriations Acts shall be used to fund any position designated as a Principal Federal Official for any Robert T. Stafford Disaster Relief and Emergency Assistance Act declared disasters or emergencies." Persistent congressional oversight and legislative efforts may have resolved the issue. In a hearing before the Subcommittee on Economic Development, Public Buildings, and Emergency Management Committee on Transportation and Infrastructure FEMA Administrator Craig Fugate stated that DHS has determined that the PFO position would not be used for an emergency or major disaster under the Stafford Act and that planning and response documents were in the process of being updated to reflect that decision. A criticism of the NRP was that input from nonfederal stakeholders, such as state and local governments, nonprofit groups, and the private sector, was poorly integrated into the document. Congress addressed this issue in Section 653 of the Post-Katrina Act, where Congress required DHS and FEMA to develop operational plans with state, local, and tribal government officials. According to a GAO report, DHS initially included nonfederal stakeholder input in the creation of the NRF, but later "deviated" from the process. Rather than disseminating the first draft of the NRF to stakeholders, DHS conducted an internal review of the document. GAO found that the issuance of a later draft to nonfederal stakeholders was delayed, reducing the amount of time for the stakeholders to respond with comments on the draft. Additionally, GAO reported that DHS failed to establish FEMA's National Advisory Council (NAC) by the December 2006 deadline that was set forth in Section 508 of the Post-Katrina Act. According to the act, the NAC is responsible for incorporating the input of state, local, and tribal governments and the private sector in the development and revision of the NRF. The importance of meeting the congressional mandate has been addressed by one analyst. Donald Kettl, a public policy professor at the University of Pennsylvania, has emphasized the importance of including local officials in the planning process. According to Kettl, "no amount of national planning can side-step the fact that ... the first indicator that something bad is happening is a report from the frontlines." In consideration of these conclusions, some may argue that failing to integrate feedback from local emergency officials could (1) omit hazards that are known at the local level but not recognized by federal officials, (2) miss an opportunity to integrate the lessons learned from local responders who have first-hand experience with emergencies and disasters, and (3) fail to establish "buy-in" to the plan at the state and local level thereby creating a possible reluctance to execute the plan faithfully. If the issue of nonfederal stakeholder input were of concern to Congress, it might move to conduct oversight on the extent to which DHS and FEMA are utilizing the NAC and incorporating nonfederal stakeholders in all aspects of national emergency planning and revision. In testimony before the House Homeland Security Subcommittee on Emergency Preparedness, Science and Technology, one emergency professional pointed out that there is a gap in the level of emergency readiness between adult and pediatric care. He noted that children are more vulnerable to hazardous materials than adults, have unique treatment needs, and require care from providers who have been specifically trained to meet these needs. The witness stated, however, that federal, state, and local efforts in disaster planning have generally overlooked the unique needs of children. Separately, Mark Shriver, Vice President and Managing Director of Save the Children's U.S. Programs, has stated that children are vulnerable during emergencies and evacuations. According to Shriver, the needs of children are commonly overlooked before, during, and after a disaster. Shelters, for example, often have unsanitary conditions, and many communities lack sufficient stockpiles of diapers, formula, pediatric medications, and child-size respirators. In various legislative provisions, Congress has focused on the needs of children during disasters. For example, the Post-Katrina Act contains a provision to reunite children with their families by establishing, within the National Center for Missing and Exploited Children, a new National Emergency Child Locator Center. Congress addressed the subject again in the Consolidated Appropriations Act, 2008. Division G, Section 603 of the act establishes the National Commission on Children and Disasters. The purpose of the Commission is to conduct a comprehensive study to examine and assess the needs of children during disasters and submit a report to the President and Congress. Under the NRF, the needs of children are addressed in ESF #6 and #13. The support of children's needs in ESF #6 is delegated to several nonprofit organizations, including Catholic Charities, Feed the Children, Save the Children, and the United Methodist Committee on Relief (UMCOR). One of the functions of ESF #13 is to protect children. Under the annex, the National Center for Missing and Exploited Children (NCMEC), a private sector organization, is responsible for preventing child abduction and sexual exploitation, and helping locate missing children. Congress might consider how well the issue of child protection in disasters is addressed in the NRF annexes. Several observations about the NRF's current coverage include the following. First, there are no primary agencies designated as responsible for addressing children's needs. Only supporting agencies have this designation. Second, some may argue that the annexes are flawed because the Public Health and Medical Services Annex (ESF #8) and Search and Rescue Annex (ESF #9) do not explicitly mention children in their various functions. Third, some may argue that having multiple annexes focused on the needs of children may create service gaps, and that when several organizations are assigned with responsibility, it becomes unclear what agency will take the lead, and what functions these agencies are carrying out. In addition, they may argue that having multiple organizations creates unnecessary duplication. Having the NRF available online appears to have some benefits. Emergencies and disasters are fluid events and having a document capable of adapting to the needs created by unique emergencies and disasters would seem to add a degree of flexibility to the NRF. It also gives users easy access to the document. Users can also sign up for email alerts to be informed of changes in the NRF. However, it is unclear what mechanisms are in place to ensure users who visit the website infrequently, or do not sign up for alerts, are informed of NRF modifications or changes. Is it possible that a state or locality may use protocols that have been removed or revised? The NRF is always in effect, whereas the NRP had to be invoked when an emergency or disaster struck. According to DHS, this has the benefit of speeding response time because it eliminates the need to wait for some form of announcement that the plan is in effect. Some may argue that a plan that is always in effect lacks a triggering mechanism to alert responders and create situational awareness. Does the NRF benefit response activities by always being in effect? The Post-Katrina Act requires the Administrator of FEMA to submit to Congress annual reports that identify the resources needed to enhance regional offices and undertake planning, training, surge capacity, and logistics. Reporting must also include information about state compliance with the NRF and the extent to which the use of federal assistance during the preceding fiscal year achieved preparedness priorities. Additionally, homeland security grants require broad state compliance with national preparedness policy. Some may argue that emergency management practices are strengthened when states and localities adopt federal standards for emergency preparedness and response. Others may argue that mandating compliance has at least two negative consequences. First, not all states have the same set of hazards. A one-size-fits-all approach may not be the best method of addressing hazards, because states and localities are better positioned to make decisions about how to conduct emergency planning and response. Second, requiring compliance and creating standards increases federal involvement in emergency policy. Again, some may argue this is beneficial, because it can help save lives and reduce property loss, but others might argue that the requirements infringe on state sovereignty. Incident Annexes in the NRF are primarily oriented toward terrorism. Since Hurricane Katrina, some have argued that there has been an emphasis on planning for high-impact, low-probability incidents at the expense of low-impact, high-probability incidents. Additionally, it is possible that planning for terrorism underemphasizes preparedness for natural disasters. For example, in testimony before the House Natural Resources Committee, David Applegate pointed out that earthquakes are among the most expensive of natural disasters in terms of destruction. According to Applegate, this underscores the importance of preparedness and mitigation; however, there is no Incident Annex addressing earthquakes. Concern over a potential earthquake on the New Madrid fault line has persuaded officials to use an earthquake scenario for the 2011 National Level Exercise in Arkansas. An earthquake annex could be used to guide the exercise and assess response capabilities. The President of the International Association of Emergency Managers (IAEM) and Director of Emergency Management, Hillsborough County, Florida, also addressed the terrorism emphasis. Director Larry Gispert responded favorably to President-elect Obama's plan to support first-responders, prepare effective emergency response plans, improve interoperable communications systems, and work with state and local governments and the private sector, and allocate funds based on risk. Gispert objected to plans that focus on terrorism because state and local emergency managers primarily deal with natural disasters. According to Gispert, the plan would have the benefit of allowing state and local governments to prepare for both types of incidents rather than predominantly terrorism. On the other hand, others would argue that planning for terrorism is of the utmost importance and that a terrorist attack would have the same consequences as a natural disaster. They may conclude that planning and preparedness for terrorism can be applied toward natural disasters and therefore fits the all-hazards model of emergency management. If Congress were concerned about the possibility that preparedness for natural disasters is being hampered by overemphasizing terrorism in emergency plans, or that resources for natural disaster preparedness are being diverted to prepare for terrorist events, Congress may elect to have FEMA develop natural disaster annexes, or incorporate more natural disaster planning in existing Incident Annexes. In response to directives from Congress and the President, the Bush Administration issued the NRF to establish a new approach to coordinate federal and nonfederal entities in times of emergencies and major disasters. The NRF does appear to respond to some of the challenges identified by Congress and others. The document is more concise, has less jargon, and has made an attempt to clarify roles and responsibilities. Additionally, anecdotal reports following Gustav and Ike indicate the coordination of emergency activities among federal, state, and local governments has improved. On the other hand, parts of the NRF may have retained some of the problems associated with the NRP. The NRF still contains the PFO arrangement, terrorism and natural disasters are not given equal treatment, and nonfederal stakeholder input appears to be lacking. Some may contend that insufficient implementation studies have been conducted on the NRF to assess its efficacy. Others might argue the NRF has yet to be tested by a large-scale disaster to form a clear picture of its effectiveness; the only way to find out whether the NRF is an improvement over the NRP may be to subject it to a major catastrophe comparable to Hurricanes Andrew or Katrina.

In response to the terrorist attacks of September 11, 2001, Congress and President Bush moved to consolidate numerous federal emergency plans into a single, unified national response plan. The end product of these efforts was the National Response Plan (NRP), which established broad lines of authority for agencies responding to emergencies and major disasters. Perceived problems with the implementation of the NRP during Hurricane Katrina led Congress to enact the Post-Katrina Management Reform Act (P.L. 109-295) to integrate preparedness and response authorities. The legislation directed DHS to issue a successor plan to the NRP entitled the National Response Framework (NRF). Implemented in March 2008, the NRF establishes a new approach to coordinating federal and nonfederal resources and entities. The Department of Homeland Security (DHS) maintains that the NRF is an improvement over the NRP. Some, however, assert that the NRF is not an improvement because it does not fully address the problems and challenges associated with the NRP. This report discusses how national response planning documents have evolved over time and describes the authorities that shape the NRF. Several issue areas that might be examined for potential lawmaking and oversight concerning the NRF are also highlighted. This report will be updated as significant legislative or administrative changes occur.

Tainted water and unsanitary practices are at the root of many health problems in the developing world and are hindering U.S. and international global health efforts. Congressional interest in combating this problem is strong, evidenced by the passage of P.L. 109-121 , The Senator Paul Simon Water for the Poor Act of 2005 (Water for the Poor Act). The law amended the Foreign Assistance Act of 1961 to make the provision of "affordable and equitable access to safe water and sanitation in developing countries" a U.S. foreign policy priority. The act also called for U.S. agencies to work toward halving the 2009 level of people without access to clean drinking water and sanitation by 2015. Key provisions of the law direct the Secretary of State, in consultation with the U.S. Agency for International Development (USAID) and other implementing agencies, to develop and implement a strategy that boosts access to safe drinking water and sanitation; require the Department of State to report annually on U.S. efforts to expand global access to clean drinking water and sanitation; and urge USAID to raise resources for and attention on water and sanitation, and better integrate water, sanitation, and hygiene (WASH) activities within global health efforts. Congressional support for the legislation was motivated, in part, by concerns that the United States had not given WASH programs sufficient priority and that these efforts needed to be better aligned with U.S. foreign aid programs, particularly global health efforts. Support for the act was also tied to previously established commitments by the United States to support attainment of the Millennium Development Goals. The Obama Administration continues to demonstrate support for advancing access to clean water and sanitation. On World Water Day in March 2010, Secretary of State Hillary Clinton pledged to elevate water issues and later called on Under Secretary for Democracy and Global Affairs Maria Otero and USAID Administrator Rajiv Shah to spearhead U.S. efforts to address water issues; develop a comprehensive approach to addressing water-related challenges; identify areas of investment that can deliver sustainable, measurable results; and maintain a long-term perspective on solving water-related issues. In March 2012, USAID announced that it had joined the Sanitation and Water for All (SWA) partnership—a coalition of governments, donors, civil society, and development groups committed to advancing sustainable access to clean drinking water and sanitation. Generally speaking, water-related efforts can be grouped into three areas: water supply, sanitation, and hygiene (WASH), water resource management, and water productivity. WASH activities are aimed at addressing the health consequences of inadequate access to clean drinking water and sanitation. Water resource management programs promote policy and legal reforms, build local capacity, and strengthen water resources planning, management, and governance. Water productivity projects seek to make water use more efficient for the preservation of water reserves, and reduce pollution and other threats to water quality for the protection of water supplies. This report focuses on bilateral WASH schemes authorized by the Water for the Poor Act. These programs are monitored and reported by the Department of State and implemented primarily by USAID and the Millennium Challenge Corporation (MCC). In FY2009, USAID and MCC accounted for roughly 90% of all U.S. spending on the issue. Broader water-related efforts supported by other U.S. agencies and departments are not addressed, nor are water and sanitation efforts implemented by a variety of international actors—including multilateral groups like the World Bank, private businesses like Procter and Gamble, and foundations like the Bill & Melinda Gates Foundation. This report identifies some issues that donors and U.S. agencies face while carrying out global drinking water and sanitation projects. Roughly 780 million people lack access to clean drinking water and some 2.5 billion people are without adequate sanitation facilities. The World Health Organization (WHO) estimates 6.3% of all deaths are caused by limited access to safe drinking water; improved sanitation facilities and hygiene practices; and water management practices that reduce the transmission of water-borne diseases. According to the United Nations (U.N.), more than 14,000 people die daily from water-borne illnesses. The bulk of these deaths are related to a number of infections, including 2 billion cases of intestinal worms; 5 million cases of lymphatic filariasis and trachoma, each; 1.4 million child diarrheal deaths; and 500,000 deaths from malaria. Children are especially susceptible to unsafe water and poor sanitation. Related death and disability rates are twice as high among children younger than 14. Some 5,000 children die daily from preventable water- and sanitation-related diseases, 90% of whom die before age five. WHO believes the impact of unclean water and unsanitary practices is underestimated, because of weak data collection and insufficient research on several WASH issues. WHO also expects global phenomena, such as climate change, to exacerbate WASH-related morbidity and mortality by creating hospitable environments for disease-carrying pests and facilitating the spread of water-related diseases. Water advocates link inadequate access to potable water and sanitation with poverty because it affects many aspects of people's lives. These areas include Health —Several diseases, including diarrhea and several neglected tropical diseases, are contracted through contact with bacteria-infested water and soil and cause millions of deaths and illnesses annually. At the same time, mosquitoes, flies, and other vectors breed in water. Good sewerage and drainage systems can eliminate breeding grounds and water can be treated to remove bacteria found in tainted water. Agriculture and economic growth —Parasitic worms afflict more than 1 billion people annually and cause a variety of ailments, including stunting, malnutrition, and anemia. Worm eggs are deposited in the soil when humans carrying the worms defecate on the ground. Humans can be infected should worms penetrate the skin; they fail to adequately wash their hands before eating and after touching tainted soil; or they eat crops grown in contaminated soil. While fleeing infested fields, farmers may relocate to areas with lower quality soil and less water access and may inadvertently carry the worm eggs with them. Expanded access to improved farming technology (such as irrigation, fertilizers and mechanized farming tools) and improved sanitation facilities can help interrupt the transmission of these diseases. E ducation —Women and children are often tasked with collecting water. While collecting water, children miss school. Following menses, girls without access to sanitation facilities may drop out of school. Access to clean water can minimize the amount of time children spend collecting water and allow more time for education. At the same time, availability of sanitation facilities at schools can help with school completion rates among girls. Conflict —A growing number of conflicts are exacerbated by limited access to water. Increasing demand and greater variability in rainfall can inflame tensions, as seen in Kenya. Regional water management strategies can help deter conflict and improve international relations. In September 2000, the United Nations (U.N.) adopted the Millennium Declaration, which committed member states to support needy countries in reaching eight Millennium Development Goals (MDG) by 2015. Progress toward the eight MDGs is measured through 21 targets and 60 indicators. Target 7C aims to halve, from 2000 levels, the share of people without access to safe drinking water and basic sanitation by 2015. In March 2012, WHO announced the world had met the MDG target for clean water ( Figure 3 ). More than 2 billion people have gained access to improved water sources from 1990 to 2010 (almost half of whom lived in China or India, Figure G -1 ). Despite this worldwide achievement, some regions were not expected to reach the target, particularly much of sub-Saharan Africa and parts of Asia. At the same time, the world is not on track to reach the sanitation targets. While worldwide access to clean drinking water has progressed enough to reach the MDG target, 780 million people remain without access to clean drinking water. Significant disparities exist among and within countries ( Figure 4 ). Roughly 90% or more of populations across Latin America and the Caribbean, Northern Africa, and much of Asia have access to clean drinking water, while an average of 61% of people in sub-Saharan Africa do. Certain segments of the population in sub-Saharan Africa, however, enjoy broad access to clean drinking water. Across 35 countries in sub-Saharan Africa, over 90% of the richest quintile in urban areas use improved water sources and over 60% have piped water on their premises ( Appendix A ). In the poorest rural quintile, however, piped water is non-existent. Use of improved sanitation facilities can help to prevent the spread of diseases that are transmitted through human feces, including intestinal worms and other neglected tropical diseases. Access to these facilities is widespread in most industrialized countries while less than half of the people in much of sub-Saharan Africa and southeast Asia have access ( Figure 5 ). Global progress in achieving sanitation targets has been skewed. South Asia (led primarily by India) made substantial progress, having halved the proportion of its population using unsafe sanitary systems. In 2010, 69% of people in the region had access to improved sanitation services, up from 46% in 1990. Sub-Saharan Africa made the least progress, having decreased the proportion of its population engaged in unsanitary practices by roughly 15%. In 2010, about 30% of people in the region had access to an improved sanitation facility, up from 26%. Nonetheless, open defecation rates were the highest across southern Asia. Roughly 41% of the people in the region practiced open defecation in 2010, down from 67% in 1990. Nonetheless, the region made greater strides than sub-Saharan Africa, which had lower rates (25%), but made the least progress in curbing the practice. Open defecation rates were particularly high among the poor who had the least access to sanitation services and were most likely to practice unsanitary practices, including open defecation ( Appendix A ). According to the Organization for Economic Cooperation and Development (OECD), global funding for water and sanitation efforts has steadily increased since 1971. Pledges in 2010, however, dropped from 2009 levels ( Figure 6 ). In 2010, members of the OECD and multilateral agencies committed $7.8 billion for improving global access to clean drinking water and sanitation, down from $8.7 billion in 2009 ( Appendix B ). Roughly 65% of these funds have been disbursed. In 2010, the five largest donors were Japan, Germany, France, the United States, and Spain. The extent to which donors funded these pledges varied. Between 55% and 108% of pledges were funded ( Table 1 ). The World Health Organization estimates that between 2005 and 2015, it would cost $72 billion annually to implement and maintain enough water and sanitation schemes to meet the water and sanitation targets. Each year, $18 billion of those funds would be spent on building new systems and $54 billion on maintaining them. Commitments by donors (multilateral organizations and donor countries) on water and sanitation are enough to fund roughly half the amount WHO recommends be spent on building new water and sanitation networks in developing countries. Should the expense of operations and management be considered, however, these funds only meet about 12% of the financial needs. Inadequate investments in operations and management can weaken the impact of water and sanitation projects and shorten the lifespan of water and sanitation projects (see " Sustainability/Prioritizing Operations and Management "). Congressional support for improving access to clean water and sanitation has grown, particularly since FY2003 when Congress directed USAID to make available $100 million for WASH efforts through its Development Assistance account (see Consolidated Appropriations Resolution, 2003, P.L. 108-7 ). In FY2006, Congress raised that amount to $220 million. In FY2008, Congress boosted funding for WASH projects again, appropriating not less than $300 million for safe drinking water and sanitation supply projects and directing that not less than $125 million of those funds be spent in sub-Saharan Africa. In each of FY2010-FY2012, Congress appropriated not less than $315 million for water and sanitation programs. Obligations for water and sanitation activities typically exceed appropriated levels (see " U.S. Agency for International Development "). In FY2011, for example, USAID obligated $597 million to the water sector, including $343.7 million for water and sanitation efforts; down from $642 million in FY2010, when some $520.4 million was obligated to WASH programs. Budgetary increases for water and sanitation efforts followed enactment of The Senator Paul Simon Water for the Poor Act of 2005 ( P.L. 109-121 ), which made the provision of "affordable and equitable access to safe water and sanitation in developing countries" a U.S. foreign policy priority. The act amended the Foreign Assistance Act of 1961 and the Agricultural Trade Development and Assistance Act of 1954, and called for U.S. agencies to seek to halve the proportion of people without access to clean water and sanitation by 2015 (from 2009 levels). The act also called for the Secretary of State, in consultation with USAID and other implementing agencies, to develop and implement a strategy to increase affordable and equitable access to safe drinking water and sanitation. The strategy is to include specific and measurable goals, benchmarks, and timetables for improving access to clean water and sanitation; an evaluation of ongoing activities; an assessment of the funding and types of assistance needed to achieve the goals, benchmarks, and timetables related to the strategy; methods to coordinate and integrate U.S. water and sanitation programs with other U.S. development programs, and with other related donor programs; a list of high-priority countries with the greatest need for access to safe water and sanitation and where assistance can make the greatest impact; and an appraisal of recipient government commitments to policies or reforms that support affordable and equitable access to safe water and sanitation. the Secretary of State to submit annual reports to Congress on the implementation of the strategy, including the amount the United States obligates for water and sanitation activities in each country; progress made in improving access to clean water and sanitation; and any changes to the strategy. In the first session of the 112 th Congress, on March 2011, Senator Richard Durbin introduced the proposed Water for the World Act of 2011 ( S. 641 ). The act calls for the United States to provide, within six years, safe water and sanitation to 100 million people, among other things. For a detailed synopsis of the bill, see Appendix C . In FY2010, the United States spent some $953 million on water and sanitation programs worldwide, of which $898 million was obligated by USAID and MCC. This report focuses on the programs supported by these two agencies, though other agencies also take part in the U.S. response. Other sources of U.S. support include contributions to international organizations and participation in several development banks. In FY2010, for example, the United States contributed approximately $40 million to nine U.N. organizations in support of international water, sanitation, and emergency relief efforts. It is important to note that information on U.S. global WASH activities is not always disaggregated from broader water efforts. In this report, efforts related to drinking water, sanitation, and hygiene will be specifically referred to as WASH. Otherwise, references to water programs refer to U.S. efforts to improve access to clean water through any number of efforts including WASH, water resource management, and water productivity. In the FY2012 Congressional Budget Justification (CBJ) for Foreign Operations, the State Department published a set of targets for expanding access to clean drinking water. According to the report, the United States sought to extend clean drinking water to more than 5 million in 2010, but only reached 3 million people ( Table 2 ). More than 90% of those assisted resided in Africa or Asia ( Figure 7 ). The department attributed the bulk of the shortfall to delays in projects throughout Pakistan, West Bank and Gaza, and the Africa Regional office. In Pakistan and West Bank and Gaza, delays were caused by shifts in the focus of the programs. The Africa Regional program encountered delays launching a Global Water Development Alliance between Coca-Cola and USAID to support water-related programs in 19 countries. On the other hand, the State Department noted advancements in other areas, particularly in Kenya, where a water treatment project exceeded its target by 252%. The State Department also noted the Coca-Cola partnership "has leveraged $15 million in private funds to provide improved access to clean water for 500,00 people." The State Department, USAID, and MCC each play a unique role in reaching the goals indicated in the Water for the Poor Act. The State Department plays a convening and oversight role, USAID works with host governments to expand access to potable water and sanitation and funds related activities, and MCC supports broader national development plans that include WASH activities. As specified by the Water for the Poor Act, the U.S. strategy for expanding access to potable water and sanitation is being jointly developed by the State Department and USAID while USAID and MCC serve as the primary implementers of designated efforts. Each year, the State Department reports to Congress progress made by the federal government in implementing the Water for the Poor Act. Though the report is intended to report on government-wide water and sanitation activities, comprehensive information is only available for USAID-supported efforts with a summary table of water projects supported by MCC. The most recent report, released in June 2011, documents activities supported from FY2006 to FY2010. In addition to its oversight role, the Department of State plays an important role in expanding access to water and sanitation through diplomatic channels. U.S. officials emphasized the importance of addressing water issues early in the Obama Administration. On World Water Day in March 2010, for example, Secretary of State Hillary Clinton called for a five-pronged water strategy that focused on building capacity at the local, national, and regional levels; bolstering water diplomacy; mobilizing financial support at the local, national, and regional levels; researching and developing improved technologies to address water-related issues; and broadening partnerships. Secretary Clinton also pledged to elevate water issues within the Global Partnerships Initiative—an effort to convene actors from various regions and sectors to work on issues of common interest. While making a speech during World Water Day on March 22, 2011, Secretary Clinton underscored the importance of leveraging partnerships to resolve water issues and signed a memorandum of understanding (MOU) with the World Bank to enhance collaboration between the United States and the World Bank on water efforts. USAID is the lead implementer of U.S. international clean drinking water and sanitation programs. These efforts are one component of broader efforts to address water issues, including water scarcity, water degradation, and inadequate water network systems. USAID groups its water programs into three sectors: water supply and sanitation, water resource management, and water productivity. Table 3 describes activities that are typically supported in each of these sectors. Roughly 70% of USAID's budget is spent on water supply and sanitation, which support improvements in water purification, public taps, small-scale piped water, tube wells, small sewer systems, septic tanks, and hygienic latrines. USAID also invests in education programs and public awareness campaigns that promote good sanitation and hygiene. Every year, USAID reports to Congress how it spent funds on global water activities, which are funded through several accounts. For a description of these accounts, see Appendix D . Annual requests for water-related programs, however, do not specify the type of support that will be funded and tend to be less than half the obligated amounts after funding from all sources is considered, including supplemental appropriations. In FY2011, for example, the President requested $260.4 million for water programs. By the end of the fiscal year, however, USAID had obligated $596.7 million for water activities, including $343.8 million for WASH ( Table 4 ). Congress appropriated not less than $315 million for global water and sanitation programs in FY2012, slightly more than requested levels ($302 million). In September 2010, the U.S. Government Accountability Office (GAO) released a report that analyzed U.S. global water and sanitation efforts from FY2004 through FY2009. This section summarizes these findings and adds details from the State Department June 2011 report to offer a review of USAID global water and sanitation programs from FY2004 through FY2010. From FY2006 to FY2009, USAID made the highest investments related to water and sanitation in the regions of the Middle East and North Africa (ME&NA) and sub-Saharan Africa ( Figure 8 ). The State Department report of June 2011, however, noted delayed WASH projects in the ME&NA led to lower obligation levels in the region in FY2010. At the same time in that fiscal year, investments in Asia & Pacific (A&P) rose precipitously from FY2009. In 2010, more than half of all funds for water and sanitation programs were obligated in 10 countries ( Figure 9 ). The Millennium Challenge Corporation (MCC) was established in 2004 as an alternative approach to traditional foreign aid. Whereas USAID seeks to create an enabling environment that facilitates development, MCC awards aid to those countries that are demonstrating good governance, encouraging economic freedom, and investing in their people. The development programs supported by MCC are conceived and implemented by the host countries, whereas development programs supported by USAID are usually developed and implemented by non-governmental organizations and other partners. Through multi-year funding, MCC has considerable flexibility in determining how to allocate its resources, whereas USAID relies on annual appropriations to fund its development programs, which are often shaped by congressional directives. Since MCC-funded compacts are country-driven, MCC does not designate priority areas, such as health, food, or water. Since its inception, MCC has approved multi-year grant agreements, known as compacts and threshold agreements, in several countries worth more than $8 billion. These agreements support country-driven development projects across several sectors including agriculture and irrigation, transportation (roads, bridges, ports), water supply and sanitation, access to health, finance and enterprise development, anticorruption initiatives, land rights and access, and access to education. Roughly $803 million of those funds are aimed at water and sanitation projects in seven countries: El Salvador, Georgia, Ghana, Lesotho, Jordan, Mozambique, and Tanzania. The water and sanitation projects support activities that range from improving complex water networks and wastewater systems (Jordan) to implementing more rudimentary approaches like drilling wells and boreholes (Ghana). Appendix E summarizes progress made in MCC-supported water projects, based on information made available on their website on July 7, 2011. The Water for the Poor Act reflected congressional support for the Millennium Development Goals by calling for U.S. programs to halve the 2009 level of people without access to clean water and sanitation by 2015. The act provided general guidance on how this should be done, but allowed flexibility on what steps implementing agencies should take to reach the goal. While the legislation did not specify how water funding should be spent, it called for increasing investments in water and sanitation activities, particularly in sub-Saharan African countries. Several groups have debated how to improve U.S. implementation of the Water for the Poor Act. This section discusses key issues raised by observers, which focus on clarifying roles and responsibilities of implementing agencies; balancing funding between WASH and other water areas; balancing regional investments; and verifying program data. The Water for the Poor Act directs the Secretary of State to develop a water strategy in conjunction with USAID and other implementing partners and to annually submit a report to Congress delineating U.S. progress in expanding access to clean water and sanitation. At the same time, the act calls on USAID to allocate greater resources to water and sanitation programs. The act does not specify, however, who has authority over funding and implementation. Under the President's Plan for Emergency AIDS Relief (PEPFAR), for example, Congress appropriates the bulk of global HIV/AIDS funds to the Department of State. The Global AIDS Coordinator at the Department of State distributes most of these resources out to several U.S. agencies that implement the international HIV/AIDS programs while the State Department oversees and reports on U.S. progress in tackling HIV/AIDS worldwide. The Water for the Poor Act and the proposed Water for the World Act call on the State Department to develop targets for improving global access to water and sanitation. Each act also designates the State Department as the agency responsible for enforcing implementation, but neither provides budgetary authority. Without a mandate, the State Department can not dictate how agencies spend water resources or coordinate program implementation across agencies. At the same time, some observers point out Congress has not appropriated funds specifically for implementing the act. A number of supporters are concerned USAID might reduce the budgets of other non-WASH activities to meet statutory requirements. Following the enactment of the Water for the Poor Act, spending by USAID on water management and productivity declined while funding for WASH activities increased. USAID reports that it has increasingly concentrated its water and sanitation resources on WASH efforts to comply with appropriations language that emphasizes WASH. Today, roughly 70% of these investments are aimed at improving water supply and sanitation. WASH funds may be used to build new water and sanitation systems, but funds provided for water resource management and productivity are used to maintain these systems and identify where water scarcity exists. Whether this apportionment for water-related projects is appropriate is a key subject of debate. Some groups advocate for increasing support for water management while others believe investing in water management distracts from efforts to achieve public health goals. Congressional language does not bar investments in operations and management. In fact, language in the Water for the Poor Act specifies that related U.S. assistance shall support the design, construction, maintenance, upkeep, repair, and operation of water delivery and sanitation systems; improve the safety and reliability of water supplies, including environmental management; and improve the capacity of recipient governments and local communities, including capacity-building programs for improved water resource management. Congress might consider clarifying how water funds are to be used through an amended Water for the Poor Act, annual appropriations legislation, or through the proposed Water for the World Act. On the other hand, some observers maintain that removing legislative directives might enable USAID to better balance water funding across water sectors. At the same time, fewer congressional mandates might also allow USAID to apply funds, as needed, to meet other development priorities that affect successful implementation of WASH efforts. In FY2009, USAID obligated $482 million for water and sanitation with about half of those investments provided in five countries or territories ( Figure 9 ): West Bank & Gaza ($102.2 million), Jordan ($53.5 million), Pakistan ($48.0 million), Sudan ($38.9 million), and Afghanistan ($22.6 million). USAID and the Department of State designated 31 countries as "high priority" in FY2009. GAO raised questions, however, about how the priority countries were selected and noted that 4 of the 10 countries that the United Nations concluded had the greatest need for access to improved water sources were not among the high priority countries, and 7 of the 10 countries that U.N. data show with greatest need for access to improved sanitation were also not counted among the high priority countries. At the same time, GAO noted that several of the "high priority countries" were not among those that the United Nations considered with the greatest need for water or sanitation. In 6 of the 31 high priority countries—Lebanon, Georgia, Armenia, Jordan, and the West Bank and Gaza—at least 76% of the population had access to improved sanitation facilities ( Appendix F ). At the same time, two of these territories—Jordan and West Bank & Gaza—were among the top 10 recipients of WASH resources and received 32% of USAID WASH funds in 2010. Similarly, in 12 of the 31 high priority countries, at least 79% of the population had access to improved water. Five of these territories were among the top 10 recipients of WASH resources and accounted for nearly half of all USAID WASH spending. The Water for the Poor Act specifies that water and sanitation assistance is to be focused toward "the countries, locales, and people with the greatest need." Some observers assert that the concentration of U.S. WASH resources in Middle Eastern countries with high water and sanitation access is motivated more by strategic geopolitical reasons than by need. Several groups call on USAID to adhere to the legislative language, adjust the disbursement of its resources, and allot greater proportions to those countries most in need, particularly in sub-Saharan Africa. Other experts maintain congressional directives limit the ability of USAID to adjust WASH resources. At the same time, another group points out the United States considers a number of factors when determining the level and type of investment, including opportunities to leverage U.S. resources and capacity to sustain the programs. At the root of this debate are questions about whether need should outweigh other mitigating factors like political will and other factors that contribute to program success like long-term capacity of recipient countries to assume ownership of water and sanitation programs. Water and sanitation projects are considered by USAID to be a "cross-cutting issue" and are funded through several accounts that are jointly managed by USAID and the Department of State, including Assistance for Eastern Europe and Central Asia (AEECA), Development Assistance (DA), Economic Support Fund (ESF), Food for Peace (FFP), and Global Health and Child Survival (GHCS). This means that USAID and the State Department attempt to address the multi-faceted impacts of limited access to clean water and sanitation through a variety of programs, bureaus, and budgetary sources. The bulk of spending on water and sanitation-related activities is funded primarily through the DA and ESF accounts. Each account is funded at different levels and has distinct objectives; see Appendix D . As such, water activities are implemented as part of the goals and objectives of the overarching account. Some believe a government-wide water and sanitation strategy might help to make U.S. international water and sanitation responses more cohesive, effective, and balanced. U.N. agencies responsible for monitoring progress in attaining the MDGs expressed some skepticism about water and sanitation data (see Appendix G ). Furthermore, WHO discourages attempts to compare data released in each annual report, because efforts to improve data collection are ongoing and each report incorporates new information. Uncertainty about these data raises several questions regarding water and sanitation programs in general and U.S. WASH programs in particular, including: How will the United States know when project goals are met? How will implementing U.S. agencies determine whether projects are reaching those most in need? How will the United States confirm the projects are designed to meet the needs of the target population? The GAO recognized this challenge in its 2010 report on the Water for the Poor Act. Specifically, the report indicated that the Department of State had not yet "developed specific and measurable goals, benchmarks, and timetables to assess its progress." Observers urge governments and donors to strengthen data collection and information systems and bolster operational research efforts. Regarding data collection and evaluation, Congress might consider providing sufficient resources for USAID and other implementing agencies to conduct rigorous field surveys. WHO and UNICEF found that such efforts are useful, but expensive. To drive down the expense, WHO calls for developing innovative, field-ready tools that could be used to rapidly and reliably measure water quality at a low cost. Ensuring adequate funding for operation and maintenance is an important, but often overlooked, part of sustaining access to clean drinking water and sanitation. While investments in water and sanitation have been escalating since the launch of the Millennium Development Goals, several experts point out that much of this spending is aimed at developing new water and sanitation systems and little is budgeted for operation and maintenance (O&M). As a result, these facilities often fail before their expected lifetimes and quality of service is compromised by deteriorated pipes and machinery that were not sufficiently cared for due to short supply of maintenance equipment, vehicles, and spare parts. Underfunding operations and management of water supply creates a cyclical effect. As countries attempt to expand water and sanitation services (often through new investments by donors), governments must seek ways to cover the costs of operation and maintenance, as well as capital costs. There is often little support within national budget ministries and among the general public to increase service charges, particularly when quality of service is poor. At the same time, donors expect governments to cover O&M expenses. Poorly defined agreements among donors and recipient countries regarding roles and responsibilities for operating and maintaining water and sanitation systems are a key contributor to poorly functioning systems and complicate efforts to sustain advancements made in broadening use of clean water and safe sanitation systems. If enacted, the proposed Water for the World Act might address several of the concerns raised by observers regarding the implementation of the Water for the Poor Act, but several issues remain. Water and sanitation goals. The Water for the Poor Act provides a broad goal for improving access to clean water and sanitation but does not specify how the United States might measure progress in attaining the goal. An option Congress might consider would be to specify what outcomes should emerge from U.S. water and sanitation efforts, particularly those that measure impacts on the local community (e.g., Do unsanitary practices or use of unclean water abate following project implementation?); how long the tools (handpumps, wells, etc.) remain operational; and the connection between WASH outcomes and health improvements, for example, reductions in diarrhea cases. Balanced water sector funding . Annual reports to Congress on U.S. water and sanitation efforts seem to reflect a perception that congressional support for water and sanitation eclipses support for other efforts, particularly water management and productivity. Language in the Water for the Poor Act, however, indicates support for improving the safe and efficient use of water and sanitation systems. The proposed Water for the World Act appears to address this ambiguity and emphasizes capacity building and water resource management. Congress might consider amending the Water for the Poor Act to clarify how water and sanitation resources should be spent in light of diminished investments in water resource management. At the same time, some advocates call for a removal of all statutory language that directs how funds should be spent. Connect authorizing and appropriating language. Both the Water for the Poor Act and the proposed Water for the World Act, as introduced, outline a number of goals and actions for the Administration in relationship to improving global access to clean water and sanitation. Neither act, however, authorizes funds to support these efforts. Some fear USAID might siphon funds from other development programs to meet the goals of the act. Congress might consider authorizing and appropriating additional funds to facilitate attainment of the goals outlined in the Water for the Poor Act and taking the same action if Congress passes the proposed Water for the World Act. Congress might also consider authorizing and appropriating gradual funding increases to extend time for planning and absorbing resources. Multi-year funding authority. Goals and targets are established by considering a number of long-term action plans. It is difficult for USAID to develop multi-year plans, however, while receiving annual appropriations. Without funding security, agencies are uncertain about what steps can be taken to reach program goals. Congress might consider authorizing multi-year funding to facilitate achievement of goals established in the Water for the Poor Act. R eporting requirements. As discussed in " Water for the Poor Act, Implementing Agencies ," reporting by the State Department on U.S. progress on improving access to clean water and sanitation worldwide focuses almost exclusively on USAID with limited discussion about MCC activities. Congress might consider directing the State Department to include additional details about other U.S. government (USG) water and sanitation efforts, particularly those conducted by agencies like the Army Corps of Engineers that provide significant resources. In FY2009, for example, the agency obligated an estimated $54 million on water and sanitation efforts. The proposed Water for the World Act specifies that the report should include information on all implementing agencies. Congress might also consider how to address incomplete compliance with reporting requirements. GAO reports, for example, that the State Department has neither developed a budget for attaining goals outlined in the Water for the Poor Act nor outlined specific and measurable goals, benchmarks, and timetables to assess WASH programs. Further, GAO indicates none of the annual reports to Congress include performance measures. The Congressional Budget Office (CBO) estimated that the Paul Simon Water for the World Act ( S. 624 ), which was introduced in the 111 th Congress, reintroduced in the 112 th Congress as S. 641 , and would modify the goals outlined in the Water for Poor Act, would cost roughly $1.3 billion annually. Political will and program sustainability. The detrimental effects of inadequate access to clean drinking water and sanitation have been well-documented. Some observers maintain, however, that limited access to these necessities should not be the main factor for allocating aid. Instead, some analysts urge the U.S. government to invest more heavily in countries that have demonstrated commitment to improving access to clean drinking water and sanitation, capacity to sustain and leverage U.S. investments in these areas, and interest in building public-private partnerships that could advance such efforts. Supporters of these ideas maintain U.S. resources would be better spent on creating an enabling environment (such as encouraging policy reforms) and monitoring and evaluating ongoing efforts. U.S. participation in the SWA partnership may help to advance these goals. The SWA emphasizes country ownership and commitment to addressing water and sanitation issues. Collection of baseline data. As discussed in " Ensuring Accuracy of Data ," experts have expressed some uncertainty about water and sanitation data. Inaccurate data on water needs and use of water resources raises questions about how the United States can (1) accurately measure progress in reaching the needy, (2) ensure WASH projects meet the needs of the community, and (3) make certain U.S. resources are efficiently and properly used. The Water for the Poor Act does not address questions about data accuracy. While the proposed Water for the World Act acknowledges the need to collect baseline data, it does not specify how the United States will collect the data, if at all. Congress might consider providing a separate budget allocation for monitoring and evaluation that would ensure funding is reserved for collecting data across implementing agencies and specify common indicators to reduce costs and harmonize efforts. U.S. and donor coordination. Each agency has a unique role to play in improving water and sanitation conditions. Each annual report to Congress asserts U.S. agencies are coordinating their efforts on water and sanitation but provides no supporting details. Congress might consider providing further guidance on U.S. coordination, which could include discussing the role of Ambassadors in ensuring implementing agencies cooperate with each other, to the extent possible, at all stages of implementation (planning, execution, and monitoring and evaluation); developing joint indicators and coordinated reporting, auditing, and procurement processes, to the extent possible; and illustrating how investments in WASH activities by one agency advance related efforts by another agency (e.g., how MCC investments in wastewater treatment facilities and water distribution networks amplify USAID efforts to decrease water-borne morbidity and mortality). The proposed Water for the World Act calls for the creation of two high-level positions at the Department of State to coordinate U.S. water and sanitation efforts and for USAID Mission Directors to report on the coordination of water and sanitation efforts in high priority countries. Neither of these positions have been granted budgetary oversight authority. Congress might consider what oversight and budgetary duties each official should play. Congress might also consider the importance of U.S. government coordination with other donors. In many developing countries, water and sanitation efforts are primarily funded by foreign donors and the private sector. In Ghana, for example, one estimate indicates between 80% and 90% of spending on water and sanitation is funded by donors, including the private sector. Experts assert that disjointed management of water and sanitation resources contributes to weak oversight of associated activities and resources. The Water for the Poor Act calls for 25% of all spending on water and sanitation activities to be provided by non-federal actors, but does not specify how this is to be accomplished or whether these efforts are to be integrated with U.S. efforts. Appendix A. Water and Sanitation Access in Sub-Saharan Africa, by Wealth and Residence, 2004-2009 Appendix B. Official Development Assistance Commitments for Water and Sanitation, 2005-2010 Appendix C. Summary of S. 641 , The proposed Water for the World Act of 2011 In the first session of the 112 th Congress, on March 2011, Senator Richard Durbin introduced the proposed Water for the World Act of 2011 ( S. 641 ). The act addresses several of the issues observers raised regarding implementation of the Water for the Poor Act. The act calls for the United States to provide, within six years, safe water and sanitation to 100 million people, on a sustainable basis, who had yet to receive such services. The act would also amend the Foreign Assistance Act of 1961 by creating a Senior Advisor for Water at USAID who shall report to the USAID Administrator, replace current Water Coordinator (the initial Senior Advisor shall be the Water Coordinator who is serving at the time of enactment), and be responsible for developing and overseeing U.S. water and sanitation efforts in high priority countries; prioritize water, sanitation, and hygiene activities that build capacity, strengthen institutions, encourage regulatory reform, seek partner collaboration, and are consistent with sound water resource management principles; integrate water strategies with country-specific or regional food security strategies; and ensure that at least 25% of the overall funding necessary to meet the millennium development targets for water and sanitation is provided by non-federal sources, including foreign governments, international institutions, and through partnerships with universities, civil society, and the private sector. creating a Special Coordinator for International Water at the Department of State who shall report to the Under Secretary for Democracy and Global Affairs and replace the current Special Coordinator for Water Resources (the initial Senior Advisor shall be the Special Coordinator for Water Resources who is serving at the time of enactment), and be responsible for overseeing and coordinating the diplomatic policy of the United States with respect to global freshwater issues; and ensure international freshwater issues are represented within the United States government and in key diplomatic, development, and scientific efforts with other nations and multilateral organizations. In addition, the proposed Water for the World Act would amend Section 6 of the Water for the Poor Act, which outlines the development of a U.S. strategy to meet the goals outlined in the Water for the Poor Act. The amended language would mandate the Special Coordinator for International Water to integrate the U.S. water and sanitation strategy into any strategy for global development, global health, or global food security that sets forth or establishes a U.S. mission for global development, guidelines for U.S. assistance, or how development policy will be coordinated with policies governing trade, immigration, and other relevant international issues; assess all U.S. foreign assistance allocated to water and sanitation over three fiscal years preceding enactment, across all United States government agencies and programs, including an assessment of the extent to which U.S. efforts are reaching and supporting the goal of enabling first-time access to safe water and sanitation on a sustainable basis for 100 million people in high priority countries; recommend what the United States Government would need to do to reach 100 million people; and identify best practices for mobilizing and leveraging the financial and technical capacity of business, governments, nongovernmental organizations, and civil society in forming public-private partnerships that measurably increase access to safe, affordable, drinking water and sanitation. The act would also add reporting requirements that call for the USAID Mission Director for each high priority country and for each region containing a country receiving such designation to report annually to Congress on the status of designating safe drinking water and sanitation as a strategic objective; integrating the water strategy into a food security strategy; assigning a USAID employee as in-country water and sanitation manager to coordinate in-country implementation with host country officials, the Department of State, and other relevant United States government agencies; conducting formative and operational research and monitoring and evaluating the effectiveness of programs that provide safe drinking water and sanitation in collaboration with the Centers for Disease Control and Prevention, the Department of Agriculture, the Environmental Protection Agency, the National Oceanic and Atmospheric Administration, and other agencies, as appropriate; and integrating efforts to promote safe drinking water, sanitation, and hygiene with existing foreign assistance programs, as appropriate, including activities focused on food security, HIV/AIDS, malaria, tuberculosis, maternal and child health, food security, and nutritional support. the U.S. Comptroller General to submit to the Committee on Foreign Affairs of the House of Representatives and the Committee on Foreign Relations of the Senate a report on the effectiveness and efficiency of United States efforts to provide safe water and sanitation for developing countries. Appendix D. Description of USAID and State Department Accounts USAID manages a range of budget accounts that are organized largely along functional and regional lines. In addition, USAID co-manages several accounts with the State Department and administers a growing amount of funding transferred from other agencies, such as MCC. Below is a summary of how USAID describes the accounts through which it funds water and sanitation efforts. Assistance for Eastern Europe and the Baltic States (AEEB) , jointly managed by USAID and the State Department, promotes local and regional stability and supports the region's transition into the European and transatlantic mainstream. AEEB also supports post-conflict, health, and environment programs, as well as activities to reduce the threat of organized crime and HIV/AIDS. This account is also known as Support for East European Democracy (SEED). Development Assistance (DA) , managed by USAID, provides sustained support to help countries acquire the knowledge and resources that enable development and nurture indispensable economic, political, and social institutions. Global Health and Child Survival (GHCS) , jointly managed by USAID and the State Department, expands basic health services and strengthens national health systems to significantly improve people's health, especially that of women, children, and other vulnerable populations. Economic Support Fund (ESF) , jointly managed by USAID and the State Department, promotes U.S. economic and political foreign policy interests by financing economic stabilization programs, supporting peace negotiations, and assisting allies and countries that are in transition to democracy. USAID implements most ESF-funded programs, with overall foreign policy guidance from the State Department. P . L . 480 Title II (Food for Peace) , managed by USAID, uses abundant U.S. farm resources and food processing capabilities to enhance food security in the developing world by providing nutritious agricultural commodities. P.L. 480 Title II funds are appropriated to the Department of Agriculture and administered by USAID. Appendix E. MCC Water and Sanitation Compacts by Country Appendix F. Access to Drinking Water & Sanitation, High Priority Countries, FY2009 Appendix G. Measuring and Evaluating WASH Programs: Challenges Clean water and sanitation efforts are implemented by a variety of actors, including donors, governmental groups (at several levels), non-governmental groups, private businesses, and foundations. At present, there is no coordinating body responsible for overseeing international water and sanitation efforts. The Sanitation and Water for All partnership is an attempt to develop a coordinated approach to water and sanitation. Nonetheless, one authoritative body has yet to be formed. As such, a number of challenges remain, including how to ensure the accuracy of WASH data, measure the impact of related programs, and ensure proper use of the resources. Although this section discusses some of the challenges related to WASH programs in general, many of the observations may apply to U.S. bilateral WASH efforts. Measuring Access to Clean Water and Sanitation The implementation, oversight, and maintenance of water and sanitation services can be provided by a number of actors. In some countries, there is no central authority responsible for these services, and municipal or district assemblies—who are primarily responsible for providing services—often subcontract the work with private operators. Because such duties can be fragmented, data can be disjointed and inconsistent. While national statistics offices (NSOs) are typically responsible for maintaining nationwide data on water and sanitation, municipal governments often maintain their own data that may not align with NSOs. Whereas NSOs largely rely on household surveys and census data, municipal governments usually monitor actual use of water and sanitation systems or the number of service connections. Donors and other actors commonly use national data to design WASH projects, although they may not align with municipal records. In Mozambique, for example, government records indicated 72% of the population in Sanga district had access to clean water. Subsequent studies concluded, however, that clean water coverage in the area was 22%. Similarly, official documents indicated 78% of water systems in the Kanungu district were functional, yet monitoring and evaluation studies found 46% of them were capable of extracting water. Measuring the Impact of WASH Programs Debate is intensifying around revising indicators for measuring access to clean water and sanitation. Donors most frequently use the number of beneficiaries as a proxy for measuring the impact of water and sanitation activities. The number of people reached in a program, however, may not adequately reflect impact. Some observers urge donors to monitor the number of people with sustained access to clean water and sanitation rather than only those who gained access in a given year. Counting the proportion of people with access in a given year does not take into account other factors, like population growth. As a result, countries experiencing rapid population growth might improve coverage rates while the count of people with improved access declines. In sub-Saharan Africa, for example, open defecation declined by 11% since 2010. Nonetheless, due to population growth, the number of people practicing open defecation increased by 33 million. Some experts advocate a metric called "water person years" (WPY). This statistic measures the cost and the utility of the initial investment ( Table G -1 ). Other examples include metrics that count the amount of latrines that are functional and continue to be used and the number of hands that are consistently washed. In an effort to take population changes into account the UNICEF and WHO 2012 Water and Sanitation Report began to report "the increase since 1995 in the number of people with access as a proportion of the current (2010) population" rather than counting only the number of people who gained access in a given year. Inadequate investment in clean water and sanitation impacts sustained access. One report contends donors overemphasize expanding coverage while largely ignoring operation and maintenance. Several papers discuss the frequent sighting of idle handpumps—abandoned due to disrepair—littering the landscape of rural areas throughout the developing world. Widely cited estimates indicate that handpump failure rates across sub-Saharan Africa range between 15% and 50%. Research on water pump sustainability is scant, however, and reasons for pump failure vary. Some causes include poorly constructed wells or boreholes; disagreement on who is responsible for operations costs; inability of local caretakers to maintain operations; and poorly constructed water taps requiring frequent repair and replacement of parts. Debates about whether donors should expect countries to maintain water and sanitation systems that they establish can be seen in other foreign aid programs. It is not uncommon to see other goods donated by foreign governments and other entities fall into disrepair. This tension is part of a larger debate about the utility of foreign aid. Ensuring Accuracy of Water and Sanitation Data WHO established microbiological and chemical standards to measure the safety of drinking water. WHO relies on countries to comply with these standards when reporting on clean water usage. After conducting pilot surveys in eight countries, WHO and UNICEF found that countries complied with WHO guidelines 90% of the time when reporting on access to clean water from piped water sources. Compliance rates were lower, however, for other water sources (between 40% and 70% for wells, boreholes, and rain collection). Similar challenges exist with sanitation data. WHO and UNICEF had difficulty, for example, confirming use of improved sanitation systems in China. The Chinese government reported that from 1991 to 2008, rural use of "sanitary latrines" had increased and that the percentage of the population using other types of sanitation facilities like dry latrines and shallow pits had fallen from 84% to 68%. Not enough information was shared, however, to determine whether the facilities met the standards of improved sanitation. As such, there is some uncertainty about the actual number of people with access to improved sanitation in the country. Ambiguity about water and sanitation data in China is important, as the country accounts for a large proportion of those who gained access ( Figure G -1 ).

According to a 2012 report released by the World Health Organization (WHO) and the United Nations Children's Fund (UNICEF), roughly 780 million people around the world lack access to clean drinking water and an estimated 2.5 billion people (roughly 40% of the world's population) are without access to safe sanitation facilities. The United States has long supported efforts to improve global access to clean water, sanitation, and hygiene (WASH). In 2000, for example, the United States signed on to the Millennium Development Goals, one of which includes a target to halve the proportion of people without access to safe drinking water and basic sanitation by 2015. In 2002, the United States also participated in the 2002 World Summit on Sustainable Development, which emphasized the need to address limited access to clean water and sanitation among the world's poor. The 109th Congress enacted legislation to advance these global goals through the Senator Paul Simon Water for the Poor Act of 2005 (P.L. 109-121 [Water for the Poor Act]). In March 2012, the U.S. Agency for International Development (USAID) announced that it had joined the Sanitation and Water for All partnership—a coalition of governments, donors, civil society and development groups committed to advancing sustainable access to clean drinking water and sanitation. Congressional support for the act was motivated, in part, by calls to augment funding for WASH programs and improve the integration of WASH activities into broader U.S. foreign aid objectives and programs, as well as global health efforts. The act called for USAID to bolster support for WASH programs, further synthesize WASH activities into global health programs, and contribute to global goals to halve the proportion of people without access to clean water and sanitation by 2015. In the 111th Congress, the Senator Paul Simon Water for the World Act of 2010 was introduced, but not enacted. That bill would have amended the Water for the Poor Act and addressed several concerns observers raised regarding the Water for the Poor Act, particularly by creating senior leadership within USAID to address water and sanitation issues, assessing U.S. water and sanitation programs, and strengthening reporting requirements. A new bill, introduced in the 112th Congress as the proposed Water for the World Act (S. 641), awaits action by the Senate Committee on Foreign Relations. Several agencies contribute to U.S. efforts to improve global access to clean drinking water and sanitation, of which programs implemented by the Millennium Challenge Corporation (MCC) and USAID make up roughly 90%. In FY2010, for example, the United States invested $953 million on water and sanitation programs worldwide, including $898 million provided by USAID and MCC. Appropriations for water projects are provided to USAID annually, while MCC receives multi-year funding for its country compacts that include support for water projects. As such, spending by MCC on water projects may vary significantly from year to year and may not be requested annually. The President requested $302 million for USAID's water activities for FY2012 and Congress appropriated not less than $315 million for international water and sanitation programs through the FY2012 Consolidated Appropriations. The FY2013 request for USAID's water and sanitation efforts was slightly lower at $299.1 million. This report addresses congressional efforts to address limited access to clean drinking water and sanitation, outlines related programs implemented by USAID and MCC, and analyzes issues related to U.S. and international drinking water and sanitation programs that the 112th Congress might consider.

M edicaid is a joint federal-state program that finances the delivery of primary and acute medical services, as well as long-term services and supports, to a diverse low-income population, including children, pregnant women, adults, individuals with disabilities, and people aged 65 and older. Medicaid is financed jointly by the federal government and the states. Federal Medicaid spending is an entitlement, with total expenditures dependent on state policy decisions and use of services by enrollees. State participation in Medicaid is voluntary, although all states, the District of Columbia, and the territories choose to participate. States are responsible for administering their Medicaid programs. States must follow broad federal rules to receive federal matching funds, but they have flexibility to design their own versions of Medicaid within the federal statute's basic framework. This flexibility results in variability across state Medicaid programs. Most Medicaid beneficiaries receive services in the form of what is sometimes called traditional Medicaid—an array of required or optional medical assistance items and services listed in statute. However, states also may furnish Medicaid in the form of alternative benefit plans (ABPs), referred to in the Social Security Act as benchmark or benchmark-equivalent coverage. Congress originally provided for ABPs in the Deficit Reduction Act of 2005 (DRA 2005; P.L. 109-171 ) to give states flexibility to provide a Medicaid benefit that more closely resembles commercial health insurance than traditional Medicaid does. Congress modified the ABP provisions in subsequent legislation, both by expanding the scope of states' service obligations in furnishing Medicaid through ABPs and by requiring that most Medicaid beneficiaries who first became eligible as a result of the Medicaid expansion in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) receive ABPs as their mandatory form of Medicaid coverage. This report answers frequently asked questions about Medicaid ABPs. The Appendix provides a glossary and abbreviations of selected terms. In general, under Medicaid, states are required to provide a comprehensive set of services to all categorically needy individuals, with some exceptions. The required Medicaid services are listed in the definition of medical assistance in the Social Security Act (SSA) and include a wide array of services and items, such as physician services; inpatient and outpatient hospital services; and services and items under the early and periodic screening, diagnostic, and treatment (EPSDT) benefit for individuals under the age of 21. Medical assistance also includes certain optional services—that is, services that states can choose whether to provide under their state plans—including routine dental services, prescription drug coverage, and care furnished by physical or speech therapists, among others. Among the broad federal requirements that apply to Medicaid benefit coverage, the federal law contains requirements relating to statewideness and comparability, meaning that in general, the scope of Medicaid mandatory and optional benefits must be the same statewide and the services available to the various Medicaid eligibility groups (with limited exceptions) must be equal in amount, duration, and scope. ABPs, which are referred to in Section 1937 of the SSA as benchmark or benchmark-equivalent coverage, were introduced as a form of Medicaid coverage in DRA 2005. One key difference between ABPs and traditional Medicaid benefits is that ABP coverage is defined by reference to an overall coverage benchmark that is based on one of three commercial insurance products or a fourth, "Secretary-approved" coverage option rather than as a list of discrete items and services. ABP coverage meets the requirements in DRA 2005 if (among other requirements) it either corresponds precisely to a benchmark plan selected by the state from options listed in the law or qualifies as benchmark-equivalent because the ABP has an aggregate actuarial value equivalent to the selected benchmark benefit package and meets various other requirements in the statute. A second major difference between ABPs and traditional Medicaid benefits is that states can choose to furnish ABP coverage to specific state-selected subgroups of Medicaid beneficiaries as their mandatory form of Medicaid coverage, notwithstanding the comparability and statewideness requirements. States can even design different ABPs for different beneficiary subgroups. States are nonetheless prohibited from requiring various high-needs subcategories of Medicaid beneficiaries from receiving Medicaid through ABPs. The Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA 2009; P.L. 111-3 ) and the ACA with its implementing regulations made significant changes to the ABP requirements, relating both to the scope of benchmark and benchmark-equivalent coverage and to the populations that may be required to receive Medicaid through ABPs. Those changes are described below. SSA Section 1937 does not refer to alternative benefit plans; instead, it refers to benchmark or benchmark-equivalent coverage. The Centers for Medicare & Medicaid Services (CMS) introduced the term alternative benefit plan in lieu of those terms in the preamble to a July 2013 regulation. CMS decided to refer to the Medicaid benchmark and benchmark-equivalent plans as ABPs in an effort to prevent confusion regarding the term benchmark, which is used in both the SSA's Medicaid regulations and private health insurance market regulations. Although the term is used in both contexts, the benchmarks used for purposes of SSA Section 1937 ABPs and for purposes of the private health insurance market are different. In the private insurance market, CMS regulations implementing ACA requirements concerning the provision of essential health benefits (EHBs) in the individual and small-group markets use the term base-benchmark to refer to the specific health insurance plan selected by a state to determine the scope of its EHB package, in keeping with federal EHB benchmark plan guidelines. The following types of health insurance coverage constitute benchmark coverage for purposes of Medicaid ABPs (ABP benchmark options): The standard Blue Cross / Blue Shield preferred provider option service plan offered through the Federal Employees Health Benefit Program (FEHBP)-equivalent health insurance coverage. The health benefits coverage plan offered to state employees. The commercial health maintenance organization (HMO) with the largest insured commercial, non-Medicaid enrollment in the state. "Secretary-approved coverage." The fourth ABP benchmark option, Secretary-approved coverage, can be any health benefits coverage that the Secretary of Health and Human Services (HHS), upon application by a state, determines provides appropriate coverage for the proposed population. Notably, Secretary-approved coverage may correspond to the Medicaid state plan benefit package offered in the state. Alternatively, states may design and seek CMS approval for benchmark-equivalent coverage, which is coverage that a state seeks to offer as an ABP that does not correspond precisely to one of the four ABP benchmark options listed above. Benchmark-equivalent coverage must meet statutory requirements including the following: The coverage must include benefits within each of the following categories: inpatient and outpatient hospital services; physicians' surgical and medical services; laboratory and x-ray services; prescription drugs; mental health services; well-baby and well-child care, including age-appropriate immunizations; and other appropriate preventive services. The coverage must have an aggregate actuarial value equivalent to one of the ABP benchmark options. If the benchmark-equivalent coverage includes vision or hearing services, the coverage for these services must have an actuarial value that is at least 75% of the actuarial value of the coverage in that category for the benchmark plan used to measure aggregate actuarial value. The coverage included in a Medicaid ABP, in addition to qualifying as benchmark or benchmark-equivalent according to the standards described above, must meet other requirements. Some of these requirements were included with the original ABP provision in DRA 2005; others were added in CHIPRA 2009 or the ACA and its implementing regulations. The requirements are the following: Beneficiaries under the age of 21 enrolled in ABPs are entitled to the EPSDT benefit, just the same as if they were receiving traditional Medicaid benefits. EPSDT may be furnished through ABP coverage or through traditional Medicaid, as a wraparound benefit, whereby supplemental services are offered to meet the EPSDT level of coverage. Coverage under an ABP must include federally qualified health center services and rural health clinic and associated ambulatory services. Coverage under an ABP must include at least the EHBs, which non-grandfathered individual and small-group plans in the private health insurance market are required to furnish. , If coverage under an ABP includes both medical and surgical benefits and mental health or substance use disorder (SUD) benefits, then the financial requirements and treatment limitations that apply to the mental health and SUD benefits must comply with the mental health parity requirements described in the Public Health Service Act. Coverage under an ABP must include family planning services and supplies for individuals of childbearing age to the same extent that such services would be covered under traditional Medicaid. Under Medicaid regulations, if a benchmark or benchmark-equivalent plan does not include medically necessary ambulance and nonemergency medical transportation services, the state must nevertheless ensure that these services are available to beneficiaries enrolled in an ABP as a wraparound benefit. In general, states are allowed to provide additional benefits, beyond those required by the law, under an ABP. The Medicaid state plan is a document comprehensively describing a state's Medicaid program. States must administer their Medicaid programs in keeping with the state plan for the state to receive federal financial participation in Medicaid expenditures. States establish ABP coverage by amending their Medicaid state plans. CMS provides a state plan amendment "preprint," on which states provide detailed information, including the populations to be covered via ABPs, which benchmark benefit package the state selected and whether it is offering benchmark or benchmark-equivalent coverage, which base benchmark the state selected as the basis for providing the EHBs, and the scope of coverage of each of the 10 categories of EHBs. For each EHB category, the state must indicate in the state plan amendment any benefits the state has elected to substitute in lieu of those provided for in the base benchmark plan, as well as any additional benefits the state has elected to provide. A state must file a Medicaid state plan amendment not only when initially establishing an ABP but also each time it seeks to modify substantially an existing ABP, such as by adding or removing a beneficiary group receiving Medicaid through ABPs or altering the scope of ABP coverage. States must require individuals who are eligible for Medicaid as a result of the ACA Medicaid expansion (the ACA Medicaid expansion population ) to receive Medicaid through ABPs. Attaching consequences to this requirement, the ACA limited federal financial participation in Medicaid expenditures for the ACA expansion population to expenditures for coverage under ABPs. With respect to other non-ACA Medicaid expansion population eligibility groups, states have the option to require enrollment in ABP coverage, with the exception of some eligibility groups, as explained below. States may impose on individual beneficiaries the requirement to enroll in ABPs only on a group-by-group basis, based on the categorically needy eligibility groups. In SSA Section 1937, Congress waived the application of the statutory comparability requirement (SSA §1902(a)(10)(B)) to ABPs. This means that states may require one or more Medicaid eligibility groups to receive Medicaid in the form of ABPs. A state also may design different ABPs tailored to different eligibility groups. Only full benefit eligibles (FBEs) may be required to receive Medicaid through ABPs. Medicaid beneficiaries are FBEs if they have been determined eligible to receive the standard full Medicaid benefit package under the state plan, if not for the application of the ABP option. The term FBE excludes partial-benefit Medicaid beneficiaries, such as those who receive Medicaid only in the form of Medicare cost sharing and/or premiums. The term also excludes medically needy individuals and other spenddown populations—Medicaid beneficiaries who have income that exceeds applicable income limits and qualify for a limited package of Medicaid benefits by using medical expenses to spend down excess income. States are prohibited from requiring some categories of Medicaid beneficiaries to receive Medicaid via ABPs even if they otherwise qualify as FBEs. The categories of ABP-exempt beneficiaries include the following: pregnant women who qualify for Medicaid as a result of having household income below 133% of the federal poverty level (FPL); individuals who qualify for Medicaid on the basis of being blind or disabled, including members of the "Katie Beckett" eligibility group (certain children under the age of 19 who require an institutional level of care and receive home- and community-based services); individuals entitled to Medicare benefits; terminally ill individuals receiving hospice benefits under Medicaid; individuals who qualify for Medicaid institutional care on a spenddown basis; individuals who qualify as medically frail; individuals who qualify for long-term care services (including nursing facility services and home- and community-based services); individuals who qualify for Medicaid because they are children in foster care or are former foster care children under the age of 26; parents and caretaker relatives whom the state is required to cover under Section 1931 of the SSA; women who qualify for Medicaid based on breast or cervical cancer; those who qualify for Medicaid on the basis of tuberculosis infection; and noncitizens who receive Medicaid only in the form of a limited emergency medical assistance benefit. For purposes of the medically frail category above, states have some discretion in defining the term. According to the implementing regulations, the definition must include at least (1) certain special-needs children; (2) individuals with disabling mental disorders, chronic substance use disorders, or complex medical conditions; (3) individuals with physical, intellectual, or developmental disabilities that significantly impair their ability to perform one or more activities of daily living; and (4) individuals with a disability determination based on the Supplemental Security Income program or Medicaid state plan criteria. States may offer ABP-exempt beneficiaries the option of enrolling in an ABP. If a state chooses this option, it must inform the exempt individual of the benefits available under the ABP and the costs under the ABP and provide a comparison of how they differ from the costs and benefits under traditional Medicaid. The law contains a tension concerning the ACA Medicaid expansion population insofar as it intersects with ABP-exempt beneficiary groups . States are prohibited from using federal funding to provide Medicaid to the expansion population other than through ABPs; at the same time, the ACA Medicaid expansion population may include ABP-exempt individuals, who by law cannot be required to enroll in an ABP. CMS addressed this issue in the implementing regulations by defining the term ABP-exempt beneficiaries to exclude members of the ACA Medicaid expansion population . The regulations also required states to give any member of the ACA Medicaid expansion population who otherwise would qualify as ABP-exempt the option to enroll in an ABP "that includes all benefits available under the approved state plan." The most significant way the ACA expanded the existing ABP requirements was by requiring that ABP coverage include at least the EHBs, as defined in Section 1302(b) of the ACA. The content of the EHBs and the process for states to meet EHB requirements through their ABP state plan amendments are described below. The ACA also added a requirement that, to the extent that coverage under an ABP includes both medical and surgical benefits and mental health and substance use disorder benefits, the entity offering the ABP must ensure that the financial requirements and treatment limitations applicable to these benefits comply with the mental health parity requirements added to the Public Health Service Act (PHSA) by the Mental Health Parity and Addiction Equity Act of 2008. Additionally, the ACA added a requirement that where a state elects to provide benchmark-equivalent coverage rather than benchmark coverage, the benchmark-equivalent coverage must include coverage of prescription drugs and mental health services. Finally, the ACA added a requirement that any coverage provided through ABPs (i.e., either benchmark or benchmark-equivalent coverage) must include coverage of family planning services and supplies for individuals of childbearing age. The ACA required all non-grandfathered health plans in the individual and small-group private health insurance markets to offer a core package of health care services, known as the essential health benefits (EHBs). The ACA required the HHS Secretary to define the EHBs, with the following limitations. First, the EHBs are required to include the following general categories of items and services: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. In addition, by statute, the EHBs are required to be equal in scope to the benefits provided under a typical employer plan, as determined by the HHS Secretary. The HHS Secretary implemented the EHB requirements for the individual and small-group private health insurance markets not by establishing the EHBs at the federal level but by requiring each state to select a coverage benchmark based on existing employer-sponsored or commercial insurance—an approach very similar to the one set forth in SSA Section 1937 for ABPs. Each state must begin from a base-benchmark option to establish its EHBs for the individual and small-group health insurance markets. Through plan year 2019, the base-benchmark options are similar, but not identical, to the benchmark options for Medicaid ABPs under SSA Section 1937. The EHB base-benchmark options are (1) the largest health plan by enrollment of any of the three largest small-group insurance products in the state; (2) any of the largest three employee health plan options offered to state employees in the state; (3) any of the largest three national FEHB program plan options offered to all health-benefits-eligible federal employees; or (4) the plan with the largest insured commercial non-Medicaid enrollment offered by an HMO operating in the state. The state must supplement the base-benchmark, if needed, to ensure the EHB package includes benefits in each of the 10 categories listed above. The resulting standardized set of health benefits that must be met by each plan is referred to as the EHB-benchmark plan . Starting in plan year 2020, states may choose to change their EHB-benchmark plans by doing any one of the following: (1) using the entire EHB-benchmark plan that another state used for plan year 2017; (2) using another state's 2017 EHB-benchmark plan to replace one or more EHB categories in its 2017 EHB-benchmark plan; or (3) "otherwise selecting a set of benefits that would become the State's EHB-benchmark plan." Per regulations finalized in April 2018, as of plan year 2020, a state's selected EHB benchmark plan still must be at least equal in scope to a typical employer plan but also "[must] not exceed the generosity of the most generous among a set of comparison plans," as listed. In their Medicaid state plan amendments establishing or amending an ABP benefit, states must identify both the ABP benchmark benefit package selected (for purposes of determining whether the coverage qualifies as benchmark or benchmark-equivalent) and the EHB base-benchmark package selected. If the ABP benchmark selected is the same as the EHB base-benchmark and includes services from all 10 EHB benefit categories, then the plan is deemed to cover the EHBs. Where the EHB base-benchmark differs from the ABP benchmark, and the base-benchmark lacks an EHB category, the state must supplement the ABP to include the missing category. The state is allowed to substitute benefits that are included in the ABP benchmark or benchmark-equivalent package for actuarially equivalent benefits of the same benefit type in the same category of EHB. For example, within the "rehabilitative and habilitative services and devices" category, if a state's ABP benchmark package includes speech therapy but not occupational therapy, whereas its EHB base-benchmark package includes the latter but not the former, the state may elect to furnish speech therapy instead of occupational therapy, so long as the benefits are actuarially equivalent. ABP coverage is not required to be provided using Medicaid managed care. Even though the various benchmark options on which the coverage is built (with the exception of "Secretary-approved coverage") are commercial or employer-sponsored insurance plans, states may choose to provide ABP coverage on a fee-for-service basis. The law authorizes states to pay for the costs of insurance premiums for Medicaid beneficiaries for a health plan offered in the individual insurance market. SSA Section 1937 specifically provides that states may furnish ABP coverage using this private insurance mechanism. Where states use a premium assistance approach, a private insurer serves as payer. The state Medicaid agency pays Medicaid beneficiaries' premiums to enable them to enroll with the private insurer. The state is required to furnish any additional benefits otherwise required under the ABP and not provided by the insurer, and the state must give enrollees information on how to access these additional benefits. CMS has taken the position that the limitations on premiums and cost sharing that apply under traditional Medicaid also apply under ABPs. Therefore, where a benefit package that a state has selected as its ABP benchmark includes premiums and cost sharing that exceed the Medicaid limits, the state must nonetheless adhere to the Medicaid limits in furnishing Medicaid through ABPs. Where a state uses a premium assistance model to provide a Medicaid ABP, the state must ensure that the beneficiary does not incur cost-sharing liability in excess of the Medicaid limits, even if other enrollees in the same commercial health insurance product incur higher cost sharing. Notably, states are barred from applying cost sharing to certain preventive services furnished under ABPs, because cost sharing may not be applied to certain preventive services described under Section 2713 of the Public Health Service Act (42 U.S.C. §300gg-13) and its implementing regulations furnished through private health insurance plans. CMS does not publish a complete list of the states that have implemented ABPs. Congressional Research Service (CRS) analysis of Medicaid state plan information available on the CMS website indicates that 35 states (including the District of Columbia) and three territories had CMS-approved ABP state plan amendments as of August 6, 2018. Although states have most commonly used ABPs to furnish Medicaid to ACA Medicaid expansion enrollees (as required by law), some states have extended ABP coverage to other populations, as well. For example, ACA Medicaid expansion states (e.g., Indiana, Kentucky, Pennsylvania, Virginia, and West Virginia) had chosen to use ABPs for populations other than the ACA Medicaid expansion population. Further, three non-ACA Medicaid expansion states (Idaho, Kansas, and Wisconsin) had chosen to implement ABPs for various non-expansion Medicaid FBE populations. Finally, three territories—Puerto Rico, the Virgin Islands, and Guam—had implemented the ACA Medicaid expansion and had implemented an ABP state plan amendment. States have most commonly used ABPs to furnish Medicaid to ACA Medicaid expansion enrollees. Selection of the ABP benchmark is a key decision for states implementing the expansion. Overwhelmingly, ACA Medicaid expansion states have implemented an ABP composed of "Secretary-approved coverage" based on the traditional state plan benefit as described below. Based on CRS analysis of Medicaid state plan information available on the CMS website as of August 6, 2018, of the 32 expansion states (including the District of Columbia) that had in effect a state plan amendment escribing the ABP benefit furnished to their expansion population, all had elected benchmark rather than benchmark-equivalent coverage, and 31 (all except North Dakota) elected to use Secretary-approved coverage as the ABP benchmark. Of the 31 expansion states that had elected Secretary-approved coverage, 25 had chosen to align the ABP benefits with traditional Medicaid benefits under the state plan as of August 6, 2018. This policy decision has the potential to minimize the disruptive effect of so-called churn between the ACA Medicaid expansion enrollee eligibility category and other Medicaid eligibility categories. Some of the states that aligned the ABP benefit with traditional state plan benefits did add or remove some benefits for purposes of the ABP. As two examples, Colorado included in its ABP benefit preventive and habilitative services not covered under traditional Medicaid. West Virginia included physical and occupational therapy and home health services under its ABP that were not covered under traditional Medicaid. By contrast, as of August 6, 2018, the remaining six expansion states (Arkansas, Indiana, Iowa, New Hampshire, New Mexico, and Pennsylvania) had selected a private health benefits package or some combination of benefits available under the state plan and within a private health benefits package as their selected form of Secretary-approved coverage. This choice has the potential to minimize disruption when individuals churn between the ACA Medicaid expansion enrollee category and coverage in the individual and small-group market. Notably, three of those six states—Arkansas, Iowa, and New Hampshire—at least initially had chosen to implement their Medicaid expansions through a premium-assistance model. The uptake of the ABP option to furnish services to populations other than ACA Medicaid expansion enrollees has been limited. As of August 6, 2018, per CRS analysis, three states that had not elected to implement the ACA Medicaid expansion (Idaho, Kansas, and Wisconsin) had in effect ABP state plan amendments. Examples of ABPs in two non-expansion states, Kansas and Idaho, are provided below. Kansas has used ABPs to help working individuals with disabilities. Under Kansas's Working Healthy program, non-elderly adults who meet the Social Security definition of disability and are earning income are eligible to receive a full package of Medicaid benefits and are allowed to pay a small monthly premium in lieu of the spenddown obligation that they otherwise would have to meet to be covered as medically needy individuals. Kansas selected an ABP benchmark based on state plan benefits, as well as additional services, including personal assistance services, assistive technology, and independent living counseling, intended to enable the individuals to attain independence. Idaho offers three different ABPs. For each, Idaho elected the Secretary-approved option and modeled the coverage on its EHB base-benchmark plan (a small-group plan), adding certain other benefits. The Basic ABP is available to children and adults who do not have special health needs. The benefit package includes the benefits under the base-benchmark plan, as well as additional prevention and wellness and SUD benefits. The Enhanced ABP is designed for individuals with disabilities and includes, in addition to the benefits included in the base-benchmark plan, additional services such as SUD services, private duty nursing, hospice, and home- and community-based waiver services. Finally, the Medicare/Medicaid Coordinated Alternative Benefit Plan is designed for dual-eligible beneficiaries (who are eligible for both Medicare and Medicaid) and includes, in addition to the benefits under the base-benchmark plan, additional SUD, community-based rehabilitation, and home health services, among others. It is difficult to draw generalizations about the ways in which ABP benefits differ from traditional Medicaid, because the scope of each type of benefit package differs from state to state. Under traditional Medicaid, states may choose which optional benefits to cover, in addition to the mandatory Medicaid state plan services. Under ABPs, states choose the ABP benchmark on which to base the benefit package. States also choose the base-benchmark for the EHBs that must be contained within the ABP. However, differences in the federal law between the scope of required services under traditional benefits and required benefits under ABPs highlight common differences between the two types of benefits. For example, care in a nursing facility for individuals over the age of 21 is a required service under traditional Medicaid, whereas nursing home care is not a required benefit under ABPs. Conversely, rehabilitative and habilitative services and devices, preventive and wellness services, and mental health and substance use disorder services are all required under ABPs. By contrast, under traditional Medicaid, the categories of medical assistance do not correspond precisely to these service categories. Items and services in these categories could fall within different categories of medical assistance, including some required and some optional, and therefore coverage of these categories under traditional Medicaid varies widely from state to state. Behavioral health benefits are mandatory under ABPs, and most types of behavioral health benefits are optional under traditional Medicaid. Each ABP benefit package must include at least the EHBs. The EHBs include "mental health and substance use disorder services, including behavioral health treatment." The required categories of medical assistance under Section 1905 of the SSA, by contrast, do not explicitly include behavioral health or any similar term. Many of the most prevalent types of behavioral health services and items, such as the services of clinical psychologists and licensed clinical social workers and prescription drugs, are optional to states under traditional Medicaid; therefore, coverage of these categories under traditional Medicaid varies widely from state to state. In addition, in furnishing any ABP coverage, whether through managed care or on a fee-for-service basis, states must ensure that any financial requirements and treatment limitations that apply to the benefit package comply with parity requirements in Section 2726 of the Public Health Service Act. This means, for example, that financial requirements (such as cost sharing) or treatment limitations (such as limits on the number of allowed visits) placed on Medicaid ABP behavioral health benefits may not be any more restrictive than for medical and surgical benefits for a given classification of services. By contrast, for traditional Medicaid benefits, the parity requirements affect only services delivered through managed care, not for services delivered in the fee-for-service setting.

Medicaid is a federal-state program that finances the delivery of primary and acute medical services, as well as long-term services and supports, to a diverse low-income population, including children, pregnant women, adults, individuals with disabilities, and people aged 65 and older. Medicaid is financed jointly by the federal government and the states. Federal Medicaid spending is an entitlement, with total expenditures dependent on state policy decisions and use of services by enrollees. State participation in Medicaid is voluntary, although all states, the District of Columbia, and the territories choose to participate. States are responsible for administering their Medicaid programs. States must follow broad federal rules to receive federal matching funds, but they have flexibility to design their own versions of Medicaid within the federal statute's basic framework. This flexibility results in variability across state Medicaid programs. Most Medicaid beneficiaries receive services in the form of what is sometimes called traditional Medicaid. However, states also may furnish Medicaid in the form of alternative benefit plans (ABPs). ABPs were first introduced in the Deficit Reduction Act of 2005 (DRA 2005; P.L. 109-171 P.L. 109-171) and are referred to in the Social Security Act (SSA) as benchmark or benchmark-equivalent coverage. In general, under traditional Medicaid benefit coverage, state Medicaid programs must cover specific required services listed in statute (e.g., inpatient and outpatient hospital services, physician's services, or laboratory and x-ray services) and may elect to cover certain optional services (e.g., prescription drugs, case management, or physical therapy services). Under ABPs, by contrast, states may furnish a benefit that is defined by reference to an overall coverage benchmark that is based on one of three commercial insurance products (e.g., the commercial health maintenance organization (HMO) with the largest insured commercial, non-Medicaid enrollment in the state) or a fourth, "Secretary-approved" coverage option rather than a list of discrete items and services. The 33 states and District of Columbia that have implemented the state option to expand Medicaid to low-income adults under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) are required to cover the ACA Medicaid expansion population using ABPs, and states also may elect to require other Medicaid populations to receive care through ABPs. States cannot require certain vulnerable populations to obtain benefits through ABPs. ABPs must qualify as either benchmark, where the benefits are at least equal to one the statutorily specified benchmark plans, or benchmark-equivalent benefits, which means the benefits include certain specified services and the overall benefits are at least actuarially equivalent to one of the statutorily specified benchmark coverage packages. In addition, ABPs must include a variety of specific services, including services under Medicaid's early and periodic screening, diagnostic, and testing (EPSDT) benefit and family planning services and supplies. Unlike traditional Medicaid benefit coverage, coverage under an ABP must include at least the essential health benefits (EHB) that most plans in the private health insurance market are required to furnish. States choose whether to furnish ABPs through managed care or a fee-for-service delivery system. The Medicaid limitations on beneficiary premiums and cost sharing apply to services furnished through ABPs. To date, states have chiefly used ABPs as the benefit package for the ACA Medicaid expansion population. However, several states have elected to use ABPs to serve other Medicaid populations (e.g., working individuals with disabilities or children and adults who do not have special health care needs). States can have more than one ABP coverage option to serve different target populations operating concurrently with traditional Medicaid benefit coverage. States have largely used the ABP design flexibility to align their benefit coverage with the traditional Medicaid benefit coverage.

Health insurance premiums represent a contractually agreed upon amount to be paid for a defined set of health benefits during a defined period of time (usually a year). Premiums are typically paid in monthly installments by policyholders (individual coverage) and enrollees (group coverage). Premiums may vary for different individuals with the same health benefits package from the same insurance company. Each variation is referred to as a premium rate. Rating methodologies generally vary between health insurance market segments and may have additional state-specific variation due to differences in state rate regulations. Typically, the following methods are used by market segment: Individual health insurance market. Rates may vary by age and sex and may also be underwritten, meaning that the insurance carrier assesses the health status of the insurance applicant and uses it to set the rate according to the health risk of that individual. Small group market. What is called a "manual rate" is first calculated estimating the costs by the age and sex of the employees, geographic location, number of employees, and the type of health insurance product. Most states also permit the manual rate to be adjusted by a health status factor. Large group market . Premium rates are determined either from an individual group's medical claims history (referred to as "experience") or from a blended average of manual rates calculated from the members of the group and from the group's experience. Health insurance premium rates are actuarial estimates of the cost of covering a risk pool of individuals under a particular health benefits package for a particular period of time. Generally, the more generous the benefits package (i.e., large, open networks of providers and low cost- sharing requirements including deductibles) the higher the premiums will be. Just as premiums must be adequate to pay for expected health care use, they also must be sufficient to compensate insurance carriers for taking on the financial risk associated with providing coverage. The final premium rate calculation often is adjusted to reflect several other factors, such as making up for a previous financial loss and providing excess capital to manage various risks generally regulated under state solvency standards. State regulators have adopted solvency standards to protect consumers by requiring insurance companies to keep certain reserves of capital to protect against asset risks, underwriting or insurance risk, and business risks. Without this required safety net of reserved cash, a health insurance company could go bankrupt if it experiences unforeseen losses, thus resulting in its consumers being placed at full financial risk for their medical claims. Data from the Bureau of Labor Statistics' (BLS's) Producer Price Index (PPI) for health insurance companies indicates that the year-over-year percentage increase by month in private health insurance premiums has averaged around 4.4% between 2004 and 2010, but has accelerated some since 2009, ranging from 4.8%-5.5% ( Figure 1 ). The year-to-year increases in the PPI may not appear significant, but there are four relevant contextual factors to take into consideration. First, premium increases can be much higher in the individual and small group markets, where the smaller risk pools can result in distortions in the average health care costs covered by premiums, due to outlier policyholders or members. In other words, if there are only a few healthy persons to help pay for a sick person, the premiums (all else being equal) will be higher than if that sick person was in a larger risk pool with many healthy persons. Second, in the employer group market, the worker share of premiums has been increasing even more because employer subsidies have been trending down incrementally. The employer and workers shares vary according to coverage tier: self-only, employee-plus-one, and family. However, in the past few years employers have shifted incrementally more of that cost to workers. For example, the average worker share of the total premium for group coverage (for self-only coverage) was 15.3% in 2008 and grew to 17.0% by 2011 ( Table 1 ). Third, as premiums have gone up, the value of the coverage has gone down in terms of higher cost sharing requirements, including deductibles (see the Appendix ). Fourth, real income (i.e., income adjusted for inflation), both per capita and family, has decreased in the past several years. Real income for adults (age 16 and older) declined 4.6%, from an average of $40,389 in 2007 to $38,543 in 2010. Similarly, average family income declined 6.6%, from $73,426 to 68,599 for the same period. As a result, incomes are not keeping up with premium increases, and a greater proportion of incomes are being consumed by health insurance premiums. The growth of health insurance premiums (and out-of-pocket costs) for individuals and families has been the focus of considerable congressional attention. Using available public data, this report explores the potential drivers of the growth trend in health insurance premiums. In general, the premiums charged by health insurance companies represent the estimated amount that would be required to cover initially three major components: (1) the expected cost of the health benefits covered, (2) the administrative costs of operating the coverage, and (3) a profit margin consistent with the strategic business goals of the company. The fourth and final component to the premium calculation involves adjustments upward or downward to reflect several miscellaneous factors, such as responding to prior gains or losses, strategically responding to competitors (i.e., pricing lower to gain market share), hedging against uncertainty risks created by a changing regulatory environment, and other factors often collectively described as the underwriting cycle. Health benefits expenses equal the aggregate products of unit prices for health services times utilization of health services (e.g., hospital visits) or health items, such as prescription drugs. Health benefits expenses represent the largest component of premiums. According to the aggregate health insurance industry statements of revenue and expenses submitted to the National Association of Insurance Commissioners (NAIC) in 2010, health benefits represented about 85% of premiums. Health benefits expenses on a per member per month (PMPM) basis have trended upwards between 2003 and 2010 in aggregate for the health insurance industry, as illustrated in Figure 2 . The annual percentage increase in total health benefits expenses, typically referred to as medical trend, has generally been over 7% per year during most of that time period, but the rate of growth was 5.0% between 2008 and 2009, and only 1.1% between 2009 and 2010. The medical trend of a particular plan or policy can vary substantively based on such factors as the relative health status of the enrollees and policyholders, differences in coverage policy, differences in the use of managed care techniques, geographic differences, use of restrictive versus open provider networks, and various organizational factors, such as being for-profit or non-profit. The unit price of health services and prescription drugs is determined through a contract negotiation process between health insurance companies, health providers, medical device companies, and drug manufacturers or distributors. There is evidence of considerable geographic variation in provider, but not prescription drug pricing. For example, the Center for Studying Health System Change (HSC) found significant differences in payment rates to hospitals and physicians among the eight markets it studied during site visits to nationally representative metropolitan areas during 2010. Average payments for inpatient hospital care, as a percentage of Medicare, ranged from 147% in Miami to 210% in San Francisco. For physician payments as a percentage of Medicare, it ranged from 82% in Miami to 176% in rural Wisconsin. HSC attributed the variation in prices paid by insurers to differences in provider bargaining power. Another study in six California markets between October and December 2008 found that physician group practice integration with hospital systems, hospital mergers, the desire for broad provider choice, growing physician shortages, and a regulatory environment that favors providers all contributed to a price negotiation advantage for some providers. The power of providers in negotiating higher unit prices has been recognized by some state insurance commissioners that perform premium rate reviews. For example, in the reformed Massachusetts market, the Division of Insurance approved (on appeal) a premium rate increase for Fallon Community Health Plan after finding that, among other things, "individuals and employer groups demand that Fallon provide options that include access to every doctor and hospital, including local providers, as well as access to larger tertiary systems." The Massachusetts Division of Insurance Appeals Board concluded that "[m]arketplace realities mean that Fallon sometimes has no choice but to contract with higher cost providers." Similarly, an investigation by the state Attorney General concluded that large providers with brand-name recognition have considerable leverage over health insurance companies when negotiating prices, and that price increases have accounted for the majority of the medical trend in Massachusetts. Health care services and items in the United States generally lack unit price transparency because they are considered proprietary contractual negotiations between payers and providers. Moreover, standard measures of producer price inflation, such as the PPI, are inappropriate to examine the unit price inflation among privately insured persons because they include prices paid by consumers that are uninsured or are in government programs (e.g., Medicare and Medicaid). However, one survey by Segal Consulting projected that the annual price inflation for hospitals will increase 7.2% for 2012 (2012 estimates from insurers are based on provider-contracted rates set before the coverage year begins). In addition, Segal projected that the annual price inflation for physicians and prescription drugs in 2012 would be 4.6% and 5.5%, respectively. Conventional wisdom states that the aging of the American population is the primary driver of increased demand for health services and prescriptions drugs experienced by health insurers. On its face, this seems logical given that the elderly have the highest utilization of health care. However, the overall age distribution of the population actually shifts very slowly over time. Indeed, the median age of the U.S. population is projected to increase just 1.8 years, from 36.9 in 2010 to 38.7 in 2030. In terms of risk based on age, the Medicare program assists the private health insurance market by assuming the liability of coverage for most persons age 65 and older. Ultimately, what matters for the insurer is not merely the general population trends, but the specific age distribution of the risk pool being insured. Moreover, studies have found that while aging does have an impact on rising health care utilization, other factors such as advances in costly medical technology and medical practice patterns drive demand more. Without countervailing regulations, health insurance companies have a financial incentive to restrain utilization. Generally, the less they pay in health benefits, the higher their profits will be. Health insurance companies can implement a number of different management techniques or limitations on coverage to restrain health care utilization. Traditional utilization management techniques include utilization review, case management, and physician gatekeeping. Insurers may also attempt to limit the use of high-priced or high-utilizing health care providers through their network contracting process. Since the cost sharing is lower for in-network providers, the plan can financially incentivize its members to use lower-cost providers by contracting only with them. Finally, insurers may choose to not cover a particular procedure, use of a technology, or prescription drug. Generally, utilization management techniques and restrictive benefits became prevalent in the late 1980s, but their use has been waning since the mid-1990s, in the face of strong consumer resistance to anything other than case management, where coordination between providers and evidence based medicine are used to improve outcomes. For example, in the employer group market, enrollment in health maintenance organizations (HMOs), the most restrictive type of plan, dropped from 31% in 1996 to 17% in 2011, while less restrictive preferred provider organization (PPO)/point of service (POS) plans increased from 42% to 65% during the same time period. In the individual (non-group) market, 2009 data from American's Health Insurance Plans (AHIP) indicate that 82.8% of members with single coverage and 72.9% with family coverage elect a PPO/POS plan, with less than 2% electing HMO or similarly restrictive plans. As the market has moved away from health insurance products with strong utilization management programs and limited provider networks, utilization of health services and prescription drugs has consistently increased every year, as measured in population-based surveys and gross sales figures. These trends in gross measures of service utilization could be explained by increases in the total population or the number of persons that are insured. In other words, per insured member service utilization may not be increasing. However, studies where researchers have had access to claims data and provider payment rates have found that most of the increase in health benefits expenditures, other than certain outpatient procedures and prescription drugs, are attributable to increases in unit prices, not to increases in the utilization per insured member. In addition to paying for medical claims, premiums are expected to cover the operational costs of the insurance company. Health insurance companies generally are complex organizations requiring specialized human resources and information technology to perform the functions of developing, marketing, and operating a health plan or insurance policy. Table 2 provides a summary review of administrative functions in health insurance plans. Insurance companies report administrative costs, on a per member per month (PMPM) basis, in regulatory filings. Such data indicate a relatively stable trend, with average costs per company increasing about $3 PMPM from 2007 to 2009 ( Figure 3 ). However, while average administrative costs have been relatively consistent, there is more substantial variation across the companies observed. Specialty firms (e.g., dental only, behavioral health) generally report below $10 PMPM in administrative costs, and companies with an emphasis on non-group insurance often report more than $100 PMPM in such costs. Administrative expenses have been found to vary by market segment, with non-group insurance costing the highest and large group the lowest. This is attributable to factors such as enrollment size. While group plans can sell to multiple individuals (for example, through an employer's human resources department), non-group insurance must be sold one-by-one to each person, thus increase marketing and sales costs. A company with multiple products generally prices each product separately. As an example from a different industry, a car company does not have one price for each of its vehicles. It charges separate prices for each car model, even if the different models are sold in the same year. Similarly, premium rates are calculated at the health insurance product level (i.e., the health plan or policy that a person, family, or employer purchases), not at the company or corporate parent levels (i.e., the corporate entity that sells the insurance product). So additional variation might be observed within each company if product level data were publicly available. These data are also limited by the fact that many health insurance companies have multiple non-insurance businesses. For example, the United Health Group (UHG) includes the information technology and consulting firm Ingenix and the pharmacy benefits manager (PBM) Prescription Solutions in addition to its health insurance benefits business segment. The inherent complexity of a large conglomerate may create unique challenges for accurate cost accounting down to the individual plans and insurance products sold within the organization. These challenges could create barriers to fair and comprehensive regulation of administrative costs across different types of health insurance companies (i.e., small local and regional non-profit insurers versus large national investor-owned, for-profit insurers). There is no consensus benchmark for what is an appropriate amount of administrative costs. Nevertheless, several industry executives of the publicly traded for-profit firms believe that administrative costs can come down as evidenced in the summary of recent earnings conference calls provided in Table 3 . The average profit margin for the health insurance industry has consistently been low; therefore, profit typically represents the smallest component of health insurance premiums. According to financial data submitted to the NAIC, the average profit margin (net income divided by total revenues) for the health insurance industry was 3.5% in 2010. Because of the membership scale associated with more profitable health insurers, it is unlikely that reductions in net income would have a substantive impact on premiums for individual members. For example, if WellPoint's entire 2010 net income of $2.89 billion were rebated back to its 2010 members, it would result in a monthly credit of $7.22 per member. There is substantial variation in health insurance company profits due to differences in the size of the companies, their willingness to aggressively manage health costs, and other business goals of the organization. Wellpoint, a large (33.3 million members) investor-owned, national for-profit company, emphasizes reduced costs and value for its investors. In 2010, Wellpoint had $2.89 billion in net income (profits after taxes). By contrast, Blue Cross Blue Shield of Rhode Island (BCBS-RI), a mid-sized (approximately 600,000 members) non-profit company operating in one state with a community mission, took a $14.1 million loss in 2010. The health insurance underwriting cycle refers to the tendency for health insurance premiums and insurer profitability to cycle over certain time intervals. (This is a different, but related, concept to medical underwriting, which is the process by which an insurer estimates the insurance risks and potential medical costs associated with an applicant for insurance based on characteristics of that applicant.) Upturns and downturns in the underwriting cycle are basically the outcome of adjustments to premiums that reflect past experience, expectations of future losses, business strategy, attempts to mitigate possible impacts of regulatory changes, and the changing demands of plan participants and policyholders (e.g., demand for large and open provider networks). For example, a health insurance company may charge premiums above the anticipated amount necessary for the current plan year's costs because the insurer lost money on the product in previous years. This will start an up cycle in profitability until it prices itself out of the competitive market, thus forcing a cut in premiums and ultimately profit margins. Alternatively, the insurer may have a business strategy to obtain as much market share as possible. To do this, the insurer reduces premiums below competitors, even if it reduces profit margins or results in a temporary loss. Once the insurer commands the desired market share, it increases premiums to achieve the desired maximum profit margin that the market will allow. Adding to the complexity, the insurance company often may attempt to subsidize one policy or plan with profits from another. To illustrate this, Table 4 provides an example of one insurance carrier's actual premium and medical loss experience in one state between 2007 and 2009. The table was abstracted from a premium rate increase request for 2010 for individual market blocks of business with and without maternity coverage from Anthem Blue Cross Life and Health Insurance Company (hereafter referred to as "Anthem") submitted to the California Department of Insurance. For the years 2007 through 2009, the table presents the actual per member per month (PMPM) premiums charged, the PMPM claims experience, the medical loss ratio (the percentage of premiums spent on medical claims), the total member months, and the gain or loss on medical expenses by the maternity and non-maternity blocks of business in the individual (non-group) market. Member months are used to reflect enrollment based metrics because individuals can join or leave a plan or policy on a monthly basis. Thus, having a member for 6 months versus the full year (12 member months) would be meaningful in terms of total premiums collected and likely claims experience. Anthem's maternity coverage policies had an operational gain in 2007, with relatively few policyholders (in member months). However, these policies operated at a loss in 2008 and 2009 despite a higher number of policyholders. Based on this trend, Anthem projected nearly a $14.2 million loss for 2010 on the maternity block of business. What are some of the options for Anthem or any other insurance company in a situation like this? It could increase premiums in the maternity coverage policies to $320 PMPM to match expected claims costs PMPM for 2010, but that would be nearly a 74% increase from premiums in 2009. Alternatively, Anthem could eliminate the maternity coverage policies, seek out non-premium sources of revenue (e.g., investment income), aggressively implement managed care methods to reduce costs, or make up for the losses in this product with gains from another product line. The latter option is what is suggested by this data. In other words, losses from the maternity coverage are financially cancelled out for the company by gains from the policies sold without maternity coverage. The regulation of private health insurance has traditionally been under the jurisdiction of the states. Most states have used their regulatory authority over the business of insurance to require the filing of health insurance documents containing rate information for one or more market segments or plan types. Under the Patient Protection and Affordable Care Act ( P.L. 111-148 , ACA, as amended), the federal government assumed a role in health insurance rate reviews by providing grant funding to states for such reviews and requiring, among other things, that insurers justify rate increases under certain circumstances. As the primary regulators of health insurance, states oversee many aspects of the industry concerning the insurance products offered in the market and the entities that sell insurance. One fundamental area in which states exercise regulatory authority is through the imposition of rate and form filing requirements. "Form" refers to the language in the insurance contract and typically is required when a new plan is offered in the market (or changes are made to that plan). "Rate" refers to the price of a unit of insurance. Rates are filed with the initial form and usually must be filed each time an insurance carrier proposes to change rates for a plan (or if changes in the form filing affect rates). Not all states actually conduct rate reviews. For those states that do, the purpose is threefold: to ensure that rates are sufficient (to guard against insolvency), but not too high (must be actuarially justified), nor unfairly discriminatory (variation in rates must be based on differences in expected claims). There is substantive variation in state regulation of health insurance rates. Some states collect rates for informational purposes only or as part of their form filing requirements. Over half of states have "prior approval" requirements, where insurance companies must file proposed rate changes and the state has the authority to approve, disapprove or modify the request. However, prior approval authority typically also includes a deeming period; if the state does not take any action and the deeming period elapses, the filing become effective. Under such a scenario, prior approval requirements may effectively work just like "file and use." File and use requires insurers to file rates with the state, which become effective either immediately or on a date specified in the filing. Under either of these scenarios, the state may disapprove a rate filing if it does not meet a certain compliance standard, such as a minimum anticipated medical loss ratio. Several states have file and use requirements. One state has "use and file," which means the filing becomes effective when used, though the insurer is required to file rates with the state. (A list of rate filing requirements by state is provided in Table 5 .) Limits on publicly accessible rate review data make comprehensive uniform comparisons between states elusive. Only 13 states have public Internet access to rate filings or summary statistics on rates. Moreover, there is considerable variation in how states with rate review regulations make their information public. For example, the Maine Bureau of Insurance posts rate filings only for insurers that are called to present their requested increase at a public hearing, whereas the Oregon Insurance Division publicly provides a list of average rate increase requests and approvals by regulated entities and provides access to individual rate filings and approvals. In terms of approvals of rate increases, there is considerable variation between states. For example, Oregon approved 68.3% of recent requested rate increases, whereas Massachusetts approved only 14.2%. These differences are likely due to both differences in regulatory standards, geographic variation in health insurance markets, health services utilization patterns, and health provider payment rates. The available public information suggests that states approve, adjust, or reject requests for rate increases primarily based on an analysis of cost trends in relation to rate increases approved in prior years, and that the approved rates can be double-digit percentage increases from the previous year. To illustrate, consider the case of Regence Blue Cross Blue Shield of Oregon, which requested an average annual increase of 26.4% for its individual health plans but was approved for a 17.3% increase effective January 1, 2010. Despite medical costs increasing 12.6% from the prior year and a financial loss of 9.7% ($15,476,565) on these policies over the period of May 1, 2008, through April 30, 2009, Oregon decided that the lower rate increase was appropriate because Regence had received an approved average rate increase of 26.5% on the same policies for the previous year. By contrast, Health Net Health Plan of Oregon's individual health plans requested and received a significant average annual rate increase of 22.8% effective on October 1, 2009. Oregon believed that the increase was justified because Health Net lost money on these policies each year between 2005 and 2008 (in aggregate $1,436,505) and it had received average rate increases less than the average increase in medical costs for four of the past five years. The Patient Protection and Affordable Care Act (P.L. 111-148, ACA, as amended) includes provisions to increase transparency of proposed rate increases, but it does not go as far as to include a formal approval process for proposed increases. Specifically, the Health and Human Services (HHS) Secretary must, in conjunction with the states, establish a process for the annual review of "unreasonable" increases in rates for health insurance coverage beginning in the 2010 plan year. The term "unreasonable" is not defined by the law and presents a challenge in preventing unintended consequences such as providing additional market leverage to large, national for-profit companies over small, local non-profit insurers. The complexity of making such a determination generally requires analysis of multiple factors by actuaries and accountants. Such a review generally does not lend itself to the use of simplistic benchmarks such as merely prohibiting double-digit percentage rate increases. As the National Association of Insurance Commissioners (NAIC) notes: The process should identify "potentially unreasonable" increases, with further review by states and/or the HHS Secretary to determine any mitigating or exacerbating factors and decide whether the increase is actually unreasonable. Any increase that is necessary to avoid a future financial loss on the block of business is usually considered reasonable, unless there are compelling reasons to determine that it is unreasonable. Rates that produce a financial loss can affect consumers by impairing the financial soundness of the insurer, reducing the insurer's incentive to provide good customer service, reducing the insurer's incentive to continue providing coverage and shifting costs to other blocks of business. Health insurance issuers will be required to submit to the HHS Secretary, and the relevant state, a justification for an unreasonable premium increase prior to implementation of the premium, and the HHS Secretary will publicly disclose the information. The justification requirement does not provide the HHS Secretary with the authority to prohibit the plan from implementing the rate increase. In other words, this is a "sunshine" provision designed to publicly expose premium increases determined to be unreasonable. On December 23, 2010, the HHS Secretary issued a notice of proposed rulemaking for the ACA rate review provisions, with a comment period ending February 22, 2011. The HHS Secretary proposes that when the average increase, alone or in combination with prior increases in the preceding 12-month period, is 10% or more then the rates will be subject to more review to determine if they are unreasonable. The proposed regulation stipulates that HHS would be adopting a state's determination of what an unreasonable rate increase is if the state has an effective rate review program. The proposed regulation specifies that a state's rate review program would be considered effective if the state has the legal authority to obtain the data and documentation necessary to conduct an effective examination. Further, the state must have the ability to review the data and documentation submitted in support of the proposed rate increases, including an examination of the reasonableness of the actuarial assumptions used by the insurer, the validity of historical data underlying the assumptions, and the insurer's accuracy with past projections. If the state does not have an effective rate review program, the Secretary proposes that HHS would conduct the review. HHS would determine that a rate increase is unreasonable if: The rate increase is excessive. The premium charged would be considered excessive if it is unreasonably high in relation to the benefits provided. HHS would consider if the rate increase results in a projected future loss ratio below the medical loss ratio standard required under Section 2718 of the PHSA. HHS would also consider if any of the assumptions on which the rate increase is based are not supported by evidence or do not support an increase of the magnitude being proposed. The rate increase is unjustified. Health insurance issuers would be required to provide certain data and documentation to HHS supporting the proposed rate increase. If the data and documentation submitted are incomplete or inadequate then the proposed increase would be determined to be unreasonable. The rate increase is unfairly discriminatory. A proposed rate increase would be unfairly discriminatory if it results in premium differences within similar risk categories that are not permissible under applicable state law or, if no state law applies, do not reasonably correspond to differences in expected costs. To support the premium rate review process, ACA requires the HHS Secretary to carry out a program of grants to the states. These grants have an appropriation of $250 million for states to use during the five-year period beginning with FY2010. On August 12, 2010, HHS announced that 42 states and the District of Columbia were awarded $43 million in grants during the first cycle of funding. On February 24, 2011, HHS announced a second cycle of funding of approximately $200 million, for which states will be given multiple opportunities to apply for funds. "On September 20, 2011, HHS awarded $109 million to 28 States and the District of Columbia." CMS published the final rule implementing the rate review provisions in ACA in the Federal Register on May 23, 2011. The final rule clarifies which proposed rate increases would be subject to review (i.e., defining "unreasonable" rate increase), establishes a process for rate review to be conducted either by the state or CMS, and specifies notice requirements to inform the public about the process and outcome of the rate reviews. The final rule also includes a comment period, for which it solicits comments on whether individual and small group health coverage sold through associations should be subject to ACA's rate review requirements. The final regulations implementing the ACA rate review provisions are not intended as a substitution for existing and future state review of rates. Throughout the final rule, CMS refers to the ongoing authority of states to impose filing requirements and conduct their own review of rates. Beginning on or after September 1, 2011, a proposed rate increase will be tentatively considered unreasonable, and therefore subject to review under ACA, if the increase either is 10% or more (over a 12-month period beginning on September 1), or meets or exceeds the state-specific threshold (applicable to a 12-month period beginning on September 1). The 10% threshold is for transitional purposes only, until the state-specific thresholds are established. In developing a state-specific threshold, the HHS Secretary will consult with a state and may review relevant information provided by other stakeholders. The rate review process (described below) will determine whether or not the proposed rate increase is unreasonable, and relevant information about each review conducted will be published online. For each proposed rate increase subject to review, a health insurance issuer must submit a Preliminary Justification, which is composed of the following: Part I—a summary of the proposed rate increase, including claims experience, utilization and cost trend projections, changes in benefits, claims and non-claims costs, current and projected premiums, and a three-year history of rate increases for the insurance product. Part II—a justification for the rate increase, including description of data and assumptions used, explanation of primary factors driving rate increase, and description of overall experience of the insurance product, including expenses and loss ratios. Part III—a rate filing document. (Instructions regarding the compliance with Part III will be provided through CMS guidance.) Parts I and II must be submitted to CMS and the applicable state (in a state that already has a mechanism in place to accept rate submissions from issuers). Part III must be submitted to CMS. In addition to the data and documentation components described above, CMS may request additional information if the insurer's submission is insufficient for making a determination. Parts I and II will be posted on the CMS website, with a disclaimer that describes the purpose of the Preliminary Justification. CMS also will provide information through its website regarding the process by which the public may submit comments on the rate reviews that CMS conducts. Reviews of the proposed rate increases will be conducted either by a state or CMS. A state will conduct the review if it has an "Effective Rate Review Program" (described below), and it discloses to CMS its analysis for making the determination whether or not a rate increase is actually unreasonable. CMS will accept the state's determination and post the state's decision online. If the rate is determined to be unreasonable and the issuer is allowed under law to implement the proposed increase, CMS will provide the state's determination and explanation to the relevant issuer. CMS will conduct the review if the state does not have an Effective Rate Review Program. Under this scenario, CMS will apply three tests to determine whether a proposed rate increase is unreasonable or not: Is it excessive? Will the proposed increase lead to premiums that are unreasonably high in relation to the benefits provided? Is it unjustified? Are the data and documentation provided by an issuer incomplete, insufficient, or otherwise lacking in relevant information that reasonableness of the proposed rate increase may not be determined? Is it unfairly discriminatory? Will the proposed rate increase lead to premium differences among insureds that share similar risk profiles that either are not allowed under state law, or do not comport with differences in expected costs? After completion of each rate review, CMS will post its final determination on its website and provide explanation to the relevant issuer. As discussed above, a state will conduct the rate review if it has an Effective Rate Review Program. CMS will evaluate (and may re-evaluate) whether a state has such a program in place, according to the following criteria: The state collects data and documentation from issuers that are sufficient enough to examine (1) the validity of assumptions used to develop the proposed rate increase, and (2) past projections and actual experience. The state conducts effective, timely reviews of such data and documentation. The state's review process includes the examinations described above, which takes into account factors specified in the rule that may impact rates (factors such as medical trend, benefit and cost-sharing changes, and others). The state's review of rates is based on statutory or regulatory standards. A state with an Effective Rate Review Program will be required to publish on its website Parts I and II of the Preliminary Justification for proposed rate increases. Moreover, the state must establish a mechanism to receive comments from the public regarding those proposed increases. CMS reviewed all available state regulatory documentation and met with state insurance regulators to determine if a state had an Effective Rate Review Program. As of July 1, 2011, 40 States, the District of Columbia, and the U.S. Virgin Islands have effective review for all insurance markets and issuers (see Table 6 ). Upon receipt of a determination that a proposed rate increase is unreasonable, the health insurance issuer may: Decline to implement the proposed increase or choose to implement a smaller increase. The issuer must notify CMS of either action. However, if the smaller rate increase still meets or exceeds the applicable threshold, the issuer must submit a new Preliminary Justification for that smaller proposed increase. or Implement the rate increase that was determined to be unreasonable, if allowed under law. In this case, the issuer must (1) submit Final Justification to CMS (which will be posted on the CMS website for three years), (2) post on the issuer's website: Parts I and II of the Preliminary Justification, the determination and explanation from the rate review conducted by the state or CMS, and the issuer's Final Justification; and (3) make this information available on the issuer's website for at least three years. The Final Justification must be consistent with the Preliminary Justification in terms of the information submitted to justify the rate increase. The final rule includes analysis conducted by CMS on the potential impact of the rule on health insurance issuers and enrollees, rate filings, and administrative costs. Those analyses are summarized below. Given that the rate review requirements apply to all individual and small group coverage (with the exception of grandfathered health plans), CMS collected and analyzed data on the number of insurance carriers that offer products in those markets, many of which operate in both the individual and small group markets. CMS estimated that 417 issuers potentially would be impacted by the rate review requirements. By market segment, 311 issuers could be affected in the individual market; 342 issuers in the small group market. With respect to enrollees, this would translate to nearly 35 million enrollees potentially affected by rate review (approximately 11 million in the individual market and 24 million in the small group market). CMS also estimated the number of rate filings that potentially would be subject to review and require justification, and developed low-, middle-, and high-range estimates for both the individual and small group markets. For 2011, CMS estimated the number of rate filings in the individual health insurance market that would be subject to review and require the submission of a justification report could range from a low of 279 filings to a high of 819 filings. These estimates represent 40%-67% of all filings in the individual market for 2011. For the small group market, CMS estimated a low of 189 filings could be subject to review and require justification, and a high of 940 filings. These estimates represent 20%-32% of all filings in the small group market for 2011. CMS also estimated the potential administrative costs to issuers related to rate review under ACA. Similar to the analysis on the number of affected rate filings, CMS developed low-, middle-, and high-range estimates of potential administrative costs, based on the 417 issuers estimated to be affected by the rate review requirements (see above). Table 7 displays the estimated costs for developing and providing justification reports, retention of records, and online notification requirements (as discussed in the final rule). Other Insurance Costs Not Included in the Premium Health insurance premiums generally represent only a part of the insured individual's or family's costs incurred under a given benefits plan for health services and prescription drugs. While enrollees and policyholders pay premiums irrespective of health service use, they typically are responsible for cost sharing in the form of deductibles, flat dollar co-payments, and/or percentage co-insurance only when services are used. Increased cost sharing has been viewed by some as a method of shifting costs to those who are utilizing the services, thus limiting the shared risk and constraining premium growth. On the other hand, increasing cost-sharing reduces the value of the coverage at the same time premiums are going up. Essentially individuals and families end up paying more for less, due to exposure to higher out-of-pocket costs. Similar to the observed increases in premiums, cost-sharing expenses have been increasing. Thus, some individuals may be able to afford purchasing the insurance, but not be able to afford the cost of utilizing health care services despite being insured. From a consumer perspective, deductibles have the most impact because coverage does not start until the enrollee spends more than the deductible amount. As illustrated in Figure A-1 , average deductibles generally have been increasing the past few years, across plan types in both the group and non-group markets. Comprehensive data on other benefit designs such as drug co-payments and hospital co-insurance are not publicly available. However, the Milliman Medical Index estimates that for a typical family of four with private employer group coverage, out-of-pocket cost sharing has increased between 5.4% and 10.5% annually between 2006 and 2010.

In general, the premiums charged by health insurance companies represent actuarial estimates of the amount that would be required to cover three main components: (1) the expected cost of the health benefits covered under the plan, (2) the business administrative costs of operating the plan, and (3) a profit. The final premium calculation often is adjusted upward or downward to reflect several factors, such as making up for a previous financial loss, that are often referred to as the "underwriting cycle." Health insurance premiums have been trending up, while the value of coverage generally has been trending down. Specifically, the year-over-year percentage increase by month in private health insurance premiums has averaged around 4.4% between 2004 and 2010, but has accelerated some since 2009, ranging from 4.8% to 5.5%. At the same time, cost-sharing requirements have generally increased. For example, a typical family of four with private employer-sponsored health benefits has seen its out-of-pocket cost sharing increase between 5.4% and 10.5% annually between 2006 and 2010. Of the main components that constitute the premium amount, health benefits expenses represented about 85% of that amount in 2010. Publicly available data indicate that medical costs have steadily risen over the past several years, but the rate of growth in these expenses slowed between 2008 and 2010. The data also suggest that the rise in medical costs is primarily attributable to the price of services, not increased utilization. The rise in the cost of health insurance has received considerable attention by Congress and resulted in calls for more regulation. The regulation of private health insurance has traditionally been under the jurisdiction of the states. Most states have used their regulatory authority over the business of insurance to require the filing of health insurance documents containing rate information for one or more insurance market segments or plan types. Under the Patient Protection and Affordable Care Act (P.L. 111-148, ACA, as amended), the federal government will assume a role in private health insurance rate reviews by providing grants to states and requiring health insurance companies to provide justifications for proposed rate increases determined to be unreasonable. However, ACA does not authorize the federal government to decline or bar implementation of proposed rate increases; such authority still is retained by the states. On May 23, 2011, Health and Human Services (HHS) issued the final rule implementing the rate review provisions in ACA. The rule clarified which proposed rate increases would be subject to review (i.e., defining "unreasonable" rate increase), established a process for rate review to be conducted either by the state or HHS, and specified notice requirements to inform the public about the process and outcome of the rate reviews. This report provides an overview of the concepts, regulation, and available public data regarding private health insurance premiums. Specifically, this report analyzes the four broad components of health insurance premiums: medical claims, administrative costs, profit, and the underwriting cycle. Finally, the report discusses state requirements to review health insurance rates, and rate review provisions under federal health reform.

On January 29, 2008, President George W. Bush signed Executive Order 13,457, "Protecting American Taxpayers from Government Spending on Wasteful Earmarks." The order states that it is the policy of the federal government "to be judicious in the expenditure of taxpayer dollars." In order "[t]o ensure the proper use of taxpayer funds," the order provides that the number and cost of earmarks should be reduced, that their origin and purposes should be transparent, and that they should be included in the text of bills voted upon by Congress and presented to the President. For appropriations laws and other legislation enacted after the date of the order, it directs executive agencies not to commit, obligate, or expend funds on the basis of earmarks included in any non-statutory source, including requests in reports of committees of Congress or other congressional documents or communications on behalf of Members of Congress, or any other non-statutory source, except when required by law or when an agency itself has determined that a project, program, grant, or other transaction has merit under statutory criteria or other merit-based decision-making. Under the executive order, an "agency" is an executive agency defined in section 105 of title 5 of the United States Code and includes the United States Postal Service and the Postal Regulatory Commission, but excludes the Government Accountability Office. This section states that an "executive agency" means a "department, a government corporation, and an independent establishment." An "independent establishment" is defined in section 104 of title 5. An "earmark" in the executive order means funds provided by Congress for projects, programs, or grants where the purported congressional direction (whether in statutory text, report language, or other communication) circumvents otherwise applicable merit-based or competitive allocation processes, or specifies the location or recipient, or otherwise curtails the ability of the executive branch to manage its statutory and constitutional responsibilities pertaining to the funds allocation process. The executive order identifies four duties of agency heads relating to earmarks. With respect to all appropriations laws and other legislation enacted after the date of the order, it directs the each agency head to take all necessary steps to ensure, first, that (1) agency decisions to commit, obligate, or expend funds for any earmark are based on the text of laws, and are not based on language in any congressional committee report, joint explanatory statement of a committee of conference, statement of managers concerning a bill in Congress, or any other non-statutory statement or indication of views of Congress or a House of Congress, committee, Member, officer, or staff thereof; (2) agency decisions to commit, obligate, or expend funds for any earmark are based on authorized, transparent, statutory criteria and merit-based decisionmaking, in the manner set forth in section II of Office of Management and Budget (OMB)Memorandum M-07-10, dated February 15, 2007, to the extent consistent with applicable law; and (3) no oral or written communications concerning earmarks shall supersede statutory criteria, competitive awards, or merit-based decisionmaking. Second, the executive order provides that an agency shall not consider the views of a House of Congress, committee, Member, officer, or staff of Congress with respect to commitments, obligations, or expenditures to carry out any earmark unless such views are in writing, to facilitate consideration in accordance with the requirement to base spending decisions on authorized, transparent statutory criteria and merit-based decision making to the extent consistent with applicable law. All written communications from Congress, a House of Congress, committee, Member, officer, or staff thereof, recommending that funds be committed, obligated, or expended on any earmark shall be made publicly available on the Internet by the receiving agency, not later than 30 days after such communication is received, unless otherwise specifically directed by the agency head, without delegation, after consulting with the OMB Director, to preserve appropriate confidentiality between the executive and legislative branches. Third, it requires that agency heads otherwise shall implement within their respective agencies the policy set forth in § 1 of the executive order consistent with any instructions that the Director of OMB may prescribe. The fourth duty is to provide to the OMB Director any information about earmarks and compliance with the executive order that the Director requests. Executive Order 13,457 has some general provisions which state that nothing in it shall be construed to impair or otherwise affect: (a) authority granted by law to an agency or agency head; or (b) functions of the OMB Director relating to budget, administrative, or legislative proposals. Moreover, it provides that the order shall be implemented in a manner consistent with applicable law and subject to the availability of appropriations. Finally, the order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity, by any party against the United States, its agencies, instrumentalities, its officers, employees, or agents, or any other person. In his State of the Union address on January 28, 2008, the President explained the reason for issuing the executive order: The people's trust in their government is undermined by congressional earmarks—special interest projects that are often stuck in at the last minute, without discussion or debate. Last year I asked you to voluntarily cut the number of earmarks and the cost of earmarks in half. I also asked you to stop slipping earmarks into committee reports that never come to a vote. Unfortunately, neither goal was met. So this time, if you send me an appropriations bill that does not cut the number or cost of earmarks in half, I'll send it back to you with my veto. And tomorrow, I will issue an executive order that directs federal agencies to ignore any future earmark that is not voted on by Congress. If these items are truly worth funding, Congress should debate them in the open and hold a public vote. There is a long tradition of congressional inclusion of, and agency compliance with, spending directives that are delineated in committee report language or in joint explanatory statements issued by conference committees. If applied rigorously, the provisions of Executive Order 13,457 could significantly alter this traditional dynamic, raising questions regarding the President's authority to control executive branch activity in this context via executive order. The President's ability to issue and implement executive orders may stem from both constitutional and statutory authority. In the constitutional context, presidential power to issue such orders has been derived from Article II, which states that "the executive power shall be vested in a President of the United States," that "the President shall be Commander in Chief of the Army and Navy of the United States," and that the President "shall take care that the laws be faithfully executed." The President's power to issue executive orders and proclamations may also derive from express or implied statutory authority. Irrespective of the nature of the authority to issue executive orders and proclamations, these instruments have been employed by every President since the inception of the Republic, and Presidents have not hesitated to wield this power over a wide range of often controversial subjects. Furthermore, if issued under a valid claim of authority and published, these instruments may have the force and effect of law, requiring courts to take judicial notice of their existence. While these principles establish the authority of the President to issue executive orders generally, the question of whether a particular order comports with constitutional and statutory provisions requires a more nuanced analysis. The framework for analyzing the validity of an executive order was delineated in Youngstown Sheet & Tube Co. v. Sawyer . There, the Supreme Court dealt with President Truman's executive order directing the seizure of steel mills, which was issued in an effort to avert the effects of a workers' strike during the Korean War. Invalidating this action, the majority held that under the Constitution, "the President's power to see that laws are faithfully executed refutes the idea that he is to be a lawmaker." Specifically, Justice Black maintained that Presidential authority to issue such an executive order "must stem either from an act of Congress or from the Constitution itself." Applying this reasoning, Justice Black's opinion for the Court determined that as no statute or Constitutional provision authorized such presidential action, the seizure order was in essence a legislative act. The Court further noted that Congress had rejected seizure as a means to settle labor disputes during consideration of the Taft-Hartley Act. Given this characterization, the Court deemed the executive order to be an unconstitutional violation of the separation of powers doctrine, explaining "the founders of this Nation entrusted the lawmaking power to the Congress alone in both good and bad times." While Justice Black's majority opinion in Youngstown seems to refute the notion that the President possesses implied constitutional powers, there were five concurrences in the case, four of which maintained that implied presidential authority adheres in certain contexts. Of these concurrences, Justice Jackson's has proven to be the most influential, even surpassing the impact of Justice Black's majority opinion. Specifically, Justice Jackson established a tri-partite scheme for analyzing the validity of presidential actions in relation to constitutional and congressional authority. Justice Jackson's first category focuses on whether the President has acted according to an express or implied grant of congressional authority. If so, according to Jackson, presidential "authority is at its maximum, for it includes all that he possesses in his own right plus all that Congress can delegate," and such action is "supported by the strongest of presumptions and the widest latitude of judicial interpretation." Secondly, Justice Jackson maintained that, in situations where Congress has neither granted nor denied authority to the President, the President acts in reliance only "upon his own independent powers, but there is a zone of twilight in which he and Congress may have concurrent authority, or in which its distribution is uncertain." In the third and final category, Justice Jackson stated that in instances where presidential action is "incompatible with the express or implied will of Congress," the power of the President is at its minimum, and any such action may be supported pursuant only the President's "own constitutional powers minus any constitutional powers of Congress over the matter." In such a circumstance, presidential action must rest upon an exclusive power, and the Courts can uphold the measure "only by disabling the Congress from acting upon the subject." With regard to President Truman's order, Justice Jackson determined that analysis under the first category was inappropriate, due to the fact that seizure of steel mills had not been authorized by Congress, either implicitly or explicitly. Justice Jackson also determined that the second category was "clearly eliminated," in that Congress had addressed the issue of seizure, through statutory policies conflicting with the President's actions. Employing the third category, Justice Jackson noted that President Truman's actions could only be sustained by determining that the seizure was "within his domain and beyond control by Congress." Justice Jackson concluded that such matters were not outside the scope of congressional power, reinforcing his declaration that permitting the President to exercise such "conclusive and preclusive" power would endanger "the equilibrium established by our constitutional system." Applying these principles to the case at hand, there does not appear to be any discernible basis upon which it could be asserted that Executive Order 13,457 runs contrary to constitutional or statutory precepts. While the potential centralization of control over agency treatment of non-statutory earmarks raises significant policy issues, E.O. 13,457 appears to fall within the accepted parameters of presidential authority in the executive order context, particularly when viewed in relation to other executive orders that have asserted similar and arguably more expansive centralization authority. For instance, in 1981, President Reagan issued Executive Order 12,291, ushering in a new era of presidential control over agency rulemaking activity. E.O. 12,291 required cost-benefit analyses and established a centralized review procedure for all agency regulations. E.O. 12,291 delegated responsibility for this clearance requirement to the Office of Information and Regulatory Affairs, which had recently been created within the Office of Management and Budget as part of the Paperwork Reduction Act of 1980. The impact of E.O. 12,291 on agency regulatory activities was immediate and substantial, generating controversy and criticism. Opponents of the order asserted that review thereunder was distinctly anti-regulatory and constituted an unconstitutional transfer of authority from the executive agencies. Despite these concerns, courts considering OMB involvement in agency rulemaking under the executive order did not address the constitutionality of such review, and Congress did not act to countermand the executive order. The review scheme established in the Reagan Administration has been employed and modified by subsequent Administrations in a manner that conveys a conception of presidential authority consonant with that of the Reagan order. However, arguments against the constitutionality of these executive orders have largely diminished, to the point that presidential review of agency rulemaking has become a widely used and increasingly accepted mechanism by which a President can exert significant and sometimes determinative authority over the agency rulemaking process. The implicit acquiescence of Congress and the courts regarding the constitutionality of 12,291 and its successors indicates that a President may successfully utilize executive orders to exert significant, centralized control over executive branch activity that has traditionally been exercised at the departmental or agency level. This rationale seems fully applicable to Executive Order 13,457, particularly in light of the fact that non-statutory earmarks are not legally binding on executive branch agencies. Art. I, sec. 9, cl. 7 of the Constitution states that, "No money shall be drawn from the treasury, but in consequence of appropriations made by law." With respect to all appropriations laws and other legislation enacted after the date of the order, the executive order directs each agency head to take all necessary steps to ensure that agency spending decisions are based on the text of laws and not on language in legislative history documents or other congressional communications to agencies and otherwise to implement the policy that earmarks should be included in the text of bills voted upon by Congress and presented to the President. The Supreme Court in Lincoln v. Vigil unanimously acknowledged a premise upon which the executive order appears to be based: Language in legislative history documents does not legally bind agencies unless it is enacted in the text of a statute. [A] fundamental principle of appropriations law is that where "Congress merely appropriates lump sum amounts without statutorily restricting what can be done with those funds, a clear inference arises that it does not intend to impose legally binding restrictions, and indicia in committee reports and other legislative history as to how funds should or are expected to be spent do not establish any legal requirements on" the agency. LTV Aerospace Corp. , 55 Comp. Gen. 307, 309 (1975); cf. , American Hospital Assn. v. NLRB , 499 U.S. 606, 616 (1991) (statements in committee reports do not have the force of law); TVA v. Hill, 437 U.S. 153, 191 (1978) ("Expressions of committees dealing with requests for appropriations cannot be equated with statutes enacted by Congress.") Put another way, a lump sum appropriation reflects a congressional recognition that an agency must be allowed "flexibility to shift ... funds within a particular ... appropriation account so that" the agency "can make necessary adjustments for 'unforeseen developments' and 'changing requirements.'" LTV Aerospace Corp., supra , at 318 (citation omitted.)" ... Of course, an agency is not free simply to disregard statutory responsibilities: Congress may always circumscribe agency discretion to allocate resources by putting restrictions in the operative statutes (though not, as we have seen, just in the legislative history). A year later in Shannon v, United States , the Court emphasized this point when it observed that, "We are not aware of any case ... in which we have given authoritative weight to a single passage of legislative history that is in no way anchored in the text of a statute.... We agree with the D.C. Circuit that "Courts have no authority to enforce [a] principl[e] gleaned solely from legislative history that has no statutory reference point." The Court in the Lincoln case quoted from LTV Aerospace Corp ., a decision of the Comptroller General, who heads the Government Accountability Office (GAO), formerly the General Accounting Office. In that decision, the Comptroller General said that with respect to appropriations, there is a clear distinction to be made between the imposition of statutory restrictions or conditions which are intended to be legally binding and the technique of specifying restrictions or conditions in a nonstatutory context. In this regard, Congress has recognized that in most instances it is desirable to maintain executive flexibility to shift around funds within a particular lump sum so that agencies can make necessary adjustments.... This is not to say that Congress does not expect that funds will be spent in accordance with budget estimates or in accordance with restrictions detailed in committee reports. However, in order to preserve spending flexibility, it may choose not to impose those particular restrictions as a matter of law, but rather to leave it to the agencies to "keep faith" with the Congress.... There are practical reasons why agencies can be expected to comply with these congressional expectations.... On the other hand, when Congress does not intend to permit agency flexibility, but intends to impose a legally binding restriction on an agency's use of funds, it does so by means of explicit statutory language. The Comptroller General added that as a general proposition, there is a distinction to be made between utilizing legislative history for the purpose of illuminating underlying language and resorting to that history for the purpose of writing into law that which is not there.... An accommodation has developed between the Congress and the executive branch resulting in the appropriation process flexibility discussed above. Funds are most often appropriated in lump sums on the basis of mutual legislative and executive understandings as to their use and derive from agency budget estimates and testimony and expressions of intent in committee reports. The understandings reached generally are not engrafted upon the appropriation provisions enacted. To establish as a matter of law specific restrictions covering the detailed and complete basis upon which appropriated funds are understood to be provided would, as a practical matter, severely limit the capability of agencies to accommodate changing conditions. Both the Supreme Court and the Comptroller General have indicated the consequence for an agency if it disregards directives in legislative history documents. The Court in the Lincoln case said that, "And, of course, we hardly need to note that an agency's decision to ignore congressional expectations may expose it to grave political consequences." Referring to a passage which indicated that Congress sometimes places restrictions in legislative history documents rather than in statutory text to permit agencies to accommodate changing conditions when allocating funds, the Comptroller General stated that, "This does not mean agencies are free to ignore clearly expressed legislative history applicable to the use of appropriated funds. They ignore such expressions of intent at the peril of strained relations with the Congress. The executive branch ... has a practical duty to abide by such expressions. This duty, however, must be understood to fall short of a statutory requirement giving rise to a legal infraction where there is a failure to carry out that duty." The above sections have reviewed the elements of Executive Order 13,457, the legal basis for the President to issue executive orders and their legal effect, and the consistency between the substance of the order and case law which acknowledges that earmarks in legislative history documents but not in statutory text do not legally bind agencies to fund them. A primary purpose of the executive order appears to be to limit the discretion of individual executive agency heads to fund earmarks that appear only in legislative history documents and other nonstatutory sources; it expresses a uniform policy throughout the executive branch that they generally should not be funded and that agency heads should base funding decisions on "authorized, transparent, statutory criteria and merit-based decision-making." Congress has a number of options to respond to this executive order. It can choose to operate within the new legal milieu that it appears to formalize or take steps to countermand it. One option to operate within it, of course, would be for Congress expressly to include each earmark in the text of a statute and thereby place it beyond the agency decision-making process that the executive order requires for nonstatutory ones. To become law, each earmark in a bill would have to pass the House and Senate and be presented to the President and, if the bill were vetoed, pass by two-thirds of each House to override a presidential veto. Another form of express incorporation would be for Congress to include language in a statute to the effect that, "Earmarks in a joint explanatory statement in House Report No. 110-XXX shall be effective as if enacted into law." Another option would be for Congress to incorporate by reference in the text of a statute each earmark that appears in legislative history documents in such a way that Members and Senators voting on the incorporating textual language and the President to whom the language is presented would be made aware of the earmarks involved. An example is a provision of the Revised Continuing Appropriations Resolution, 2007, which provides that, "The Office of National Drug Control Policy shall expend funds for 'Counterdrug Technology Center' by Public Law 109-115 in accordance with the joint explanatory statement of the committee of conference (H.Rept. No. 109-307) within 60 days after the date of enactment of this section." The unambiguous language of a directive of this type—"shall expend"—would appear legally to bind an agency to expend funds in accordance with the joint explanatory statement to which the directive refers. In Chevron, U.S.A. v. Natural Resources Defense Council, Inc. , the Supreme Court held that [w]hen a court reviews an agency's construction of a statute, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter, for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. A passage in the policy section of the earmarks executive order may acknowledge this principle. It states, in relevant part, that "[f]or appropriations laws and other legislation enacted after the date of this order, executive agencies should not commit, obligate, or expend funds on the basis of earmarks included in any non-statutory source, including reports of committees of the Congress or other congressional documents ... except when required by law." If Congress should choose to attempt to countermand the executive order, it could seek to enact language stating that it should have no force and effect. Another congressional option would be to seek to deny funds to the Office of Management and Budget to enforce the order. As noted above, § 4(b) of the order states that it "... shall be implemented in a manner consistent with applicable law and subject to the availability of appropriations." There is precedent for Congress enacting a statute to revoke an executive order. During the Administration of President William J. Clinton, Congress enacted a provision of the National Institutes of Health Revitalization Act of 1993, which stated that the provisions of Executive Order 12,806, "... shall not have any legal effect." This executive order, which had been issued by President George H.W. Bush the previous year, directed the Secretary of Health and Human Services to establish a fetal tissue bank. Given the highly speculative basis of any asserted constitutional authority for the President to issue such an order, there appears to be little doubt as to the legitimacy of this congressional revocation. However, any congressional attempt to revoke the earmarks executive order could set the stage for a more significant confrontation, given the broad conception of presidential authority upon which its issuance appears to be premised. Ultimately, whether enacting a statute to revoke the order or enacting language denying OMB funds to enforce it would have significant legal effect is not clear because of the nature of the order. As noted in the discussion above on consistency between it and relevant case law, Executive Order 13,457 does not appear to create new law. Instead, it directs executive agencies to comply with a principle acknowledged by the Supreme Court: namely, that agencies are not legally required to fund earmarks contained in legislative documents but not in the text of statutes. Its significance appears to be in the establishment of a uniform policy throughout the executive branch and the imposition of specific duties on agency heads to foster its implementation. The provisions of Executive Order 13,457 may significantly influence the dynamic that has traditionally governed executive and legislative practice with regard to nonstatutory earmarks, but the order itself appears to fall within the accepted parameters of presidential authority in the executive order context. Courts have acknowledged a premise upon which the order appears to be based: Earmarks in legislative history documents and other sources that are not anchored in statutory text have no legal force or effect. Moreover, while the provisions of the order appear to direct executive agencies to refrain from funding nonstatutory earmarks that they may have funded as a matter of course before it was issued, Congress has options such as expressly including earmarks in the texts of statutes or statutorily incorporating by reference earmarks in legislative history documents. These congressional responses may ameliorate the impact of the order. Ultimately, the extent to which the earmarks executive order will affect agency practice pertaining to non-statutory earmarks remains to be seen, and, as the foregoing analysis indicates, may prove to be more a matter of political rather than legal significance.

On January 29, 2008, President George W. Bush signed Executive Order 13,457, "Protecting American Taxpayers from Government Spending on Wasteful Earmarks." The order states that it is the policy of the federal government "to be judicious in the expenditure of taxpayer dollars." In order "[t]o ensure the proper use of taxpayer funds," the order provides that the number and cost of earmarks should be reduced, that their origin and purposes should be transparent; and that they should be included in the text of bills voted upon by Congress and presented to the President. For appropriations laws and other legislation enacted after the date of the order, it directs executive agencies not to commit, obligate, or expend funds on the basis of earmarks included in any non-statutory source, including requests in reports of committees of Congress or other congressional documents or communications on behalf of Members of Congress, or any other non-statutory source, except when required by law or when an agency itself has determined that a project, program, grant, or other transaction has merit under statutory criteria or other merit-based decision-making. In the context of the order, an "earmark" is defined as any funds provided by Congress for projects, programs, or grants where the purported congressional direction (whether in statutory text, report language, or other communication) circumvents otherwise applicable merit-based or competitive allocation processes, or specifies the location or recipient, or otherwise curtails the ability of the executive branch to manage its statutory and constitutional responsibilities pertaining to the funds allocation process. There is a long tradition of congressional inclusion of, and agency compliance with, spending directives that are delineated in committee report language or in joint explanatory statements issued by conference committees. If applied rigorously, the provisions of Executive Order 13,457 could significantly alter this traditional dynamic. Accordingly, this report provides an overview of the provisions of the order; addresses questions that have arisen regarding both the President's authority to control executive branch activity in this context and the effect of non-statutory congressional spending directives; and considers and evaluates potential congressional responses to the executive order. The report will be updated as events warrant.

In 1999, a federal district court judge approved a settlement agreement and consent decree in Pigford v. Glickman , a class action discrimination suit between the U.S. Department of Agriculture (USDA) and black farmers. Due to concerns about the large number of applicants who did not obtain a determination on the merits of their claims under the original Pigford settlement, Congress enacted legislation in 2008 that permitted any claimant who had submitted a late-filing request under Pigford and who had not previously obtained a determination on the merits of his or her claim to petition in federal court to obtain such a determination. The multiple claims that were subsequently filed were consolidated into a single case, In re Black Farmers Discrimination Litigation (commonly referred to as Pigford II ), and an agreement was reached to settle these claims. This report discusses both the original Pigford consent decree and the subsequent Pigford II settlement. Before turning to the main discussion regarding the litigation in these cases, it is useful to understand the historical background leading up to the litigation, as well as some of the studies that have examined USDA's treatment of minority farmers during this period. Litigation against the U.S. Department of Agriculture (USDA) for discrimination against African American farmers began in August 1997 with two suits brought by black farmers— Pigford v. Glickman and Brewington v. Glickman —but its origins go back much further. For many years, black farmers had complained that they were not receiving fair treatment when they applied to local county committees (which make the decisions) for farm loans or assistance. These farmers alleged that they were being denied USDA farm loans or forced to wait longer for loan approval than were non-minority farmers. Many black farmers contended that they were facing foreclosure and financial ruin because the USDA denied them timely loans and debt restructuring. Moreover, many claimed that the USDA was not responsive to discrimination complaints. A huge agency backlog of unresolved complaints began to build after the USDA's Civil Rights Office was closed in 1983. In 1994, the USDA commissioned D. J. Miller & Associates, a consulting firm, to analyze the treatment of minorities and women in Farm Service Agency (FSA) programs and payments. The study examined conditions from 1990 to 1995 and looked primarily at crop payments and disaster payment programs and Commodity Credit Corporation (CCC) loans. The final report found that from 1990 to 1995, minority participation in FSA programs was very low and minorities received less than their fair share of USDA money for crop payments, disaster payments, and loans. According to the commissioned study, few appeals were made by minority complainants because of the slowness of the process, the lack of confidence in the decision makers, the lack of knowledge about the rules, and the significant bureaucracy involved in the process. Other findings showed that (1) the largest USDA loans (top 1%) went to corporations (65%) and white male farmers (25%); (2) loans to black males averaged $4,000 (or 25%) less than those given to white males; and (3) 97% of disaster payments went to white farmers, while less than 1% went to black farmers. The study reported that the reasons for discrepancies in treatment between black and white farmers could not be easily determined due to "gross deficiencies" in USDA data collection and handling. In December 1996, Secretary of Agriculture Dan Glickman ordered a suspension of government farm foreclosures across the country pending the outcome of an investigation into racial discrimination in the agency's loan program and later announced the appointment of a USDA Civil Rights Task Force. On February 28, 1997, the Civil Rights Task Force recommended 92 changes to address racial bias at the USDA, as part of a USDA Civil Rights Action Plan. While the action plan acknowledged past problems and offered solutions for future improvements, it did not satisfy those seeking redress of past wrongs and compensation for losses suffered. In August 1997, a proposed class action suit was filed by Timothy Pigford (and later by Cecil Brewington) in the U.S. District Court for the District of Columbia on behalf of black farmers against the USDA. The suit alleged that the USDA had discriminated against black farmers from 1983 to 1997 when they applied for federal financial help and again by failing to investigate allegations of discrimination. This section discusses the Pigford lawsuit and the subsequent settlement approved by the court in the consent decree, as well as current statistics regarding the resolution of Pigford claims. Following the August 1997 filing for class action status, the attorneys for the black farmers requested blanket mediation to cover all of the then-estimated 2,000 farmers who may have suffered from discrimination by the USDA. In mid-November 1997, the government agreed to mediation and to explore a settlement in Pigford . The following month, the parties agreed to stay the case for six months while mediation was pursued and settlement discussions took place. Although the USDA had acknowledged past discrimination, the Justice Department opposed blanket mediation, arguing that each case had to be investigated separately. When it became apparent that the USDA would not be able to resolve the significant backlog of individual complaints from minority farmers, and that the government would not yield on its objections to class relief, plaintiffs' counsel requested that the stay be lifted and a trial date be set. On March 16, 1998, the court lifted the stay and set a trial date of February 1, 1999. On October 9, 1998, the court issued a ruling certifying as a class black farmers who filed discrimination complaints against the USDA between January 1983 and February 21, 1997. In his ruling, Judge Friedman concluded that the class action vehicle was "the most appropriate mechanism for resolving the issue of liability" in the case. A complicating factor throughout the period, however, was a two-year statute of limitations in the Equal Credit Opportunity Act (ECOA), the basis for the suit. Congress, accordingly, passed a measure in the FY1999 omnibus funding law that waived the statute of limitations on civil rights cases for complaints made against the USDA between 1981 and December 31, 1996. As the court date approached, the parties reached a settlement agreement and filed motions consolidating the Pigford and Brewington cases, redefining the certified class and requesting preliminary approval of a proposed consent decree. On April 14, 1999, the court approved the consent decree, setting forth a revised settlement agreement of all claims raised by the class members. Review of the claims began almost immediately, and the initial disbursement of checks to qualifying farmers began on November 9, 1999. Under the consent decree, an eligible recipient is an African American who (1) farmed or attempted to farm between January 1, 1981, and December 31, 1996, (2) applied to USDA for farm credit or program benefits and believes that he or she was discriminated against by the USDA on the basis of race, and (3) made a complaint against the USDA on or before July 1, 1997. The consent decree set up a system for notice, claims submission, consideration, and review that involved a facilitator, arbitrator, adjudicator, and monitor, all with assigned responsibilities. The funds to pay the costs of the settlement (including legal fees) come from the Judgment Fund operated by the Department of the Treasury, not from USDA accounts or appropriations. The Pigford consent decree basically establishes a two-track dispute resolution mechanism for those seeking relief. The most widely used option— Track A —provides a monetary settlement of $50,000 plus relief in the form of loan forgiveness and offsets of tax liability. Track A claimants had to present substantial evidence (i.e., a reasonable basis for finding that discrimination happened) that the claimant owned or leased, or attempted to own or lease, farm land; the claimant applied for a specific credit transaction at a USDA county office during the applicable period; the loan was denied, provided late, approved for a lesser amount than requested, encumbered by restrictive conditions, or USDA failed to provide appropriate loan service, and such treatment was less favorable than that accorded specifically identified, similarly situated white farmers; and the USDA's treatment of the loan application led to economic damage to the class member. Alternatively, class participants could seek a larger, tailored payment by showing evidence of greater damages under a Track B claim. Track B claimants had to prove their claims and actual damages by a preponderance of the evidence (i.e., it is more likely than not that their claims are valid). The documentation to support such a claim and the amount of relief were reviewed by a third party arbitrator, who makes a binding decision. The consent decree also provided injunctive relief, primarily in the form of priority consideration for loans and purchases, and technical assistance in filling out forms. Finally, plaintiffs were permitted to withdraw from the class and pursue their individual cases in federal court or through the USDA administrative process. Under the original consent decree, claimants were to file their claim with the facilitator (Poorman-Douglas Corporation) within 180 days of the consent decree, or no later than October 12, 1999. For those determined to be eligible class members, the facilitator forwarded the claim to the adjudicator (JAMS-Endispute, Inc.), if a Track A claim, or to the arbitrator (Michael Lewis, ADR Associates), if a Track B claim. If the facilitator determined that the claimant was not a class member, the claimant could seek review by the monitor (Randi Roth). If the facilitator (and later by court order, the arbitrator ) ruled that the claim was filed after the initial deadline, the adversely affected party could request permission to file a late claim under a process subsequently ordered by the court. Late-filing claimants were directed to request permission to submit a late claim to the arbitrator by no later than September 15, 2000. The arbitrator was to determine if the reason for the late filing reflected extraordinary circumstances (e.g., Hurricane Floyd, a person being homebound, or a failure of the postal system). Since there reportedly had been extensive and widespread notice of the settlement agreement and process—including local meetings and advertisements in radio, television, newspapers, and periodicals across the nation and in heavily populated black minority farmer areas— lack of notice was ruled an unacceptable reason for late filing. In general, there seems to be a consensus that many of the issues surrounding the implementation of Pigford I can be attributed to the gross underestimation of the number of claims that would actually be filed. At the same time, many in Congress and those closely associated with the settlement agreement have voiced much concern over the large percentage of denials, especially under Track A—the "virtually automatic" cash payment. Interest groups have suggested that the relatively poor approval percentages (69%) can be attributed to the consent decree requirement that claimants show that their treatment was "less favorable than that accorded specifically identified, similarly situated white farmers," which was exacerbated by poor access to USDA files. Table 1 shows the Court Monitor cumulative statistics for Track A claims as of December 30, 2011. As of that date, there were also 169 eligible Track B claimants (1% of the total eligible class members). These data are the final data reported by the Court Monitor. More alarming to many, however, was the large percentage of farmers who did not have their cases heard on the merits because they filed late—those now eligible to file under Pigford II , as described below. Approximately 73,800 Pigford II petitions (66,000 before the September 15, 2000, late filing deadline) were filed under the late filing procedure, of which 2,116 were ultimately allowed to proceed under the Pigford I process. Many claimants who were initially denied relief under the late filing procedures subsequently requested a reconsideration of their petitions. Out of the approximately 20,700 timely requests for reconsideration, 17,279 requests had been decided; 113 had been allowed to proceed by the end of 2005, according to the most recent compilation of individual case data. Many argued that the large number of late filings indicated that the notice was "ineffective or defective." Others countered these claims by arguing that the Pigford notice program was designed, in part, to promote awareness and could not make someone file. Some also suggested—including many of the claimants—that the class counsel was responsible for the inadequate notice and overall mismanagement of the settlement agreement. Judge Friedman, for example, cautioned the farmers' lawyers for their failure to meet deadlines and described their representation, at one point, as "border[ing] on legal malpractice." Judge Friedman also declared that he was "surprised and disappoint[ed]" that USDA did not want to include in the consent decree a sentence that in the future the USDA would exert "best efforts to ensure compliance with all applicable statutes and regulations prohibiting discrimination." The judge's statements apparently did not go unnoticed, as the Black Farmers and Agriculturalists Association (BFAA) filed a $20.5 billion class action lawsuit in September 2004 against the USDA on behalf of roughly 25,000 farmers for alleged racial discriminatory practices against black farmers between January 1997 and August 2004. This lawsuit, however, was dismissed in March 2005 because BFAA failed to show it had standing to bring the suit. The cumulative data for Pigford I were reported December 31, 2011 in the final Court Monitor Report published April 1, 2012. These data include both Track A and Track B claimants, and are summarized below: Approximately 22,721 claimants were found eligible to participate in the claims process. Approximately 22,552 claimants chose to resolve their claims through Track A. Approximately 15,645 (69%) prevailed in the Track A claims process. Approximately 169 claimants chose to resolve their claims through Track B. Approximately 104 (62%) prevailed in the Track B claims process or settled their Track B claims and received a cash payment. Approximately 5,848 claims were the subject of a petition for reexamination of a decision by the Facilitator (eligibility), Adjudicator (Track A), or Arbitrator (Track B). The Monitor directed reexamination of approximately 2,941 (50%) of the claims. The federal government provided a total of approximately $1.06 billion ($1,058,577,198) in cash relief, estimated tax payments, and debt relief to prevailing claimants (Track A and Track B). Due to concerns about the large number of applicants who did not obtain a determination on the merits of their claims under the original Pigford settlement, Congress included a provision in the 2008 farm bill that permitted any claimant who had submitted a late-filing request under Pigford and who had not previously obtained a determination on the merits of his or her claim to petition in federal court to obtain such a determination. This provision did not reopen the previous Pigford litigation, but rather provided such farmers with a new right to sue. Ultimately, multiple separate lawsuits were filed, and these claims were consolidated into a single case, In re Black Farmers Discrimination Litigation (commonly referred to as Pigford II ). On February 18, 2010, Attorney General Holder and Secretary of Agriculture Vilsack announced a $1.25 billion settlement of these Pigford II claims. Normally, funding for the costs of such settlements would be paid out of the Judgment Fund, which is a permanent, indefinite appropriation for the payment of final judgments and "compromise settlements" for which "payment is not otherwise provided." However, because $100 million was made available for payment of Pigford II claims in the 2008 farm bill, meaning that payment was otherwise provided for, the Pigford II settlement was contingent upon congressional approval of an additional $1.15 billion in funding. After a series of failed attempts to appropriate funds for the settlement agreement (see " Legislative Action " section below), the Senate passed the Claims Resolution Act of 2010 ( H.R. 4783 ) to provide the $1.15 billion appropriation by unanimous consent on November 19, 2010. In addition to the funding, the legislation contains several measures that appear to be designed to combat potential fraud during the settlement process. The Senate bill was passed by the House on November 30, 2010, and signed by the President on December 8, 2010. Relevant provisions in the act have been incorporated into the settlement agreement, which was revised as of May 13, 2011. Under the terms of the Pigford II settlement agreement, an eligible claimant is any individual who submitted a late-filing request under Section 5(g) of the original Pigford consent decree after October 12, 1999, and before June 19, 2008, but who has not obtained a determination on the merits of his or her discrimination complaint. Like the original Pigford decision, the Pigford II settlement provides both a "fast-track" adjudication process and a track for higher payments to claimants who go through a more rigorous review and documentation process. Potential claimants could seek the fast-track payments of up to $50,000 plus debt relief, or choose the longer process for damages of up to $250,000. On October 27, 2011, the U.S. District Court for the District of Columbia granted final approval of the settlement agreement. Under the terms of the court order, claims could be submitted beginning on November 14, 2011. Both the settlement agreement and the order and opinion approving the agreement set forth detailed requirements regarding claims submission procedures. The deadline for submitting claims was May 11, 2012. The court overseeing the Pigford II litigation also authorized the law firms representing the plaintiffs to establish a website for information purposes ( http://blackfarmercase.com/ ), through which interested parties could find information about the claims process, request a claims form, and monitor the progress of the review process. According to the third-party information management firm overseeing the claims process, approximately 89,000 claim forms were mailed out. Nearly 40,000 of them ultimately were filed. Of those, approximately 34,000 were deemed complete, timely, and eligible. The claims administrator developed an internal control design to identify and deny any invalid claims. Hearing officers—retired judges and lawyers with no involvement in the case—were approved by the court, sworn in, and trained in the elements of the claims. Each claim went through four to five reviews. Statistical reviews of the behavior of individual hearing officers were also conducted to further ensure that each claim was subjected to a fair and consistent review process. Ongoing monitoring by the Government Accountability Office (GAO) and USDA's Office of the Inspector General added further auditing and data standardization to the claims review process. The Claims Resolution Act of 2010 ( P.L. 111-291 ), which provided the funds for the Pigford II settlement, mandated that GAO evaluate the internal controls for the Pigford II review process and report twice on the review process. In December 2012, GAO published a report on its first evaluation of the review process. GAO concluded that "the internal control design provides reasonable assurance that fraudulent or otherwise invalid claims could be identified and denied; however, certain weaknesses in the control design could expose the claims process to risk of improper determinations." Some of the weaknesses GAO identified were a result of constraints imposed by the settlement agreement itself, and, in some cases, originated in the Pigford I settlement. GAO recognized that these weaknesses could not be modified by the parties implementing Pigford II . GAO also identified weakness in the internal control design that could be modified. GAO noted in its report (1) that the internal controls could be improved to identify and prevent claimants who obtained prior judgments on their discrimination complaints (e.g., claims under Pigford I ); and (2) that the internal control design needed to be fully implemented, including measures that could prevent duplicate claims submitted on behalf of the same farming operation or the same class member. Under the settlement, no claims will be paid until the merits of all claims have been determined. A determination of the validity of the claims is expected to be completed in June /July 2013, after which the claims administrator will begin distributing payments to successful claimants. A final judicial review of the claims review process will occur before final settlement. Preliminary estimates from the Claims Administrator suggest that 17,000-19,000 Track A claims are likely to be positively adjudicated under Pigford II , a rate of approximately 50%-56%. Under Pigford I , approximately 69% of Track A claims were successful. The 2008 farm bill provision also mandated a moratorium on all loan acceleration and foreclosure proceedings where there is a pending claim of discrimination against USDA related to a loan acceleration or foreclosure. This provision also waives any interest and offsets that might accrue on all loans under this title for which loan and foreclosure proceedings have been instituted for the period of the moratorium. If a farmer or rancher ultimately does not prevail on her claim of discrimination, then the farmer or rancher will be liable for any interest and offsets that accrued during the period that the loan was in abeyance. The moratorium terminates on either the date the Secretary of Agriculture resolves the discrimination claim or the date the court renders a final decision on the claim, whichever is earlier. The Pigford II settlement reiterated these provisions. Questions have been raised about the number of black farmers who were or are eligible for a settlement under Pigford or Pigford II . Determining the number of African American farm operators who farmed during the period of January 1, 1981, and December 31, 1996, is difficult because of the way in which the Census of Agriculture defined farm operator. Prior to the 2002 Census of Agriculture, only principal farm operators were counted. In the 1982 Census of Agriculture, there were 33,250 African American-operated farms; in 1987, 22,954; in 1992, 18,816; and in 1997, 18,451. Essentially, the number of African American farms was treated as synonymous with the number of African American operators. These statistics, however, failed to recognize that many farms are operated by more than one farm operator. In 2002, the Census of Agriculture collected data for a maximum of three principal operators per farm. The 2002 Census enumerated 29,090 African American farm operators. This statistical change more accurately captured the actual number of operators, that is, those who are actually engaged in farming. For example, a single farm may be operated by four or more operators, each of whom could have conceivably made loan applications to USDA agencies. In addition, a farm operator might operate rented or leased land owned by a principal operator. In such a case, that operator renting or leasing farmland would not have been counted as the operator of that farm. Under the term of the consent decree, however, such a farmer could be an eligible claimant because he or she farmed or tried to farm during the requisite time period. The varying Census definitions of farm, farm operator, and farm owner help explain why the number of initial claimants in the Pigford case (approximately 94,000) was higher than the number of farms/farm operators enumerated by the Census of Agriculture between 1982 and 1997 and why the estimated number of potential Pigford II claimants may be greater than the number of farms/farm operators enumerated in those or subsequent Census counts. In addition, it is important to note that there may be other reasons for discrepancies between the number of farmers reflected in farm Census data and the number of claimants under Pigford or Pigford II . For example, individuals who attempted to farm but who were denied loans or other farm assistance would not be counted as farmers but may have been or may be eligible to file a claim under the terms of the two settlement agreements. Likewise, the estate of a deceased individual who farmed or attempted to farm during the eligibility period may be entitled to relief under either settlement, but such persons would not be counted as farm operators. Finally, due to fraud or mistake, some individuals who are not eligible may have filed or may file claims under Pigford or Pigford II , but such claims would not be entitled to an award. For example, nearly 7,000 Track A claims in Pigford (31%) were denied relief, presumably because such claims lacked merit or had other defects. Thus, the number of claims filed cannot be viewed as an accurate representation of the number of awards that have been or will be made under the two settlements. Due to long-standing congressional interest in providing relief to late-filers who did not receive assistance under the original Pigford settlement, numerous bills that would provide a remedy to black farmers who were victims of discrimination have been introduced in recent legislative sessions. For example, in the 110 th Congress, the Pigford Claims Remedy Act of 2007 ( H.R. 899 ; S. 515 ) and the African-American Farmers Benefits Relief Act of 2007 ( H.R. 558 ) were introduced to provide relief to many of these claimants who failed to have their petitions considered on the merits. The provisions of these bills were incorporated into the 2008 farm bill, providing up to $100 million for potential settlement costs. The Administration requested an additional $1.15 billion for these potential settlement costs in its FY2010 budget, but appropriators did not provide such funding in the FY2010 appropriations bill. Meanwhile, Senator Charles Grassley and Senator Kay Hagan introduced S. 972 , a bill that would have amended the 2008 farm bill to allow access to an unlimited Judgment Fund at the Department of the Treasury to pay successful claims. The legislation also would have allowed for legal fees to be paid from the fund in addition to anti-fraud protection regarding claims. A related bill in the House ( H.R. 3623 ) was also introduced by Representative Artur Davis. During the 111 th Congress, Attorney General Holder and Secretary of Agriculture Vilsack announced a settlement of the Pigford II claims. The Administration requested $1.15 billion in a 2010 supplemental appropriation ( H.R. 4899 ) for the Pigford II settlement. Senator Inouye introduced an amendment ( S.Amdt. 3407 ) to H.R. 4213 , the Tax Extenders Act of 2009, to provide the requested $1.15 billion. On March 10, 2010, the Senate voted 66-34 to invoke cloture on the bill and limit debate on the substitute being considered for amendment purposes. The vote blocked S.Amdt. 3407 as non-germane. On May 28, 2010, the House passed its version of H.R. 4213 and included the $1.15 billion for the settlement. The Senate version of the bill did not recommend the $1.15 billion, and H.R. 4213 passed without the Pigford II funding. Meanwhile, the House version of H.R. 4899 , the supplemental appropriations bill that passed the House on March 24, 2010, also included the funding for Pigford II . The Senate version of H.R. 4899 , which passed May 27, did not include the funding. Subsequently, the House passed an amended version of H.R. 4899 that included the funding on July 1. However, the Senate objected to the House version, and on July 27, the House passed the Senate's May 27 version of H.R. 4899 that did not include the funding for Pigford II . Finally, on November 19, 2010, by unanimous consent, the Senate passed the Claims Resolution Act of 2010 ( H.R. 4783 ) to provide the $1.15 billion appropriation. The Senate bill was then passed by the House on November 30 and signed by the President on December 8, 2010.

On April 14, 1999, Judge Paul L. Friedman of the U.S. District Court for the District of Columbia approved a settlement agreement and consent decree in Pigford v. Glickman, a class action discrimination suit between the U.S. Department of Agriculture (USDA) and black farmers. The suit claimed that the agency had discriminated against black farmers on the basis of race and failed to investigate or properly respond to complaints from 1983 to 1997. The deadline for submitting a claim as a class member was September 12, 2000. Cumulative data show that as of December 31, 2011, 15,645 (69%) of the 22,721 eligible class members had final adjudications approved under the Track A process, and 104 (62%) prevailed in the Track B process for a total cost of approximately $1.06 billion in cash relief, tax payments, and debt relief. Many voiced concern over the structure of the settlement agreement, the large number of applicants who filed late, and reported deficiencies in representation by class counsel. A provision in the 2008 farm bill (P.L. 110-246) permitted any claimant who had submitted a late-filing request under Pigford and who had not previously obtained a determination on the merits of his or her claim to petition in federal court to obtain such a determination. A maximum of $100 million in mandatory spending was made available for payment of these claims, and the multiple claims that were subsequently filed were consolidated into a single case, In re Black Farmers Discrimination Litigation (commonly referred to as Pigford II). On February 18, 2010, Attorney General Holder and Secretary of Agriculture Vilsack announced a $1.25 billion settlement of these Pigford II claims. However, because only $100 million was made available in the 2008 farm bill, the Pigford II settlement was contingent upon congressional approval of an additional $1.15 billion in funding. After a series of failed attempts to appropriate funds for the settlement agreement, the Senate passed the Claims Resolution Act of 2010 (H.R. 4783) to provide the $1.15 billion appropriation by unanimous consent on November 19, 2010. The Senate bill was then passed by the House on November 30 and signed by the President on December 8 (P.L. 111-291). Like the original Pigford case, the Pigford II settlement provides both a fast-track settlement process (Track A) and higher payments to potential claimants who go through a more rigorous review and documentation process (Track B). A moratorium on foreclosures of most claimants' farms will remain in place until after claimants have gone through the claims process. On October 27, 2011, the U.S. District Court for the District of Columbia granted final approval of the settlement agreement. Under the terms of the court order, claims could be submitted beginning on November 14, 2011, with a deadline for filing claims of May 11, 2012. Approximately 89,000 claim forms were mailed out. Nearly 40,000 of them ultimately were filed. Of those, approximately 34,000 were deemed complete and timely. A determination of the validity of the claims is expected to be completed in June/July 2013, after which the claims administrator will begin distributing payments to successful claimants. Preliminary estimates from the claims administrator suggest that 17,000-19,000 claims will be positively adjudicated under Pigford II, a lower proportion of successful claims than under Pigford I. This report highlights some of the events that led up to the original Pigford class action suit and the subsequent Pigford II settlement. The report also outlines the structure of both the original consent decree in Pigford and the settlement agreement in Pigford II. In addition, the report discusses the number of claims reviewed, denied, and awarded under Pigford, as well as some of the issues raised by various parties under both lawsuits. It will be updated periodically.

This report (1) provides background information and discusses potential issues for Congress on the topic of portsecurity, which has emerged as a significant part of the overall debate on U.S. homelandsecurity. (2) The terroristattacks of September 11, 2001 heightened awareness about the vulnerability to terrorist attack ofU.S. ports and the ships in them. The issue for Congress is providing oversight on port security andproposals for improving it. Port security legislation can have significant implications for publicsafety, the war on terrorism, the U.S. and global economy, and federal, state, and local homelandsecurity responsibilities and expenditures. Government leaders and security experts are worried that the maritime transportation systemcould be used by terrorists to smuggle personnel, weapons of mass destruction, or other dangerousmaterials into the United States. They are also concerned that ships in U.S. ports, particularly largecommercial cargo ships or cruise ships, could be attacked by terrorists. Experts are concerned thata large-scale terrorist attack at a U.S. port could not only cause local death and damage, but alsoparalyze global maritime commerce. The 9/11 Commission reported that, "While commercialaviation remains a possible target, terrorists may turn their attention to other modes. Opportunitiesto do harm are as great, or greater, in maritime and surface transportation. Initiatives to secureshipping containers have just begun." (3) In response to concerns for port security, on November 14, 2002, Congress passed S. 1214 , as amended, the Maritime Transportation Security Act of 2002 (MTSA), andthe President signed it into law as P.L. 107-295 on November 25, 2002. The Coast Guard andMaritime Transportation Act of 2004 was signed into law as P.L. 108-293 on August 9, 2004. TitleVIII of the act adds specificity to some of the provisions in MTSA. On December 17, 2004, theIntelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) was signed into law. Thisact implements the transportation security-related recommendations of the 9/11 Commission withrespect to maritime transportation. There is continuing debate about whether current efforts to improve port security areadequate in addressing the threat. While many agree that Coast Guard and CBP initiatives to addressthe threat are strengthening the security of the maritime transportation system, they contend thatthese initiatives represent only a framework for building a maritime security regime, and thatsignificant gaps in security still remain. U.S. Ports. The U.S. maritime system includesmore than 300 sea and river ports with more than 3,700 cargo and passenger terminals and more than1,000 harbor channels spread along thousands of miles of coastline. (4) Transportation firms tend to concentrate traffic through major cargo hubs because of the highcost of their infrastructure. (5) The top 50 ports in the United States account for about 90% of allcargo tonnage and 25 U.S. ports account for 98% of all container shipments. (6) Energy products areconcentrated at particular ports. For instance, almost one-quarter of California's imported crude oilis offloaded in one geographically confined area. (7) Commercial Ships Using U.S. Ports. In 2003,approximately 6,000 commercial ships made approximately 60,000 U.S. port calls. (8) Most ships calling at U.S.ports are foreign owned and foreign crewed; less than 3% of U.S. overseas trade is carried onU.S.-flag vessels. (9) Cargo Containers. Container ships are a growingsegment of maritime commerce -- and the focus of much of the attention on seaport security. Container ships carry stacks of marine containers loaded with a wide variety of goods. A largecontainer ship can carry more than 3,000 containers, of which several hundred might be offloadedat a given port. A marine container is similar to a truck trailer without wheels; standard sizes are 8 x 8 x 20feet or 8 x 8 x 40 feet. Once offloaded from ships, they are transferred to rail cars or tractor-trailersor barges for inland transportation. Over-the-road weight regulations generally limit the cargo loadof a 40 foot container to approximately 45,000 pounds. The estimated world inventory of containersis about 12 million. Container ships tend to carry higher-value cargo than other types of cargo ships. While they represent only 11% of annual tonnage, they account for 66% of the total value of U.S.maritime overseas trade. Containerized imports are dominated by consumer goods, such as clothing,shoes, electronics, and toys. U.S. automakers also import large quantities of parts in containers. Containerized exports are dominated by wastepaper, forest products, chemicals, and agriculturalproducts. (10) More than 9 million cargo containers enter U.S. sea ports each year. For comparison, over13 million trucks and rail cars cross the Canadian and Mexican borders. CBP analyzes cargomanifest information for each container to decide which to target for closer inspection, based on suchfactors as origin, destination, shipper, and container contents. Only a small portion have theircontents physically inspected by CBP. Physical inspection could include scanning the entirecontainer with a sophisticated x-ray or gamma ray machine, unloading the contents of a container,or both. (11) Economic Importance. Ships are the primarymode of transportation for world trade. Ships carry approximately 80% of world trade byvolume. (12) The UnitedStates is the world's leading maritime trading nation, accounting for nearly 20% (measured in tons)of the annual world ocean-borne overseas trade. Ships carry more than 95% of the nation'snon-North American trade by weight and 75% by value. Trade now accounts for 25% of U.S. GrossDomestic Product (GDP), up from 11% in 1970. Over the next two decades, the total volume ofdomestic and international trade is expected to double. Given the importance of maritime trade to the U.S. and world economies, disruptions to thattrade can have immediate and significant economic impacts. (13) By one estimate, the costto the U.S. economy of port closures on the West Coast due to a labor- management dispute wasapproximately $1 billion per day for the first five days, rising sharply thereafter. (14) The container shipping system is designed for speed and efficiency. Transportation servicesare a critical component of the global, low-inventory (i.e., just-in-time) distribution model that manymanufacturers have adopted. Most industries in the United States use some imported componentsfrom overseas suppliers. By bringing parts to a plant just before they are needed for assembly,manufacturers can save money on warehouse space and inventory carrying costs. Transportefficiencies permit warehouse requirements to be minimized. Lean inventories in turn havecontributed to business productivity. From 1980 to 2000, according to one study, business logisticscosts dropped from 16.1% of U.S. GDP to 10.1%. (15) Given the dependence of the United States and the global economy on a highly efficientmaritime transportation system, many experts acknowledge that slowing the flow of trade to inspectall inbound containers, or at least a statistically significant random selection would be "economicallyintolerable." (16) Supplychain analysts are concerned that increased security-related delay at seaports could threaten theefficiency gains achieved in inventory management over the past two decades by forcing companiesto hold larger inventories. Enhanced security has benefits as well as costs. Many experts see economic benefits totighter control over maritime commerce. Resources put towards seaport security can also reducecargo theft, narcotic and migrant smuggling, trade law violations, the accidental introduction ofinvasive species, and the cost of cargo insurance. Improved planning for responding to a terroristattack at a seaport could also improve responses to other emergencies, such as natural disasters ortransportation accidents. New technologies intended to convert the sea container into a "smart box,"such as electronic seals, sensors, or tracking devices, could also improve shipment integrity, helpcarriers improve their equipment utilization, and help cargo owners track their shipments. Inresponse to the terrorist threat, the CBP has accelerated development of its new informationmanagement system, the Automated Commercial Environment (ACE). This system will assist CBPin evaluating cargo manifest information for high risk shipments but will also speed the customsfiling process for U.S. importers. (17) National Security Importance. In addition to itseconomic significance, the marine transportation system is vital for national security. TheDepartments of Defense and Transportation have designated 17 U.S. seaports as strategic becausethey are necessary for use by DOD in the event of a major military deployment. Thirteen of theseports are commercial seaports. During Desert Storm, 90% of all military equipment and supplieswere shipped from U.S. strategic ports. The deployment required over 312 vessels from 18commercial and military ports in the United States. As the GAO has reported, "If the strategic ports(or the ships carrying military supplies) were attacked, not only could massive civilian casualties besustained, but DOD could also lose precious cargo and time and be forced to rely heavily on itsoverburdened airlift capabilities." (18) Security experts are concerned about a variety of terrorist threat scenarios at U.S. ports. Among other things, they are concerned that terrorists could: use commercial cargo containers to smuggle terrorists, nuclear, chemical, orbiological weapons, components thereof, or other dangerous materials into the UnitedStates; seize control of a large commercial cargo ship and use it as a collision weaponfor destroying a bridge or refinery located on the waterfront; sink a large commercial cargo ship in a major shipping channel, therebyblocking all traffic to and from the port; attack a large ship carrying a volatile fuel (such as liquefied natural gas) anddetonate the fuel so as to cause a massive in-port explosion; attack an oil tanker in a port or at an offshore discharge facility (19) so as to disrupt the worldoil trade and cause large-scale environmental damage; seize control of a ferry (which can carry hundreds of passengers) or a cruiseship (which can carry more than 3,000 passengers, of whom about 90% are usually U.S. citizens)and threaten the deaths of the passengers if a demand is not met; attack U.S. Navy ships in an attempt to kill U.S. military personnel, damageor destroy a valuable U.S. military asset, and (in the case of nuclear-powered ships) cause aradiological release. use land around a port to stage attacks on bridges, refineries located on thewaterfront, or other port facilities. Some of these scenarios (or similar ones) have already come to pass elsewhere. For example,in October 2002, the French oil tanker Limberg appears to have been attacked by a bomb-laden boatoff the coast of Yemen, killing one crewman aboard the tanker, damaging the ship, and causing anoil spill. (20) In October2001, Italian authorities arrested on terrorism charges an Egyptian-born Canadian citizen found withhigh-tech equipment (including a satellite phone and a computer) and other personal possessions ina cargo container in an Italian port. (21) In October 2000, the U.S. Navy destroyer Cole was attacked bya bomb-laden boat during a refueling stop in the harbor of Aden, Yemen, killing 17 sailors, injuring39 others, and causing damage to the ship that cost about $250 million to repair. (22) In 1985, terrorists seized the cruise ship Achille Lauro in the Mediterranean and held its passengers hostage, killing one ofthem. Much concern has focused on the threat that a sea container could be used to smuggle anuclear weapon into the United States. Experts are concerned that if a nuclear weapon in a containeraboard a ship in port is detonated, it could not only kill tens of thousands of people and causemassive destruction, but could also paralyze the movement of cargo containers globally, therebyshutting down world trade. (23) Port Facilities. Port areas and ships in ports havemany vulnerabilities to potential terrorist attack. Port areas have very large landside perimeters tosecure, giving terrorists many potential landside points of entry. Some ports are located immediatelyadjacent to built-up urban areas, giving terrorists places to hide while approaching or escaping fromport areas. Large numbers of trucks move in and out of ports, making it possible for terrorists to usea truck to bring themselves and their weapons into a port. Many ports harbor fishing and recreationalboats that terrorists could use to mask their approach to a target ship. Ships. Commercial cargo ships at pier or atanchorage in harbor are stationary, and those moving through port do so at slow speeds, makingthem easy to intercept by a fast-moving boat. Commercial cargo ships are generally unarmed andhave very small crews, making them vulnerable to seizure by a small group of armed people, asproven by modern-day pirates. In the 1990s, the number of reported attacks on cargo ships by piratestripled. (24) Most pirateattacks occur while the ship is in port. Although most attacks occur in Southeast Asian waters onforeign-flag freighters, U.S. shippers are likely to be among the owners of cargo onboard. It can alsobe noted that some experts believe there is a link between piracy and terrorism -- that the goal ofsome acts of piracy may be to raise money to finance terrorist operations. The Financial Times hasreported an incident where a chemical tanker in the south Pacific was boarded by pirates whopracticed steering the vessel at varying speeds for several hours. (25) The lack of transparency in ship registration has been a longstanding concern. AnOrganization for Economic Cooperation and Development (OECD) study on the ownership andcontrol of ships reports that: Not only does perfect transparency not exist, but in factanonymity seems to be the rule rather than the exception, and not only is it permitted, but in manycases positively encouraged. This enables terrorists and would be terrorists to remain intimatelyinvolved in the operation of their vessels, while maintaining totally hidden, through the use ofrelatively simple mechanisms that are readily available and legally tolerated in almost alljurisdictions. (26) Unscrupulous ship owners are known to mask their identity by re-registering their vesselsunder fictitious corporate names and renaming and repainting their ships. Shipowners can registertheir vessels in "flag of convenience" countries which may have lax regulations and require littleinformation from the applicants. According to press reports, U.S. intelligence officials believe theyhave identified 15 cargo ships that have links to al Qaeda. (27) Container Shipments. The complexity of theprocess for completing containerized shipments makes it more difficult to ensure the integrity of thistype of cargo. (28) Unlikeother cargo ships whose loading process occurs at the port and whose cargo is often owned by asingle company, container ships carry cargo from hundreds of companies and the containers areloaded away from the port at individual company warehouses. A typical single container shipmentmay involve a multitude of parties and generate 30 to 40 documents. A single container could alsocarry cargo for several customers, thus multiplying the number of parties and documents involved. The parties involved in a shipment usually include the exporter, the importer, a freight forwarder,a customs broker, a customs inspector, inland transportation provider(s) (which may include morethan one trucker or railroad), the port operators, possibly a feeder ship, and the ocean carrier. Eachtransfer of the container from one party to the next is a point of vulnerability in the supply chain. The security of each transfer facility and the trustworthiness of each company is therefore critical inthe overall security of the shipment. It is also important to keep in mind that not all U.S.-boundcontainers arrive at U.S. ports. Half of the containers discharged at the Port of Montreal, forinstance, move by truck or rail for cities in the northeastern or mid-western United States. (29) Also, many containers thatenter U.S. waters are bound for other nations. Maritime Crimes. Security experts warn thatterrorists attempting to use a container to smuggle a weapon of mass destruction or componentsthereof into the United States could purchase a known exporter with a long and trustworthy shippingrecord. Drug smugglers have been known to employ this strategy to disguise their contraband inotherwise legitimate cargo. While both the Coast Guard and CBP are experienced in the marineenvironment with the "war on drugs," they recognize that terrorism is a different kind of threat. Among other things, drug smugglers are often interested in finding a smuggling method that can beused over and over to make multiple shipments. This permits the Coast Guard and CBP to look forcertain patterns of operation among drug smugglers. Terrorists, on the other hand, are more likelyto be interested in using a particular method of attack only once, to carry out a particular terroristoperation. This makes the tactic of looking for patterns of operation potentially much less useful. Another difference concerns the potential consequences of failure to detect and intercept. Given thetremendous amount of cargo arriving at seaports, the mission of interdicting illegal drugs or aweapon of mass destruction is often described as searching for the needle in the haystack. In the caseof the weapon of mass destruction, however, the potential consequence of not finding the so-calledneedle is much greater. The incidence of other shipping-related crimes also attests to the challenges faced inimproving port security. The National Cargo Security Council estimates that cargo theftdomestically ranges between $10 billion and $15 billion annually. (30) The FBI believes muchof this theft occurs in or near seaports. (31) Identifying where cargo theft occurs in the transportation systemmay help identify where terrorist infiltration could occur. Port Governance and Financing. In consideringhow to enhance seaport security, it is important to know how they are governed and operated. Thegoverning structure of ports varies from place to place. While the federal government hasjurisdiction over interstate and foreign commerce and designated federal waterway channels, stateor local governments have ownership over ports. There are ports which are part of state governmentand others which are part of city government. The Port Authority of New York and New Jersey andthe Delaware River Port Authority are examples of bi-state or regional port agencies. Ports can be a subsidiary of a public agency but may be structured to act as a private sectorcorporation. Most ports are "landlord ports," which means the port provides the basic services andinfrastructure but the tenant, such as a terminal operator, performs most of the activity. "Operatingports" both generate and carry out most of the activity at the port. In addition to city lawenforcement personnel, some port authorities also have their own police forces. Depending on how they are structured, ports finance infrastructure improvements througha variety of means. Some may levy taxes, if they are granted this authority. Ports may also pay forinfrastructure with the general funds they receive from the governments they are a part of, fromoperating revenues, general obligation bonds, revenue bonds, trust fund monies, or loan guarantees. Most ports generally break even or are minimally profitable. (32) Federal Agencies Involved in Port Security. Federal agencies involved in port security include the Coast Guard, the Bureau of Customs andBorder Protection (CBP), and the Transportation Security Agency (TSA), all of which are housedin the Department of Homeland Security (DHS), and the Maritime Administration (MARAD). TheCoast Guard and CBP are the two federal agencies with the strongest presence at seaports. Coast Guard. The Coast Guard is the nation'sprincipal maritime law enforcement authority and the lead federal agency for the maritimecomponent of homeland security, including port security. (33) Among other things, the Coast Guard is responsible forevaluating, boarding, and inspecting commercial ships as they approach U.S. waters, for counteringterrorist threats in U.S. ports, and for helping to protect U.S. Navy ships in U.S. ports. Ahigh-ranking Coast Guard officer in each port area serves as the Captain of the Port (COTP), whois lead federal official responsible for the security and safety of the vessels and waterways in his orher geographic zone. Under the terms of the Ports and Waterways Safety Act of 1972 (P.L. 92-340)and the recently enacted Maritime Transportation Security Act of 2002, the Coast Guard hasresponsibility to protect vessels and harbors from subversive acts. Bureau of Customs and Border Protection. TheBureau of Customs and Border Protection (CBP) is the federal agency with principal responsibilityfor inspecting cargoes, including cargo containers, that commercial ships bring into U.S. ports andfor the examination and inspection of ship crews and cruise ship passengers for ships arriving in U.S.ports from any foreign port. Prior to the establishment of the CBP, customs and immigrationfunctions at U.S. borders were conducted separately by the Department of the Treasury's U.S.Customs Service and the Department of Justice's Immigration and Naturalization Service. Transportation Security Administration. TSA is anagency created by the Aviation and Transportation Security Act of 2001 ( P.L. 107-71 ). Initially, itsfocus was the security of air transportation but it is responsible for the security of all modes oftransportation, cargo and passenger. Maritime Administration. MARAD, which is partof the Department of Transportation (DOT), is a civilian agency that supports the U.S. commercialmaritime industry. MARAD publishes regular Maritime Security Reports and a national planningguide on port security. MTSA requires MARAD to publish a revised version of its national planningguide on port security. Coast Guard. In response to the terrorist attacksof September 11, 2001, the Coast Guard created the largest port-security operation since World WarII. Coast Guard cutters and aircraft were diverted from more distant operating areas to patrol U.S.ports and coastal waters. The Coast Guard began to maintain security zones around watersidefacilities, Navy ships, and cruise and cargo ships entering or leaving port. Coast Guard port securityteams began to inspect certain high-interest vessels, and Coast Guard sea marshals began escortingcertain ships transiting the harbor. To counter the terrorist threat, the Coast Guard and CBP have sought to improve the qualityand advance the timing of information submitted to them by shippers and carriers so that they canbetter evaluate the terrorist risk of ships, cargo, or crew bound for the United States. By increasingtheir knowledge of the various parties in the marine environment it is hoped that federal authoritieswill be better able to separate the bad from the good without impeding the flow of legitimatecommerce. In support of this goal, the Coast Guard has instituted new reporting requirements for ships enteringand leaving U.S. harbors. The former 24-hour advance Notice of Arrival (NOA) has been extendedto a 96-hour NOA. The NOA includes detailed information on the crew, passengers, cargo, and thevessel itself. The Coast Guard has also developed the concept of maritime domain awareness (MDA). MDA involves fusing intelligence information with information from public, private, commercial,and international sources to provide a more complete picture of potential maritime security threats. The Coast Guard will use this picture to support a risk-management approach to preventing ormitigating terrorist threats through the use of actionable knowledge. (34) In support of the MDAeffort, the Coast Guard is expanding a vessel tracking system (the Automatic Identification System)to monitor ship traffic in harbors and is underway on a multibillion dollar effort (the Deepwaterprogram) to replace and modernize its aging vessels and aircraft. (35) On October 22, 2003 the Coast Guard issued final rules implementing MTSA. (36) These regulations becameeffective on November 21, 2003. Bureau of Customs and Border Protection. Among the programs CBP has initiated to counter the terrorist threat are the Container SecurityInitiative (CSI) and the Customs-Trade Partnership Against Terrorism (C-TPAT). CSI is a seriesof bilateral, reciprocal agreements that, among other things, allow CBP personnel at selected foreignports to pre-screen U.S.-bound containers. In order to give inspectors the data and time they needto pre-screen containers, CBP issued a new rule requiring that information about an ocean shipmentbe transmitted to CBP 24 hours before the cargo is loaded at a foreign port onto a U.S.-bound vessel. Previously, ocean carriers did not submit this information until the ship arrived at a U.S. port. CBPis also requiring more comprehensive and specific cargo information so it can more efficientlyevaluate individual container shipments for risks of terrorism. More detailed descriptions areintended to help speed up non-intrusive inspections of high risk containers by reducing the numberof containers inspectors need to unload for closer examination. The rationale of CSI is that a nuclearweapon or a radiological "dirty bomb" (37) that enters a U.S. port could be detonated, before the ship isinspected. (38) C-TPAT, initiated in April 2002, offers importers expedited processing of cargo if theycomply with CBP guidelines for securing their entire supply chain. Businesses that sign up for theprogram are required, among other things, to conduct a comprehensive self-assessment of theirsupply chain and submit a completed questionnaire to CBP that describes their current securitypractices. If CBP certifies an applicant, they may benefit from a reduced number of cargoinspections, thus reducing the risk of shipment delay. Transportation Security Administration. TheTransportation Security Administration in conjunction with CBP is conducting the Operation SafeCommerce (OSC) pilot project. (39) The goal of OSC is to verify the contents of containers at theirpoint of loading, ensure the physical integrity of containers in transit, and track their movementthrough each mode of transport from origin to final destination. Container tracking is a key area ofdebate on cargo security. Various "smart container" devices are being developed that would providereal-time location information and container tampering notification. The challenge is developinga device that can withstand the harsh ocean environment, be relatively inexpensive, and reliableenough not to trigger false alarms. TSA is also field-testing a Transportation Worker IdentificationCredential (TWIC) for workers in all modes of transportation that will be used to control access tosecure areas of cargo and passenger facilities. The agency has developed a "MaritimeSelf-Assessment Risk Module" to assist port terminal and vessel owners in developing their securityplans as required by MTSA. Maritime Administration. MARAD, along withthe Coast Guard, CBP, and TSA, is part of the Container Working Group which has made classifiedrecommendations on how best to ensure the security of marine container transportation. MARADhas also developed a curriculum for training maritime security personnel. International Institutions. In June 2002, theGroup of Eight Nations identified the IMO and the World Customs Organization (WCO) as twoinstitutions that should develop global initiatives to improve maritime security. At its December 2002 conference, the IMO adopted a new chapter to the Safety of Life at Sea(SOLAS) Convention entitled International Ship and Port Facility Security (ISPS) Code. (40) The code contains bothmandates and voluntary measures to improve maritime security. IMO member governments haduntil July 1, 2004 to implement the new regulations. The code largely parallels the requirementscalled for in MTSA. (41) The World Customs Organization is a Brussels-based entity that has been working towardssimplifying and harmonizing customs procedures to improve the efficiency of cross-bordertrade. (42) Currently, 164countries accounting for 99% of world trade are members of the WCO. In June 2002, the WCOcreated a task force to draft a "Resolution on Security and Facilitation of the International SupplyChain" which they completed in June 2003. In May 2005, the WCO issued its Framework ofStandards to Secure and Facilitate Global Trade. The framework sets out principles for advance,electronic reporting of cargo and shipper data and requires importers to verify security measurestaken by its suppliers. The bill creating the new Department of Homeland Security (DHS), was passed by the Senateon November 19, 2002 and by the House on November 22, 2002, and signed into law as P.L.107-296 on November 25, 2002. The DHS incorporates the Coast Guard, the former CustomsService, and TSA, among others. (43) The Maritime Transportation Security Act of 2002 was passed by Congress on November14, 2002 and signed into law as P.L. 107-295 on November 25, 2002. The act creates a U.S.maritime security system and requires federal agencies, ports, and vessel owners to take numeroussteps to upgrade security. The act requires the Coast Guard to develop national and regional areamaritime transportation security plans. It requires ports, waterfront terminals, and certain types ofvessels to develop security and incident response plans with approval from the Coast Guard. Theact authorizes CBP to require that cargo manifest information for inbound or outbound shipmentsbe provided to the agency electronically prior to the arrival or departure of the cargo. Thisinformation may be shared with other appropriate federal agencies. The legislation calls on theDepartment of Transportation to determine the level of funding needed for a grant program that willfinance security upgrades. The act also authorizes $90 million in grants for research anddevelopment in improving cargo inspection, detecting nuclear materials, and improving the physicalsecurity of marine containers. A dispute over how to pay for the cost of enhancing port security wasresolved by eliminating controversial user fee provisions from the conference report (funding issuesare discussed further below). The Trade Act of 2002 ( P.L. 107-210 ) was enacted into law on August 6, 2002. Section 343provides authority to CBP to issue regulations requiring the electronic transmission of cargoinformation to CBP prior to the shipments' exportation or importation into the United States. The Coast Guard and Maritime Transportation Act of 2004 was signed into law as P.L.108-293 on August 9, 2004. Title VIII of the act contains a number of provisions related to maritimesecurity, many of which add specificity to provisions in MTSA. Among other things, the act requiresthe DHS to submit a plan to Congress implementing a maritime intelligence system (section 803);it requires the DHS to submit a plan for a maritime security grant program, includingrecommendations on how funds should be allocated (section 804); it requires the Coast Guard toreport on the implementation and use of joint operational centers at certain U.S. ports (section 807);it requires the DOT to investigate and examine sensors that are able to track marine containersthroughout their supply chain and detect hazardous and radioactive materials within the containers(section 808); it requires the DHS to report on the costs of vessel and container inspections, and aplan for implementing secure systems of transportation, including the need for and feasibility toinspect and monitor intermodal shipping containers within the United States (section 809). The week of December 6, 2004, Congress passed the Intelligence Reform and TerrorismPrevention Act of 2004 ( P.L. 108-458 ). The act imposes an urgency on DHS's efforts instrengthening maritime security by imposing deadlines on the agency in planning and carrying outcertain maritime security activities that were called for in MTSA. This includes a deadline of April1, 2005 for completion of a national maritime security plan; a deadline of December 31, 2004 forcompletion of facility and vessel vulnerability assessments; and deadlines for a deployment plan forTWIC, a status report on standards for seafarer identification, and a status report on establishingperformance standards for container seals and locks. The act also requires DHS to create a terrorism"watch list" for passengers and crew aboard cruise ships. The challenge of port security raises several potential issues for Congress. Some Membersof Congress, who have introduced their own versions of maritime security legislation, are concernedthat MTSA does not go far enough in its requirements. In addition to considering further portsecurity legislation, Congress is debating whether the federal government is providing enough fundsto port authorities and border agencies for improving port security. Congress is also considering howto pay for port security. A major concern for Congress is assessing whether the Nation is addressing the threat tomaritime security with enough urgency. Despite the progress that has been made in strengtheningport security thus far, many security officials still describe seaports as "wide open" and "veryvulnerable" to terrorist attack. (44) Seaports, along with air cargo, general aviation, and mass transitwere identified in a recent GAO report as the "major vulnerabilities" remaining in the nation'stransportation system. (45) The GAO found that "an effective port security environment may be many years away." While manyagree that CSI, C-TPAT, OSC, and MDA, are sound strategies for addressing the threat, they contendthat these programs represent only a framework for building a maritime security regime, and thatsignificant gaps in security still remain. In the words of one security expert, (46) Right now, none of these initiatives has changed theintermodal transportation environment sufficiently to fundamentally reduce the vulnerability of thecargo container as a means of terrorism. However, all are important stepping-off points for buildingan effective risk management approach to container security -- a foundation that simply did not existprior to September 11, 2001. In its oversight role, Congress is examining the effectiveness of these programs in addressingthe terrorist threat, whether they are proceeding at sufficient pace, and whether enough resources arebeing provided to implement these and other security initiatives. Some observers and Members of Congress are concerned that initiatives to fill gaps in portsecurity are not proceeding at a sufficient pace. TSA's program to credential all transportationworkers and its effort to develop a "smart-box" to ensure the integrity of container shipments hasalso been criticized for moving forward too slowly. Some argue that the security funding providedto seaports, especially when compared to the amount provided to airports, is woefully inadequate. Others argue that current efforts to improve port security are proceeding at an unprecedentedpace. They note that the IMO, with leadership from the U.S. Coast Guard, agreed to newinternational port security measures within a year. They also note that the Coast Guard issued finalrules implementing MTSA within a year after becoming law. During Operation Liberty Shield,(March 17, 2003 through April 16, 2003) the Coast Guard and CBP demonstrated their ability torapidly intensify port security operations by increasing ship and cargo inspections, increasing air andsurface patrols, escorting more ships through harbors, and other activities. (47) According to many, the unresolved debate over how to pay for port security is stalling effortsto improve port security. The debate is over whether port security should be paid for with federalrevenues, by state and local governments, by the maritime industry, or by a cost sharing arrangementamong all of the above. The Coast Guard roughly estimates the cost of implementing the new IMOsecurity code and the security provisions in MTSA to be approximately $1.5 billion for the first yearand $7.3 billion over the succeeding decade. (48) Congress has provided over $650 million through FY2005 indirect federal grants to ports to improve their physical and operational security. This is in additionto the budgets of the Coast Guard, Bureau of Customs and Border Protection, TSA, and other federalagencies involved in port security. (49) Advocates for more spending argue that the federal fundsprovided to port authorities thus far are woefully inadequate, particularly when compared to airports. Skeptics of additional spending argue that taxpayers should not provide funds to large and profitablecorporations to secure infrastructure that is in their own financial interest to do so. Sources of Funds. A dispute over how to financesecurity requirements arose during the conference committee on MTSA. Senator Hollings proposedcreating a system of user fees on ship cargo as a means of generating funds for port security upgradesrequired in the legislation. Other conferees opposed this proposal, calling the user fees a tax. Somepolicymakers contend that without providing a funding source, the act amounts to an unfundedmandate. Port authorities, ocean carriers, and shippers argue that port security is a national concern andtherefore the federal government should finance it through general revenues. Others argue that themaritime industry should finance port security through user fees because it is a direct beneficiary ofimproved security as it reduces cargo theft and other economic damages. (50) Proponents of user fees contend that user surcharges are an effective means of ensuringimproved security because they would provide a more secure and predictable source of funding thanannual appropriations. They propose that a port security trust fund be created in a manner thatprevents the user fees from being spent on anything other than port security. If such a port securitytrust fund were created, they argue, port security would not have to compete with other fundingpriorities in the annual appropriations process. Some economists contend that a user fee system isalso more efficient than direct subsidies because the users of the service being provided (in this caseport security) are likely to demand that policymakers spend the funds in the most productive manner. Allocating Resources. An issue of likely interestto Congress is how to allocate resources appropriately to the various ports. Maximum security isprohibitively expensive. Therefore, it is important to properly identify specific security areas thathave the greatest vulnerability and apportion funds accordingly. Criteria could include a port'srelative economic importance and its proximity to an urban or sensitive area. The 9/11 Commissioncriticized the TSA for lacking a strategic plan for systematically analyzing transportation assets,risks, costs, and benefits in order to allocate limited resources in the most cost-effective way. (51) The Inspector General ofthe DHS was critical of port security grant award decisions made thus far and maderecommendations for improving them. (52) Resources for Foreign Ports. In addition tofunding security at U.S. ports, there is also the issue of finding resources for improving security atforeign ports, especially in developing countries that may not be able to afford the technology toimprove their ports' security. The IMO's recent adoption of new security measures includes astatement inviting the Secretary General of the IMO to give early consideration to establishing a"Maritime Security Trust Fund" for the purpose of providing financial support in developingcountries for strengthening their maritime security infrastructure. (53) Security experts argue that perfect maritime security can only be achieved by shutting downthe transportation system. As one observer stated, "a harbor without ships is safe, but that is notwhat harbors are built for." (54) The issue for Congress is how to increase port security to desiredlevels while minimizing the economic impacts associated with impeding the maritime trade system. When security experts speak of significant gaps still remaining in maritime security, they are oftenreferring to the credibility problems associated with the container loading and screening processoverseas and the true identity of ships and their crew on the high seas. Point of Origin Cargo Security. A major area ofconcern is ensuring the integrity of cargo as it begins its transit to the United States from its overseasorigin. Point of origin security is necessary because inspecting cargo on the high seas is practicallyimpossible and inspecting cargo upon its arrival at a U.S. port could be too late to prevent a terroristevent. Ensuring that the container was not stuffed with illegitimate cargo at the overseas factory, thatthe loaded container was not tampered with while trucked to the port of loading, and ensuring thatthe cargo information reported to CBP is not fraudulent are all critical challenges in supply chainsecurity. Congress is examining the effectiveness of C-TPAT, CSI, and OSC in ensuring theintegrity of U.S. bound cargo at its overseas point of origin. Issues include what type of proceduresare necessary to verify the legitimacy of cargo loaded into a container, what type of "smart box"devices should be required to ensure the physical integrity of the container while en route, and whatspecific information should cargo manifests contain to enable CBP to target shipments for closerinspection. The GAO investigated how the CSI and C-TPAT programs were being implemented andfound several shortcomings that need correction. (55) The GAO found that C-TPAT participants were benefitting fromreduced scrutiny of their imported cargo after they had been certified into the program but beforeCBP had validated that the participants were indeed carrying out the promised security measures. The GAO also found that not all containers that CBP had targeted for inspection at the overseasloading port were being inspected by the host customs administration. The GAO found other flawsin these two programs and CBP has taken corrective action to address some of these flaws. (56) Vessels Under Foreign Ownership and Control. There is no single sovereign power that regulates international shipping. MTSA requires the CoastGuard to report on foreign-flag vessels calling at U.S. ports, specifically those vessels with murkyownership histories, and to report on actions taken to improve the transparency of vessel registrationprocedures (section 112). In December 2002, as mentioned above, the IMO adopted more stringentinternational standards for the security of vessels and ports. Congress is likely to examine the effectiveness of Coast Guard and international efforts atraising the security level of ship operators. Skeptics contend that the new IMO regulations mostlyoffer the illusion of increased security. They contend that "flag of convenience" countries lack theresolve to enforce these standards and that the compliance documentation is too easy to manipulatein order to appear as legitimate operators. (57) While the United States enforces its standards when the CoastGuard selects arriving ships for boarding, their burden is greater if there is no effective internationalshipping regime that pre-screens sub-standard shipping. In the wake of the terrorist attacks of September 11, 2001, a consensus emerged amongexperts involved in the issue that an effective solution for securing maritime trade requires creatingan international maritime security regime. This regime would rely not on a single solution, such asincreasing the number of container inspections, but rather on a layered approach with multiple linesof defense from the beginning to the final destination of a shipment. The first security perimeter inthis "defense in depth" strategy would be at the overseas point of origin. (58) Security experts argue thatan effective solution must start with preventing undesired items from entering the maritimetransportation network, because if some of these items -- particularly nuclear weapons or dirty bombs-- reach a U.S. seaport, they could be detonated before inspectors could find them. A related issue is whether raising international port security standards should become partof international trade agreements. Thus far, the United States' strategy has been to raise standardsby working within the maritime transportation industry, such as through the IMO. However, someassert that given the strong link between maritime security and international trade, the United Statescould also pursue international port security standards as part of international trade agreements. An additional issue for Congress is determining what elements of port security might be bestaddressed through across-the-board requirements that establish common standards and practices tobe applied at all seaports, versus those elements of port security that might be best addressed througha tailored, bottom-up approach that employs measures that are designed to fit the specificcircumstances and meet specific needs of each seaport. Some observers, while acknowledging the need for site-specific measures, argue that acertain amount of uniform measures are necessary to help ensure that no seaport remains excessivelyvulnerable to terrorist attack. Other observers argue that while standardized measures make senseup to a point, the effort to implement such measures must not come at the expense of efforts todevise and implement site-specific security measures that respond to the unique characteristics ofeach port. Compared to commercial airports, seaports are generally more diverse in terms of theirphysical infrastructure and operations. As a result of this diversity in characteristics, each ship andport facility presents different risks and vulnerabilities. Port authorities are also very concerned with finding the right balance between standard andport specific security regulations. Ports seek a level of uniformity in security requirements becausethey are concerned that their customers will move their business to competing ports where theirgoods may be cleared more quickly. At the same time, ports do not want to be held to inflexiblefederal standards. They are concerned that setting security benchmarks may waste time andresources if those benchmarks are not applicable at their port given their particular commodity mixor other unique circumstances. Security Cards. In addition to improving thesecurity infrastructure of U.S. ports, there is also the issue of ensuring the trustworthiness of thepeople who work in them. Issuing credentials for port workers illustrates the challenge ofimplementing standard security measures. One of the difficult questions is what should disqualifysomeone from holding a job in a port area. MTSA (Section 70105) requires the Secretary ofHomeland Security to develop a transportation security card for port workers that would be used tolimit access to secure areas in a port. (59) Among the items that would disqualify a port worker fromobtaining a card would be a felony conviction within the last seven years that the Secretary believescould cause the individual to be a terrorism risk. (60) The USA PATRIOT Act ( P.L. 107-273 ) passed in October 2001,requires background checks for truckers carrying hazardous materials. The TSA is developing a"Transportation Worker Identification Credential" (TWIC) Program that will use biometric cardsissued to all transportation workers to limit access to secure areas in the nationwide transportationnetwork. Issuing transportation ID cards is an example of an across-the-board requirement. However,the difficulty of implementing such measures at specific ports is illustrated below: (61) ...Tampa offers a good example. Some of the port'smajor employers consist of ship repair companies that hire hundreds of workers for short-termprojects as the need arises. Historically, according to port authority officials, these workers haveincluded persons with criminal records. However, new state requirements for background checks,as part of issuing credentials, could deny such persons needed access to restricted areas of the port. From a security standpoint, excluding such persons may be advisable; but from an economicstandpoint, a company may have difficulty filling jobs if it cannot include such persons in the laborpool. A major concern for U.S. policymakers is assigning roles and responsibilities for maritimesecurity among federal agencies, among federal, state, and local agencies, and between governmentagencies and private industry. Clear roles and responsibilities are needed to prevent overlap,duplication of effort, and conflicting regulations. It is critical that the maritime trade communityperceives that federal agencies are working in concert, otherwise the DHS's goal of a closepartnership with industry in fighting terrorism may be frustrated. Intelligence Sharing. The difficulty of detectingterrorist activity once it has entered the maritime system may point to the value of intelligence. Mostacknowledge that there is just too much cargo, coming from all corners of the globe, to scrutinizeeach shipment thoroughly. Uncovering terrorist activity is likely to require "actionable" or preciseintelligence identifying exactly which shipment to intercept. The GAO reports that "in surfacetransportation, timely information-sharing has been hampered by the lack of standard protocols toexchange information among federal, state, and local government agencies and private entities." (62) One barrier to moreeffective intelligence sharing with local port authorities may be that state and local governmentofficials do not have the required security clearances. Private Industry's Role. A broad policy questionfor Congress is how much of a role the private sector should have in enhancing maritime security. Many observers believe that businesses will worry more about near term profits than the remotepossibility that their property will be attacked. (63) At the same time, most experts acknowledge that there are justtoo many cargo movements for the government to monitor on its own. Security experts believe thattightening control over maritime commerce requires that security be "embedded" into everydaybusiness processes. CBP's C-TPAT program is intended to enlist the effort of the many companiesinvolved in international container shipments. In its oversight responsibilities, Congress mayevaluate the effectiveness of this program, particularly in ensuring the due diligence of maritimetraders over the long term. Congress may consider how best to ensure sustained follow through onthe part of C-TPAT participants. A "trust but verify" approach utilizing regular CBP security auditsmay be one strategy policymakers consider. Several proposals have been introduced in the 109th Congress to improve port security. Inthe House, H.R. 163 , introduced by Representative Millender-McDonald, would createa pilot program for the sealing of empty containers. H.R. 173 , introduced byRepresentative Millender-McDonald, would amend the criminal code to include certain terroristrelated acts in the marine environment as unlawful, require the Attorney General to coordinateport-related crime data collection, as well as other port security related provisions. H.R. 478 , introduced by Representative Millender-McDonald, authorizes federal port security grants andthe issuance of letters of intent to fund port security projects. H.R. 785 , introduced byRepresentative Stearns, would create a federal database for the collection of cargo crime data. H.R. 1731 , introduced by Representative Harman, authorizes federal port security grantsto be funded from Customs import duties. H.R. 1817 , the DHS Authorization Act forFY2006, which passed the House on May 18, 2005, contains numerous provisions related to portsecurity. In the Senate, S. 3 , introduced by Senator Gregg, makes unlawful certain actsrelated to maritime security. S. 12 , introduced by Senator Biden, would accelerate thedeployment of radiation detection portal equipment at U.S. and foreign seaports and establish atanker security initiative, among other provisions. S. 376 , introduced by SenatorHutchinson, requires the DHS to develop a strategy to ensure the security of intermodal shippingcontainers, whether imported, exported, or shipped domestically and requires that no less than halfof all imported containers be equipped with "smart box" technology by 2007. S. 378 ,introduced by Senator Biden, and reported by the Committee on the Judiciary on April 21, 2005,increases penalties for certain maritime crimes. S. 744 , introduced by Senator Nelson,requires the Maritime Administration to create a Caribbean Basin Port Security Assistance Program. S. 855 , introduced by Senator Collins, parallels H.R. 1731 . S. 1052 , introduced by Senator Stevens, would establish additional joint harbor operational centers forport security, establish a deadline of January 1, 2006 for the issuance of the TWIC card, requireimporters to submit additional manifest data as part of the 24 hour rule, increase the number of CSIinspectors, establish and develop a plan for the random inspection of shipping containers, requireDHS to conduct a study on the desirability of creating a user fee for funding port security, as wellas other provisions related to port security.

The terrorist attacks of September 11, 2001 heightened awareness about the vulnerability toterrorist attack of all modes of transportation. Port security has emerged as a significant part of theoverall debate on U.S. homeland security. The overarching issues for Congress are providingoversight on current port security programs and making or responding to proposals to improve portsecurity. The U.S. maritime system consists of more than 300 sea and river ports with more than 3,700cargo and passenger terminals. However, a large fraction of maritime cargo is concentrated at a fewmajor ports. Most ships calling at U.S. ports are foreign owned with foreign crews. Container shipshave been the focus of much of the attention on seaport security because they are seen as vulnerableto terrorist infiltration. More than 9 million marine containers enter U.S. ports each year. While theBureau of Customs and Border Protection (CBP) analyzes cargo and other information to targetspecific shipments for closer inspection, it physically inspects only a small fraction of the containers. The Coast Guard and CBP are the federal agencies with the strongest presence in seaports. In response to September 11, 2001, the Coast Guard created the largest port-security operation sinceWorld War II. The Coast Guard has advanced its 24-hour Notice of Arrival (NOA) for ships to a96-hour NOA. The NOA allows Coast Guard officials to select high risk ships for boarding upontheir arrival at the entrance to a harbor. CBP has also advanced the timing of cargo information itreceives from ocean carriers. Through the Container Security Initiative (CSI) program, CBPinspectors pre-screen U.S.-bound marine containers at foreign ports of loading. The Customs TradePartnership Against Terrorism (C-TPAT) offers importers expedited processing of their cargo if theycomply with CBP measures for securing their entire supply chain. To raise port security standards, Congress passed the Maritime Transportation Security Actof 2002 ( P.L. 107-295 ) in November 2002. The focus of debate in Congress has been about whethercurrent efforts to improve port security are adequate in addressing the threat. While many agree thatCoast Guard and CBP programs to address the threat are sound, they contend that these programsrepresent only a framework for building a maritime security regime, and that significant gaps insecurity still remain. The GAO has investigated how the CSI and C-TPAT programs are beingimplemented and found several shortcomings that need correction. The GAO found that C-TPATparticipants were benefitting from reduced scrutiny of their imported cargo after they had beencertified into the program but before CBP had validated that the participants were indeed carryingout the promised security measures. The GAO also found that not all containers that CBP hadtargeted for inspection at the overseas loading port were being inspected by the host customsadministration. This report will be updated periodically. Key Policy Staff: Port and Maritime Security

In response to the September 11, 2001, terrorist attacks against the United States, Congress enacted the Authorization for Use of Military Force (2001 AUMF; P.L. 107-40 ; 50 U.S.C. §1541 note) to authorize the use of military force against those who perpetrated or provided support for the attacks. President George W. Bush identified Al Qaeda as the group that carried out the attacks, and the Taliban, then in control of the governance of Afghanistan, as harboring Al Qaeda within the territory of that country. Under the authority of the 2001 AUMF, in October 2001 President Bush sent U.S. Armed Forces to Afghanistan to conduct military operations "designed to disrupt the use of Afghanistan as a terrorist base of operations and to attack the military capability of the Taliban regime." More than 13 years later, in December 2014, President Obama declared the end of the combat mission in Afghanistan. Despite this announcement, U.S. Armed Forces remain in Afghanistan and are reportedly authorized to target Al Qaeda and the Taliban. As armed conflict against Al Qaeda and the Taliban has progressed, and U.S. counterterrorism strategy has evolved, U.S. use of military force has expanded outside Afghanistan. After the U.S. invasion of Afghanistan, many members of Al Qaeda moved out of the country and into Pakistan. In response, the United States has conducted unmanned aerial vehicle (UAV) missile strikes against Al Qaeda and Taliban targets in Pakistan. The United States has identified other groups in the Middle East and Africa that it considers "associated forces" of Al Qaeda, that is, organized forces that have entered alongside Al Qaeda in its armed conflict with the United States and its coalition partners. The United States has used force against these Al Qaeda associates in a number of other countries, including Yemen, Somalia, Libya, and most recently, Syria. In addition, the President has relied in part on the 2001 AUMF as authority for his campaign against the Islamic State (also known as ISIS or ISIL) in Iraq and Syria, and against the Khorosan Group of Al Qaeda in Syria. Since 2001, counterterrorism activities involving deployment of U.S. Armed Forces, if not always the use of military force, have steadily increased, taking place in countries around the world, although it is not clear whether the 2001 AUMF has provided authority for these activities. The 2001 AUMF, as many have argued and the executive branch has agreed, does not seem to authorize all uses of military force in furtherance of U.S. counterterrorism objectives. Although some presidential reporting to Congress suggests a wide interpretation of the scope of 2001 AUMF authority, the Obama Administration, as recently as May 2014, has stated that the 2001 AUMF authorizes only those uses of military force against Al Qaeda, the Taliban, and their associated forces, and, when such actions are taken outside of Afghanistan, only in cases of imminent threat of attack against the United States. Because the 2001 AUMF covers only some uses of military force to counter terrorist threats, other legislation and presidential powers under Article II of the Constitution provide authority to carry out U.S. counterterrorism activities globally. Some observers and Members of Congress have argued that the 2001 AUMF, focused as it is on those who perpetrated and supported the September 11, 2001, terrorist attacks, is outdated and should be repealed, as it has been stretched and perhaps distorted to fit uses of force that were not contemplated when the 2001 AUMF was enacted. Others assert that the 2001 AUMF should be updated to reflect the evolution of the terrorist threat since 2001 and the continued need to authorize the use of military force against this threat, perhaps with greater oversight and procedural requirements from Congress. The Obama Administration has indicated its willingness to address concerns about the 2001 AUMF and continued uses of military force in support of counterterrorism goals, in the past arguing that the 2001 AUMF must remain in force until combat operations end in Afghanistan. By the end of 2014, the United States and Afghanistan had finalized a bilateral security agreement, and the combat mission in Afghanistan had been declared complete. The Obama Administration, however, still finds itself relying on 2001 AUMF authority not only for continuing U.S. military operations in Afghanistan, but also for beginning a new campaign against the Islamic State in Iraq and Syria, and possibly expanding operations to other countries if the Islamic State or Al Qaeda groups or associates effectively expand their reach and pose a threat to U.S. national security and interests. The President, in his February 11, 2015, letter to Congress concerning his draft proposal for a new authorization for use of military force against the Islamic State, stated, "I remain committed to working with the Congress and the American people to refine, and ultimately repeal, the 2001 AUMF."   In the face of these issues, Congress has for several years considered a number of legislative proposals to change the authority in the 2001 AUMF, the manner in which it is used, and the congressional role in its oversight and continuing existence. This process has continued in the 114 th Congress, and deliberations over the future of the 2001 AUMF have become entwined with consideration of proposals to enact a new AUMF to respond to the actions of the Islamic State in Iraq and Syria. Generally considered a broad authorization for the President to use military force against the terrorist threat posed by Al Qaeda after the September 11, 2001, terrorist attacks, the 2001 AUMF is nonetheless limited in scope, targeting only those who perpetrated or supported those attacks. Because of this limitation, the two most recent Administrations have instituted procedures to determine which actors are lawful targets of military force and in which parts of the world such force might be used under different circumstances. The effect has been U.S. uses of military force or other deployment activities in several countries, and varying as to type and scope. Shortly after the September 11, 2001, terrorist attacks on the United States, Congress enacted and President George W. Bush signed into law the 2001 AUMF. The 2001 AUMF authorizes the President to use U.S. Armed Forces to combat the nations, groups, and individuals who perpetrated the September 11, 2001, attacks and those who harbored such perpetrators. Section 2(a) of the 2001 AUMF authorizes the use of force in response to the September 11 attacks: Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, . . . . sec. 2. authorization for use of united states armed forces. (a) In General.—That the President is authorized to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons, in order to prevent any future acts of international terrorism against the United States by such nations, organizations or persons. The authorizing language is broad in its scope concerning prevention of any future acts of terrorism perpetrated against the United States, but is circumscribed by authorizing the targeting only of those nations, organizations, or persons involved in perpetrating the September 11 attacks or harboring those who perpetrated the attacks. Although President Bush identified the terrorist group Al Qaeda and individuals within that group as the perpetrators of the attacks, and the Taliban then governing Afghanistan as the entity that harbored Al Qaeda, these actors were not specifically named in the 2001 AUMF's language. The 2001 AUMF represented a novel approach to modern-era military force authorizations, because it empowered the President to target non-state actors, even to the individual level, instead of only states. In contrast to the authorization enacted by Congress in the 2001 AUMF, the legislation originally proposed by the Bush Administration in the wake of the September 11, 2001, attacks would have provided the authority to use military force not only against Al Qaeda and the Taliban, but also to counter all terrorist threats generally, without necessitating a connection to the attacks: Resolved by the Senate and the House of Representatives of the United States of America in Congress assembled— That the President is authorized to use all necessary and appropriate force against those nations, organizations or persons he determines planned, authorized, harbored, committed, or aided in the planning or commission of the attacks against the United States that occurred on September 11, 2001, and to deter and pre-empt any future acts of terrorism or aggression against the United States . Because Congress did not accept this broader authorization language, it can be argued that Congress deliberately chose to limit presidential authority to respond to the threat posed by those who carried out and supported the September 11, 2001, attacks, and not to other persons, nations, or groups. The continuing application of 2001 AUMF authority and its perceived expansion has led to arguments over the proper scope of 2001 AUMF authority and calls for legislative clarification of such scope. Because Congress limited the use of force to targets associated with the September 11, 2001, attacks, while according broad discretion to the President regarding whom to target, implementing the 2001 AUMF has required the creation of frameworks and procedures to determine which uses of force fall under the 2001 AUMF's authority. Prior to the U.S. military campaign against the Islamic State that began in summer 2014, executive branch officials made statements that included certain interpretations concerning the 2001 AUMF: The 2001 AUMF is primarily an authorization to enter into and prosecute an armed conflict against Al Qaeda and the Taliban in Afghanistan. The 2001 AUMF authorizes the President to use military force against Al Qaeda and the Taliban outside Afghanistan, but such uses of force must meet a higher standard of threat to the United States and must use limited, precise methods against specific individual targets rather than general military action against enemy forces. Because the 2001 AUMF authorizes U.S. involvement in an international armed conflict, the international law of armed conflict informs the authority within the 2001 AUMF. This law permits the use of military force against forces associated with Al Qaeda and the Taliban as co-belligerents; such forces must be operating in some sort of coordination and cooperation with Al Qaeda and/or the Taliban, not just share similar goals, objectives, or ideologies. According to the Obama Administration, this interpretation of the scope of 2001 AUMF authority fits within the overall framework of presidential power to use military force against those posing a threat to U.S. national security and U.S. interests. In situations where the 2001 AUMF or other relevant legislation does not seem to authorize a given use of military force or related activity, the executive branch will determine whether the President's Article II powers as Commander in Chief and Chief Executive, as interpreted by the executive branch itself, might authorize such actions. In this way, similar U.S. military action to meet U.S. counterterrorism objectives might be interpreted to fall under different authorities, of which the 2001 AUMF is just one, albeit important, example. In seeming contrast to the interpretation described above, Obama Administration officials and the President's September 2014 notifications to Congress for airstrikes and other actions in Iraq and Syria stated that the 2001 AUMF authorizes the President to order certain U.S. military strikes against the Islamic State in Iraq and Syria, as well as the Khorasan Group of Al Qaeda in Syria. This reliance on 2001 AUMF authority might represent a shift in the Administration's previously stated interpretation of that authority in at least two ways. First, the military campaign against the Islamic State seems to represent an expansion of the scope of military operations undertaken previously outside Afghanistan under 2001 AUMF authority. Second, the reasons for the military campaign seem to rest as much on (1) current U.S. policy goals for Iraq's stability; (2) the stability of the region; and (3) support for moderate rebel groups in their fight against the Islamic State, other extremist groups, and the Asad government in Syria, as they do on responding to an imminent threat to the United States, its citizens, or its personnel and facilities abroad. Acting under 2001 AUMF authority, U.S. Armed Forces began operations in Afghanistan on October 7, 2001, to neutralize the terrorist threat in that country by targeting Al Qaeda elements and infrastructure and removing the Taliban from power. The U.S. combat mission continued in Afghanistan until December 2014, including as part of NATO's International Security Assistance Force (ISAF). U.S. military action in Afghanistan continues in a reduced form in 2015. In addition, since 2001, U.S. military action against terrorist groups has expanded to several other countries. Past comments from Obama Administration officials have indicated that military actions taken under the 2001 AUMF outside Afghanistan had nonetheless been limited in scope, at least until the current military campaign against the Islamic State. For example, in May 2014, an Administration official stated that 2001 AUMF-authorized military actions had included strikes in Yemen against Al Qaeda in the Arabian Peninsula (AQAP), considered either part of or associated with Al Qaeda, and operations to kill or capture Al Qaeda members in other countries, including Yemen and Somalia. Drone strikes and other military operations in other countries, such as Pakistan and Libya, are also considered to be carried out under 2001 AUMF authority. According to information provided at intervals by the executive branch in the 13-plus years since the 2001 AUMF was enacted, the United States has engaged in counterterrorism operations including the use of military force in a number of other countries. Since the 2001 AUMF's enactment, presidential notifications to Congress have reported uses of military force, military deployments, and other activities in a number of countries and for a number of purposes, including to deploy U.S. Armed Forces and conduct military operations in several countries in a number of regions of the world, including most recently in Iraq and Syria against forces of the Islamic State and the Khorosan Group of Al Qaeda; counter generally the terrorist threat against the United States following September 11, 2001; engage terrorist groups "around the world"; engage terrorist groups "on the high seas"; detain individuals at Guantanamo Bay, Cuba, and to take other actions related to detainment decisions; and conduct trials of terrorist suspects in military commissions. These presidential notifications include language invoking either the authority or requirements of the 2001 AUMF, often in conjunction with the authorities and requirements of the War Powers Resolution ( P.L. 93-148 ; 50 U.S.C. §§1541-1548), which requires the President to report military deployments and the introduction of U.S. Armed Forces into hostilities, with or without congressional authorization such as that provided in the 2001 AUMF. Some notifications state that certain military actions are taken pursuant to the President's authority as Commander in Chief and Chief Executive, including the authority to carry out the 2001 AUMF's provisions. While referencing the 2001 AUMF, such notifications often simply state that such reporting is "consistent with" the requirements of the 2001 AUMF, which directs the President to make reports periodically of U.S. military actions taken pursuant to the 2001 AUMF. Several notifications reference the 2001 AUMF at the beginning or end of a longer section on counterterrorism operations, which then lists a number of activities in several countries without explaining each list item's connection to 2001 AUMF authority. As a result, it is often difficult to determine which military actions and which countries have been determined by the executive branch to fall within 2001 AUMF authority. President Obama and his Administration have publicly expressed support for possibly amending and eventually repealing the 2001 AUMF, in order to change the stance of the United States, as President Obama has termed it, "from a perpetual war-time footing." According to Administration officials, the primary importance of the 2001 AUMF has been to authorize U.S. Armed Forces to enter into armed conflict with those who carried out or supported the September 11, 2001, terrorist attacks, namely Al Qaeda and the Taliban. U.S. military operations against Al Qaeda and the Taliban occurred for more than a decade primarily in Afghanistan, and some U.S. Armed Forces currently remain there. Although the President announced the end of the U.S. military mission in Afghanistan in December 2014, he notified Congress in December 2014 that certain U.S. military operations against Al Qaeda in Afghanistan will continue pursuant to 2001 AUMF authority, and such operations have been reported in 2015. The United States and Afghanistan concluded a bilateral security agreement and status of forces agreement in late 2014, providing the basis under international law to remain in Afghanistan in a post-conflict role. The Obama Administration has stated that with the end of the U.S. combat mission in Afghanistan, it intends to work with Congress to either amend or repeal the 2001 AUMF. Administration officials have stated that any change to the 2001 AUMF should not, however, constrain the President's authority in a way that frustrates his ability to protect the United States from terrorist attacks and to meet U.S. counterterrorism objectives generally. The President has also maintained that he will oppose any attempt to legislate wider executive branch war-making authority. Instead, the Administration has proposed modernizing the counterterrorism authorities of the 2001 AUMF to precisely authorize the President to meet the current challenges posed by terrorist groups and networks around the world. Some Members of Congress have espoused this approach as well. More recently, however, these stated Administration goals for the reform or repeal of the 2001 AUMF have been thrown into doubt by statements from the President and Administration officials in connection with U.S. military operations conducted against forces of the Islamic State and the Khorasan Group of Al Qaeda in Iraq and Syria. The President, in his August 2014 notifications to Congress, indicated that his powers as Commander in Chief and Chief Executive under Article II of the Constitution gave him authority to undertake deployments and airstrikes in Iraq against IS forces. The President's September 2014 notifications to Congress for airstrikes and other actions in Iraq and Syria, however, stated that the 2001 AUMF provides authorization for certain U.S. military strikes against the Islamic State. Due to Al Qaeda's February 2014 disavowal of any remaining ties with the Islamic State, and the Islamic State's seeming lack of connection with the September 11, 2001, terrorist attacks, some experts have questioned whether the Islamic State can be targeted under the 2001 AUMF. The Obama Administration has stated that the Islamic State can be targeted under the 2001 AUMF because its predecessor organization, Al Qaeda in Iraq, communicated and coordinated with Al Qaeda; the Islamic State currently has ties with Al Qaeda fighters and operatives; the Islamic State employs tactics similar to Al Qaeda; and the Islamic State, with its intentions of creating a new Islamic caliphate, is the "true inheritor of Osama bin Laden's legacy." This interpretation seems to suggest that the Islamic State could be treated either as part of Al Qaeda that has splintered from the main group, or as an associate of Al Qaeda; under either interpretation, the Islamic State would arguably be targetable under the 2001 AUMF. Prior to the wider military campaign against the Islamic State, the Obama Administration had stated that it will use limited force against individuals and groups outside Afghanistan under 2001 AUMF authority only when they are legally defined military targets that "pose a continuing, imminent threat to U.S. persons.... " With regard to the current crisis in Iraq and Syria, the Administration has indicated that the Islamic State's threat to U.S. national security is one factor in the President's decision to conduct the current military campaign against the group. Although it is not clear whether the Administration is still adhering to this policy of limited force, the Administration might have made a determination of a "continuing, imminent threat" from the Islamic State, thus plausibly placing the current military campaign within the limited scope of 2001 AUMF authority set out by the Administration prior to the Islamic State crisis. The ongoing, indefinite, large-scale military campaign against the Islamic State, outside the Afghanistan theater of operations, however, might be seen as an executive branch policy shift toward a more expansive interpretation of 2001 AUMF authority. Without a new authorization for use of military force specifically targeting the Islamic State, it seems the President would rely heavily on 2001 AUMF authority indefinitely to prosecute the military conflict against the group. Despite this, the President has continued to make statements confirming that Administration policy remains one of amending or repealing the 2001 AUMF, including in his February 11, 2015, letter to Congress accompanying his proposal for a new authorization for use of military force against the Islamic State. The executive branch's reliance on the 2001 AUMF has raised a number of concerns among some Members of Congress and policy analysts. These concerns relate to Congress's constitutional role in declaring and funding war, as well as several executive branch activities to counter terrorism that are perceived as problematic. In contrast, Obama Administration officials have testified that the legal framework for the current conflict against Al Qaeda and associated forces, which includes the 2001 AUMF, remains valid and effective in meeting the U.S. military's requirements for conducting counterterrorism operations, even as they state that they remain open to working with Congress to amend or repeal it. Some argue that Congress, since enacting the 2001 AUMF, has in some ways abdicated its role in directing the use of U.S. military force to counter terrorist threats. Congress, some contend, authorized the use of military force in haste during the initial reaction to the September 11 attacks, and has taken little legislative action since to tailor the use of such force to current circumstances. There are ongoing concerns that under the 2001 AUMF, especially regarding the use of unmanned aerial vehicles (UAVs), transparency in executive branch actions is lacking, and that Congress has neither voiced effective demands for information, nor asserted its role in decision-making through consultation and oversight. With the President's most recent reliance on 2001 AUMF authority to prosecute the military campaign against the Islamic State, calls to repeal the 2001 AUMF and terminate any newly enacted authority within three years seem to indicate that some in Congress are intent on using the legislative process to shape the course of ongoing counterterrorism and other military operations going forward. Observers assert that by its own terms, the 2001 AUMF over time has become obsolete, as it focuses directly on preventing the perpetrators of the September 11, 2001, attacks from carrying out further attacks against the United States, most of whom by now have been killed or captured. It has been noted, however, that the 2001 AUMF remains central to the executive branch's justification for expanding efforts globally to counter terrorist threats, including continuing efforts against Al Qaeda. Administration officials assert that the 2001 AUMF is a key source of domestic legislative authority to conduct military operations against terrorist elements in any country where terrorist groups operate and plan to attack the United States or U.S. interests. The executive branch has targeted terrorist groups that are perceived by some to have only tenuous connections to those who perpetrated or supported the September 11, 2001, attacks. In perhaps the most significant expansion of military action taken pursuant to 2001 AUMF authority, the President in September 2014 cited the statute as providing legal justification for U.S. military airstrikes and other operations against forces of the Islamic State and the Khorasan Group of Al Qaeda in Iraq and Syria. Many Members of Congress, however, claim that this is a new military campaign and requires a separate congressional authorization. Several proposals for a new authorization for use of military force targeting the Islamic State have been introduced, in both the 113 th and 114 th Congresses, and the President himself has proposed a new Islamic-State AUMF. None of these proposals have been enacted into law; the President continues to rely on 2001 AUMF and other authorities. In addition to concerns about the perceived expanding scope of 2001 AUMF authority, maintaining the 2001 AUMF as current law might complicate congressional efforts to shape future authority granted to the President to use military force against other threats, such as the ongoing debate over authorizing military force against the Islamic State. Legislative proposals to authorize the use of military force against the Islamic State ("IS AUMF") have so far included a number of different provisions to limit the scope and duration of presidential authority to conduct military operations. Some are concerned that leaving the 2001 AUMF in place, with its broadly interpreted authorizing language, could neutralize any provisions in a new IS AUMF that purport to limit or otherwise shape the authority granted to the President. It could be argued that this sort of interpretation of congressionally granted authority, where multiple AUMFs are combined into one larger authority to conduct wider military operations, has already occurred, with the President relying on both 2001 and 2002 AUMF authority to conduct the current campaign against the Islamic State. In an attempt to prevent this cumulative approach to multiple AUMF authorities, at least one IS AUMF proposal introduced in the 113 th Congress stated that it constituted the sole authority to target the Islamic State militarily: "The provisions of this joint resolution pertaining to the authorization of use of force against the Islamic State of Iraq and the Levant shall supersede any preceding authorization for the use of military force." This type of provision could prove less than effective, however, if Congress chooses to take no action to amend or repeal the 2001 AUMF's authority, especially in light of the President's position that the 2001 AUMF authorizes military action against the Islamic State. In addition to concerns about the 2001 AUMF's duration and scope, certain activities have also come under debate in connection with the 2001 AUMF. The Obama Administration's increased use of UAVs to strike terrorist elements abroad, yet away from the conventional battlefield, is one of the controversial activities for which the President has invoked 2001 AUMF authority. Critics of such drone strikes state that the practice is not sufficiently transparent, leaving the public and Congress without the information necessary to determine the propriety of the strikes through effective oversight. Moreover, critics argue that expanded UAV use targets far too many individuals, including low-level terrorist operatives as well as U.S. citizens abroad, raising constitutional due process concerns in the latter case. Collateral casualties and damage are also causes for concern. Because UAV strikes often are discrete incursions into foreign air space completed in short periods of time, and do not involve placing U.S. personnel in harm's way, some observers believe that the requirements of the War Powers Resolution for congressional consultation and authorization will become obsolete through the employment of this new remote warfare technology. Many observers object to the detention practices of the U.S. government regarding terrorism suspects and enemy combatants, including U.S. citizens, citing allegedly inhumane conditions at the Guantanamo facilities, the use of rendition to foreign governments, the indefinite nature of detention in many cases, the constitutional due process concerns such practices raise, and issues with the government's choices of military or civilian judicial venues for prosecution in different cases. Some government officials have indicated in recent years that U.S. military uses of force on U.S. territory could be authorized under the 2001 AUMF, sparking criticism. It is argued that because the 2001 AUMF does not contain explicit authorizing language for the use of force "within the United States," it does not meet applicable legal requirements for using the U.S. military domestically under the Posse Comitatus Act, which states that the military cannot be used on U.S. territory to execute the law unless expressly authorized by the Constitution or an act of Congress. Obama Administration officials have stated that they believe domestic uses of military force would be permitted only in the most extraordinary circumstances, and when such action is necessary to neutralize an identified domestically based threat to U.S. national security. Although this eventuality remains unlikely, the issue of whether the 2001 AUMF or any other authorization for use of military force can be legitimately interpreted to authorize domestic military action without specific authorizing language could remain a concern. Some Members of Congress have supported legislative options to repeal, amend, or replace the 2001 AUMF, while others defend leaving it as is. Some of the key arguments being made in support of or against these options are considered below. According to the Department of Defense, the 2001 AUMF provides authority to meet all U.S. military requirements to respond effectively and flexibly to terrorist threats globally, and allows the military to meet threats in conformity with domestic law and the international laws of war. Proponents of maintaining the 2001 AUMF as it stands state that it is important to ensuring the United States can continue to respond with force to terror threats. Repealing or narrowing the 2001 AUMF might remove legal authority to conduct certain counterterrorism efforts, and could undo authority to detain enemy combatants at Guantanamo Bay and elsewhere. Proponents of the status quo state that because the threat of terrorism will continue years into the future, the broad congressionally mandated authority in the 2001 AUMF is important to ensuring political legitimacy and the public's support for counterterrorism efforts. Some have argued, however, that counterterrorism operations will likely continue to expand in geographical and operational scope, and that Congress should take action to have a role in directing the course of using force against terrorist groups into the future. Others assert that maintaining the 2001 AUMF as is could provide an effective means of constraining presidential powers to conduct military operations against terrorist groups over time, for the very reason that its language is limited to those involved in the September 11, 2001, terrorist attacks, a list of groups and individuals that will arguably continue to dwindle as the numbers of those directly connected with the September 11, 2001, attacks diminishes. According to this view, if Congress were to leave the 2001 AUMF in place, uses of military force under 2001 AUMF authority will become increasingly constrained over time. Many argue that repealing the 2001 AUMF is necessary for a number of reasons: the President announced in December 2014 that the military combat mission in Afghanistan had ended, and in other circumstances Congress has passed legislation formally ending war authority for other conflicts; the fight against terrorist groups has been improperly expanded and extended to the point that there are no effective restraints on presidential power in this area; and more emphasis should be placed on counterterrorism efforts that do not involve military force, such as disruption of terrorist financing and communications, economic development and assistance programs to populations vulnerable to terrorist influence, and law enforcement actions to arrest and prosecute terrorist suspects. In addition, some argue that repeal would limit presidential authority to use force against terrorist groups to the powers contained in Article II of the Constitution and the international law of self-defense, standards that might in some cases be more restrictive than the authority in the 2001 AUMF. On the other hand, other observers claim that repeal would essentially ensure continued expansion of presidential Article II powers, as it would be expected that presidential uses of military force against terrorist groups would continue solely under Article II auspices. Some also oppose the repeal of the 2001 AUMF for reasons discussed in the prior section, including the belief that the 2001 AUMF is a necessary and appropriate measure to respond to ongoing terrorist threats. Proposals to amend or replace the 2001 AUMF on the whole contemplate creating authority that is significantly more detailed than the general language of the 2001 AUMF, whether that detail restricts or expands presidential power to use force against terrorist elements globally. Proposals to restrict presidential power include setting out criteria that must be met to (1) introduce U.S. Armed Forces into another country; (2) conduct UAV strikes against terrorist targets, including U.S. citizens abroad; (3) detain and prosecute terrorist suspects; and (4) use military force in the United States. It has been suggested that a sunset clause should be included, as well as provisions to define the circumstances under which the threat of terrorist attack is neutralized and the authority to use force no longer adheres. Similar to the argument to repeal the 2001 AUMF, leaving the President with more limited Article II powers, are proposals for a new authorization that merely reiterates that the President's only powers to use force to counter terrorism emanate from these limited Article II powers to defend against imminent attack on the United States, or to international law of self-defense. Others respond to these recommendations by warning that any restrictions placed on the President to prevent perceived overreach might restrict the U.S. military's flexibility in responding to emerging and changing terrorist threats in the future. Alternatively, and not necessarily exclusive from proposals to restrict authority to use force, some Members recommend that Congress consider expanding or updating presidential authority to use force against terrorists. These recommendations include updating language to detail new uses of force, such as UAVs and cyberwarfare, and specifying new terrorist groups that might not have ties to al Qaeda but still pose a threat to the United States. Some counter, however, that any update or expansion of authorities would further enshrine in law the idea of perpetual authorized war. They argue as well that new authorities might encourage Presidents to expand uses of force in undesirable ways, or to use armed force as a first resort, and that a new congressional imprimatur to continue the "war on terror" might produce a negative reaction from the international community, including U.S. allies. Any expansion of authorities specifically granting presidential power to conduct preventive war, it is asserted, would set an unfortunate precedent for an unfettered executive branch with the authority to kill anyone associated with terrorism, no matter how remote the threat to the United States; invade any country harboring terrorists who might someday attack the United States; and detain people indefinitely without due process of law. One set of recommendations suggests providing a new authorization for the use of force against terrorist elements. This new authorization would set forth general legislative criteria for such uses of force, but it would also require the executive branch to identify targeted groups and geographic areas through an administrative process that includes congressional notification and waiting periods before becoming effective. This administrative process would operate much like the State Department's Foreign Terrorist Organization identification process. Any such authorization would include specific criteria for using force, as well as precise definitions for key terms, such as "belligerent" and "imminent threat." Any such authorization would also require the executive branch to provide post-action reporting on any exercise of force under the authorization, and to assess a terrorist group's designation on a regular basis. Over the past few Congresses, a number of legislative proposals contained provisions to sunset or repeal the 2001 AUMF, or to limit the use of appropriated funds to carry out the 2001 AUMF's provisions. These proposals were not enacted into law. With the advent of the Islamic State crisis and the U.S. military response, many proposals affecting the 2001 AUMF introduced late in the 113 th Congress and early in the 114 th Congress have been included in proposals for a new authorization for use of military force against the Islamic State or are otherwise related to that crisis. Current proposals specifically concerning the 2001 AUMF include the following: On February 2, 2015, Representative Adam Schiff introduced the Authorization for Use of Military Force Against ISIL Resolution ( H.J.Res. 27 ). The resolution would repeal the 2001 AUMF three years after the resolution's enactment. On February 10, 2015, Representative Barbara Lee introduced the Comprehensive Solution to ISIL Resolution ( H.J.Res. 30 ), which would repeal the 2001 AUMF as well as the 2002 AUMF. Repeal would become effective 60 days after enactment. Senator Ben Cardin introduced the Sunset of the 2001 Authorization for Use of Military Force Act ( S. 526 ) on February 12, 2015. The bill would repeal the 2001 AUMF three years upon enactment. On March 4, 2015, Representative Barbara Lee introduced the Repeal of the Authorization for Use of Military Force ( H.R. 1303 ), which would repeal the 2001 AUMF 180 days after enactment. Past enacted legislation concerning the 2001 AUMF has generally confirmed executive branch claims of authority under the 2001 AUMF, such as provisions included in the 2006 and 2009 acts related to military commissions, and the National Defense Authorization Act, Fiscal Year 2012 (NDAA 2012; P.L. 112-81 ). Section 1021 of the NDAA 2012 includes the term "associated forces" with regard to detentions of terrorist suspects; some claim that term has been effectively adopted into the authorities of the 2001 AUMF to justify broader authority for military action against loosely affiliated groups.

In response to the September 11, 2001, terrorist attacks against the United States, Congress enacted the Authorization for Use of Military Force (2001 AUMF; P.L. 107-40; 50 U.S.C. §1541 note) to authorize the use of military force against those who perpetrated or provided support for the attacks. Under the authority of the 2001 AUMF, U.S. Armed Forces have conducted military operations in Afghanistan since October 2001. As armed conflict against Al Qaeda and the Taliban progressed, and U.S. counterterrorism strategy evolved, U.S. use of military force has expanded outside Afghanistan to include Al Qaeda and Taliban targets in Pakistan, Yemen, Somalia, Libya, and most recently, Syria. The 2001 AUMF is not the sole authority for all U.S. uses of military force in furtherance of U.S. counterterrorism objectives; other legislation and presidential powers under Article II of the Constitution are invoked to carry out U.S. counterterrorism activities globally. Nevertheless, the Obama Administration still finds itself relying on 2001 AUMF authority not only for continuing U.S. military operations in Afghanistan, but also for beginning a new campaign against the Islamic State in Iraq and Syria, with the possibility of expansion to other countries if the Islamic State or Al Qaeda groups or associates effectively expand their reach and pose a threat to U.S. national security and interests. At the same time, the President has requested that Congress enact new authority for U.S. operations to counter the Islamic State and has expressed a continued commitment to "working with the Congress and the American people to refine, and ultimately repeal, the 2001 AUMF." As the United States has engaged in counterterrorism and other military operations against Al Qaeda, the Taliban, and other terrorist and extremist groups over the past 13-plus years, many Members of Congress and legal and policy analysts have questioned the continuing reliance on the 2001 AUMF as a primary, effective authority for U.S. military action in a number of countries. Some have asserted that the 2001 AUMF has become outdated, unsuited to the challenge of countering terrorism and extremism in a changed world, at times claiming that the executive branch has relied on the 2001 AUMF for military action outside its intended scope. Congress has for several years considered a number of legislative proposals to change the authority in the 2001 AUMF (by amending or repealing the law), the manner in which it is used, and the congressional role in its oversight and continuing existence. This process continues in the 114th Congress, and deliberations over the future of the 2001 AUMF have become entwined with consideration of proposals to enact a new authorization for use of military force to respond to the turmoil caused by the actions of the Islamic State in Iraq and Syria. Debate in Congress over the status of the 2001 AUMF may evolve in response to numerous developments overseas and U.S. policy responses. For further information on the Islamic State crisis, the U.S. response, and proposals to enact a new AUMF targeting the Islamic State, see CRS Report R43612, The "Islamic State" Crisis and U.S. Policy, by [author name scrubbed] et al., and CRS Report R43760, A New Authorization for Use of Military Force Against the Islamic State: Issues and Current Proposals in Brief, by [author name scrubbed].

Airline passenger screening in the United States has been transformed since the 9/11 terrorist attacks. These transformations fall into two broad categories: new screening technologies, including advanced X-ray systems for screening carry-on items and whole-body scanners, and changes in policies, procedures, and practices such as requiring passengers to remove laptop computers and liquids from their carry-on luggage at the time of screening. These changes have been overseen by the Transportation Security Administration (TSA), the federal agency created in the aftermath of the 9/11 terrorist attacks under provisions in the Aviation Transportation and Security Act (ATSA; P.L. 107-71 ). In ATSA, Congress mandated that TSA provide for comprehensive security screening of all airline passengers and property carried aboard passenger air carrier aircraft. ATSA, however, gave TSA authority to implement trusted traveler programs and utilize available technologies to expedite the security screening of passengers participating in such programs in order to allow screening personnel to focus on passengers who should be subject to more extensive screening. Subsequently, Congress (see P.L. 108-458 ) directed TSA to assume responsibility for checking all airline passengers against terrorist watchlists maintained by the federal government. Implementing these and other risk-based facets of passenger screening proved to be extremely challenging. Consequently, TSA has mostly relied on an assumption of uniform risk among airline passengers in its approach to airport checkpoint screening. This stands in contrast to the risk-based strategies TSA has employed to address other aspects of aviation security, such as air cargo security and security of charter and non-commercial operators. The uniform approach to screening has proven problematic. Under this approach, efforts to improve screening capabilities and streamline the screening process have primarily focused on technology. Technologies such as whole-body imagers and advanced X-ray equipment have improved detection of a broad array of threat objects, including non-metallic weapons and explosives, but technology limitations, budgetary considerations, and other factors have placed constraints on a strictly technology-driven approach to airport screening. TSA personnel have limited time and resources to screen passengers and property at airports without creating unacceptably long wait times. Space limitations at airports and congressional limitations on screener hiring have constrained TSA's capability to address these concerns simply by adding screening lanes and personnel. Airline passengers continue to face sometimes cumbersome procedures, such as removing shoes and separating laptop computers for X-ray screening, that can make airport wait times unpredictable and even deter travelers from flying. Inflexible security methods may have tainted public perceptions of TSA—a 2012 poll showed 54% of Americans thought TSA was doing a good or excellent job —and led to sharp criticism from experts such as former TSA Administrator Kip Hawley, who has argued, "In attempting to eliminate all risk from flying, we have made air travel an unending nightmare ..., while at the same time creating a security system that is brittle where it needs to be supple." TSA has responded to such criticisms by attempting to shift from an approach that assumes a uniform level of risk among all airline travelers to one that focuses on passengers thought to pose elevated security risks. Risk-based screening has itself been controversial; while some initiatives have been encouraged or even directed by Congress, others have met with considerable skepticism among some Members of Congress or outside groups. The controversy derives, in part, from widely divergent views of what constitutes risk and how risk should be appropriately assessed and mitigated. The dilemma over where to appropriately focus security efforts can be informed by the advice Frederick the Great offered to his generals: "Little minds try to defend everything at once, but sensible people look at the main point only; they parry the worst blows and stand a little hurt if thereby they avoid a greater one. If you try to hold everything, you hold nothing." That view was echoed more recently by former Secretary of Homeland Security Michael Chertoff, who wrote in 2006, "In a free and open society, we simply cannot protect every person against every risk at every moment in every place. There is no perfect security." While security is necessarily imperfect, it nonetheless can be configured in an informed manner designed to minimize risk. The preliminary step in this process is to reach an understanding of the nature and characteristics of the security risk, followed by an identification of specific strategies to mitigate or manage that risk. A general definition of risk focuses on the probability of incurring some type of loss. In the aviation security context, risk is most often framed as a complex interaction of three underlying factors: threats, vulnerabilities, and consequences. Although risk is a probabilistic construct, the ability to assign specific probability values to individual threats and vulnerabilities in the aviation security context is limited. Consequently, risk-based practices settle for categorical techniques and scoring methods to quantify threats, vulnerabilities, and security risk in less precise terms. A comprehensive risk-based aviation security strategy attempts to mitigate all three elements of risk. Risk-based passenger screening includes a number of initiatives that fit within this broader framework, but it focuses specifically on detecting and managing the threat element of risk. Risk is mitigated by identifying individuals who may pose threats and utilizing detection technologies to screen for weapons, explosives, and other threat objects. Vulnerabilities are identified through various assessment techniques and addressed through multiple layers of security, such as reinforcing cockpit doors, deploying air marshals aboard planes, and changing security protocols based on known or perceived threats. In contrast to threat and vulnerability, consequences are generally assessed in terms of their potential severity, often to derive a risk valuation and assess costs and benefits of specific security strategies. Consequences, however, are primarily mitigated by emergency management and response and post-incident recovery activities. These activities are primarily the responsibility of airports, airlines, and state and federal emergency management agencies, and are not a principal concern of TSA. Defining the risk environment and specifying acceptable and unacceptable levels of risk are key challenges in establishing an effective risk-based strategy for aviation security. With respect to air cargo security, TSA has made extensive use of risk scoring to assess risks and plan security strategy. With respect to commercial passenger aviation, however, the practice of risk scoring of individuals has been considered so complex and controversial that it has not been a central part of TSA's strategy. Rather, risk assessment of airline passengers is performed primarily through categorical processes, such as by assigning passengers to low-threat, unknown or elevated threat, and high threat categories after checking biographical data against terrorist and criminal databases. Risk-based techniques also examine some behavioral indicators, such as ticket purchasing characteristics and overt behaviors exhibited at the airport. These indicators are used to derive behavioral-based risk scores, but the validity of these methods has been questioned. Complicating matters further, there may not be agreement on what specific risks a risk-based security strategy should seek to mitigate. One example of this occurred following TSA's March 2013 proposal to allow passengers to carry small knives and certain sports equipment onboard aircraft, reversing a long-standing ban. The agency asserted that the threat posed by these items had diminished and that other security layers, such as deployment of armed air marshals aboard some flights, arming of some pilots through the Federal Flight Deck Officers (FFDO) program, and reinforcement of cockpit doors sufficiently mitigated the risk of a hijacking or terrorist attack posed by small knives, golf clubs, and baseball bats. Critics, including organizations representing flight attendants, pilots, and airlines, argued that TSA had failed to adequately consider risks unrelated to hijacking and terrorism, such as those posed by unruly passengers wielding knives and golf clubs aboard planes. After legislation was introduced to prevent TSA from lifting its ban on small knives, TSA announced that it would not proceed with its proposal. At the operational level, risk-based passenger screening stands in contrast to TSA's historical approach of prohibiting certain items aboard aircraft and instructing screeners to focus on enforcing those prohibitions. This comports with the concerns raised by former TSA administrator Hawley, who wrote of the dilemma faced by TSA screeners, "the fear of missing even the smallest thing, versus the likelihood that you'll miss the big picture when you're focused on the small stuff." Hawley's objections are shared by Raphael Ron, an Israeli expert on aviation security and counterterrorism. Ron asserts that reliance on prohibited items lists and detection technology reduces the security system's ability to respond to shifting threat landscapes; he notes that the box cutters used by hijackers in the 9/11 attacks were not prohibited items at the time. As he writes, "Terrorists love our detection technology because they can trust that it will not do what it is not designed to do and never did before. In a sense, our technology gives the terrorist a positive feedback on what to expect." Ron claims that there has never been a case in which a planned terrorist attack was prevented by the detection of threat items alone. Comments such as Hawley's and Ron's point to an approach that does not dispense with detection technologies, but integrates detection capabilities with other measures for assessing threats and minimizing vulnerabilities. Such an approach might depart from TSA's historical practice of using relatively rigid and inflexible measures to screen passengers in a uniform manner. They might require the agency to be more proactive, as opposed to largely reactive, with respect to specific threats and incidents, and to emphasize flexibility and unpredictability. Advocates of risk-based security frequently point to Israel, which employs demographic profiling, intelligence and law enforcement databases, and extensive security interviews to identify passengers deemed to pose high risks. These individuals are then subject to heightened screening measures and in-depth inquiries to assess any potential threat before they are allowed to board a plane. Despite continued threats, Israel has avoided any major terrorist attacks against its airlines and airports for over 40 years. The exact role that its methods have played in deterring or preventing such attacks is undetermined. Regardless, adopting an Israeli-style approach in the United States is considered to be problematic, both legally and pragmatically. Research by TSA's Kenneth Fletcher concluded that a risk-based approach to passenger screening tailored to meet the specific operational and legal framework of aviation security in the United States would be more effective, as well as more politically feasible, socially acceptable, and legally defensible, than the extensive interviewing and targeted screening carried out under the Israeli airport security model. Table 1 identifies the principal attributes of a comprehensive risk-based aviation security framework, as described by scholars of the subject. Risk-based screening should be understood as part of a comprehensive, multi-layered approach to aviation security rather than as an alternative approach. Risk-based programs closely interact with physical screening checkpoint measures to allow TSA to focus physical screening resources on unknown and elevated risk passengers. They also inform the protocols TSA utilizes to modify security postures based on known or perceived threats. It is possible that risk-based programs affect decisions related to the posting of behavioral detection officers and the deployment of air marshals by identifying which passengers should be more closely observed and which flights may be considered high-risk, although details about the interaction of these security components have not been disclosed publicly. Risk-based approaches to airline passenger screening have been used since the early 1970s. At that time, before 100% screening of all airline passengers went into effect in 1973, the Federal Aviation Administration (FAA) used rudimentary passenger profiles to determine whether to screen particular passengers and search their carry-on items. In the late 1970s, as walk-through metal detectors and X-ray scanners for carry-ons were deployed at commercial passenger airports and became mandatory, these risk-based profiling techniques were largely abandoned, although FAA continued to utilize profiling tools to examine information in airlines' passenger name records that could signal an increased threat. In the late 1980s, concern over aircraft bombings led FAA to require that airlines ask all passengers two basic security questions: Has anyone unknown to you asked you to carry any items on this flight? Have any of the items you are traveling with been out of your immediate control since the time you packed them? The questions served for years as rudimentary security screening measures, primarily to target elevated-risk checked baggage, but were often criticized because their intent seemed so obvious and they were typically posed by airline ticket agents with little or no security training. Nonetheless, they served to heighten passenger awareness of potential security threats and reflected the real threat posed by bombers who may try to dupe an unwitting individual into carrying a device aboard an aircraft (see Text Box ). Although several other countries and some foreign airlines continue to use these or similar questions, usually as part of more in-depth interviews or questioning conducted by security screeners, TSA eliminated use of the questions in 2006. Following the December 21, 1988, bombing of Pan Am Flight 103 over Lockerbie, Scotland, FAA and the airlines developed the Computer-Assisted Passenger Pre-Screening (CAPPS) system, which was implemented in the late 1990s. CAPPS resides on airline reservation systems and relies on patterns in flight reservation data to identify passengers considered to pose potential security threats. While the specific algorithms used by CAPPS, which is now overseen by TSA, are security sensitive, it has been reported that indicators may include purchasing a one-way ticket or paying with cash. Separately, FAA, in coordination with the Federal Bureau of Investigation (FBI), developed a list of known terrorists who were to be denied boarding: the "no-fly" list. However, on the day of the 9/11 attacks only 12 names were on the list, none of them the 9/11 hijackers, even though other government terrorist watchlists contained tens of thousands of names. After the 9/11 attacks, ATSA directed TSA to establish requirements for trusted traveler programs and to use available technologies to expedite screening for participating passengers, thereby allowing screening personnel to focus on those passengers who should be subject to more extensive screening. The act, along with the subsequent Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ), directed TSA to ensure that CAPPS or any successor system be used to evaluate all passengers prior to boarding, and to assure adequate screening of passengers selected by such systems as well as their carry-on and checked baggage. This emphasis on risk-based screening reflected recommendations made by the Department of Transportation Airport Security Rapid Response Team, formed in response to the 9/11 attacks. Specifically, the team found an urgent need to establish a nationwide program for voluntarily submitting information for vetting passengers in order to expedite processing of the vast majority of travelers, thus allowing aviation security resources to be focused more effectively. The team also recommended that passenger prescreening performed using CAPPS be applied to assess passenger risk on all flights. In response to these mandates, TSA initiated work on a follow-on system to CAPPS. Dubbed CAPPS II, the system endeavored to encompass identity authentication, watch list checks, and expanded risk-based assessments of passengers. As initially envisioned, CAPPS II was to integrate checks of passenger name records against the "no fly" list of individuals to be denied boarding and the "selectee" list of individuals of elevated risk requiring more thorough secondary screening. It was to include the capability to categorize or score passengers based on threat assessments, potentially using additional government and commercial databases. Controversy over privacy, data protection, and redress processes led TSA to scrap CAPPS II development in 2004, and move forward with a more focused effort to screen all passengers against terrorist watchlists. Despite missteps in developing CAPPS II, the 9/11 Commission formally recommended in 2004 that the "no fly" and "automatic selectee" lists be improved, and that air passengers be screened not only against these lists, but against the "larger set of watchlists maintained by the federal government." The commission urged that screening be performed by TSA, not by air carriers, and that carriers be required to supply the information needed to test the new prescreening system. Reflecting the recommendations of the 9/11 Commission, the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) required TSA to assume the passenger watchlist screening function from air carriers, after it established a way to utilize the greater set of watchlists integrated in the Terrorist Screening Database (TSDB) administered by the FBI. Appropriations language, however, expressly forbade TSA from employing algorithms to assign risk scores to passengers or from using commercial data other than airline passenger name records in assessing passenger risk. In October 2008, TSA published a final rule detailing the operational implementation of this program, which it called "Secure Flight." The program was implemented for domestic flights in 2009 and for international flights in 2010. Secure Flight has been fully operational since 2011, screening passenger biographic information against terrorist watchlists, principally the TSDB. The "no fly" and "selectee" (or "automatic selectee") lists are subsets of this database. While the specifics are classified, TSA said in 2008 that the full TSDB contained fewer than 400,000 names, of which about 50,000 identities were included in either the "no fly" or "selectee" subsets. More recently, the news media reported in May 2013 that the larger Terrorist Identities Datamart Environment, or TIDE—a repository maintained by the National Counterterrorism Center that serves as a principal source of foreign identities included in the TSDB—has grown to include about 875,000 names. TIDE serves as a principal data source for foreign terrorist identities included in the TSDB. The expansion of TIDE was attributed in large part to increased reliance on the system in the aftermath of the failed bombing attempt on Northwest Flight 253 on December 25, 2009, and subsequent reviews of intelligence community practices. The TSDB has also expanded, reportedly containing more than 500,000 identities as of September 2012, as improving watchlist practices, with a particular emphasis on processing nominations and removals to assure timeliness, accuracy, and completeness, has been a significant focus of intelligence community efforts since the attempted bombing. Functionally, Secure Flight compares data from airline passenger name records against the "no fly" and "selectee" lists, and in certain cases, against the full TSDB, to determine whether passengers and other individuals seeking access through airport checkpoints (such as family members assisting disabled travelers or children traveling as unaccompanied minors) should be denied access or subject to additional screening measures. Additionally, Secure Flight compares passenger names to a list of individuals provided by the Centers for Disease Control and Prevention of persons who should be denied boarding due to public health concerns. If TSA does not identify a potential watchlist match using Secure Flight, records are to be destroyed within seven days of completion of the travel itinerary. Potential matches, however, are retained for 7 years and confirmed watchlist matches may be retained for up to 99 years. Known traveler lists and lists of individuals disqualified from expedited screening due to past security incidents are retained until superseded by updated lists. Secure Flight development benefited from operational experience with the Advance Passenger Information System (APIS) administered by U.S. Customs and Border Protection (CBP), which predated Secure Flight and continues to collect passenger manifest data from airlines for all international flights inbound to the United States. Air carriers transmit APIS data on passengers and crew to CBP prior to aircraft departure. CBP cross-checks the data against law enforcement, customs, and immigration screening databases and terrorist watchlists. CBP also relies on its Automated Targeting System-Passenger (ATS-P) to perform risk assessments on inbound and outbound international travelers. For inbound flights, ATS-P serves as a tool to assist CBP in making assessments in advance of arrival as to whether an individual should be admitted to the United States. Derived from a system developed in the 1990s to identify suspect cargo, the passenger module of ATS does not use a risk scoring methodology to determine an individual's risk. Rather, it compares elements of passenger name record data for all travelers against terrorist and law enforcement databases to identify potential matches to terrorist identities and wanted criminals, and to look for other red flags such as suspected use of a lost or stolen passport. In contrast, the cargo screening module of ATS relies on risk scoring methods. In general, data in the ATS may be retained for up to 15 years. In accordance with an agreement between the United States and the European Union, however, passenger name record data are depersonalized within six months, but may otherwise be retained in an active database for up to five years. Thereafter, the data will be transferred to a dormant database, where they may be retained for up to 10 years. Additionally, travelers with passports from countries in the Visa Waiver Program must electronically submit biographical information through the Electronic System for Travel Authorization prior to boarding a U.S.-bound flight. That information is checked against law enforcement databases, databases of lost and stolen passports, visa revocations, and the TSDB. For each passenger, CBP transmits the resulting status code to Secure Flight specifying whether the database checks indicate a potential threat. Secure Flight seeks to employ risk-based analysis drawing exclusively on data compiled by government agencies and the airlines. A separate TSA program, Screening Passengers by Observational Techniques (SPOT), attempts to identify passengers who could present threats by observing behavior at airports. TSA initiated early tests of SPOT in 2003. By FY2012, the program deployed almost 3,000 BDOs at 176 airports, at an annual cost of about $200 million. Program costs and continued questions over its scientific validity and operational utility have been central concerns in the continued controversy over the program since its inception. TSA asserts that its behavior detection and analysis program is "based on scientifically validated behaviors to identify individuals who potentially pose a threat to the nation's transportation network." SPOT is rooted in law enforcement techniques that rely on criminal profiling methods and behavioral assessment strategies, including behavioral observation. TSA asserts that behavior detection techniques that form the basis for SPOT have been practiced for many years in the context of law enforcement, customs and border protection, defense, and security. However, there are several nuanced differences between SPOT and law enforcement behavior analysis tools and techniques that set the SPOT program apart. Law enforcement agencies generally apply behavioral analysis in the investigation of specific crimes, not with large groups of individuals, and tend to employ extensive interviewing methods to look for patterns of inconsistencies in statements and to gather evidence for potential criminal proceedings. Moreover, whereas behavioral detection as practiced in the TSA SPOT program focuses heavily on interpretation of non-verbal cues, such as facial expressions or avoidance of eye contact, such cues generally do not play a central role in establishing suspicion in a law-enforcement setting. In this regard, TSA's SPOT program stands out as unique in its extensive use of non-invasive observation techniques and its development of a formal scoring system to rate suspicion on the basis of behavioral indicators, including non-verbal indicators evaluated by a behavior detection officer. Whereas law enforcement agencies will use such techniques in combination with other interrogation practices, often over the course of lengthy interviews and repeated encounters with persons of interest, TSA has stated that it takes a BDO less than 30 seconds to meaningfully observe an average passenger. Since its inception, reviews of the SPOT program have raised questions regarding whether it is an effective tool for identifying individuals who pose a specific threat to aviation. Despite TSA's assertions regarding effectiveness, the Government Accountability Office (GAO) reported in 2010 that on at least 23 different occasions, at least 16 known terrorists transited through checkpoints at eight different airports where BDOs were stationed. GAO could not determine if the SPOT program had resulted in the arrest of any terrorists or individuals planning to engage in terrorist activity. It concluded that the SPOT program had been fielded before being fully validated and without adequate cost-benefit analysis. TSA responded by carrying out validation studies in cooperation with the Department of Homeland Security (DHS) Science and Technology Directorate and the American Institutes for Research. According to TSA, the tests demonstrated that its behavior detection techniques were nine times more likely to detect high-risk travelers than random selection. It has not released the study publicly to allow for independent analysis or critique. The agency also said it had taken specific steps to address GAO recommendations for improving behavior assessment methods, performance metrics, data collection, and program management. Further, TSA noted that it has partnered with several international counterparts to exchange operational and programmatic information and share best practices to further refine the SPOT program. Despite the seemingly impressive results of the validation study reported by TSA, both the GAO and the DHS Office of Inspector General have continued to raise doubts about behavior detection and analysis as employed in the SPOT program. In 2013, GAO concluded that available evidence still did not support the validity and utility of behavior detection techniques employed by TSA. A fundamental concern was that the metrics TSA used to evaluate the program—principally, the number of referrals to law enforcement that have resulted in confiscations of prohibited items or arrests and detentions for warrants, parole violations, drug possession, other criminal activity, and illegal immigration status—do not directly relate to TSA's mission to deter, detect, and prevent terrorism and other criminal acts targeting aviation assets. Given the low occurrence of terrorist acts, developing suitable metrics to evaluate the impact of the SPOT program on these mission objectives has proven elusive. GAO reported wide individual differences among BDOs in terms of referrals to law enforcement, raising questions about the training on and operational use of behavioral indicators. Similarly, the DHS Office of Inspector General found that metrics used to support TSA's assertion of SPOT's effectiveness, such as detection of prohibited items, undeclared currency, and illegal aliens, are not directly related to aviation security objectives. Its audits revealed significant lapses in records-keeping, suggesting that incomplete and inaccurate data about the program had been presented to TSA's senior leadership. The Inspector General also found that TSA did not consistently offer formal refresher training for behavior detection officers, despite a TSA task force's conclusion that "observation skills ... need to be constantly honed and refocused on some regular basis." Moreover, a lack of performance evaluation and recurrent training for BDO instructors raised additional questions about the quality and consistency of BDO training. While TSA has championed the SPOT program as a cornerstone of its risk-based approach to passenger screening, questions remain over the program's efficacy. While some Members of Congress have sought to shutter the program, Congress has not moved to do so. For example, H.Amdt. 127 , an amendment to the FY2014 DHS appropriations measure which sought to eliminate funding for the program, failed to pass a floor vote. Congress also has not taken specific action to revamp the program, despite the concerns raised by GAO and the DHS Office of Inspector General. While behavioral detection approaches have been sharply criticized, TSA's efforts to implement Pre-Check, a trusted traveler program designed to expedite processing of low-risk passengers, have garnered more favorable responses. Pre-Check began in October 2011, and became fully operational in 2012. Since then, TSA has been incrementally expanding its scope and availability. The program is available at no cost to U.S. citizens designated as select frequent flyers of certain airlines, and to U.S. and Canadian citizens who are paid members of CBP's trusted traveler programs (including Global Entry, SENTRI, and NEXUS). Eligible travelers not in any of these categories may, for a fee, apply directly at a TSA enrollment center to join Pre-Check. The Pre-Check program bears some resemblance to the former Registered Traveler (RT) program, which was scrapped in 2009. RT was implemented under a public-private partnership model with multiple vendors providing biographical and biometric data collection and storage. While different vendors held contracts to issue biometric IDs and operate identity verification kiosks at different airports, the systems were designed to be interoperable, theoretically giving registered travelers access to expedited screening lanes at multiple airports. When RT was launched at 19 airports in 2007, TSA conducted extensive background checks of applicants based on biographical data collected by vendors. However, as it expanded the program to additional airports in 2008, TSA eliminated the background check process and the associated portion of the program fee, indicating that these checks "were not core elements in determining threats," as terrorist watchlist checks were being performed on all passengers under Secure Flight. The program was dismantled shortly thereafter. Under Pre-Check, TSA has resurrected extensive biographic-based background checks, apparently reversing its earlier stance under RT that these additional checks were of limited value in identifying threats to aviation security. In contrast to RT, Pre-Check does not issue a biometric credential. Rather, an approved individual is issued a known traveler number to use when booking flight reservations. This number is used to indicate the individual's status as a Pre-Check member on the boarding pass, thereby allowing the passenger to use expedited screening lanes. Nonetheless, to deter exploitation of expedited screening lanes, Pre-Check participants may be selected randomly to undergo more thorough physical screening. The exclusive reliance on boarding passes for Pre-Check authentication may be of concern, given TSA's limited ability to authenticate boarding passes and traveler identification documents. TSA's deployment of document and boarding pass inspection and authentication technologies, called Credential Authentication Technology/Boarding Pass Scanning Systems, has been delayed and faces several ongoing technical and managerial challenges. Without the ability to authenticate boarding pass information, TSA may not be able to assure that access to Pre-Check screening lanes is limited to properly cleared individuals at all airports. In September 2013, TSA issued a system of records notice (SORN) regarding the process for members of the public to voluntarily apply for the Pre-Check program. The SORN defines the legal context under which TSA collects and retains information on Pre-Check applicants. Applicants are required to submit biographic and biometric data (i.e., fingerprints and identity verification documentation containing a photograph, such as a passport or driver's license) to TSA. TSA, in turn, is to use the submitted information to conduct security threat assessments of individuals, using law enforcement, immigration, and intelligence databases, including a fingerprint based criminal history records check through the FBI. TSA accepts Pre-Check applications from U.S. citizens, U.S. nationals, and legal permanent residents. Individuals are to be determined ineligible if, within specified time periods (generally seven years since court determination or five years since release from prison), they have been convicted of, found not guilty by reason of insanity, or are under want, warrant, or indictment for certain specific crimes. Further, TSA may reject an applicant with extensive foreign or domestic criminal convictions, even if the crimes are not specifically disqualifying, and may reject an applicant based on information in government terrorist watchlists, Interpol data, and other international law enforcement and counterterrorism data. Pre-Check applicants must pay a non-refundable processing fee of $85. Once vetted and approved, a traveler is to receive a notification letter from TSA with an assigned Pre-Check Known Traveler Number, which will be valid for five years. Applicants who are determined not to be qualified for Pre-Check must notify TSA within 30 days to indicate their intent to appeal and to correct information believed to be inaccurate. To obtain corrections, the applicant must provide certified copies of records supporting the claim that the initial determination was inappropriate. Since the $85 processing fee is non-refundable, individuals who have reason to believe they may be disqualified based on their criminal record or may not meet eligibility requirements because of other factors, including citizenship or residency status, may choose not to apply. In December 2013, TSA opened the first Pre-Check enrollment center for the general public at the Indianapolis, IN, airport. TSA anticipates that there will eventually be as many as 300 enrollment centers nationwide as well as an online application process. Individuals seeking to participate may initiate the application process by pre-enrolling online, but must visit a physical enrollment site to provide identification and fingerprints. Early indications have suggested that frequent travelers are generally pleased with Pre-Check. A 2012 survey of frequent flyers found that almost 54% of those using Pre-Check were very satisfied or extremely satisfied, compared to less than 7% of frequent travelers expressing similar opinions of their most recent TSA screening in general. However, rapid expansion of the program could limit some of its benefits. TSA has increased availability of Pre-Check's expedited screening lanes from 40 airports in FY2013 to over 100 airports by January 2014, with a goal of providing expedited screening to half of all airline passengers by the close of FY2015. As the Pre-Check program grows in popularity, wait times in Pre-Check lanes may increase, while non-participating travelers may potentially stand to save time also as more and more fellow travelers join Pre-Check. Non-participating travelers may also benefit from possible selection to use a Pre-Check lane either through occasional selection based on Secure Flight assessments or under an initiative referred to as managed inclusion. Managed inclusion refers to a TSA initiative exploring real-time threat assessments of passengers to identify individuals considered low risk and thus eligible for random selection for processing using one of the Pre-Check expedited screening lanes. New passenger screening canine teams, specially trained to work in crowded areas and sniff passengers to detect the scent of explosives, along with behavioral detection officers who screen individuals for behavioral indicators of potential threat, perform initial screening of passengers in the screening checkpoint queue. If neither the canine team nor the officer signals that a passenger is an elevated risk, then he or she may be randomly selected for managed inclusion in a Pre-Check screening lane. Upon stepping on a mat in front of the travel document checker's kiosk the passenger triggers a lighted directional arrow that will indicate whether to proceed to regular screening lanes or a Pre-Check expedited screening lane, based on a random selection. In addition to Pre-Check members and those selected by Secure Flight selection or managed inclusion, military servicemembers, including active duty members, reservists, and National Guard members, are allowed to use Pre-Check screening lanes. Cleared military personnel can use this service for both official and personal travel. Family members under 12 years old may pass through the Pre-Check lanes when traveling with cleared military personnel. However, family members over age 12 must either proceed through standard screening lanes or independently obtain eligibility for the Pre-Check program through the various means established by TSA. It has been reported that civilian employees of the Department of Defense and the Coast Guard will also be allowed to participate in expedited screening beginning in mid-April 2014 without enrolling in Pre-Check or a CBP trusted traveler program. Pre-Check lanes are also being used to expedite screening of uniformed airline crewmembers, including pilots and flight attendants, participating in TSA's Known Crew Member identification initiative. Airline-issued identification credentials are to be checked against a database of participating airlines' flight and cabin crew personnel with valid security background checks to determine eligibility for expedited screening. Airline crews undergo TSA managed fingerprint-based criminal history record checks and security threat assessments as a condition of employment. The Known Crew Member database can serve as a means of verifying airline crew credentials and eligibility for expedited screening. Each of these sub-populations undergoes background screening that, at a minimum, TSA considers equivalent to those performed on Pre-Check applicants. In many cases, particularly for military personnel and civilian employees holding defense secret clearances, the background investigation may be even more extensive, even though the security clearance process for these individuals has recently been criticized. TSA considers individuals in these specific sub-populations to be lower risk than individuals from the general population who have not undergone a background investigation, and of comparable risk to trusted travelers vetted directly by TSA or CBP. Moreover, the credentialing process for military servicemembers, defense personnel, and airline crews may be seen as providing a comparatively secure means of assuring an individual's identity and eligibility for expedited screening under these provisions. Nonetheless, TSA continues to use random selection to direct certain members of these sub-populations to standard non-expedited screening, as it does with Pre-Check members. This adds an unpredictable element to screening, in keeping with the principles of a comprehensive risk-based approach to security. Each risk-based screening program collects and retains various forms of biographic, biometric, and/or other identifying data regarding individuals. Additionally, TSA collects and retains data from intelligence sources and its own investigations regarding potential threats and identities of individuals believed to pose some level of threat to the aviation system. Each risk-based program has separate data collection and retention rules (see Table 2 ). TSA has stated that its policy is to delete data that are no longer needed. Under the terms of its various SORNs, records that correspond to traveling individuals whose identities are matches or potential matches to terrorist or criminal databases are retained for extensive periods, whereas other records are destroyed shortly after completion of the corresponding travel itinerary. Data submitted voluntarily by individuals who are not considered possible matches, such as data provided in Pre-Check applications, are typically retained throughout an individual's participation in the program, unless superseded by updated or corrected data. While TSA may use information from commercial databases and consumer reporting agencies in validating identities and conducting risk assessments, it does not reciprocate by disclosing information to consumer reporting agencies. In general, personal data collected under these various risk-based programs may be shared among DHS agencies when necessary to support counterterrorism and homeland security mission functions. Data may also be shared with intelligence, law enforcement, and judicial agencies at the federal, state, local, or tribal levels for investigating potential criminal, civil, or regulatory violations, and with audit or oversight agencies, federal records management agencies, and federal contractors performing work that requires access to the specific data. In all these instances, data are to be protected against inappropriate handling or disclosure in accordance with the Privacy Act of 1974 ( P.L. 93-579 ), in a manner detailed in each SORN. The Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) required TSA and DHS to establish appeals procedures by which persons who are identified as security threats based on records in the TSDB may appeal such determinations and have such records, if warranted, modified to avoid recurrence. Also, provisions in the Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ) required DHS to establish an Office of Appeals and Redress to establish a timely and fair process for individuals who believe they have been delayed or prohibited from boarding a commercial aircraft because they were wrongly identified as a threat. DHS must maintain records of passengers and individuals who have been misidentified and have corrected erroneous information. To meet these statutory requirements, DHS established the DHS Traveler Redress Inquiry Program (DHS TRIP) as a mechanism for addressing situations in which individuals claim to have been inappropriately singled out. The DHS TRIP program allows passengers seeking redress, or their representatives, to file complaints online or by mail. After receiving the completed online questionnaire or the complaint form, DHS is to request supporting information within 30 days. Filers are given a control number that allows them to track the status of their inquiry using the Internet. If the investigation finds that the traveler was delayed due to a misidentification or name-matching issue, DHS is to describe the steps required to resolve the issue. For example, the traveler may be required to retain a copy of the DHS response letter and present it during the check-in process when traveling on airline flights. If a passenger disagrees with the resolution decision made by DHS, he or she may take further steps to appeal the decision. However, TSA decisions based on records maintained on individuals in connection with the Secure Flight program are largely exempt from judicial review. In January 2013, TSA released a market research announcement seeking information to expand expedited screening beyond the Pre-Check program by relying on third-party prescreening of passengers. The announcement sought solutions using "non-governmental data elements to generate an assessment of the risk to the aviation transportation system that may be posed by a specific individual, and to communicate the identity of persons who have successfully passed this risk based assessment to TSA's Secure Flight." In response to clarifying questions on the solicitation, TSA indicated that third parties could make use of any data services that are legally available to them, but noted that data accuracy and security are issues of concern that should be taken into consideration. The announcement points to the possible future use of large commercial databases to cull information about airline travelers. Given the broad range of commercial data services, this prospect has raised concerns regarding privacy and the accuracy of data that may form the basis of future passenger risk assessments. Historically, such data have primarily been used to assess consumer credit risk and more recently to target marketing and advertising toward specific individuals. An article published in the New York Times in October 2013 raised concerns that passenger prescreening using a wide assortment of non-federal government and private databases may already be taking place, although noting that details of specific programs doing so have not been divulged publicly. The article points specifically to CBP's ATS, although it also identifies Secure Flight, Pre-Check applications, the Pre-Check disqualification list, and TSA's Transportation Security Enforcement Records System (a database of reports and identities tied to violations and potential violations of security regulations) as systems in which commercial data may play a role in risk assessments and where personal information may be used for purposes other than counterterrorism. Previously, Congress had acted to restrict the use of commercial data in airline passenger prescreening. Specifically, Congress included provisions in appropriations acts during the development and initial deployment of Secure Flight prohibiting the use of data from non-governmental sources to assess the risk of passengers whose names do not appear on government terrorist watchlists. Consequently, congressional oversight and possible legislative action related to TSA systems utilizing commercial data as part of risk-based assessments may be an issue of particular interest as TSA's risk-based approaches to passenger prescreening evolve. In addition to specific concerns raised regarding the use of commercial data in assessing risk and behavioral profiling techniques, TSA's foray into risk-based screening of airline passengers raises a number of broader issues for Congress. Since many of the details regarding TSA's passenger threat assessment and risk-based screening programs cannot be publicly discussed for security reasons, congressional oversight serves an important role in reviewing the various facets of TSA's risk-based approach to airline passenger screening to assure that they are effective and efficient, and provide adequate safeguards for data security and privacy. One broad concern is the extent to which the various risk-based programs developed by TSA fit into a comprehensive strategy that addresses security risk. As noted above, most experts in the aviation security field do not consider risk-based screening to be a stand-alone technique, but rather to consist of a variety of techniques which, both individually and collectively, fit within a comprehensive risk-based approach to security such as that presented in Table 1 . There may also be other relevant criteria that would be useful in assessing the degree to which these programs fit into a broader risk-based framework. An issue of potential significance is the extent to which the risk-based approach, as implemented, is able to effectively adapt and evolve to address shifting threats and to incorporate new methods and capabilities. It is difficult to assess whether the risk-based approach to passenger screening is adequately adaptive and evolving, in part because some elements like the Pre-Check program are relatively new and, in part, because details necessary to make such assessments regarding terrorist watchlists and behavioral profiling techniques are not publicly divulged. The evolution of processes to consolidate and disseminate terrorist watchlist information has been a key issue for the intelligence community since the attempted bombing of Northwest Flight 253 on December 25, 2009. However, specific changes made in response have not been publicly acknowledged. Similarly, information regarding any evolution or adaptation of behavioral detection methods since the inception of TSA's behavioral detection program has not been publicly disclosed. How TSA's risk-based strategy and the underlying intelligence practices informing risk-based decisions have adapted to shifting threat landscapes, potential changes in resources, and the introduction of new procedures and technologies may be an issue of interest for congressional oversight. The selection of appropriate metrics appears to be a key issue in assessing the effectiveness of TSA's risk-based strategies. Suitable metrics have been difficult to identify, again, in part because of the necessary secrecy surrounding security. Defining suitable metrics may also prove difficult as a result of relatively limited numbers of encounters with individuals having ties to terrorism, and even fewer still with those seeking to carry out attacks against civil aviation. With regard to behavioral detection programs, TSA's choice of metrics has been questioned. For other programs, such as Pre-Check, TSA has emphasized efficiency metrics rather than metrics that specifically address security effectiveness, at least publicly. As a practical matter, the limited number of terrorist encounters raises concerns over the prevalence and implications of false alarms, singling out individuals as potential threats who in fact pose no threat. Since the number of suspected terrorists is small relative to the number of airline passengers, false alarms occur with far greater frequency than valid threat detections. Efforts to reduce false positives could leave gaps in threat detection capabilities. Nonetheless, high false alarm rates may lead to potentially significant consequences by misdirecting limited screening resources and by creating complications for individuals mistakenly targeted as potential threats. In the past, initiatives to reduce false alarms associated with Secure Flight have focused on systematic culling and parsing of terrorist databases to ensure that information is thorough, accurate, and up to date. Additionally, a congressionally mandated redress process has been put in place to provide a mechanism for falsely targeted individuals to seek remediation. The effectiveness of these steps in reducing false alarm rates in aviation passenger pre-screening has not been disclosed publicly. In addition to measuring effectiveness, assessing anticipated efficiency gains related to risk-based screening initiatives appears to have important implications for oversight of TSA operations and appropriations. TSA anticipates that risk-based security efficiencies will result in savings of about $120 million, and allow staffing reductions of more than 1,500 full-time equivalent positions in FY2015. Congressional oversight may examine whether these efficiency gains can be realized without compromising security effectiveness. Finally, privacy and appropriate data protections are matters of considerable interest to Congress. Through its various systems of records of data maintained on individuals, DHS has established practices to protect personal data and comport with Privacy Act requirements. The extent to which these various privacy protections and data security measures are being appropriately implemented in practice may also be a matter of concern. In summary, as TSA moves forward in its implementation of a risk-based approach to passenger screening, questions persist as to whether this approach appropriately integrate s various programs and elements of the approach and interdependently and collectively exhibits the characteristics of a comprehensive risk-based strategy outlined in Table 1 ; adequately adapt s and evolve s to changes in the threat landscape, to potential changes in the availability of resources including personnel, and to the introduction of new procedures and technologies; can identify and analyze appropriate metrics for assessing the effectiveness of risk-based programs against specific mission goals tied to detecting and mitigating threats to civil aviation; adequately addresses potential impacts of false positives without compromising threat detection capabilities; and ensures appropriate privacy and data protections consistent with those detailed in the agency's SORNs and in a manner that appropriately balances security and intelligence needs with public expectations. Despite elaborate security measures implemented in the years since the 9/11 terrorist attacks, the potential for a large-scale attack targeting aviation remains. In this context, debate over how to strike a balance between maintaining appropriate levels of privacy while implementing efficient and effective risk-based security strategies to combat terrorism is likely to remain a central issue for aviation security policy and possible congressional oversight.

Until recently, the Transportation Security Administration (TSA) had applied relatively uniform methods to screen airline passengers, focusing primarily on advances in screening technology to improve security and efficiency. TSA has recently shifted away from this approach, which assumes a uniform level of risk among all airline travelers, to one that focuses more intently on passengers thought to pose elevated security risks. Risk-based passenger screening includes a number of initiatives that fit within a broader framework addressing security risks, but specifically emphasizes the detection and management of potential threats posed by passengers. Various risk-based approaches to airline passenger screening have been used since the early 1970s, including the application of rudimentary behavioral profiles, security questions, and analysis of ticket-purchase data to look for indicators of heightened risk. Additionally, "no-fly" lists were developed to prevent known or suspected terrorists from boarding aircraft, but prior to the terrorist attacks on September 11, 2001, these lists were not robust and proved ineffective. Following the 9/11 attacks, TSA's initial risk-based efforts focused on integrating checks of passenger name records against the "no fly" list of individuals to be denied boarding and the "selectee" list of individuals of elevated risk requiring more thorough secondary screening. These efforts culminated in the deployment of Secure Flight, which screens each passenger's full name and date of birth against terrorist watchlists. Additionally, international passengers are screened by U.S. Customs and Border Protection (CBP), which uses the Advance Passenger Information System (APIS) and the Automated Targeting System-Passenger (ATS-P) to conduct risk assessments. At airports, TSA employs behavioral detection and analysis under the Screening Passengers by Observational Techniques (SPOT) program in an effort to identify suspicious passengers. Another risk-based security program is Pre-Check, a trusted traveler program designed to expedite processing of low-risk passengers. In addition to the Pre-Check participants, TSA is routing certain other passengers through expedited lanes using behavior detection officers and canine teams to screen for suspicious behavior and explosives under an initiative called managed inclusion. Implementation of risk-based passenger screening raises numerous issues of congressional interest. These include the efficacy of the SPOT program; how the various elements and programs complement each other and integrate with TSA's other layers of security; the risk-based approach's ability to adapt and evolve over time; the ability to measure its effectiveness; the potential impacts of false positives on the traveling public; and implications for safeguarding data and maintaining privacy.

According to the federal Substance Abuse and Mental Health Services Administration (SAMHSA), in 2007 about 11% of adults (23.7 million) experienced serious psychological distress, such as anxiety and mood disorders, that resulted in functional impairment that impeded one or more major life activities. It is estimated that less than half of these individuals received mental health care due to various social, financial, and systemic barriers. Even among those individuals who received mental health care, some did not receive the best possible care due to lack of trained mental health providers and other issues affecting quality of care. The term "mental health care" has been used in various contexts to encompass a wide variety of services, ranging from commonly used services, such as family and marital counseling, to specific treatment options for severe mental conditions, such as bipolar illness. In this report, "mental health care" includes care for all levels of severity of mental illness as well as treatment of mental conditions that are common in certain age groups—including Alzheimer's and other dementias among older adults, post-partum depression and other mood disorders among middle-aged adults, and autism and attention-deficit disorders (ADD) among children. It includes counseling, inpatient care, outpatient care, and prescription medications for problems with emotions or anxiety, and within this report, it does not include alcohol or drug treatment. This report begins with a historical perspective on delivery of mental health care services. Next, it describes the health care delivery system within which mental health care is currently provided and presents the various mechanisms that finance the current system. In describing the mental health system, this report considers three aspects: Who provides care? Where is the care provided? Who pays for the care? Finally, this report analyzes the barriers to receiving mental health treatment and workforce training issues, and presents possible options for Congress to address these barriers. While it is recognized that mental health care is also provided within the Department of Veterans Affairs (VA) and the Department of Defense's (DOD's) Military Health system, a detailed analysis of these systems is beyond the scope of this report. Instead, this report focuses on the civilian mental health care delivery system. Congress has been increasingly interested in transforming the mental health system in the aftermath of tragedies involving mentally ill individuals—such as the shootings at Columbine and Virginia Tech, which led to heightened public interest in the adequacy of the mental health care system. In the past decade, Congress passed two far-reaching laws on mental health care. The first law, the Children's Health Act, reauthorized the SAMHSA in 2000 and called for greater focus on the measurement of mental health care outcomes. The second law, the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, expands federal requirements for mental health coverage and requires health insurers who choose to cover mental illness to provide mental health benefits on par with that for physical health. In the United States, mental illnesses are diagnosed and coded in administrative databases based on the Diagnostics and Statistical Manual-IV (DSM-IV). Mental illnesses are common in the United States. An estimated 26.2% of Americans aged 18 and older—about one in four adults or 57.7 million people—suffer from a diagnosable mental illness in a given year. Even though mental illnesses are widespread in the population, the main burden of illness is concentrated in a much smaller proportion—about 6%, or 1 in 17—who suffer from a serious mental illness. Many people suffer from more than one mental illness at a given time. Nearly half (45%) of those with any mental illness meet criteria for two or more illnesses, with severity strongly related to comorbidity. The most common mental illnesses in the United States are anxiety and mood disorders. Society generally has a negative perception of individuals with mental illness. The stigma attached to mental illness is manifested by bias, distrust, stereotyping, fear, embarrassment, anger, and/or avoidance. It is a barrier that discourages people from seeking treatment, especially in rural areas. According to the Surgeon General's report, in order to address the issue of stigma, there needs to be a change in society's perception of mental illness through greater availability of effective treatment options, provider attitude toward recovery for individuals with mental illness, and public awareness that mental illness is not only common but treatable. In order to understand the issues currently facing the contemporary mental health care delivery system, it is useful to trace its evolution. Care for individuals with mental illness has long been a challenging issue largely due to the historical lack of effective treatment options. While there have been recent advances in treatment options, the delivery system and financing mechanisms have been slow to transform. Mental health care has been seen primarily as the responsibility of state and local governments. The earliest record of a mental health care system in the United States dates back to the 18 th century, when the state of Virginia built the first "asylum" and the state of Pennsylvania set aside the basement in Pennsylvania Hospital to house individuals with mental illnesses. Treatment consisted of attempts to return an individual to reason by using physical and psychosocial techniques. While some of these techniques, such as hiring intelligent and sensitive attendants to work closely with patients or reading and talking to the patients and taking them on regular walks, were considered humane, some techniques such as bloodletting (bleeding), purging (forced vomiting), and hot and cold baths were considered inhumane. In the early part of the 19 th century, other states built asylums too. While the asylum is reported to have been instrumental in restoring the mental health of many individuals, it could not prevent mental illnesses from becoming chronic conditions. Because of this failure, by the middle of the 19 th century, asylums primarily housed individuals with untreatable and chronic mental illnesses. The failure resulted in deteriorating quality of care for mental illnesses, overcrowding in these asylums, and underfunding for treatment. In the second half of the 19 th century, the mental health care delivery system began to incorporate the newly emerging principles of "public health," which focused on prevention and early intervention. These did not help improve the mental health care system because its funding was left to the cash-strapped local governments. Care in asylums deteriorated even further, leading to media exposés about the conditions in these settings. By the end of the 19 th century, states passed laws requiring the states to assume financial responsibility for asylums. Treatments continued to be largely ineffective at the turn of the 20 th century. The scientific study and treatment of mental illnesses, called neuropathology, was just beginning. In 1946, Congress passed the National Mental Health Act, which, for the first time in U.S. history, provided federal funding for psychiatric education and research. This Act led to the creation in 1949 of the National Institute of Mental Health (NIMH). In the meantime, conditions in asylums had worsened even further during the Great Depression and World War II. In the middle of the 20 th century, mental health care was transformed with the advent of "deinstitutionalization" or providing mental health care in communities, rather than in asylums. This led to the building and funding of community mental health care centers. Federal support for these centers was authorized under the Community Mental Health Act of 1963. This was the first time federal funds were used to provide for the treatment of mental illnesses. The effects of deinstitutionalization were mixed. On one hand, individuals with mental illnesses were no longer subject to the poor conditions in asylums. On the other hand, community support was inadequate to provide for the treatment and social needs of the mentally ill. Deinstitutionalization shifted many individuals with mental illnesses from asylums to institutions such as the criminal justice system and homeless shelters. Beginning in the mid-1970s, emphasis shifted toward providing social supports to the mentally ill through housing and vocational training. In 1977, President Jimmy Carter's Commission on Mental Health was established in order to review the mental health needs of the nation and recommend policies to overcome deficiencies in the mental health system. However, when the commission's report, the National Plan for the Chronically Mentally Ill , was completed in 1980, bureaucratic rivalries between successive administrations, tensions and rivalries within the mental health professions, and the difficulties of distinguishing the roles played by social issues such as poverty, racism, stigmatization, and unemployment influenced the commission's deliberations and subsequent enactment of the commission's recommendations within the short-lived Mental Health Systems Act. As newer and more effective treatment approaches were discovered, they were used to complement social services. President George H.W. Bush declared the 1990s as the Decade of the Brain. In this decade, progress was made through federal investment in research—in basic neuroscience, behavioral science, and genetics—about the complex workings of the brain and mental illnesses. In the 21 st century, despite advances in the understanding of mental illnesses and their treatments, policymakers and mental health experts assert that the system is fragmented and difficult to use to effectively meet the needs of individuals with mental illness. Many problems remain, including the lack of health insurance by 17.2% of the U.S. population, underinsurance for mental illnesses even among those who have health insurance, access barriers for members of many racial and ethnic groups, discrimination, and the stigma about mental illness, which is one of the factors that impedes help-seeking behavior. These issues are analyzed later in this report. The 110 th Congress passed a law ( P.L. 110-343 ) that will expand federal requirements for mental health coverage and require health insurers who choose to cover mental illness to provide mental health benefits on par with physical health. At least two federal reports indicate that most of the advances in the treatment of mental illnesses have occurred since the 1980s. In 1999, the U.S. Department of Health and Human Services (HHS) released Mental Health: A Report of the Surgeon General , which reviews scientific advances in the understanding of mental health and mental illnesses. In 2005, the Institute of Medicine released a report titled Improving the Quality of Health Care for Mental and Substance-Use Conditions: Quality Chasm Series , which examines the mental health care treatment system and recommends a comprehensive strategy to improve its quality. The earliest drugs used to treat individuals with mental illness in the 18 th century were sedatives; they were used mostly as a chemical way to restrain the patient. As mentioned earlier, the scientific study of mental illnesses and treatment options began in the early part of the 20 th century. It was in the middle of the 20 th century that drugs showing promise in the treatment of schizophrenia and depression were discovered. These drugs were widely used in the 1960s. The next major advance in treatment of mental illness was in the 1970s, when lithium was used to treat manic depressive illness. This was followed by the discovery of drugs called Selective Serotonin Reuptake Inhibitors (SSRIs) in the 1980s, which were more effective than earlier drugs in treating depression. With increased interest in brain research in the 1990s, more effective drugs emerged to treat psychosis and schizophrenia. Experts believe that effective, state-of-the-art treatments vital for quality care and recovery are now available for most serious mental illnesses and serious emotional disorders. Despite substantial investments that have enormously increased the scientific knowledge base and have led to developing many effective treatments, a commission established under President George W. Bush reported that many Americans were not benefiting from these investments. To improve access to quality care and services, the commission recommended fundamentally transforming how mental health care is delivered in America. In the United States, mental health care is delivered by a range of providers in a range of settings. The 1999 Surgeon General's report provided an overview of the U.S. mental health care delivery system. Providers may be formally trained mental health specialists, general health care providers, human services providers, or volunteer support group leaders. Settings in which mental health care is provided also vary in their formality. Financial resources may determine the provider and setting for a patient's mental health care. Providers, types of setting, and financial resources have a bearing on the quality of mental health care a person receives and their health outcomes. This section discusses several characteristics related to the mental health care delivery system, such as the types of providers of mental health care and their licensing and training requirements, the settings in which mental health care is provided, and the manner in which this system is financed. Finally, this section describes two federally funded efforts to measure quality of mental health care. Mental health care may be delivered by a range of providers with varying levels of expertise. Providers of mental health care fall roughly into one of four categories depending on the care being provided. They may be (1) highly trained providers, (2) generalists, (3) social service providers, or (4) informal volunteers. Mental health care may be delivered in one of three categories of settings. The settings may be (1) a hospital, (2) an outpatient clinic, or (3) an informal venue. The severity of an individual's mental illness may determine the setting in which care is provided. While mild mental illness may be treated using medication on an outpatient basis, severe mental illness may preclude an individual from being a functional member of the community. For instance, the type of mental health care provided for an individual suffering from mild eating disorders or mild depression would be quite different from that provided to an individual with severe bipolar illness. The first category of providers of mental health care are highly trained specialists, such as psychiatrists, psychologists, and psychiatric nurses. These providers have generally received specialized training in mental health care, are licensed by a state to provide this care, and have to take regular training and receive continuing education credits in order to keep their license. For example, specialty mental health providers may be licensed to permit them to require involuntary hospitalization and treatment of a suicidal individual. It is estimated that in 2005, there were 41,598 psychiatrists and 398,000 mental health therapists in the United States. Specialty mental health providers generally have their own professional associations (e.g., American Psychiatric Association, American Psychological Association) and accreditation body (e.g., American Board of Medical Specialists). It is estimated that in 2004, there were 2,891 organizations that delivered specialized mental health care in the United States. Specialty mental health care is generally delivered in a clinic or hospital that is specifically designed for such care. This could include outpatient care in the provider's office or inpatient care under the constant supervision of a provider. Inpatient care is generally reserved for acute situations when an individual is perceived to be a threat to himself or others around him. In addition, psychiatric care for the elderly may be provided in nursing homes by mental health specialists. Recent trends indicate a shift from inpatient care for older adults with certain mental illnesses to less expensive settings, such as skilled nursing facilities. The second category consists of providers with training in general health care, such as family practitioners, pediatricians, and nurse practitioners. These providers are trained in a field that is broader than mental health and are also licensed by the state to provide more general health care. They need to take regular training and receive continuing education credits on health-related issues; however, the training need not be related to mental health. This group of providers is a common source of care in areas where there is a shortage of specialized mental health providers. Mental health care for children and youth is generally provided by pediatricians. This includes treatment for most forms of Attention Deficit Disorders (ADD), autism, and childhood mood disorders. Depending on the pediatrician's training and the availability of specialists, youth with severe mental illness may be referred to mental health specialists for care. General health care providers may belong to a broad-based provider association (e.g., American Medical Association) and are accredited as a general provider (e.g., by the National Board of Medical Examiners). A general health care provider may deliver mental health care in the provider's office on an outpatient basis. Mental health care is sometimes delivered in hospital emergency departments where an individual is treated by emergency care professionals. These professionals are trained to stabilize acute illnesses rather than treat chronic conditions, such as mental illnesses. Once the patient is discharged from the emergency department, he or she may receive a referral to a mental health specialist. However, there is rarely any follow-up to ensure that the patient receives recommended outpatient care. The third category consists of providers who are trained to provide social services, such as school-based counselors and criminal justice workers. These providers are trained in a human services field and may not be licensed to provide any health care services. While they may need to take regular training and receive continuing education credits related to their field, they are not required to receive training to provide mental health care. Providers in this category may belong to a social service-related professional association (e.g., American School Counselor Association), but may not be associated with a medical accreditation body. A human services provider generally delivers care within a non-medical institution (e.g., school, prison). Support groups are usually held in public meeting spaces or in a private home. Some individuals use these services to complement care they get in one of the two settings mentioned above. Others, usually individuals with mild mental illness, may get care solely in this type of setting. The fourth category of providers includes informal volunteer groups, such as support groups and peer counselors. These providers generally have no formal training or license to provide mental health services. Hence, there are no regular mental health training or continuing education credit requirements. Rural areas suffer shortages in the supply of trained mental health professionals. The Health Resources and Services Administration (HRSA), an agency within the Department of Health and Human Services (HHS), designates geographical areas with less than one mental health provider per 10,000 population as a Health Professional Shortage Area (HPSA) for mental health. In 2008, 66% of HPSAs for mental health were in rural areas. Also that year, there were 3,059 HPSAs for mental health with 77 million people living in these areas. According to HRSA, it would take 5,145 practitioners to meet their need for mental health providers. Due to the lack of specialty mental health providers in rural areas, primary care providers who practice in non-metropolitan areas play a large role in mental health care. Where a person receives care is a reflection of the payer for these services as well as personal preferences. Even if an individual has health insurance that would cover specialty care, he or she may prefer to get care from his primary care provider because of the stigma that the individual may associate with being seen at a psychiatrist's office. The Centers for Medicare and Medicaid Services (CMS), an agency within HHS, compiles the National Health Expenditure Accounts (NHEA), which estimate the annual health spending for the entire U.S. population, by source of funding for those services. Estimates include expenses from private (such as private health insurance and out-of-pocket spending) and public sources (such as Medicare and Medicaid). Researchers who analyzed data from the NHEA reported that in 2005 the national health expenditure on treatment of mental illness was $142 billion. Expenditures for the treatment of mental illness were second only to those for circulatory diseases. As shown in Figure 1 , private insurance accounts for the largest share of expenditure for mental health services. Private funding for mental health care may also be provided through individual out-of-pocket payment for services, employer-based or individual health insurance, or private philanthropic foundations. Health insurance coverage for mental illnesses is often less generous than that for other physical illnesses. This disparity can include non-coverage of mental illnesses, or higher copayments and lower treatment limits for mental illnesses. The mental health parity law that was enacted in 2008 ( P.L. 110-343 ) aims to eliminate these disparities. For reasons discussed later in this report, some advocates for individuals with mental illnesses believe that disparities may exist even after the enactment of this law. State and local government funding for mental health care services is second only to federal funding, as described below. This reflects in part the historical reality of states carrying the responsibility for low-income individuals with serious mental illness. State- and county-funded mental health services have long served as a safety net for people unable to obtain or retain access to privately funded mental health services. Federal funding, the largest source of public funding, is provided by a range of agencies, each with a different mission, focus, or target population. Federal funding for mental health care research is provided through NIMH, and mental health care treatment is provided through VA, DOD, SAMHSA, HRSA, and CMS. Generally, VA and DOD provide mental health benefits within their delivery system. In contrast, SAMHSA provides for treatment through formula-based block grants and discretionary grant programs to states and communities, while HRSA provides for treatment by funding the federal community health centers. CMS administers the Medicaid, CHIP, and Medicare programs. Generally, the Medicaid program provides health insurance for certain low-income individuals, the CHIP program provides health insurance to certain uninsured children in families with modest income, and the Medicare program provides health insurance for individuals aged 65 and older and for certain disabled beneficiaries. The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 ( P.L. 110-343 ) requires Medicaid and CHIP programs to provide mental health services on par with their physical health services. Medicare partially covers certain inpatient and outpatient mental health services and home health services. Currently, Medicare requires a 50% coinsurance for outpatient psychotherapy services, whereas it requires a 20% coinsurance for other health services. The Medicare Improvements for Patients and Providers Act of 2008 ( P.L. 110-275 ) requires this difference in coinsurance to be phased out between 2010 and 2014. The Institute of Medicine defines health care quality as "the degree to which health care services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge." Each of the elements considered in this report—providers, settings, and financing—has implications for the quality of mental health care delivered. Measuring the quality of mental health care requires data on multiple measures collected over a sustained period of time. The measures need to reflect patterns in at least two areas: (1) the process of obtaining care and (2) the outcome of the care received. Federal entities that attempt to measure the quality of mental health care are those that provide for mental health care (VA, DOD, SAMHSA, HRSA, CMS) and the Agency for Healthcare Research and Quality (AHRQ). This section describes the indicators used by SAMHSA, HRSA, CMS, and AHRQ. SAMHSA has developed mental health specific indicators, called National Outcome Measures (NOMs), for use by its grantees to measure the outcomes of mental health care provided. The NOMs are based on a report by a public-private partnership, Mental Health Statistics Improvement Program (MHSIP) Consumer-oriented Report Card Task Force. SAMHSA's indicators include reduced morbidity, employment, education, housing stability, social connectedness, access to care, and retention in and perception of care. At this time, reports assessing the quality of mental health care using these indicators are in the preliminary stage. The only mental health-specific measure that HRSA requires states to report on is suicide rates among 15- to 19-year-olds. The Medicare program and many private health insurers use the Healthcare Effectiveness Data and Information Set (HEDIS) to measure mental health care quality. The measures in HEDIS include medication management for anti-depressants, follow-up after hospitalization for mental illness, and utilization of mental health care services. AHRQ produces two congressionally mandated reports on the quality of health care annually. It tracks quality across nine health conditions, including mental illness, to determine the effectiveness of health care in the United States using existing national data sources. The indicators that AHRQ uses to measure effectiveness of mental health care are suicide death rate, based on data from the HHS's National Vital Statistics System, and receipt of treatment for major depression, based on the HHS's National Survey on Drug Use and Health. There are two federally funded inventories of mental health care quality measures: the National Inventory of Mental Health Quality Measures (NIMHQM) and the National Quality Measures Clearinghouse (NQMC). NIMHQM is a searchable database of over 300 measures for quality assessment and improvement in mental health and substance abuse care that may be used by payers, patients, and providers to measure quality of care. NQMC is an inventory 89 process and outcome measures of the quality of mental health care. With numerous providers, treatment settings, and payment mechanisms, the mental health care delivery system in the United States is complex, and some policymakers and other stakeholders believe that the system has gaps that make it difficult for some populations to navigate. In view of recent focus on the reform of the general health care system, Congress may consider opportunities to transform the mental health care delivery system. Policy discussions may address the following findings and assertions: While great advances have been made in the discovery of evidence-based treatment practices, the practical application of these findings has been slow. Access to competent mental health providers is scarce in rural areas and even some urban areas. Health insurance coverage of mental illness is often less comprehensive than that of physical illnesses. Mental health care is often not coordinated with other care that an individual may be receiving or may need. Measurements of the quality of mental health care are inadequate to improve quality and transform the system. In the 1990s, a number of federal reports on the state of the nation's mental health system have called for its reform: Mental Health: Report of the Surgeon General (Surgeon General's report),1996. President's New Freedom Commission Report (Freedom Commission report), 2003. Transforming Mental Health Care in America report (Action Agenda), 2005. Improving the Quality of Health Care for Mental and Substance-Use Conditions report (IOM report), 2005. These reports are consistent in their recommendations for reforming the mental health care system. They recommend improving the evidence-base for treatment practices, overcoming stigma, improving quality of mental health care and its measurement, addressing workforce shortage issues, coordinating care, and addressing financial barriers to mental health care. The reports differ in their area of primary focus and the extent to which they assign specific roles to the public and private entities in order to reform the mental health care system. For example, the Surgeon General's report and the Freedom Commission report provide general guidelines for reform, whereas the Action Agenda and the IOM report attempt to translate the guidelines into action steps. This section analyzes the issues facing the mental health care delivery system, including evidence-based practices, access to care, financing mental health care, coordination of care, and quality of care. Options that Congress may consider are described in each area. Congress may, of course, also decide not to take any additional steps to address mental health care delivery, given other priorities. A crosswalk of the recommendations of the four federal reports mentioned above in the context of the issues facing the mental health care delivery system is included in the Appendix . Significant advances have been made in the understanding and treatment of mental illness. Despite these advances, experts believe that many Americans are not benefiting from improved mental health care. The lag between discovering effective forms of treatment and incorporating them into routine patient care is long, lasting on average about 15 to 20 years. The following points may help to explain the disconnect between research and practice. First, use of evidence-based practices can be affected by coverage decisions. Payers can be reluctant to cover new treatment modalities, even when there is evidence for their effectiveness, possibly because the new modalities are not yet considered to be mainstream or may be more expensive. Second, providers are often not trained in the newly discovered evidence-based practices. Research findings are not disseminated in a manner that enables providers to easily incorporate them in their practice. Third, experts believe that there is a shortage of research in at least five areas: (1) disparities between minorities and whites in seeking and receiving mental health care, (2) long-term effects of medications used to treat mental illness, (3) mental health effects of exposure to traumatic events, (4) effective options for acute care of mental illnesses, and (5) effectiveness of alternative treatment practices, such as faith-based care. An area of mental health treatment that has a small evidence-base to date is that of complementary and alternative medicine (CAM) for mental illness, such as faith-based therapy. Data from HHS's 2007 National Health Interview Survey show that CAM was used by 2.8% of adults for treating anxiety and by 1.9% of adults for treating depression. In addition, CAM was used by 4.8% of children for treating anxiety, by 2.5% of children for treating ADD, and by 1% of children for treating depression. Such alternative therapies may be practiced by non-formal providers of care, and there is little research on measuring their effectiveness. As the field of mental health treatment is relatively new, the Freedom Commission report recommends more research in order to address the knowledge gaps mentioned above. Experts recommend efforts to increase the use of practices that have been shown to be effective in order to improve the quality of mental health care. Application of the current advances in mental health treatment would require appropriate training for providers. Support for emerging evidence-based treatment modalities would require changes in financing mechanisms. The IOM report suggests that delays in the application of evidence-based practices may be reduced by the use of quality improvement tools and information technology. In response, Congress could consider requiring HHS and CMS to collaborate with private insurers to encourage the application of emerging research findings into practice through grants and payment incentives. In addition, Congress could consider requiring SAMHSA to work with accreditation boards to provide more training and continuing education opportunities for providers to use the latest evidence-based practices and information technology. Congress has appropriated funds to promote the use of information technology in general health care. While this funding may improve reporting on mental health care that is delivered by general health providers, it is not targeted toward specialty mental healthcare providers. In rural areas, individuals who seek mental health care often need to travel great distances. Scarcity of providers also makes it difficult for individuals to seek mental health care without being noticed by others in their community. The perceived social stigma associated with receiving mental health care and the need to travel large distances to get this care lead to fewer mental health visits by patients in these areas, thus decreasing the likelihood of such individuals receiving the care they need. Mental health provider shortages are not restricted to rural areas. Even in urban areas, there is a shortage of mental health care providers who are culturally competent or linguistically diverse. In addition, research on the integration of cultural competence into practice and measures of effective implementation is lacking. Without concerted efforts to remedy the shortage of culturally competent care, researchers believe the situation could intensify the disproportionate burden of mental illnesses on racial and ethnic minorities. When faced with a shortage of mental health providers, the primary care practitioner often provides care for a patient's mental illness. Primary care practitioners, however, face a number of practice and professional constraints in treating mental illness, including insufficient training and skills, heavy patient case load, lack of time, and lack of specialized backup. When mental health provider shortages are combined with an anticipated increase in demand for care, such as in the current economic crisis, some suggest that individuals who need mental health care may not receive it. The Surgeon General's report indicates that in order to provide access to quality care for all individuals with mental illness, the capacity of the mental health care system would need to be increased. The Freedom Commission report recommends that the mental health workforce be developed to support changes in demand for care and treatment options, and that workforce competencies be developed in order to respond to the demand for culturally competent and sufficiently diversified range of services. Congress could consider addressing this issue by asking the professional associations of health care providers to assess the mental health training needs for mental health providers who work in various settings such as primary care, as well as needs for training in cultural competence for mental health providers. Once the training needs are identified, Congress would have the option of providing funding to SAMHSA to address those needs. The expanded federal mental health parity law, the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, requires health insurers who choose to cover mental illness to provide coverage for mental illness on par with that for physical illness. Advocates for individuals with mental illness believe that several factors may lead to continued disparity in mental health coverage and persistent barriers to access mental health care. First, federal mental health parity law does not require a health plan to provide coverage for mental health. It requires parity coverage for any mental illnesses that an insurer chooses to cover. Some analysts believe this could lead insurance companies to drop coverage for mental health, rather than provide on par coverage. Second, the law allows insurers to provide parity coverage within the context of managed care. Some advocates for people with mental illnesses believe this will cause more aggressive management of mental health benefits, such as requiring referrals, because insurers can no longer impose differential limits on treatment and financial coverage. Third, it is challenging for regulators to determine parity in treatment options for mental health and physical health. For example, Cognitive Behavior Therapy (CBT) is one treatment option that has been shown to be effective for treating some mental illnesses, but CBT is not comparable to treatment for any physical illnesses. Fourth, the federal parity laws do not address quality of care issues such as training for providers of behavioral health care as well as basic mental health training for primary care providers. As a result, some analysts believe this law could lead to an increase in the quantity of mental health care provided, without a corresponding improvement in health outcomes. Fifth, the federal mental health parity law does not address the issue of mental health care needs of the uninsured. Some believe that the current downturn in the economy coupled with the absence of mental health coverage for the uninsured could increase the need for mental health services, thus straining the behavioral health care delivery system. Research is needed to determine the effectiveness of the new mental health parity requirements in improving mental health coverage. Authors of the four national reports mentioned earlier recommend the need for increased federal support for mental health research. Congress could consider how to improve, for example, leadership and vision, with a public-private partnership that involves federal and state entities, providers, insurers, researchers, and advocates for individuals with mental illnesses. Such leadership at the national level could help illuminate the changes needed to transform the U.S. mental health delivery system. According to the Office of the Surgeon General, effective functioning of the mental health service system requires connections and coordination among public and private sectors, various specialty services, and a range of institutions in housing, criminal justice, and education. Individuals with mental illnesses may receive social services and general health care services from various agencies or providers. Lack of effective communication between these service providers could result in missed opportunities to ensure that individuals with mental illness, who may come in contact with any of these systems, get routed to appropriate care. The report asserts that such coordination at the systems level, or with financial mechanisms, is necessary to ensure that an individual, whose cognitive ability may be diminished as a result of his or her mental illness, is able to navigate the system's bureaucracy and receive the mental health care he or she needs. Individuals often pay for the mental health care they receive with more than one funding source. Different payers may require different processes for seeking and paying for care. Some providers may not accept all the mechanisms that are outlined above for financing mental health care. Individuals with mental illness often suffer from multiple behavioral health conditions, including substance abuse disorders. The situation is further complicated because the mental functioning of an individual needing this care is often reduced. Hence, without coordination, care can soon become fragmented, creating barriers to access. Experts and advocates for individuals with mental illness recommend patient-centered mental health care that is focused on an individual's recovery to health. This requires coordination and integration of mental health care with general health care and other sectors. As recommended by the IOM report, consumers and caregivers need to be more involved in planning for their mental health services, so that it is fully responsive to individual needs and preferences and appropriately coordinated with other social and rehabilitation activities In order to address this issue, Congress could consider requiring SAMHSA, working with federal and state agencies that could provide social or health services to individuals with mental illness, to develop a coordinated system of care model. Then, such a model could be adapted to function at the state or community level. This may be based on SAMHSA's Systems of Care for children with serious emotional disorders where a wide range of mental health and related services, such as educational services, social services, and substance abuse services, are coordinated to provide care. Inadequate evidence-based practices, inconsistent access to mental health care, numerous financing mechanisms, and poor coordination of care all have a negative impact on the quality of mental health care provided. Yet, measuring and assessing these quality issues is a challenge. According to the IOM report, mental health care has a number of unique characteristics that combine to distinguish it from quality measurements for other conditions. The distinguishing characteristics include the greater use of involuntary commitment into treatment for mental illness, a less-developed quality measurement infrastructure, separate delivery systems, and a differently structured marketplace. The administrative data collection systems that are widely used to monitor quality of care do not include mental health assessment and treatment practices, as these have not been standardized. For reasons mentioned earlier, practitioners do not always use the latest evidence-based treatment modalities. The development of performance measures for mental health care has not received significant attention in the private sector, and efforts in the public sector have not yet achieved widespread consensus. At the national level, administrative and surveillance systems do not adequately capture data on the indicators needed, such as those developed by SAMHSA, for transforming the mental health care delivery system. Further, even when the systems are developed and can obtain data on a comprehensive set of indicators, greater efforts may be needed to translate the outcomes data into recommendations for system transformation. The understanding and use of modern quality improvement methods have not yet permeated the day-to-day operations of organizations and individual mental health care providers in general or specialty health care sectors. While improvements in the individual areas outlined in this report may have an impact on the quality of care, a comprehensive strategy that transforms the mental health care delivery system could ultimately lead to improved outcomes for individuals with mental illness. Specifically, the IOM report recommends that the system needs improved diagnostic and assessment strategies, a stronger infrastructure for measuring and reporting the quality of mental health care, and support for quality improvement practices. The IOM report also states that development of mental health information technology infrastructure will help in measurement and improvement of quality of mental health care. Congress could require providers to develop the systems that are needed to collect data on mental health care quality. In addition, Congress could require SAMHSA to work with national experts to translate the NOMs into recommendations for transforming the system. Finally, Congress could require coordination among federal agencies involved with mental health research, care delivery, and financing. Historically, mental illness has not been as well understood as other physical illness. This has led to disparities in the treatment and financing of mental illness. The mental health care system currently faces a number of structural and functional issues. Experts have called for its transformation and provide numerous recommendations. Transformation of the mental health care system, in this view, would require incorporating in a timely fashion evidence-based practices as part of routine practice, resolving workforce shortage issues, ensuring access to care by removing financial barriers, coordinating mental health care with general health care and social services, and developing a way to systematically measure and improve the quality of care delivered. While each of these recommendations may result in some benefits, evidence suggests a comprehensive transformation of the mental health system could be necessary to ensure the availability and accessibility of quality mental health care to all individuals who need it.

In the past decade, four federal reports have offered insight into the nation's mental health care system and recommended a fundamental transformation of the system. According to these reports, transformation of the mental health care system would require timely incorporation of evidence-based practices in routine practice, resolution of workforce shortage issues, removal of financial barriers, coordination of mental health care with general health and social services, and systematic measurement and improvement of the quality of care delivered. While each of these recommendations may result in some benefits, the findings suggest that a comprehensive transformation of the mental health system could be necessary to ensure the availability and accessibility of quality mental health care to all individuals who need it. In 2007 about 11% of adults (23.7 million) in the United States experienced serious psychological distress, such as anxiety and mood disorders, that resulted in functional impairment that impeded one or more major life activities. Different types of providers deliver care in a range of settings and are financed by various combinations of public and private payers. Congress has been increasingly interested in transforming the mental health system in the aftermath of tragedies involving mentally ill individuals—such as the shootings at Columbine and Virginia Tech, which led to heightened public interest in the adequacy of the mental health care system. Two federally funded efforts, one through the Agency for Healthcare Research and Quality (AHRQ) and the other through the Substance Abuse and Mental Health Services Administration (SAMHSA), attempt to measure the quality of mental health care on an annual basis. At this time, neither effort is adequately developed to guide the transformation of the system. SAMHSA estimates that less than half of individuals with serious psychological distress receive mental health care due to various social, financial, and systemic barriers. While there have been advances in treatment options, the delivery system and financing mechanisms have been slow to transform and apply these findings in routine practice. For this reason, despite substantial investments that have increased the knowledge base about mental illness and have led to the development of many effective treatments, experts agree that many Americans are not benefiting from these investments. Mental health care is often not coordinated with other care that an individual may be receiving or may need. Access to competent mental health providers is scarce in rural areas and even some urban areas. Coverage for mental illness provided by private health insurance, Medicare and Medicaid, is sometimes less comprehensive than that for physical illnesses, negatively affecting access. In addition, some issues, such as social stigma around mental illness, and inadequate public awareness that mental health problems are treatable create disincentives for individuals to seek care. These issues affect both the access to, and the quality of, care delivered and, by consequence, the mental health outcomes achieved. In the past decade, Congress passed two far-reaching laws on mental health care. The first law, the Children's Health Act, reauthorized the Substance Abuse and Mental Health Services Administration (SAMHSA) in 2000 and called for greater focus on measurement of mental health care outcomes. The second law, the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, expands federal requirements for mental health coverage. Congress could consider transformation of the mental health system as part of larger health care reform efforts.

Nigeria begins 2015 facing highly polarizing—and potentially destabilizing—elections amid a dangerous territorial advance in the northeast by the violent Islamist insurgent group Boko Haram. By some estimates, more than 5,500 people were killed in Boko Haram attacks in 2014, and Boko Haram attacks have already claimed hundreds of lives in early 2015. In total, the group may have killed more than 10,000 people since its emergence in the early 2000s. More than 1 million Nigerians have been displaced internally by the violence, and Nigerian refugee figures in neighboring countries continue to rise. State Department officials have suggested that the planned elections may be a factor in the increased tempo of Boko Haram attacks, as the group seeks to manipulate political sensitivities and undermine the credibility of the state as the polls approach. On February 7, Nigerian election officials announced that the elections, scheduled for February 14 and 28, would be delayed by six weeks. The decision is controversial. The election commission declared that it was "substantially ready" and that preparations were "sufficient to conduct free, fair and credible elections as scheduled." The decision to delay the vote was made after security officials contended that they could not guarantee security for the polls because the military "needed at least six weeks within which to conclude a major military operation" against Boko Haram and could not provide "traditional support" to police and other security agencies during elections. Some observers view the delay as an opportunity to improve conditions for prospective voters in the northeast, amid fears that many could be disenfranchised by the violence and displacement. The delay also provides more time to address concerns about poll preparations. It is unclear, however, whether the Nigerian public will view the delay as enhancing or detracting from the credibility of the electoral process. The potential for substantial improvement in the security situation in the northeast within this timeframe is also unlikely. The opposition, while urging calm, called the delay "provocative" and "a major setback for democracy," and press reports and social media suggest that many Nigerians perceive the postponement as undue interference by security officials. Former Nigerian President Olusegun Obasanjo expressed public alarm with the decision, saying, "I hope we will not have a coup." Secretary of State John Kerry voiced deep disappointment, stating that "political interference" with the election commission was "unacceptable," warning against further delays, and declaring it "critical that the government not use security concerns as a pretext for impeding the democratic process." The United Kingdom articulated a similar view, calling the decision "cause for concern." With public confidence in the electoral process reportedly already low, such concerns may amplify political tensions and raise the potential for violent protests if the election results are disputed. A contested election outcome could undermine the Nigerian government's ability to bring potential post-election violence under control and further impede its ability to counter the Boko Haram threat. The upcoming presidential elections may be Nigeria's closest contest to date, with the field of serious candidates narrowed for the first time to the standard-bearers of two major political parties. The incumbent, President Goodluck Jonathan, a Christian from the southern Niger Delta region, and his People's Democratic Party (PDP), which has been in power since the return to civilian rule in 1999, face a strong challenge from a new opposition alliance. That party, the All Progressives Congress (APC), draws support in part from popular disaffection with government performance in the predominately Muslim north and its response to Boko Haram, and with reports of rising corruption. In December, the APC selected former military ruler Muhammadu Buhari, a northerner who challenged Jonathan in the last election, as its candidate. Experts suggest that inter-faith relations in Nigeria, where the population is roughly divided between Christians and Muslims, have deteriorated in recent years. Religious identity overlaps with ethnic and regional identities in Nigeria, and the invocation of religious identity by some politicians in increasingly inflammatory political messages has stoked tensions in parts of the country. The U.S. Commission for International Religious Freedom explains, In an electoral context, the religious and ethnic affiliations of persons running for public office are important to most Nigerian voters and are always known to them; indeed many observers note that these are two of the most important bases on which people vote. If given a choice, Muslims tend to vote for Muslims and Christians for Christians. Both political parties understand the importance of the confluence of religious identity and politics, and both are highlighting religion in the campaign. In 2014, the PDP labeled the APC as "Nigeria's Muslim Brotherhood," although the party has not advocated an Islamist platform, and many key APC leaders were once top PDP officials (including several southern, Christian politicians who left the PDP over disagreements with Jonathan). Buhari's running mate is a Yoruba (Nigeria's second-largest ethnic group) Pentacostal pastor and former state attorney general from the opposition-leaning, populous southwest. Some in the PDP have tried to link the APC to the Boko Haram insurgency, despite Buhari having reportedly been the target of a Boko Haram attack in July 2014 and labeled more recently as an "infidel" by Boko Haram's leader. Conversely, while the PDP historically has been arguably the most diverse of Nigeria's political parties, internal divisions and defections to the opposition in the past year, notably among its northern members, have led some in the north to characterize the PDP under President Jonathan as representing primarily Christian and southern—and more specifically Niger Delta—interests. The potential for violence around the elections is high (see Figure 1 for potential hot spots). Previous elections have been marred by violence, and many analysts suggest that the prospects for electoral unrest have never been greater. An estimated 800 people were killed in violence following the last elections, in 2011, and some 65,000 were displaced. The post-election protests in the north against Jonathan's victory highlighted grievances and mistrust of the government in that region. Such frustration is widely believed to have grown in the past four years as the impact of the Boko Haram insurgency has spread. Further, some northern opponents of President Jonathan view his candidacy as illegitimate, given legal questions surrounding his eligibility and a popular view in the region that it is the north's "turn" to hold the presidency. These tensions, overlaid atop simmering communal violence in parts of central and northern Nigeria, and alongside the potential for Boko Haram efforts to further destabilize the situation, have led some former U.S. officials to express alarm about the country's trajectory. Nigeria also faces mounting economic pressures; uncertainty around the elections and the prospect for security conditions to deteriorate further have deterred investors and undermined consumer confidence. The value of the Nigerian naira has plummeted against the dollar recently, and the government is struggling to balance competing budget demands, including the considerable cost of the elections and a rising security budget, amid a sharp drop in the global price of oil, a primary source of foreign exchange and government revenue. Nigeria is considered a key country in Africa because of its size and political and economic weight in the region. It is Africa's largest economy, largest oil producer, and most populous country, with almost 180 million people. Nigeria's Muslim population is among the largest in the world, vying with, and likely overtaking, Egypt's as the largest on the continent. Lagos, its commercial center, is among the world's largest cities. Until recently, Nigeria routinely ranked among the United States' largest sources of imported oil. The United States imported over 40% of Nigeria's total crude oil exports until 2011, but U.S. purchases have since plummeted as domestic U.S. energy supply has increased. The Obama Administration still considers its relationship with the country to be among the most important on the continent, although reports suggest relations have deteriorated in the past year. Diplomatic engagement has been tempered at times over the years by Nigerian perceptions of U.S. intrusion in domestic or regional affairs, and by U.S. concern with human rights, governance, and corruption issues. Disagreements over Nigeria's approach to countering Boko Haram have been an increasing source of friction in the relationship. Nigerian political life has long been scarred by ethnic, geographic, and religious conflict, and decades of corruption and misrule have undermined the state's authority and legitimacy. Divisions among ethnic groups, between north and south, and between Christians and Muslims, often stem from contention over access to land, jobs, and socioeconomic development. By some estimates, as many as 16,000 Nigerians have died in localized clashes driven by such tensions in the last decade (separate from the casualties caused by the Boko Haram conflict). In 2014, Nigeria was estimated to have the largest displaced population in Africa—more than 3.3 million people—and the third largest in the world. Additionally, years of social unrest, criminality, and corruption in the oil-rich southern Niger Delta region have hindered oil production, undermined the Delta's economic development, and contributed to piracy in the Gulf of Guinea. While Nigeria's economy is Africa's largest, its human development indicators are among the world's lowest, and a majority of the population lives in extreme poverty. Nigeria has high income inequality by global standards and lags far behind South Africa, Africa's second-largest economy, on the U.N. Human Development Index. Over 40% of the current population is under the age of 15, and almost a third of primary-school-aged children are not enrolled in school. Nigeria's long-term economic growth is threatened not only by political instability and security challenges, but also by poor infrastructure and electricity shortages. Decades of economic mismanagement, instability, and corruption have hindered investment in Nigeria's education and social services systems and stymied industrial growth. Debt relief from the Paris Club of donors in 2005 has provided new opportunities for investment in Nigeria's social development, but experts stress a need to take action to forestall a relapse into unsustainable levels of debt that could prevent the country from meeting its development goals. The announcement in October 2014 by the World Health Organization (WHO) that Nigeria was free of Ebola virus transmission brought positive attention to the country's coordinated effort to stop the spread of the virus, which has ravaged Guinea, Liberia, and Sierra Leone. Nigeria's response also highlighted lessons learned in a country that until recently was considered a global epicenter of polio transmission. Nigeria's response to its Ebola outbreak was swift, with the government immediately declaring a national public health emergency and creating an operations center from which experts directed contact tracing, case management, health care worker protocols, and public education. The response benefited from applied epidemiology experience from Nigeria's polio eradication efforts; experts from the U.S. Centers for Disease Control and Prevention and the WHO supported the effort. Nigeria has had other recent public health successes, nearly eradicating polio, decreasing malaria and tuberculosis prevalence, and reducing HIV prevalence among pregnant women. Nigeria still grapples with significant health sector challenges, though, and is home to nearly one-tenth of the world's HIV/AIDS infected persons—more than 3 million people—the largest HIV-positive population in the world after South Africa. Nigeria's upcoming elections are a critical test for its political leaders, its security forces, and its people. The country was ruled by the military for much of the four decades after independence before transitioning to civilian rule in 1999. Elections held in the following decade were widely viewed as flawed, with each poll progressively worse than the last. The 2011 elections, in contrast, were seen by international observers as more credible than previous efforts, but not without problems, and the protests and violence that followed the polls suggested that many Nigerians lacked faith in the electoral process. Since then, donors and advocacy groups have pressed the government to improve electoral procedures and prosecute cases of electoral fraud and political violence to promote accountability and build public confidence. While Nigeria's election commission has received praise for some of its efforts to improve the credibility of the process, including through an update of the voter register, other efforts have been hampered by inaction on electoral law reforms. Recent assessments of election preparations have raised potentially significant concerns, such as delays in the distribution of tens of millions of voter cards and the recruitment and training of poll workers. The question of whether the country's sizeable internally displaced population can legally vote outside their home areas is a potential flashpoint, as is the possibility that parts of the northeast may be deemed too insecure to hold elections. Given the close nature of the race, allegations of disenfranchisement could call into question the credibility of the poll results. Jonathan will again face Buhari in the 2015 polls, in a race widely expected to be much closer than in 2011, when Jonathan won with more than 59% of votes. Buhari received only 32% amid a crowded field of candidates. To win, a candidate must gain an absolute majority of the votes and at least 25% in two-thirds of the states. With some predictions of a race that could be decided by less than 1 million votes (with 68.8 million registered voters), concerns about disenfranchisement and rigging are significant. High stakes around the historically contentious state gubernatorial races offer further risks of rigging and violence around the polls. The presidential candidates' commitment to the Abuja Accord, a January 2015 agreement in which they pledged to avoid statements that could incite violence, will be tested in the coming weeks. The opposition has urged calm in response to the February poll delay, with Buhari stating that "any act of violence can only complicate the security challenges in the country and provide further justification to those who would want to exploit every situation to frustrate the democratic process." In 2014, the U.S. Consul General in Lagos wrote in an op-ed that Nigeria faced a "crisis of credibility" fueled by decades of impunity for large-scale corruption and electoral fraud. According to a 2014 Gallup poll, only 13% of Nigerians expressed confidence in the electoral process. Independent efforts to assess the process and verify the election results, such as the "Quick Count" planned by the Transition Monitoring Group (a coalition of local civil society groups) may improve voter confidence. In the event of a close outcome, the perceived legitimacy of the process and the results will be critical factors in averting potentially widespread protests and minimizing violence. Nigeria's security forces, already stretched by deployments to counter Boko Haram (which targeted election facilities in 2011), will face an additional challenge in trying to secure 120,000 polling stations without fueling the perception of interference. Northern views of the security forces were already reportedly low in the context of alleged abuses during operations to counter Boko Haram, and there have been allegations in the past year that the PDP has used security agencies for political purposes. Accusations that military officials have used insecurity as a pretext to delay the polls and keep Jonathan in office may further hinder security forces' ability to ensure security and stability when the elections occur. Boko Haram has grown increasingly active and deadly in its attacks against state and civilian targets in Nigeria since 2010, calling for an uprising against secular authority and a war against Christianity. The group draws on a narrative of vengeance for state abuses to elicit recruits and sympathizers, and appears to have increased its ranks through forced recruitment and jailbreaks. U.S. officials have estimated in press reports that Boko Haram may have between 4,000 and 6,000 "hardcore" fighters, while other sources contend its force could be larger. After years of calling for the creation of an Islamic caliphate in Nigeria, the group now appears intent on establishing one by force. In July 2014, Boko Haram shifted from a tactical focus on asymmetric attacks against government and civilian targets, toward a more strategic approach in which it has also targeted key infrastructure like bridges and fuel depots, and mounted a conventional offensive to seize and hold territory. Estimates on the amount of territory held by Boko Haram vary, but press reports suggest that by early 2015 the Nigerian government may have lost between 40%-70% of Borno state and some territory in neighboring Yobe and Adamawa states, including border areas near Cameroon. Nigerian forces have countered large-scale assaults on the state capitals of Maiduguri and Damaturu, but such efforts have reportedly left rural areas largely undefended. Reuters calculated in mid-January 2015 that Boko Haram held 30,000 square km of territory, roughly the size of Maryland, while the London-based Telegraph put the figure at 20,000 square km a week prior. U.S. officials have not publically corroborated either estimate. Recent military offensives by Nigeria and Chad have reclaimed some territory, but their ability to hold those gains will rely on continued cooperation between the two countries. Boko Haram attracted increased international attention in 2014. Its April abduction of some 270 school girls from Chibok, a town in Borno, sparked both a domestic and international outcry and the Twitter campaign #BringBackOurGirls. While some of the girls escaped, the majority have yet to be returned to their families. In early June, Boko Haram deployed its first known female suicide bomber, in the northeast state of Gombe. Weeks later, the group conducted its first known attack in southern Nigeria, using another female suicide bomber to target a fuel depot in Lagos. It has continued to target markets, bus stations, schools, banks, detention facilities and other government facilities, among other locations. In November, the group hit the central mosque in Kano, northern Nigeria's largest city, killing more than 120 and wounding almost 400. The group's tactics and strategy evolved in 2014, with an upsurge of violence that included the increasing deployment of women and children as weapons as well as large-scale incursions to take territory. Some of its attacks, including the January 2015 raid on Baga and surrounding settlements in far northeast Borno, which may be its deadliest attack yet, appear to be retribution against communities seen to cooperate with Nigerian forces, including through vigilante groups. While Boko Haram attacks have remained largely concentrated in northeast Nigeria, the group periodically strikes beyond that area and appears increasingly active in neighboring countries, notably Cameroon. Its leadership has appeared at times to be inspired by the Islamic State; it has modified its logo to incorporate the Islamic State flag, used its anthem in a video, and voiced support for both the Islamic State and Al Qaeda (AQ) in public messages. As of January 2015, U.S. officials did not consider the group to be an AQ affiliate. On March 7, 2015, Boko Haram released an audio message on Twitter from its leader, Ababukar Shekau, in which he pledges allegiance to the leader of the Islamic State, Abu Bakr al Baghdadi. The practical implications of that pledge, and the extent to which, if at all, the two groups have direct links, are unclear. Multiple factors have undermined the Nigerian security forces' response to Boko Haram, notably security sector mismanagement and corruption. By many accounts, troops are not adequately resourced or equipped to counter the insurgency despite a rising defense budget of more than $5 billion in 2014 (roughly 20% of the government's total budget). Many soldiers, particularly in the northeast, reportedly suffer from low morale, struggling to keep pace with a foe that appears increasingly well-armed and trained. In the assessment of DOD officials, Nigerian funding for the military is "skimmed off the top," and former Nigerian President Obasanjo, himself once a military leader, suggests that corruption in the army is "deeply ingrained." Nigerian government statements about its response to the Boko Haram threat have appeared, at times, out of touch with events. A government announcement in October 2014 of a purported cease-fire and hostage negotiations with Boko Haram, for example, was met with skepticism by many Nigerians as dozens were killed in attacks within days of the agreement allegedly taking effect. Likewise, security officials at times have downplayed the threat posed by Boko Haram's territorial advance and overplayed the success of their own response. In January, Nigerian government officials were criticized for making limited statements in the days after a major Boko Haram attack in which hundreds were killed while publicly expressing sympathy with France for the deaths of 16 terrorist attack victims in that country. The official rationale for the February 2015 election delay has prompted further skepticism as observers question whether the military can make substantial progress against Boko Haram and create a secure environment for the polls within six weeks. Nigerian security officials insist that there will be enough troops available by March 28 to secure the elections, citing improved military cooperation with Nigeria's neighbors, and indicate that the poll date will not be moved again. Nigeria's national security advisor has also vowed that all known Boko Haram camps will be dismantled during this period. Boko Haram currently appears to pose a threat primarily to stability in northern Nigeria, and to surrounding areas in neighboring Cameroon, Chad, and Niger. U.S. intelligence officials warn, however, that if its territorial offensive continues, it "could grow into a significant regional crisis with implications outside of northwest Africa." The group also poses a threat to international targets in the region, including Western citizens. Boko Haram's leader has issued direct threats against the United States, but to date no U.S. citizens are known to have been kidnapped or killed by the group. The State Department designated Boko Haram and a splinter faction, Ansaru, as Foreign Terrorist Organizations (FTOs) in November 2013. The United Nations Security Council added Boko Haram to its Al Qaeda sanctions list in May 2014. In its first formal public reaction to Boko Haram's activities, the U.N. Security Council issued a presidential statement on January 19, 2015, condemning the recent escalation of attacks and resulting humanitarian crisis. The Council also expressed concern that the situation was undermining peace and security in West and Central Africa and welcomed the efforts of countries in the region, as well as foreign donors, to support the creation of a multinational joint task force. The Security Council is expected to consider authorization of a regional force endorsed by the African Union at its annual summit in late January. Previous efforts to make a regional force operational have been hindered by a lack of cooperation, capacity, and in some cases political will, among the affected countries. After a period of strained relations in the 1990s during Nigeria's last military dictatorship, U.S.-Nigeria relations steadily improved in the 2000s, and until recently appeared comparatively strong. Positive relations have been significant in the context of Nigeria's role on the U.N. Security Council (as one of its nonpermanent members since January 2014), and in the context of global dialogues on such issues as nuclear nonproliferation. In addition to the strategic role their country often plays as a U.S. partner in the region and in global forums, Nigerians are the single largest African diaspora group in the United States. Nigeria is an important U.S. trading partner and the second-largest beneficiary of U.S. private investment on the continent. In 2010, the Obama and Jonathan Administrations established the U.S.-Nigeria Binational Commission (BNC), a strategic dialogue to address issues of mutual concern. Its working groups cover a range of topics, including terrorism. Human rights issues have at times been an area of contention, not only in relation to the behavior of Nigeria's security forces but also on such topics as gay rights. Nigeria routinely ranks among the top recipients of U.S. bilateral foreign assistance in Africa. The United States is Nigeria's largest bilateral donor, providing roughly $700 million annually in recent years. The State Department's FY2016 foreign aid request includes more than $607 million for Nigeria; the FY2015 request totaled over $720 million (the decrease primarily reflects a lower request for global health funding, which comprises a majority of the aid portfolio). Strengthening democratic governance, improving agricultural productivity and access to education and health services, promoting job creation and increased supplies of clean energy, and professionalizing and reforming the security forces have been priorities for U.S. assistance. Support related to the upcoming elections is wide-ranging and includes technical assistance to the election commission, support to civil society groups for voter education and efforts to mitigate violence, and funding for domestic and international observation missions. Nigeria is a focus country under the President's Emergency Plan for AIDS Relief (PEPFAR), the President's Malaria Initiative (PMI), and the Obama Administration's Power Africa initiative. Nigerian farmers benefit from programs under the Feed the Future (FTF) initiative that focus on building partnerships with the private sector to expand exports and generate employment. Interventions to encourage private sector participation in trade and energy are also key components of the Obama Administration's economic growth initiatives. Bilateral cooperation on global health issues has been strengthened in the context of efforts to eradicate polio, and was critical in supporting Nigeria's effort to stop the spread of Ebola in the country. U.S. humanitarian assistance in response to the complex emergency in the northeast has totaled almost $25 million to date in FY2014 and FY2015, including protection, water and sanitation, and emergency food aid support for displaced populations and psychosocial support for violence-affected communities. U.S. security assistance to Nigeria is sizable by regional standards, ranging from $15 million to $20 million annually for military and law enforcement aid in recent years. Nigeria also acquires U.S. defense materiel through U.S. Foreign Military Sales (FMS), Direct Commercial Sales (DCS), and Excess Defense Articles (EDA). Nigeria has played a significant role in peace and stability operations across Africa, and the State Department continues to provide assistance to enhance Nigeria's peacekeeping capabilities. Given its strategic position along the Gulf of Guinea and rising rates of piracy in the region, the United States coordinates with Nigeria on various maritime security initiatives, and the Nigerian navy receives substantial U.S. security assistance. Counterterrorism cooperation with civilian agencies reportedly improved in the aftermath of the December 2009 "Christmas Day" airliner bombing attempt and the rise in the Boko Haram threat, but there are limits to that cooperation. The Nigerian government has coordinated with the Department of Homeland Security, the Federal Aviation Administration, and the International Civil Aviation Organization to strengthen its security systems in recent years, and the country now uses full body scanners in its international airports. Nigerian law enforcement agencies have received roughly $2 million annually in Anti-Terrorism Assistance (ATA) in recent years. Nigeria is a participant in the State Department's Trans Sahara Counterterrorism Partnership (TSCTP), a U.S. interagency effort that aims to increase regional counter-terrorism capabilities and coordination. Its role in TSCTP has been historically minor in comparison to Sahel countries, but is increasing—in FY2014, Nigeria received $5 million in TSCTP programming focused on counter-IED training and civil-military relations, in addition to counter-radicalization efforts. In the aftermath of the 2014 Chibok kidnapping, the Obama Administration deployed an interagency team to assess opportunities to support Nigerian efforts to counter Boko Haram and rescue the schoolgirls. As part of that effort, the Department of Defense (DOD) offered advisors to assist Nigerian forces and share information, including that obtained by intelligence, surveillance, and reconnaissance (ISR) assets based in neighboring Chad. While some of the expanded support offered in the aftermath of the Chibok incident is ongoing, it does not appear as robust as originally envisioned, which may reflect challenges in the bilateral relationship. DOD support for regional efforts to counter Boko Haram is set to expand under a new $40 million Global Security Contingency Fund (GSCF) program announced in 2014 that aims to enhance the institutional and tactical capabilities of Cameroon, Chad, Niger, and Nigeria, and improve regional coordination, to counter the threat. The extent to which Nigeria itself will benefit from that program, however, remains unclear. The United States has long sought to balance security and human rights concerns in Nigeria. Political and human rights concerns have been a prominent factor in shaping U.S.-Nigeria relations for decades. State Department reports have continued to highlight serious human rights violations by the Nigerian security forces every year since the transition from military rule in 1999. U.S. security assistance to Nigeria has been constrained both by law and policy concerns, and, as noted above, the security relationship has been hampered at times by a lack of cooperation from Nigerian officials and systemic problems within its military. Security forces' abuses in the context of operations to counter Boko Haram have also complicated U.S. efforts to pursue greater cooperation, despite shared concerns about the group. According to the State Department, the information on security force abuses currently implicates roughly half the units in the Nigerian army, and likely would render those units ineligible for assistance under congressionally mandated restrictions known as the "Leahy Laws," if those units were submitted for vetting. Nevertheless, the State Department has cleared more than 1,000 members of the Nigerian security forces, and several hundred military and police units, for U.S. assistance in recent years. While stressing the importance of the U.S.-Nigeria relationship and the gravity of security threats in, and potentially emanating from, the country, many U.S. officials remain concerned about these reported abuses, and about the role they may play either in tainting the military's credibility among the population in the north or in fueling support for the insurgency. When Secretary of State John Kerry visited the African Union headquarters in Ethiopia in 2013, he raised the issue with Nigerian officials, stating, "... one person's atrocity does not excuse another's." Administration officials have continued to reiterate this message and the need for Nigeria to improve its management of the security response, while also stressing the seriousness with which the United States views the Boko Haram threat. Some Nigerian officials reportedly object to these comments as perceived U.S. interference in internal affairs and are dismissive of certain training offers. Nigerian frustration also appears in part driven by unsuccessful efforts to acquire certain major U.S. defense equipment; the country has turned to Russia and China in recent years for helicopters, jets, and unmanned aerial platforms. Recent media reports suggest that these factors have strained the relationship between U.S. defense officials and certain branches of the Nigerian armed forces. In November 2014, Nigeria suspended advanced infantry training by U.S. Special Forces for an elite Nigerian army unit that had been cleared for assistance. DOD officials have assessed the Nigerian forces as "slow to adapt with new strategies, new doctrines and new tactics," and have described Nigeria as "an extremely challenging partner to work with." U.S. officials have encouraged the government to take a more comprehensive counterterrorism approach, and one that is, in the words of one former DOD official, "less brutal." One of the primary aims of DOD engagement has been to "convince the Nigerians to change their tactics, techniques, and procedures" in the northeast, in line with lessons the U.S. military learned in the context of counterinsurgency operations in Iraq and Afghanistan. The Nigerian army has taken some steps in that direction, seeking support to develop its own civilian protection and human rights monitoring and training, for example. Nigerian officials have made statements suggesting an evolving counterterrorism strategy, one that seeks not only security, but also political and economic solutions. In recent congressional testimony, however, a senior U.S. intelligence official indicated that Nigeria has yet to adopt a comprehensive counterinsurgency approach, assessing: Nigeria's military forces have been challenged by mass desertions and often retreat on first contact with BH. The military leadership - often focused on advancing private gain over strategic imperatives - has failed to properly resource and train troops. Nigeria recently acquired new weapons systems, but troops lack the training and motivation to effectively employ them. The Obama Administration has nevertheless publicly committed support for Nigerian efforts to counter Boko Haram, including through support for the Nigerian military. USAID, the State Department, and the Broadcasting Board of Governors oversee programs to counter radicalization in Nigeria. The State Department and DOD continue to deliberate on how best to support a shift by Nigeria to "a comprehensive, holistic strategy for countering Boko Haram that protects civilians, respects human rights, and addresses the underlying causes of the conflict by bringing both civilian and security tools to the fight." In reference to counterterrorism cooperation, Secretary Kerry emphasized in his January 2015 visit to Nigeria, "bottom line, we want to do more ... we are prepared to do more, but our ability to do more will depend to some degree on the full measure of credibility, accountability, transparency and peacefulness of this election." The February postponement of the polls appears likely to delay any significant improvement in cooperation in the coming months. What are the prospects for improved counterterrorism cooperation with Nigeria after the elections? Several commentators, among them former U.S. officials, have offered recommendations on the way forward, ranging from expressions of support for expanded assistance to the neighboring countries, calls for direct U.S. military action against Boko Haram, and proposals for new approaches to improve the effectiveness of the Nigerian army. Former DOD official Alice Friend suggests that the latter, in the near term, may be a challenge: Today, almost everything the federal government does is seen as related to Jonathan's efforts to be re-elected next month, and some northern observers have argued that the government's disinterest in combatting Boko Haram has a regionalist bias to it. Likely low voter turnout in the northeast due to the mass population displacement will only exacerbate these tensions. In view of the growing impact Boko Haram has had on neighboring Cameroon, Niger, and Chad, U.S. officials have increasingly sought to support programs to improve counterterrorism coordination between Nigeria and its neighbors, and to improve their capacity to contain the group. Tensions in those countries' own relationships with Nigeria may hinder cooperation. Nigeria's neighbors have reportedly worried about potential Nigerian military leaks of information to Boko Haram, and by some accounts have viewed the Nigerian response as ineffective and been reticent to put their troops under Nigerian command in its previous proposals for a regional force. As a result, their efforts to engage Boko Haram were largely unilateral until 2015. However, Chad, which has also been active in countering violent extremists in Mali, has recently offered increased support to Cameroon and Niger. It deployed troops to Cameroon in January 2015 and has since reportedly been involved in both airstrikes and ground assaults against Boko Haram inside Nigerian territory. Senior U.S. officials, including President Obama and Secretary Kerry, have discussed the Boko Haram crisis with French and British counterparts, recommitting their support for a regional strategy to counter the group. Regional efforts to stand up a multinational force are underway—in late January 2015, Niger hosted the first of several summits to finalize plans for the force. U.S. delegations have participated in these events. Boko Haram was a top agenda item at the African Union (AU) Summit in Ethiopia (January 29-31), during which the regional body endorsed a multilateral military response by Nigeria and its neighbors. The African Union is now seeking authorization from the U.N. Security Council and support from donors, including the United States, to establish the force, which could be similar to that created by the AU for Somalia, and more recently Mali and the Central African Republic. (In the latter two countries, AU forces were later subsumed into U.N. peacekeeping operations.) The initial troop-contributing countries—Benin, Cameroon, Chad, Niger, and Nigeria—agreed to create a force of up to 10,000 troops, with its headquarters in N'Djamena, Chad. They have called for donor support for the anticipated $4 million deployment. France is providing logistical and operation support to Nigeria's neighbors and aerial surveillance in those countries. In addition to existing U.S. support, including that provided through the State Department's TSCTP program, the planned $40 million GSCF program, and other DOD assistance, the Obama Administration may seek congressional support for additional aid to the African-led operation. The coming months may be a critical period in Nigeria, not only for its democratic trajectory, but for the security and stability of the country, and possibly the wider sub-region. Developments during this period may also have implications for congressional oversight of U.S. policy toward Nigeria. "No matter which candidate is declared victorious," one former U.S. ambassador to Nigeria argues, "there are plenty of reasons for the loser to reject the results." Concerns raised around the poll delay likely exacerbate the opposition's skepticism of the Jonathan government's commitment to a fair process. Another former senior U.S. diplomat contends that the problems with voting in the northeast, the potential for fraud, and the reported influx of arms to volatile areas are an explosive mix that could render parts of the country "ungovernable" and allow the threat posed by Boko Haram to increase. He suggests that "there is no national consensus in Nigeria on how to deal with this [Boko Haram] insurgency, and no one seems prepared to confront it as the national crisis it is. Instead the matter has become deeply politicized, as competing regional factions accuse each other of active complicity with the terrorists." By many accounts, U.S. government leverage with the Nigerian government is limited. Anxiety will remain high as the elections approach. Some experts caution that Nigerians and the international community must prepare for a "less than perfect outcome." The prospect of another election delay would likely be unacceptable not only to the opposition, but to Nigeria's international donors. A possible outcome in which Jonathan, with the advantage of incumbency, wins a narrow victory based in part on high turnout in his southern Niger Delta stronghold, and in which significant numbers of voters in the northeast are unable to vote, may be difficult for some opposition supporters to accept. Some opposition politicians have threatened to form a parallel government if they view the polls as rigged. If suggestions that the election campaign has been a distraction from counterinsurgency efforts are valid, a post-election scenario of unrest could draw further attention and resources away from Nigeria's counterterrorism response. Without genuine Nigerian cooperation, efforts by neighboring countries and the broader international community to intensify their response to Boko Haram may have limited effect inside Nigeria, where the group's impact is the greatest.

In early February, the Nigerian government controversially delayed its scheduled elections by six weeks, to March 28, based on security concerns, drawing criticism from the political opposition and the Obama Administration, among others. The delay has heightened concerns about tensions around the polls and raised questions about alleged political interference in the electoral process. Two weeks prior to the delay, in late January, Secretary of State John Kerry traveled to Nigeria to stress U.S. views about the importance of the elections, and to extend condolences to the families of victims of recent attacks by the violent extremist group Boko Haram. Kerry reiterated a U.S. commitment to support counterterrorism efforts in Nigeria, a topic of particular congressional interest in the past year. His visit highlighted the extent of U.S. concern with current political and security challenges facing Nigeria, which is Africa's most populous country and largest economy, and which routinely ranks among the top African recipients of U.S. bilateral foreign aid. The potential for violence around the upcoming elections is high, given a close presidential race and widespread frustration in northern Nigeria with the government's performance. Incumbent President Goodluck Jonathan faces a serious challenge from an opposition coalition that appears to have extensive support in the north, and which also seeks to draw support away from the ruling party in central and southern states. Pre-election assessments in January had raised concerns about the status of election preparations, but previous calls for a delay had been dismissed by the election commission. The opposition had raised concerns that hundreds of thousands of Nigerians from the northeast states most affected by Boko Haram might be unable to vote, but had pressed for the elections to be held on schedule. Observers have cautioned that violent protests could follow if the polls are not viewed as credible—allegations of fraud and rigging have plagued past elections, and opinion polls indicated that public confidence in the electoral process is low. These political tensions, overlaid atop simmering communal and ethno-religious violence in parts of Nigeria, and alongside Boko Haram efforts to foment further instability, have raised concerns about the country's trajectory in the coming months. Nigeria also faces mounting economic pressures, and the government is struggling to balance competing budget demands amid a sharp drop in the global price of oil, a primary source of foreign exchange and government revenue. Since attracting international headlines with the kidnapping of some 270 schoolgirls in April 2014, Boko Haram has commenced a territorial offensive in the northeast that Nigerian security forces have struggled to reverse. Boko Haram's attacks are not limited to the northeast, and the group is increasingly active in neighboring countries. By some estimates, more than 5,500 people were killed by the group in 2014, making Boko Haram one of the world's deadliest terrorist groups. Boko Haram raids and bombings in early 2015 have claimed hundreds of lives. Boko Haram's actions have attracted increasing attention from Members of Congress, and the 2014 abductions and other attacks have spurred calls for new efforts to counter the group in various hearings, statements, and legislation, including H.Res. 46, H.Res. 53, and S.Res. 65 in the 114th Congress. The group's March 7 pledge of allegiance to the Islamic State is likely to elicit concern. The Obama Administration seeks to support a regional strategy to counter Boko Haram, amid apparent strains in the bilateral relationship over Nigeria's counterterrorism approach and its effectiveness. Nigeria and its neighbors have repeatedly committed to forming a joint force to fight Boko Haram, but cooperation among the countries has been limited. Signs of improved coordination among the neighbors—Cameroon, Chad, and Niger—may offer opportunities for the United States and other donors to enhance regional containment of the threat.

A permanent cease-fire agreement between the Angolan government and its long-time military adversary, the National Union for the Total Independence of Angola (UNITA) was signed on April 4, 2002. It provides for the demobilization of UNITA forces and for their integration into a unified national military, in accordance with the Lusaka Protocol, an abortive peace accord. A new law provides UNITA forces with a general amnesty for wartime offenses. In mid-April, over 9,000 of about 55,000 UNITA troops had reported to demobilization areas. The cease-fire agreement was holding. Some logistical delays related to the supply of food, medicine, and other goods to the newly established cantonment were reported. The cease-fire accord followed the death of Jonas Savimbi, UNITA's founder and long-time leader. He was killed in a government ambush in February, 2002 in the eastern province of Moxico. The former Savimbi-led faction is led by General Paulo "Gato" Lukamba, the UNITA secretary-general and head of UNITA's Administrative Affairs commission. In mid-March, just prior to initial cease-fire talks, he issued a communiqué to UNITA fighters appointing an interim management commission, which he heads. Angola, a country of about 12.7 million people that is nearly twice the size of Texas, has vast oil reserves, diamonds and other minerals deposits, and rich agricultural potential. Most Angolans remain poor, however, due to a 25-year civil conflict that is estimated to have taken more than 1 million lives. A tripartite agreement among the three major liberation movements to form a transitional government collapsed just after Angola became independent of Portugal in 1975. Parties to the agreement included the Popular Liberation Movement of Angola (MPLA), the current ruling party; its armed rival, UNITA; and the National Front for the Liberation of Angola (FNLA), led until recently by Holden Roberto. Although all three groups sought national liberation and included members from across Angola, each drew the core of its support from different ethnic coalitions. UNITA has been dominated by the Ovimbundu ethnic group of central Angola, although it has also drawn support from the Chokwe, Luena, and Ovambo communities of eastern and southern Angola. The MPLA was originally predominantly a coalition between the Mbundu of northwest Angola, persons of mixed race, and urban dwellers. The FNLA drew much of its support from the northern Bakongo people and some rural Mbundu. A civil war began following the collapse of the agreement, as the MPLA, UNITA, the FNLA and other splinter groups fought one another for control of the government in Luanda, then – and since – held by the MPLA. In the 1970s and 1980s, the conflict was shaped by the Cold War. The Soviet Union and Cuba assisted the then-Marxist MPLA, which established a de facto one party state. The United States and South Africa aided UNITA and the FNLA. In 1985, Congress repealed a 1976 ban on covert aid to Angolan belligerents; in 1986 the Reagan Administration initiated covert military assistance to UNITA. In 1979, Eduardo dos Santos, Angola's current president and leader of the governing MPLA, succeeded Agostino Neto, the country's president at independence. Dos Santos, born in1942 in Luanda to a family of ethnic Mbundu origins, studied petroleum engineering in the Soviet Union at the Institute of Oil and Gas in Baku. Before becoming president, he had been minister of foreign affairs in Angola's first post-independence government, after serving as first deputy prime minister and minister of planning (1978-1979). Dos Santos oversaw a gradual liberalization of the MPLA's socialist political ideology during the late 1980s and early 1990s, and later supported a reorientation toward liberal, free market policies, as did many other African leaders. He has presided over the long-running civil war, and in recent years he appears to have taken closer control of its prosecution. In 1999, he abolished the post of prime minister and created a highly autonomous Defense Ministry. The Dos Santos government has been labeled authoritarian by many observers because of its sometimes harsh repression of its domestic political opponents, and journalists – and for curtailing public expression and the opportunity for its citizens to change their government (see " Human Rights " section, below). The country's first and only national election was held in 1992; it ended in an aborted run-off election and a return to civil war. The government's fierce prosecution of the war against UNITA, in which thousands of young Angolans were impressed into military service, has also contributed to a hardline image of the government. In May 1991, UNITA and the dos Santos government signed a peace pact known as the Bicesse Accords, which provided for disarmament, the creation of a unified national army, and national multi-party elections. Multi-party competition was permitted under constitutional amendments ratified in April 1992. In September 1992, Angola held its first and only multi-party elections, in which 18 parties contested, and which were monitored by the United Nations (U.N.). Campaigning was reportedly tense, given the recentness of open conflict, and because the separatist Cabinda movement FLEC (see below) called for an electoral boycott. Over 75% of voters cast ballots. The MPLA won a parliamentary majority, but the presidential race resulted in the necessity of a run-off election. Neither dos Santos, with 49.6% of the vote, nor Savimbi, with 40%, won a required majority. UNITA officials alleged that the MPLA government had engaged in widespread election fraud, including the use of dummy ballots, stolen ballot boxes, and rigged counts, and asserted that the personal security of UNITA supporters was being violated by government supporters. In an atmosphere of increasing conflict across Angola, UNITA dismissed a U.N. finding that the election had been substantially free and fair and, asserting that the conditions for a fair run-off did not exist, rejected a run-off election, effectively abandoning the Bicesse Accord. It rearmed and rapidly took control of large areas. The MPLA, which had substantially demobilized, faced the increasing UNITA attacks with the help of armed civilians and police; it subsequently invested heavily to build its military capacity, and launched a broad offensive against UNITA. International pressure on UNITA to return to negotiations grew. In September 1993, the United Nations imposed an oil and arms embargo on UNITA. Peace talks subsequently ensued, culminating in the November 1994 Lusaka Protocol, which called for a renewed cease-fire, the re-validation of the Bicesse Accords; the disarmament and demobilization of UNITA; and UNITA's participation in a government of national reconciliation. A 7,000-member U.N. peacekeeping operation was deployed, but implementation of the Protocols was repeatedly delayed. A Government of Unity and National Reconciliation was installed in April 1997, but Savimbi refused to come to the capital, citing safety concerns, and low-level conflict continued. In the same year, the fall of the Mobutu government in the Democratic Republic of Congo (the DRC, then called Zaire) – a strong UNITA backer – and of the Lissouba government in the Republic of the Congo (also known as Congo-Brazzaville), deprived UNITA of rear supply bases, and of political and logistical channels for the arms and diamond transshipments. The U.N. Security Council enacted stronger sanctions against UNITA, including a flight and travel ban, in October 1997. The Protocols were never fully implemented, and a period of continuing insecurity characterized by sporadic conflict ensued; by mid-1998, armed clashes had become more frequent. In August 1998, UNITA was suspended from parliament. Full scale war did not resume until December 1998, when the MPLA government, angered by UNITA's failure to honor the Protocols, attacked UNITA strongholds in central Angola, causing the final collapse of the Protocols. UNITA managed to stall the offensive, and launched counterattacks, making significant territorial gains by mid-1999, including the seizure of much of diamond-rich eastern Angola. The U.N. targeted further sanctions against UNITA in April 2000. The U.N. has primarily blamed UNITA for its failure to implement the Lusaka Protocol. UNITA charged that the U.N. showed bias toward the government, and accused the government of violence against UNITA's supporters. The MPLA claimed many military successes in 1999-2000. In September 1999, the government captured key UNITA strongholds in the central towns of Bailundo and Andulo, although UNITA mounted a strong counter-offensive, and laid siege to several government-held cities. By July 2000, the government claimed control of over 90% of the country. In late 2000, the government undertook large scale operations along the Namibian border, in apparent military cooperation with Namibia, and later attacked UNITA in the east, near Zambia. UNITA also came under pressure as a result of the Angolan government's military presence in Congo-Brazzaville and the government's participation, as an armed ally of the DRC government, in the DRC war. The government conducted extensive military operations against UNITA in eastern Moxico Province, near Zambia in late 2001 and early 2002. It claimed to be routing Savimbi's forces, but some observers remained skeptical. Public comments by Angolan government officials had often predicted imminent military victory, but the conflict had endured. Despite the government's military successes and UNITA's reported loss of most of its conventional military capability, the group carried out many attacks across Angola throughout 2001 and into 2002. These included attacks near Luanda, the capital, which the government strongly countered. UNITA's attacks in 2001 and early 2002 were primarily guerrilla-style supply and harassment raids. In some, food and other provisions were seized, property destroyed, and vehicles burned. Civilian captives were reportedly taken by UNITA on multiple occasions, although UNITA has usually denied responsibility for such actions. Despite severe military pressure, UNITA appeared – based upon the high and continuing numbers of reported attacks by the group throughout 2001 and published analyses of the conflict – to possess a formidable, mobile guerrilla force and a national command-and-control network. Many observers saw the group as capable of waging an indefinite bush war, even though it had been unable to effectively occupy and control territory. UNITA was able to fund its operations by selling diamonds and obtaining arms, in violation of U.N. sanctions against it, U.N. reports state – albeit at a diminished level compared to earlier periods. In addition to its conflict with UNITA, the Angolan government has also faced sporadic armed attacks by factions of an armed rebel movement in Cabinda, the Front for the Liberation of the Enclave of Cabinda (FLEC). FLEC, which is splintered into several factions, advocates self-government for the people of Cabinda, a small, oil-rich Atlantic coast enclave of Angola that lies between the DRC and Congo-Brazzaville. Cabinda is the source of about 70% of Angola's oil. In early April 2002, FLEC accused the government of launching a widespread offensive against FLEC forces, and claims that following the April 4 cease-fire agreement, the Angolan government has increased its military presence in Cabinda. On April 18, FLEC accused the Angolan army of killing ten civilians in an attack on a village, a claim denied by the Angolan government, which has also denied increasing its military presence in the enclave. In June 1999, the parliament, whose term had been extended in 1996 for between two and four years, voted to postpone elections. Later in the year, the government announced that elections would take place in 2001, but later moved the date to 2002. President dos Santos announced to a meeting of the ruling MPLA party's central committee in August 2001 that the next elections would likely take place in late 2002 or in 2003. He asserted, however, that elections could not take place before people and goods could move freely throughout Angola, and internally war-displaced persons had been resettled. Defense Minister Kundi Paihama, was quoted on March 22 as saying that general elections would be held under U.N. supervision by 2003 "at the latest." Mr. dos Santos told the MPLA party leadership in late August 2001 that he would not run as a candidate in the next presidential election, and that he would leave in the hands of the MPLA the selection and "preparation" of its presidential candidate. Dos Santos is widely perceived to have designated no clear successor. The president's announced intention not to run has reportedly elicited scepticism among some opposition members and observers of Angolan politics, given the president's firm control of national politics and military affairs. Some see the move as a bid to unify a sometimes fractious party prior to elections, to bolster the rationale for an extended dos Santos presidency, and to defend against and draw out potential contenders within his party. Some observers believe that the president will be "persuaded" by MPLA supporters to return as its presidential candidate. Others believe he will step down, but will continue to exert strong influence over national affairs as a leadership power-broker. Mr. dos Santos has periodically been rumored to suffer ill-health, but many observers discount such assertions. In January 2001, dos Santos dismissed Angolan Armed Forces (FAA) Chief of Staff General João de Matos. De Matos had commanded the FAA since 1992, and had overseen many successful military operations against UNITA and commanded Angolan forces in the Republic of Congo and the Democratic Republic of the Congo (DRC). In late 2000, de Matos reportedly voiced doubts about the possibility of a military solution to the war and implied that a political settlement was necessary, raising speculation about policy differences with dos Santos. The latter had been seen as supporting a continued robust military campaign against UNITA. De Matos' business endeavors, particularly in the security and mining sectors, reportedly may also have placed him at odds with the president. De Matos has been seen as an effective leader and a possible MPLA challenger to dos Santos in upcoming presidential elections; he is said to be supported by a group of key MPLA members who are said to support internal reform of the MPLA and its political agenda. In addition to de Matos, possible presidential candidates reported in the press include parliamentary president Roberto de Almeida; minister of defense Kundi Paihama; interior minister Fernando da Piedade Dias "Nando" dos Santos; MPLA secretary-general João Lourenço; former prime minister Marcolino Moco; and former MPLA secretary-general Lopo do Nascimento. Until February 2002, prospects for elections and many analyses of Angola's political future had been premised on the assumption that Angola would continue to be afflicted by armed conflict or related instability. The death of UNITA leader Jonas Savimbi on February 22, 2002 however, radically altered Angola's political landscape and raised the possibility that an end to the conflict could be reached. Savimbi, 67, was killed following a government ambush of a UNITA military convoy in which he had been traveling toward the Zambian border near Lucusse, a small town in Angola's eastern Moxico Province, where he was later buried. His death followed intensive FAA counter-insurgency operations against UNITA that placed the group under severe military pressure in Moxico and elsewhere. The ambush resulted in the death of over 20 UNITA officials and followers, and the capture of one of Savimbi's four wives. Some UNITA officials were reportedly able to escape. About a week before Savimbi's death, the government had reportedly captured UNITA's deputy military commander, and a number of UNITA officers were captured or killed in late 2001 and early 2002 as a result of similar military operations. Government forces were reportedly able to locate Savimbi by tracking satellite telephone phone calls made by him and members of his party; reconnaissance drones and tracking dogs were also reportedly used. UNITA representatives, citing the possible involvement of foreign governments in Savimbi's death, have called for an international investigation into the circumstances of Mr. Savimbi's killing. Savimbi's death raised the prospect that subsequent UNITA leadership changes or internal realignments might lead to a cease-fire or negotiations to end the conflict. The Angolan government and some international observers had long attributed the continuation of Angola's conflict to Savimbi. They charged that he had abandoned the Lusaka Protocol and the electoral process, instead seeking political power by force of arms. Savimbi, for his part, attributed the continued conflict to belligerence by the MPLA government, which UNITA viewed as a corrupt dictatorship that refused to renegotiate the Lusaka Protocol, seen as defective by Savimbi. The impasse between the two parties meant that no attempt to bring peace to Angola had succeeded after the failure of the Protocols. In the days after Savimbi's death, the Angolan government urged UNITA forces to surrender and stated its willingness to take "decisive and rapid steps" to bring about a cease-fire. Such actions have been welcomed and strongly encouraged by the international community. The U.S. and Portuguese governments, the European Union, and U.N. Secretary-General Kofi Annan, among others, have called for a cease-fire. No details of efforts to bring about a cease-fire, such as a proposed schedule for de-escalation, were initially announced. During the same period, leaders of the armed wing of UNITA – who were said to be in the bush fleeing Angolan government forces, which initially continued the strong offensive that had led to the killing of Savimbi – maintained a public silence. UNITA parliamentarians in Luanda and UNITA spokesmen in Europe spoke on behalf of the movement. They welcomed the prospect of a cease-fire and further dialogue in support of such an outcome, but stated that a cease-fire offer would need to come from the government. UNITA indicated that it was not prepared to surrender militarily, and asserted that the Angolan government – despite its call for a cease-fire – was not truly interested in peace negotiations, and intended to continue its military offensive. Some initial assessments of the post-Savimbi conflict posited that UNITA would likely continue to pursue its military objectives in the short term, if only because communicating political decisions to UNITA fighters in the field may take time. Peace negotiations that began in mid-March 2002, however, appear to be producing movement toward peace. The leadership vacuum created by Savimbi's sudden departure created a succession crisis. Prior to his death, Savimbi had reportedly sought to ensure the primacy of his leadership by eliminating rivals within UNITA who might seek detente with the government, and many key UNITA leaders had been captured in late 2001 and early 2002. These circumstances and the weak military position of UNITA implied that UNITA might not be able to maintain the organizational cohesion necessary to continue its armed struggle, and appear to have created the basis for later cease-fire negotiations. The UNITA constitution reportedly calls for the UNITA vice-president to succeed Savimbi automatically, pending the election of a new leader by a UNITA congress. In conformity with this provision, the interim accession to the top leadership position by UNITA vice-president António Sebastião Dembo, 58, was announced in late February by UNITA representatives in Europe. The succession was complicated, however, after reports emerged that Dembo had died. The current de facto political leader of the former Savimbi-led wing of UNITA is General Paulo "Gato" Lukamba, the UNITA secretary-general and head of UNITA's Administrative Affairs commission Gato has a reputation as a military hawk, but recently is reported to have stated that "the phase of the armed struggle is over. Now we shall head towards the confrontation of political ideas." In mid-March, just prior to preliminary cease-fire talks, he issued a communiqué to UNITA fighters appointing an interim management commission, which he heads, to lead UNITA until the group's next congress. Gato, who held the third highest position within UNITA, is in his mid-40s, and is reported to have been in close contact with Savimbi just prior to his death. UNITA's External Mission, a group of members of UNITA's armed wing who reside outside of Angola, initially rejected the interim leadership commission, and claimed to be the sole legitimate representatives of UNITA. They asserted that UNITA leaders in Angola were government captives and were not free to speak openly. News reports in late March, however, indicated that the External Mission and a group of over 45 UNITA legislators in Luanda had each independently issued statements backing the "caretaker commission" formed by Gato. On March 13, 2002, the government announced that it had ordered the FAA to end offensive actions against UNITA prior to the initiation of talks between UNITA and the government. It also sought to prepare for a full cease-fire by initiating contacts between FAA field commanders and UNITA units across Angola, and announced plans to reintegrate UNITA soldiers into civilian life and to seek a Parliamentary grant of amnesty for all surrendering rebel fighters. It also repeated its intention to prepare for general elections, and stated that UNITA would be accepted as a legitimate political party following its disarmament, as per the Lusaka Protocol, which the government maintains UNITA must implement. The government's actions followed earlier efforts to end to the conflict. In November 2000, the government announced a broad amnesty for UNITA fighters who agreed to surrender, and in January 2001, it established a Fund for Peace and Reconciliation to assist demobilized fighters. The government claimed that several thousand UNITA fighters subsequently defected, and indicated that it might consider negotiations with UNITA. Toward this end, a 22-member parliamentary commission on prospects for peace was created in April 2001. In October 2001, the government hosted representatives of the troika that had overseen the signing of the Lusaka Protocol – the United States, Russia, and Portugal – in an effort to resume the search for peace. In December 2001, the United Nations announced a government-approved U.N. initiative to seek contacts with UNITA. On March 15, 2002, a Angolan military delegation headed by Angolan armed forces Deputy Chief of Staff General Geraldo Sachipengo Nunda held a first round of cease-fire talks with a UNITA delegation headed by UNITA chief of staff General Geraldo Abreu Muhengu Ukwachitembo "Kamorteiro." The government press agency, ANGOP, published a joint statement by the two delegations, which met in Cassamba town in Moxico Province, indicating that they had agreed to work toward a permanent end to hostilities and under the abortive Lusaka Protocol. Kamorteiro was reported to have been hospitalized due to a pre-existing health condition following the talks. Further talks were held in late March, and initial contacts between FAA and UNITA commanders at the provincial level were initiated. Limited UNITA troops movements and several attacks attributed to UNITA followed the initiation of the truce talks, but the level of hostilities decreased dramatically as the talks continued. Members of UNITA's External Mission initially voiced skepticism about the talks. They asserted that several members of the UNITA delegation had been captured by government forces, and were likely participating under duress. They labeled the initial truce talks a "farce," but later accepted the talks as legitimate after communicating with Gato. The government denied that the UNITA delegates were under detention or participating under duress, but the circumstances surrounding talks are unclear. The Angolan government has informed the U.N. that the talks are "part of a military exercise." No outside mediators or observers were initially present at the talks, and news of the negotiations was limited to summaries published by Angolan state media. UNITA appeared to be negotiating from a position of weakness, and the government played a dominant role in shaping the agenda for the talks. The government announced that the FAA was "in charge of the logistics and all technical arrangements for the holding of the talks, including the transportation of the UNITA forces." The government's strong hand was also signaled by an Angolan state television broadcast of a March 22 meeting between the FAA deputy chief and Gato at an unspecified UNITA base in northeast Angola. The talks reportedly focused on military issues only. Issues reportedly discussed included the siting of assembly points for disarming UNITA forces, and protocols for the demobilization of UNITA fighters and for their later integration into a unified national army. On April 4, 2002, a formal cease-fire agreement was signed by the Angolan government and UNITA. It followed the unanimous approval by the Angolan parliament on April 2 of a general amnesty for former UNITA soldiers and "all civilians and soldiers, Angolan or foreign, who committed crimes against the security of the Angolan state." Present at the ceremony were the top UNITA leadership; President Jose Eduardo dos Santos; U.N. Undersecretary-General Ibrahim Gambari; representatives of the "troika" of observers to the Lusaka Protocol (Portugal, the United States and Russia); and regional leaders. The full terms of the cease-fire have not been published, but it reportedly includes a pledge by the former adversaries to abide by the terms of the Lusaka Protocol; provides for the demobilization of approximately 50,000 UNITA soldiers and their families; for their reintegration into society over the next four to nine months; and for the integration of many former UNITA fighters into the Angolan army and police. The two sides will hold additional discussions on further measures to extend the peace process. Demobilization at 27 regional centers, which will be monitored by the U.N., has begun. By mid-April, 2002, over 9,000 UNITA troops had reported to demobilization areas, and the cease-fire agreement was generally holding. Delivery of supplies to demobilization cantonment areas, however, was reportedly hampered by logistical delays. Although Gato appears to have garnered widespread support within UNITA, subsequent changes within the organization, including possible realignments with factions that had split with Savimbi in recent years, may bring new leaders to the fore. According to UNITA parliamentarian Jaka Jamba, deputy speaker of the Angolan national assembly, and news reports, key contenders – in addition to Gato – who may seek to lead UNITA include: Alcides Sakala, 44, UNITA Foreign Secretary, member of UNITA political commission, and close confidant of the late Savimbi. Sakala had reportedly lost some of his influence following the imposition of travel sanctions against UNITA, which have prevented Sakala from representing UNITA's cause overseas. Some news accounts report that he is ill. Isias Samakuva, UNITA's former top negotiator. He reportedly unofficially represents UNITA in France, where he resides. Geraldo Ukwachitembo "Kamorteiro" Abreu, late 40s, UNITA military Chief of Staff. Abreu Kamorteiro was reportedly close to Savimbi, but is said to lack independent political support within UNITA and, like Gato, may face dwindling support attributable to his hardline military stance. Kamorteiro represented UNITA during post-Savimbi cease-fire talks in mid-March 2002, and signed the April 4 ceasefire on behalf of UNITA. Celestino Mutuyakevela Kapapelo, a former UNITA parliamentarian, UNITA lawyer, and head of UNITA's Security Affairs commission. He is seen as playing a key role in the interpretation and application of rules governing the succession process. Abel Chivukuvuku, 44, a leading UNITA parliamentarian. Chivukuvuku is a former key Savimbi advisor and UNITA ideologue, and leader of a UNITA faction in Luanda that had distanced itself from Savimbi but is not part of UNITA-Renovada. A potential reunification of the disparate factions of UNITA has been raised repeatedly by observers and members of UNITA-R following Savimbi's death. Another issue facing UNITA is the possible reunification of the Gato-led wing with two or more UNITA splinter factions; reunification could make UNITA a strong electoral contender against the ruling MPLA. UNITA-Renovada (UNITA-Renewal or UNITA-R) is a dissident branch of the party that was formed in September 1998 following considerable government pressure on UNITA leaders in Luanda to speak out against Savimbi. UNITA-R, headed by Eugenio Manuvakola, was recognized by the government as "the only valid interlocutor for the continuation of the implementation of the Lusaka Protocol, which it accepts and pledges to respect." The formation of UNITA-R appears to have been the result both of intra-UNITA leadership rivalries and of the government's desire to isolate and sideline Savimbi, and seek alternatives to his leadership. Savimbi's UNITA rejected the splinter group, and rival UNITA parliamentarian Abel Chivukuvuku was elected chairman of the UNITA parliamentary group in Luanda in October 1998. Several UNITA members of parliament, most prominently Chivukuvuku, have since remained independent of both the UNITA-Renovada faction and UNITA's armed wing. Despite the emergence of a more diverse UNITA, Savimbi, as leader of the armed wing, remained crucial to any future peace settlement. On March 15, 2002 Luanda-based UNITA-Renovada leader Eugenio Manuvakola called for an all-UNITA congress in order to reunite the armed and Luanda-based factions of the party. On April 5, Gato and Manuvakola reportedly held a "courtesy meeting" to discuss reunification of their two factions, but Manuvakola was later quoted as saying that he rejected a "mechanical reunification" with the faction of Gato, who he called "dictatorial" and "irascible, arrogant and violent." Gato was quoted as calling the reunification of the two factions "a "minor problem," and asserted that "there were never two UNITAs, only a single one; that of Jonas Savimbi." The United Nations has supported past peace initiatives with verification and observer missions. The mission of the U.N. Angola Verification Mission (UNAVEM I) verified the redeployment and phased withdrawal from Angola of Cuban troops that had assisted the government in its military efforts. The withdrawal was completed in late May 1991. UNAVEM II (May 1991 to February 1995) was established by the U.N. Security Council (UNSC) to monitor a cease-fire and police activities under the Bicesse Accords. It was later charged with observing and verifying the 1992 presidential and legislative elections in Angola. After renewed fighting in October 1992 the UNAVEM II mandate was altered to allow the mission to assist the two sides to agree on modalities for finalizing the peace process and to broker related national or local cease-fire agreements. After the signing of the Lusaka Protocol in November 1994, UNAVEM II was charged with verifying the first stages of the peace agreement. It was superceded by UNAVEM III in February 1995, which was to monitor and verify the implementation of the Lusaka Protocol. In June 1997 UNAVEM III was replaced by the U.N. Observer Mission in Angola (MONUA), which was given an enlarged, multi-sectoral mandate. Its political unit monitored the implementation of the Lusaka agreements and the normalization of state administration across Angola, and monitored UNITA's integration into these institutions. It also assisted with confidence-building and the mediation of conflicts arising from these activities. A police affairs unit assisted with police-related aspects of political normalization and post-conflict integration; verified police neutrality; promoted security, freedom of movement and association; and monitored the disarmament of civilians. A human rights unit investigated human rights abuses, and promoted the observation of human rights and the development of national human rights education and monitoring capacities. A military unit monitored cease-fire compliance, demobilization, and the integration of UNITA into the FAA. A U.N. organization, the Humanitarian Assistance Coordination Unit, supported the demobilization and social reintegration of UNITA ex-combatants, monitored humanitarian needs, and acted as a coordination unit for the delivery of humanitarian assistance. The security situation deteriorated sharply in 1998, leading to a resumption of full scale war, and in February 1999 the mission was terminated. In October 1999, the UNSC established the U.N. Office in Angola (UNOA) to liaise with the political, military, police and other authorities in Angola. UNOA was mandated with exploring possible measures for restoring peace; assisting in institutional capacity building; the delivery of humanitarian assistance; the promotion of human rights; and related coordination activities. In order to compel UNITA to comply with peace accords that it had signed during the Lusaka peace process, existing U.N. sanctions on UNITA were strengthened in June 1998. The earlier sanctions had included an arms and fuel embargo on UNITA; restrictions on UNITA travel; bans on the delivery to UNITA of flight services, aircraft, and equipment; and restrictions on UNITA's overseas representational activities. The added sanctions included the freezing of UNITA assets abroad; restrictions on official contacts with UNITA in Angola; a ban on diamond exports from Angola not authorized by the Angolan government; and a ban on the provision to UNITA of mining equipment and services, and of water and road vehicles and spare parts. In May 1999, the U.N. Security Council created a panel of experts to trace violations of sanctions on arms trafficking, oil supplies and the diamond trade, and the movement of UNITA funds. In April 2000, the Security Council adopted resolution 1295 (2000); it tightened existing sanctions, created a new monitoring mechanism, and established a process by which the Security Council would consider actions to be taken against states suspected of violating the sanctions. In late 2001, the U.N. initiated efforts to establish contacts with Savimbi's UNITA wing in an attempt to restart peace negotiations to end what many observers had concluded was a militarily unwinnable war. The U.N. Security Council met in late March 2002, following the start of cease-fire talks, to discuss recent developments and decide further steps to be taken by the U.N. It dispatched Ibrahim Gambari, Secretary-General Kofi Annan's Adviser for Special Assignments in Africa, to Angola to monitor the cease-fire negotiations and related developments. During his two week trip, Mr. Gambari reportedly urged the disparate factions of UNITA to unite in order to ensure a smooth transition to peace. In response to substantial progress toward peace following the death of Savimbi, the Security Council had reportedly been considering a gradual repeal of sanctions against UNITA. On April 18, however, the Security Council determined that "the situation in Angola continues to constitute a threat to international peace and security in the region." It passed Resolution 1404, which, while welcoming the April 4 cease-fire agreement, extended by six months the mandate of the U.N. UNITA sanctions monitoring mechanism. The Security Council also restated its concern about humanitarian conditions in Angola. On April 17, the U.N. Office for the Coordination of Humanitarian Affairs (OCHA) announced that U.N. humanitarian agencies were initiating a survey of humanitarian conditions in Angola in areas of the country that have long been inaccessible to relief agencies due to insecurity and logistical constraints. The survey findings, expected to be completed by late May, will be used to prioritize emergency relief delivery and to determine the roles and responsibilities of the government, non-governmental organizations (NGOs), and U.N. agencies in responding to humanitarian needs. U.N. agencies participating in the survey include the World Food Program (WFP); the U.N. Children's Fund (UNICEF); the Food and Agriculture Organization (FAO); the U.N. High Commissioner for Refugees (UNHCR); the U.N. Development Program (UNDP); and the World Health Organization (WHO). According to the U.S. Department of State and human rights advocacy groups, human rights in Angola are abused frequently by both government security forces and UNITA. Many abuses are related directly or indirectly to the war, and to police corruption. Social violence and gender inequality, including violence and discrimination against women, adult and child forced labor, and prostitution, were common problems. Labor issues are dominated by the government, and labor unions and worker rights were constrained. The government also repressed freedoms of expression, of assembly, and of association and movement, according to the State Department, news accounts, and human and civil rights monitoring reports by private voluntary organizations. In 2000, some observers, including the U.S. State Department and the Committee to Protect Journalists, saw moderate improvements in some areas. Examples included fewer detainments of journalists, limited toleration of some peaceful public protests and public forums on such issues as conflict resolution, prospects for elections, and poverty in Angola. Increasing international and domestic political pressure and the general goal of ending the civil war appear to be gradually prompting the government to allow a more open and tolerant political environment to develop. Churches, opposition parliamentarians, some MPLA moderates, journalists, national civil society groups, and foreign humanitarian organizations have placed increasing pressure on the government to ensure increased transparency and public accountability; to consider signing a cease-fire agreement with UNITA; and to engage in new peace negotiations. A petition advocating such a position was circulated after a March 2001 conference on peace and reform. The Inter-Ecclesiastical Committee for Peace in Angola (COIEPA) has been especially active in seeking civil society-based solutions to the conflict. In June 2000 and on other occasions since, thousands of citizens have marched for peace in Luanda. In July 2000, religious leaders called for a cease-fire and negotiations to end the war. The state appears unwilling or unable to simply coercively suppress these growing voices. Estimates of Angola's total annual gross domestic product (GDP) vary widely; the World Bank placed it at $8.8 billion in current dollars for 2000, and estimated annual Gross National Income per capita at $240 for the same year. The Economist Intelligence Unit (EIU) cited GDP figures of $4 billion for 2000 and $4.1 billion for 2001. The Central Intelligence Agency estimated GDP for 2000 at $10.1 billion using the purchasing power parity method (calculations that account for exchange rate changes and the purchasing power of local currency), and estimated exports at $7.8 billion for 2000. Humanitarian conditions are grim. According to U.N. estimates, about 3.1 million Angolans – about a quarter of the population – have been displaced since the collapse of the Lusaka peace agreement in 1998. Insecurity is widespread, meaning that the majority of rural people, 85% of whom are subsistence producers, cannot tend to food crops, and face destitution. Severe hunger, even near the capital, reportedly increased in 2001, and land mines are widespread. The U.N. has reported moderate amelioration of socio-economic conditions in some areas, but displacements elsewhere continue. High inflation, at 268% by December 2000, down from 437% in May 2000, fell to 80.23% during the first ten months of 2001; the annual average for 2001 was estimated by the EIU to be 115%. Accurate evaluations of the Angolan government's budget are difficult to produce, due to recent changes in the national accounts system, and a history of off-the-books spending. In July 2000, the World Bank authorized a credit of $33 million to enhance social programs and poverty reduction. Several World Bank affiliates are active in Angola. Oil production, which accounts for over 40% of Angola's GDP and an estimated 85% of state revenues (see Table 1 ), is the engine of the Angolan economy, but it is not well integrated with other economic sectors. Angola's known oil reserves are large (between 5.4 and 7 billion barrels of proven oil reserves, and possibly as many as 12 billion according to one estimate), but much of it is located in deep-water, making extraction costs high. Exxon holds rights to a recently confirmed, large oil field known as Block 15, one among several recent discoveries. Chevron, TotalFinaElf, and Texaco, ExxonMobil, and BP are among of the largest foreign investors in Angola. Some analysts claim that state oil revenues are a source of large black-budget spending and extensive corruption. Non-governmental organizations, such as Global Witness, have pressured oil companies to maintain transparency in their dealings with the Angolan government. In February 2001, the oil firm BP reportedly announced it would disclose the financial terms of certain of its dealings with the government. The latter was reportedly displeased by the action, and reproached the firm in a sharply worded letter that warned that BP's production sharing agreements with Angola would be subject to possible termination if the terms of the firm's agreements with Angola were revealed. Diamonds are another key Angolan export. While much less valuable than Angola's oil production, diamonds are believed to have played an important role in government financing of the war. For UNITA they have played a crucial role in financing that organization's military and logistical operations. Diamonds are found throughout Angola, but are notably abundant in the northeast of the country, in Lunda Norte and Lunda Sul provinces. Angolan diamonds are primarily gem-quality; the proportion of industrial grade diamonds has comprised between 10 and 15% of total diamond production in recent years, with the balance made up of near-gem and gem quality stones. Total production for 2000 has been estimated at just over $740 million, up from estimated 1999 production totals of between $400 million and $618 million. The volume of production may be higher than these figures indicate because extensive smuggling of Angolan diamonds takes place. In order to comply with U.N. Resolution 1173, the Angolan government has instituted a diamond marketing and certificate of origin system designed to allow the government to guarantee that UNITA diamonds do not enter into officially-sanctioned export channels; to cut off sources of funding for UNITA; to deter diamond smuggling; and to increase government tax revenues. Under the system, the majority of Angolan diamonds are sold through a single company, the Angola Selling Corporation (Ascorp), a joint venture between Sodiam UEE, a company owned by the Angolan government and two private foreign investors. The U.N. Monitoring Mechanism on Sanctions against UNITA, which monitors the effectiveness of the implementation of Angola-related U.N. sanctions, reports that between $1 million and $1.2 million worth of diamonds are illegally exported from Angola each day. Illicit exports are estimated to total between $350 million to $420 million annually. The Mechanism attributed an estimate of between 25% and 30% of such trade to UNITA; the balance exits the country through a wide variety of channels. In April 2000, Angola and the International Monetary Fund (IMF) signed a nine-month Staff Monitored Program (SMP), which technically expired in June 2001. The arrangement was later extended in the form of Article IV consultations. The agreement provided for external monitoring of the Angolan economy by the IMF and a contracting firm of the state budget, central bank, and Sonangol, the state oil firm. It also included a special oil revenue audit, dubbed an "Oil Diagnostic," the purpose of which was "to assist the Government in increasing transparency with respect to the revenues from petroleum production and building managerial capacity for monitoring and forecasting the amount and flows of those revenues." The monitoring program obligated the government to implement economic reforms – including transparency, higher social spending, reduced extra-budgetary spending, and increased privatization of state firms – prior to possible consideration of a formal loan agreement and rescheduling of Angola's approximate $10.38 billion debt. Implementation of the monitoring agreement was reportedly uneven, and in February 2002, the IMF announced that it would not sign onto an economic program to be monitored by Fund staff, thus paving the way for IMF loans to Angola. The IMF found that: [d]espite a massive increase in oil and diamond-related income over the past three years, Angola continues to face pressing economic and social problems. ... The budgetary situation appears to have deteriorated further during the last quarter of 2001 and in early 2002, when the government used almost all of its deposits at the central bank, and the bank itself lost about half of its foreign exchange reserves. The IMF noted that in discussions with the Angolan government leading up to the decision not to pursue a full-fledged lending program, and in relation to the transparency of government operations, key IMF concerns: centered on the need to identify and eliminate or include in the treasury account all extra-budgetary and quasi-fiscal expenditures; record and transfer to the treasury all revenues, including the total amount of signature oil bonuses; ensure that all foreign currency receipts and government revenues, including Sonangol receipts, are channeled through the central bank as mandated by the law; eliminate all subsidy and tax arrears to and from Sonangol; publish data on oil and other government revenues and expenditures, as well as on external debt; and conduct independent financial audits of the 2001 accounts of Sonangol and of the central bank. President Dos Santos reportedly told a Voice of America interviewer that the "policing" of the Angolan economy by the IMF is not acceptable to the government. He is said to have charged that the IMF had acted "incorrectly" in its relationship with Angola. He also rejected charges of widespread corruption in the country and criticized the IMF for focusing its attention on loans made against future national oil production. He reportedly emphasized that such loans were controlled by Angola – acting as sovereign state that controls its own finances – and not the IMF. Dos Santos also reportedly cancelled scheduled meetings with the IMF and World Bank, a move that may indicate deteriorating relations with the two institutions. According to the U.S. State Department, in 2000, 40% of the national budget, equivalent to 22% of Gross Domestic product, was spent on defense. This proportion appears to be changing, as the government seeks to create the conditions for a transition to peace. In mid-December 2001, Angola's parliament approved a 2002 national "transition" budget of $5.8 billion, of which 68% will be funded by oil revenues. The budget allocates 11% to defense, security and public order; education and health receive36% and 28% respectively , and 21% percent will go to social security and welfare; 10% goes to housing and public works, including energy and water supplies, and 5% supports cultural projects. Control of the state's oil and diamond wealth, and of political power, is reportedly highly concentrated within the presidency, the cabinet of ministers, and a small military and business elite with close ties to the government, while the vast majority of the population lives in penury. The concentration of wealth and power, according to numerous allegations by critics and analysts, both results from and has helped engender an extensive culture of large-scale corruption within the national leadership, as well as widespread petty corruption within society at large. The leadership's wealth is said to be derived from portions of the revenues from the sale of national oil reserves, oil extraction rights, the sale of diamonds, lucrative weapons deals, and control of state corporations and regulatory agencies. Leaders in control of state institutions and attendant access to public sector assets, legal powers, and services support, in turn, a subsidiary network of political clients. State workers, businessmen, commercial licensees, professionals, family members, and others depend on the top leadership for jobs, income, contracts, or freedom to operate various enterprises, according to at least one scholar. The effect is the creation of a top-down, tiered system of patronage and a network of mutual interest and economic inter-dependence that critics say accumulates national wealth at the expense of the broader public. The presidency, known as the Futungo de Belas – the White House of Angola – reportedly exerts political influence through the Eduardo dos Santos Foundation (FESA, after its Portuguese acronym), in addition to controlling political patronage networks that operate through state institutions of government. The expenditure of large portions of Angola's oil revenues is alleged to regularly take place off-budget. In the process, large sums are believed to be misappropriated by well-connected officials. Examples of transactions that are allegedly subject to manipulation include the payment of signature bonuses (advance payments associated with the right to bid on contracts), operations licensing fees, loans that use future oil production as collateral, and spot sales of oil outside of regular contractual arrangements. Critics assert that national security concerns associated with the long-running war have provided both a rationale and political cover for a lack of governmental accountability and transparency in relation to national accounts, and associated corruption. The nature of Angola's oil assets have also insulated the oil economy and its proceeds from both the war and from the oversight and influences of civil society and political opposition. Reserves are primarily found off-shore, foreign firms undertake the majority of extractive operations, and oil sector contracts are controlled and allocated by MPLA-controlled institutions of government, leaving little scope for local Angolan policy or business participation within the oil sector. In recent years revenue has reportedly been used to fund debt repayment, military expenses, and the country's extensive network of patron-client relationships. Smaller proportions have generally been allocated to economic development, social services, and reconstruction of infrastructure destroyed by the war, although the most recent budgets reportedly include increased funding for these areas. The Angolan government has repeatedly and vigorously rejected charges that it is corrupt. It recently accused its critics of ignoring "the courageous reforms, including measures to ensure transparency, that the government has introduced under extremely adverse conditions." It has focused much of its criticism on the NGO Global Witness, which has produced numerous documents that describe in detail alleged patterns of oil-related state corruption, some in cooperation with foreign firms, in Angola. The government has called Global Witness's most recent report "bogus research " that is part of an "insidious campaign" designed "to befuddle the Angolan and the international public, and slander the government of Angola." The report, it asserted, "amounts to nothing more than conjectures about the production and marketing of Angolan oil, and the acquisition of resources for the defence of the country, to which any sovereign state is entitled." The government has also recently repeated previous denials of assertions by critics that it had been party to corrupt oil-based weapons deals with politically-connected weapons brokers and financiers, labeling them "groundless."It stated that the government had not entered into deals with French companies for the acquisition of war materiel, and denied that such materiel has ever been acquired through France. To bolster its denials of corruption, the government cites its implementation of a range of transparency and accountability-enhancing measures. Such measures, the government asserts, include the external auditing of the National Bank of Angola's accounts; the diagnosis of the petroleum sector by an international company selected by means of a World Bank-supervised tender; the external auditing of the accounts of Sonangol [the National Angolan Fuel Company], Endiama [Angola National Diamond Enterprise] and affiliates; and the establishment of an Audit Court. Such measures reflect a firm commitment of the Angolan authorities to the best forms of good governance, and the unwavering political will to create in Angola a new era of transparency, governance, and political accountability by state officials and agents. In April 2002, the government also announced the opening of a tax office that will monitor and combat tax evasion, reform public finances, and serve as a best practices model and training school for tax inspectors. It also points to the recent creation of the National Reconstruction Service, a civil institution being established to absorb demobilized government army and UNITA forces, whose labor will be used to clear land mines and repair roads, railways, and other infrastructure. On February 26, 2002, President Bush met at the White House with President dos Santos, together with the Presidents of Botswana and Mozambique. According to a White House release, Mr. Bush stated that: I urged President dos Santos to move quickly toward achieving a cease-fire in Angola. And we agreed that all parties have an obligation to seize this moment to end the war, and develop Angola's vast wealth to the benefit of the Angolan people. President dos Santos has it within his power to end 26 years of fighting by reaching out to all Angolans willing to lay down their arms. Angolans deserve no less. The United States has actively supported efforts to implement the Lusaka Protocol, to which the United States is an observer, and has provided significant humanitarian assistance to Angola (see Appendix ). In recent years, U.S. policy toward Angola has supported the government, and condemned UNITA's war effort, while at the same time backing political and economic reform. In early October 2001, the new U.S. Ambassador, Christopher William Dell, reiterated these positions, and vowed to work with government, churches, and civil organizations to build a strong democracy. In January 2002, Principal Deputy Assistant Secretary, William Bellamy, reportedly met with Angolan government officials and members of civil society during a visit to Angola that focused on strengthening U.S.-Angolan bilateral relations; assessing the status of current Angolan political and economic reforms; and prospects for peace in the context of the Lusaka Protocol. In late April 2001, President Bush reportedly sent a letter to President dos Santos urging that Angola implement transparent governance. U.S. Assistant Secretary of State for African Affairs Walter Kansteiner recently re-emphasized President Bush's call for increased transparency, according to an April 9, 2002 Reuters news report. Kansteiner was quoted as stating that: The whole international community wants to see Angola move to better economic policies including transparency... They [the Angolan government] need to out all of their revenue on budget. They have a fair amount of revenue that's off budget and that's problematic... You're not going to get economic change or growth if you lose, say, 25 percent of your revenue stream. Congress has long monitored developments in Angola. Congressional attention has focused primarily on conflict resolution and the amelioration of conflict-related humanitarian conditions in Angola and the surrounding sub-region. In the 1970s and 1980s, much debate focused on the delivery of covert aid and military assistance to Angola. In the 107 th and 106 th Congresses, the issue of conflict diamonds has drawn particular congressional attention. Angola, along with Sierra Leone and the Democratic Republic of Congo, has been the subject of several hearings and legislative proposals focusing on ways to end trade in diamonds that fund conflict. In March 2001, Rep. Alcee Hastings introduced H.Con.Res. 16 , which condemns the assassination of Congolese President Laurent Kabila and urges Angola, as a party to the Lusaka Peace Accord and as a foreign government involved in the Congolese conflict, to abide by the Accord and support a transition to peace and stability in the Democratic Republic of the Congo. In the 106 th Congress, Rep. Maxine Waters introduced H.Res. 390 , which called for Angolan and international efforts to end the Angolan conflict and to ensure the delivery of humanitarian assistance to alleviate human suffering in Angola. Officials of the State Department's Bureau of African Affairs have stated support for a relationship between the United States and Angola that is structured by U.S. investment in the Angolan oil industry; assurance of U.S. access to Angolan oil exports; and U.S. support for a resolution of the Angolan conflict. Angola has provided between 3.5% and 5% of U.S. oil supplies in most recent years; the proportion varies depending on fluctuations in world market prices and supplies, and according to whether volume or value is measured. The exposure of the Export-Import Bank (Ex-Im Bank) totaled over $141 million in FY 2001, down from over $150 million in FY 2000. The Overseas Private Investment Corporation (OPIC) has also offered political risk insurance and other financial backing to projects in Angola – notably a political risk insurance contract of up to $200 million in 1998. The United States has also supported World Bank and other multilateral projects in Angola. U.S. officials have expressed support for the efforts of U.S.-Africa business forums, such as the Corporate Council on Africa and the U.S.-Angolan Chamber of Commerce, an independent, non-profit organization of businesses that promotes bilateral trade and investment. The Chamber, formed in 1990, has over sixty-five corporations, associations, and individuals as members. To promote trade, investment and Angolan economic development, the Chamber sponsors trade missions to Angola, represents private sector views to both governments, hosts bi-lateral exchanges, and promotes trade and investment opportunities in both countries. During his February 2002 U.S. visit, President dos Santos addressed the Corporate Council on Africa and the United States-Angola Chamber of Commerce. He highlighted the role played by U.S. private sector investment in achieving economic growth in Angola, commended U.S. government efforts to help end the Angolan war, and stressed Angola's role as a growing supplier of oil to the United States. He observed that as a non-Organization of the Petroleum Exporting Countries (OPEC) oil exporter, Angola plays a role in contributing to U.S. energy security. He also called attention to U.S. investment in Angola's non-oil industries, in such areas as agriculture, fisheries and manufacturing, and financial services, and predicted that U.S. investment opportunities would rise as Angola undertakes anticipated post-war construction. Some observers maintain that U.S. Angola policy has tended to dis-proportionately focus on the maintenance of strong bilateral business ties. Such concerns, they contend, have forestalled or superseded more forceful U.S. advocacy of Angolan governmental and economic reforms, and greater equity in the distribution of income derived from Angola's national resources among its overwhelmingly poor population. U.S. policy makers contend, however, that the United States has advocated reform by, for example, pushing for the IMF to undertake the Oil Diagnostic, and they note that the United States has been among the leading donors of emergency assistance to Angola in recent years. U.S. assistance to Angola provides emergency and humanitarian relief to Angola's displaced and war-affected populations, and supports capacity building and service provision in the health, agricultural, and educational sectors. USAID health sector programming supports immunization efforts; malaria and HIV/AIDS prevention; maternal and child health; nutritional support and supplemental feeding; access to clean water and sanitation; and the provision of prosthetic devices for persons injured by land mines. USAID funds a range of efforts to strengthen civil society that focus on increasing participatory decision-making and enhancing the ability of civil organizations to communicate and organize, and to undertake public advocacy and education campaigns. It also supports private sector growth capacity-building projects; smallholder agriculture; and land tenure reform. U.S. assistance to Angola has also included support for the removal of land mines – totaling $9.34 million from FY 1997 through FY 2001 – and for international military education and training.

A permanent cease-fire agreement between the Angolan government and its long-time military adversary, the National Union for the Total Independence of Angola (UNITA) was signed on April 4, 2002. The accord provides for the demobilization of UNITA's forces, and for their integration into a unified national military. Under a separate law passed prior to ratification of the accord, UNITA's armed forces will receive a general amnesty for wartime offenses committed against the state and Angolan people. The agreement followed the death of Jonas Savimbi, the founder and long-time leader of UNITA, who was killed in a government ambush in February, 2002 in eastern Angola. Savimbi's death raised the prospect of possible realignments within the UNITA organization or of changes in its leadership. The current de facto political leader of the former Savimbi-led wing of UNITA is General Paulo "Gato" Lukamba, the UNITA secretary-general and head of UNITA's Administrative Affairs commission. Eduardo dos Santos, Angola's current President and leader of the ruling Popular Liberation Movement of Angola (MPLA), indicated in 2001 that he would step down prior to elections that may be held in late 2002 or in 2003. Dos Santos has designated no clear successor, and some analysts believe that he may yet stand as a presidential candidate. The Angolan government has been labeled authoritarian by many observers because of its sometimes harsh repression of domestic political opponents and journalists, and for curtailing public expression and the opportunity of its citizens to change their government. Angola has been engaged militarily in several neighboring countries in recent years. The country's first and only national election was held in 1992, following a peace accord between the government and UNITA; it ended in an aborted run-off election and a return to civil war. International pressure on UNITA to return to peace talks grew. In 1993, the United Nations (U.N.) imposed an oil and arms embargo on UNITA. Peace talks ensued, culminating in a renewed cease-fire agreement in accord with the Lusaka Protocol. A U.N. peacekeeping operation was deployed, but the Lusaka accord was never fully implemented. A period of instability ensued, and by late1998 Angola again faced full-scale civil war. The government attacked UNITA strongholds in central Angola. UNITA launched counterattacks; it had seized much territory by mid-1999, including many diamond-rich zones. The U.N. imposed further sanctions on UNITA. The MPLA claimed many military successes in 1999-2002, but UNITA carried out many attacks across Angola during the same period. UNITA was able to fund its operations by selling diamonds and obtaining arms, in violation of U.N. sanctions against it.

Budgets for the Department of State and the Broadcasting Board of Governors (BBG), as well as U.S. contributions to United Nations (U.N.) International Organizations, and U.N. Peacekeeping, are in the State, Foreign Operations Appropriations in both the House and Senate. Intertwined with the annual appropriations process is the biannual Foreign Relations Authorization that, by law, Congress must pass prior to the State Department's expenditure of its appropriations. The Administration sent its FY2008 budget request to Congress on February 5, 2007. The requested funding level for the Department of State is $10,013.8 million, representing a 10.5% increase over the FY2007 estimate, but a decline of 4.3% as compared with the FY2006 actual appropriation (the most recent enacted appropriation for the Department of State), including rescissions and supplementals. For international broadcasting, the FY2008 request of $668.2 million represents a 3.8% increase over the FY2007 estimate, but a 1.7% decline from the FY2006 level, including rescissions and supplementals. Along with the FY2008 budget request, the White House sent to Congress two supplemental funding requests—one for FY2007 amounting to $1,168 million for State and $10 million for international broadcasting; another for FY2008 amounting to $1,934.6 million for the Department of State. Both requests are primarily for U.S. operations in Iraq and Afghanistan. The House passed its supplemental emergency funding bill ( H.R. 1591 , H.Rept. 110-60 ) on March 23, 2007. It contains $1.3 billion for the Department of State's Iraq operations, security, exchanges and international peacekeeping and $10 million for international broadcasting. The Senate passed its version of H.R. 1591 ( S.Rept. 110-37 ) on March 29, 2007. The Senate bill includes $1.1 billion for State Department operations in Iraq, security, exchanges, international organizations and peacekeeping. Like the House bill, the Senate also provides $10 million for international broadcasting. The House and Senate passed the conference report ( H.Rept. 110-107 ) on April 25 th and 26 th , respectively. The President vetoed the supplemental on May 1 st . Congress was unable to override the veto. In February 2006, the President sent to Congress his FY2007 budget request totaling $9,502.4 million for State and $671.9 million for international broadcasting. A week after, he sent two FY2006 supplemental requests to Congress with more than $1,702 million for the Department of State and the Broadcasting Board of Governors. The 109 th Congress passed $1,737.7 million in supplemental funding for the Department of State and international broadcasting, but did not enact regular appropriations for State and the Broadcasting Board of Governors. The President signed the supplemental measure into law ( P.L. 109-234 ) on June 15, 2006. Rather than enact regular appropriations, the 109 th Congress passed a series of continuing resolutions (CR) with funding based on the lesser of either the FY2006 amount or the House-passed or Senate-passed FY2007 levels. The last CR extended funding through February 15, 2007. The 110 th Congress passed the FY2007 appropriation ( H.J.Res. 20 ) and it was signed into law ( P.L. 110-5 ) February 15, 2007. Table 1 provides regular and supplemental State Department and related agencies' appropriations for FY2005, FY2006 (including the FY2006 Emergency Supplemental), FY2007 estimates, and the FY2008 request. Both the FY2007 and FY2008 supplemental requests are included, as well. On January 18, 2006, Secretary of State Condoleezza Rice announced her vision for U.S. diplomacy in the 21 st Century. She said that, to match President Bush's bold mission of "supporting democracy around the world with the ultimate goal of ending tyranny in our world," the United States needs "an equally bold diplomacy that not only reports about the world as it is, but seeks to change the world itself." The Secretary referred to this as "transformational diplomacy." Specific aspects of Secretary Rice's Transformational Diplomacy include: Global repositioning—Beginning in FY2006 and continuing through FY2007, the Department of State has decided on more than 200 positions to be moved largely from Europe and Washington, DC, to critical areas in Africa, South Asia, East Asia, the Middle East and elsewhere in FY2007. Additional jobs will be targeted by the summer. Regional focus—The Department is creating regional public diplomacy centers in Europe and the Middle East, as well as regional centers for information technology to perform management support activities such as human resources or financial management. Localization—American Presence Posts (APP) will be operated by one diplomat working away from the embassy in key population centers of a country; Virtual Presence Posts (VPP) will provide an Internet site enabling millions of local citizens, particularly young people, to interact with embassy personnel. IT Centralization will provide the State Department workforce with real-time and cutting-edge information whether at their desks or traveling. Creative use of the Internet will enhance America's presence through the Internet interactive online discussions such as Café USA/Seoul. Plans for new skills challenges include enhanced training for technology and languages; multi-region expertise requiring diplomats to be experts in at least two regions and fluent in two languages; post assignments criteria that diplomats must serve in at least one of the more challenging posts; hands on practice for diplomats to be more involved in helping foreign citizens, promoting democracy, running programs, starting businesses, improving healthcare, and reforming education, and public diplomacy to be recognized as an important part of every diplomat's job. Empowerment of diplomats to work with other federal agencies—especially with the military. Within the Department of State's FY2008 budget, the Administration is requesting $124.8 million for Transformational Diplomacy. Included is $39.9 million for repositioning of jobs, $20.8 million for language, public diplomacy, and technology training, $34.5 million for Foreign Service modernization, and $15 million for public diplomacy. The FY2007 budget request included $102.8 million for Transformational Diplomacy. Currently, the U.S. Embassy in Iraq has over 1,000 American and locally engaged staff representing about 12 agencies. 156 U.S. direct hires and 155 locally engaged staff represent the Department of State (DOS) in the U.S. Mission. The bulk of the FY2007 and FY2008 supplemental requests would fund State Department operations in Iraq. Of a total FY2007 State Department appropriation supplemental request of $1,168 million, $823.9 million would fund U.S. operations, security, and mission in Iraq. Other supplemental funding would include $21.9 million for public diplomacy to combat violent extremism in Muslim populations and diplomacy efforts in the Sudan; $67.2 million for security upgrades in Afghanistan and Sudan; $35 million for the Special Inspector General for Iraq Reconstruction; $20 million for educational and cultural exchange programs to combat violent extremism; and $200 million for unforeseen U.N. international peacekeeping activities. Additionally, $71.5 million for migration and refugee assistance, and $30 million for emergency migration and refugee assistance are in the request. Also, the Administration is requesting $10 million for the Broadcasting Board of Governors to expand Arabic language broadcasting in 22 countries on Alhurra Television. The House passed its supplemental emergency funding bill ( H.R. 1591 , H.Rept. 110-60 ) on March 23, 2007. It contains $1.3 billion for the Department of States Iraq operations, security, exchanges and international peacekeeping and $10 million for international broadcasting. The Senate passed its version of H.R. 1591 ( S.Rept. 110-37 ) on March 29, 2007. The Senate bill includes $1.1 billion for State Department operations in Iraq, security, exchanges, international organizations and international peacekeeping. Like the House bill, the Senate bill also provides $10 million for international broadcasting. The House and Senate passed the conference report ( H.Rept. 110-107 ) on April 25 th and 26 th , respectively. The President vetoed the supplemental on May 1 st . Congress was unable to override the veto. (For more details on the FY2007 emergency supplemental, see CRS Report RL33900, FY2007 Supplemental Appropriations for Defense, Foreign Affairs, and Other Purposes , coordinated by [author name scrubbed].) Of the $1,934.6 million FY2008 emergency funding request, $1,881.6 million is for ongoing U.S. Mission operations in Iraq and $53 million would fund U.N. Assistance Missions in Afghanistan and in Iraq. In addition, $35 million is in the request for Migration and Refugee Assistance. Last year the Bush Administration requested an FY2006 Emergency Supplemental of $1,497 million within State's Diplomatic and Consular Programs budget account to cover Iraq operations and security. The House and Senate passed the emergency supplemental conference report ( H.R. 4939 . H.Rept. 109-494 ) in June 2006. The final measure included $1,529.4 million for D&CP in Iraq, $25.3 million for State's Inspector General, $5.0 million for exchanges in Iran, $178 million for U.N. peacekeeping, and $36.1 million for international broadcasting in Iran. The President signed the measure into law ( P.L. 109-234 ) on June 15, 2006. The State Department's mission is to advance and protect the worldwide interests of the United States and its citizens through the staffing of overseas missions, the conduct of U.S. foreign policy, the issuance of passports and visas, and other responsibilities. Currently, the State Department coordinates with the activities of 50 U.S. government agencies and organizations in operating more than 260 posts in over 180 countries around the world. Currently, the State Department employs approximately 30,000 people, about 60% of whom work overseas. Highlights follow. Diplomatic and Consular Programs (D&CP) —The D&CP account funds overseas operations (e.g., motor vehicles, local guards, telecommunications, medical), activities associated with conducting foreign policy, passport and visa applications, regional bureaus, under secretaries, and post assignment travel. Beginning in FY2000, the State Department's Diplomatic and Consular Program account included State's salaries and expenses, as well as the technology and information functions of the former USIA and the functions of the former ACDA. For D&CP's FY2008 budget, the Administration is requesting $4,942.7 million, 14.5% above the estimated FY2007 level, but a 13.2% decline from the FY2006 funding level of $5,692.3 million, reflecting rescissions and supplementals. Within the FY2008 request, $964.8 million is designated for worldwide security upgrades. The estimated FY2007 funding level is $4,314.0 million, of which more than $700 million is for supporting worldwide security upgrades. Embassy Security, Construction and Maintenance (ESCM) —This account supports the maintenance, rehabilitation, and replacement of overseas facilities to provide appropriate, safe, secure and functional facilities for U.S. diplomatic missions abroad. Early in 1998, Congress had enacted $640 million for this account for FY1999. However, following the embassy bombings in Africa in August 1998, Congress agreed to more than $1 billion (within a supplemental funding bill) for the Security and Maintenance account by establishing a new subaccount referred to as Worldwide Security Upgrades. The Administration request for FY2008 seeks $792.5 million for regular ESCM and $806.9 million for worldwide security upgrades, for a total account level of $1,599.4 million, a 7.4% increase over both the FY2007 and FY2006 ESCM total appropriations level of $1,489.7 million, reflecting rescissions. Educational and Cultural Exchanges —This account funds programs authorized by the Mutual Educational and Cultural Exchange Act of 1961, such as the Fulbright Academic Exchange Program, as well as leadership programs for foreign leaders and professionals. Government exchange programs came under close scrutiny in past years for being excessive in number and duplicative. After the September 11 th attacks, the Department of State began to emphasize public diplomacy activities in Arab and Muslim populations. The Bush Administration is requesting $486.4 million for exchanges in FY2008. This represents a 9.1% increase over the FY2007 estimate and a 12.8% increase over the FY2006 enacted level of $431.3 million. In addition, Congress, in the FY2006 appropriation, designated $329.7 million in the D&CP funds go for public diplomacy. The estimated FY2007 funding level for public diplomacy within D&CP is unclear at this time. The Capital Investment Fund (CIF) —CIF was established by the Foreign Relations Authorization Act of FY1994/95 ( P.L. 103-236 ) to provide for purchasing information technology and capital equipment which would ensure the efficient management, coordination, operation, and utilization of State's resources. The FY2008 budget request includes $70.7 million for CIF, which is 21.7% higher than both the enacted FY2006 and estimated FY2007 levels of $58.1 million. The request seeks no funding for the Centralized Information Technology Modernization Program which was funded in FY2006 at $68.5 million. In addition, the FY2006 conference report (H. Rept 109-272) stated that the conferees expect $116 million from expedited passport fee collections would be used for Technology Investments in FY2006. The Revised Continuing Appropriation Resolution, FY2007 ( P.L. 110-5 ) explicitly stated no funding would be provided for the Centralized Information Technology Modernization Program in FY2007. In recent years, U.S. contributions to the United Nations and its affiliated agencies (CIO) and peacekeeping operations (CIPA) have been affected by a number of issues. These have included the withholding of funds related to international family planning policies; issues related to implementation of the Iraq Oil for Food Program and the findings and recommendations of the Volcker Committee Inquiry into that program; alleged and actual findings of sexual exploitation and abuse by personnel in U.N. peacekeeping operations in the field and other misconduct by U.N. officials at U.N. headquarters in New York and at other U.N. headquarters venues; and efforts to develop, agree to, and bring about meaningful and comprehensive reform of the United Nations organization, in most of its aspects. Since 2004, congressional attention has often been directed to ways to ensure comprehensive U.N. reform, through legislative proposals fashioned after extensive hearings. Current legislative issues remaining include followup and oversight of reforms initiated by the United Nations membership in September 2005 and throughout its fall General Assembly session and the possibility of increasing the 25% legislative cap on U.S. contributions to U.N. peacekeeping assessments to 27.1%. (For more detail, see CRS Report RL33611, United Nations System Funding: Congressional Issues , by [author name scrubbed] and [author name scrubbed].) Contributions to International Organizations (CIO) —CIO provides funds for U.S. membership in numerous international organizations and for multilateral foreign policy activities that transcend bilateral issues, such as human rights. Maintaining a membership in international organizations, the Administration argues, benefits the United States by advancing U.S. interests and principles while sharing the costs with other countries. Payments to the U.N. and its affiliated agencies, the Inter-American Organizations, as well as other regional and international organizations, are included in this account. The President's FY2008 request totaling $1,354.4 million for this account represents a 17.6% increase over the estimated FY2007 level and the FY2006 enacted appropriation of $1,151.3 million. Contributions to International Peacekeeping Activities (CIPA) —The United States supports multilateral peacekeeping efforts around the world through payment of its share of the U.N. assessed peacekeeping budget. The President's FY2008 request totals $1,107.0 million. This represents nearly a 4% decline from the FY2006 actual funding level of $1,152.1 million and a smaller decline of 2.5% below the estimated FY2007 CIPA funding level of $1,135.3 million. The International Commissions account (although not in the 150 account but is in the State Department budget) includes the U.S.-Mexico Boundary and Water Commission, the International Fisheries Commissions, the International Boundary Commission, the International Joint Commission, and the Border Environment Cooperation Commission. The FY2008 request of $113.5 million represents a 100.8% increase over the FY2006 level of $66.5 million and a 99% increase over the estimated FY2007 level of $67 million. The increase is largely due to a water treatment project near San Diego, California. The Asia Foundation— The Asia Foundation is a private, nonprofit organization that supports efforts to strengthen democratic processes and institutions in Asia, open markets, and improve U.S.-Asian cooperation. The Foundation receives both government and private sector contributions. Government funds for the Asia Foundation are appropriated to, and pass through, the State Department. The Administration request for FY2008 is $10 million, the same as requested a year earlier, but 27.5% below the enacted FY2006 level of $13.8 million (with rescissions). The estimated funding level for FY2007 is $13.8 million for the Asia Foundation. The International Center for Middle Eastern-Western Dialogue Trust Fund —The conferees added language in the FY2004 conference agreement for the Consolidated Appropriations Act, FY2004 to establish a permanent trust fund for the International Center for Middle Eastern-Western Dialogue. The act provided $6.9 million for perpetual operations of the Center which is to be located in Istanbul, Turkey. Despite the fact that the Administration did not request any FY2005 funding for this Center, Congress provided $7.3 million for it in FY2005. The Administration requested spending $850,000 of interest and earnings from the Trust Fund for program funding in FY2006, but Congress set the appropriated level at $5 million. For FY2007, the Administration requested appropriation authority to spend $750,000 of interest and earnings from the Trust Fund to be used for programming activities and conferences at the Center. The FY2008 budget contains no request for the Trust and $875,000 for the program account. National Endowment for Democracy (NED) —The National Endowment for Democracy, a private nonprofit organization established during the Reagan Administration, supports programs to strengthen democratic institutions in more than 90 countries around the world. NED proponents assert that many of its accomplishments are possible because it is not a government agency. NED's critics claim that it duplicates U.S. government democracy programs and either could be eliminated or could operate entirely with private funding. The Administration's FY2008 budget request of $80 million for NED is the same as its FY2005, FY2006, and FY2007 requests. The FY2008 request represents an 8.1% increase over the enacted $74.0 million (after rescissions) for FY2006. In addition, however, the 109 th Congress created a Democracy Fund in the FY2006 Foreign Operations Appropriations ( P.L. 108-102 ) which provided an additional $15.25 million for NED that year. The estimated FY2007 funding level is estimated to be $74 million. East-West and North-South Centers —The Center for Cultural and Technical Interchange between East and West (East-West Center), located in Honolulu, Hawaii, was established in 1960 by Congress to promote understanding and cooperation among the governments and peoples of the Asia/Pacific region and the United States. The Center for Cultural and Technical interchange between North and South (North-South Center) is a national educational institution in Miami, FL, closely affiliated with the University of Miami. It promotes better relations, commerce, and understanding among the nations of North America, South America and the Caribbean. The North-South Center began receiving a direct subsidy from the federal government in 1991. The Administration's FY2008 request is for $10 million for the East-West Center, a decrease of 47.4% from the FY2006 funding level of $19.0 million (including rescissions), and no funds for the North-South Center. The FY2007 funding level is currently set at $19 million. The United States International Broadcasting Act of 1994 reorganized within USIA all U.S. government international broadcasting, including Voice of America (VOA), Broadcasting to Cuba, Radio Free Europe/Radio Liberty (RFE/RL), Radio Free Asia (RFA), and the Middle East Broadcasting Network. The 1994 Act established the Broadcasting Board of Governors (BBG) to oversee all U.S. government broadcasting; abolished the Board for International Broadcasting (BIB), the administering body of RFE/RL; and recommended that RFE/RL be privatized by December 31, 1999. This recommendation was repealed by P.L. 106-113 . During the reorganization debate in 1999, the 105 th Congress agreed that credibility of U.S. international broadcasting was crucial to its effectiveness as a public diplomacy tool. Therefore, Congress agreed not to merge broadcasting functions into the State Department, but to maintain the Broadcasting Board of Governors (BBG) as an independent agency as of October 1, 1999. For FY2008 international broadcasting activities the President is requesting $668.2 million, an increase of 3.8% over the FY2007 estimate of $644 million, but a decrease of 1.7% from the FY2006 enacted level of $679.6 million, including rescissions and supplementals. Of the $668.2 million request, $618.8 million would be for broadcasting operations, such as VOA, $10.7 million for Capital Improvements, and $38.7 million for Broadcasting to Cuba. The BBG is planning to eliminate several VOA services including Uzbek, Greek, and Cantonese as well as the RFE/RL Macedonia service. BBG also plans to reduce several others, such as VOA and RFE/RL service in Ukrainian, Tibetan, and Romanian. Reportedly, eleven former VOA directors are appealing to Congress to reverse the proposed Administration cuts. At the same time, BBG's FY2008 request would increase Middle East Broadcasting network funds by some $20 million. The State Department traditionally has had sole authority to issue visas overseas. The Homeland Security Act of 2002 ( H.R. 5005 / P.L. 107-296 , signed into law on November 25, 2002) now provides the Secretary of the Department of Homeland Security (DHS) with exclusive authority to: 1) issue regulations regarding administering and enforcing visa issuance, 2) impose upon any U.S. government employee, with consent of the head of his/her agency, any functions involved in visa issuance, 3) assign DHS employees to each overseas post where visas are issued, and 4) use the National Foreign Affairs Training Center to train DHS employees who will be involved in visa issuance. The act states that these authorities will be exercised through the Secretary of State. The Homeland Security Act of 2002 further provides the Secretary of State and consular officers with the authority to refuse visa applications. The act stipulates that within one year after the act is signed, the Secretary of DHS and the Secretary of State must report to Congress on implementation of visa issuance authorities and any proposals that are necessary to improve the activities surrounding visa issuance. Specifically regarding visa issuance in Saudi Arabia, the act stipulates that upon enactment of the act, the third party screening program in Saudi Arabia will terminate, but on-site personnel of the DHS shall review all visa applications prior to adjudication there. The Department of State has authority to use machine readable visa fees in its expenditures. In recent years funds amounted to $602.9 million for FY2004; for FY2005 it was $668.1 million; for FY2006 it was $772.8 million; for FY2007 the estimate is $747.6 million; and the request for FY2008 is $862 million. The fees are typically used for State Department border security programs, technology, and personnel.

State Department funding, formerly in the House Science, State, Justice, Commerce (SSJC) Appropriations Subcommittee, is now aligned in both the House and Senate Appropriations Subcommittees on State-Foreign Operations. In addition to passing annual appropriations, foreign relations authorization legislation is required authorizing the Department of State to spend its appropriations. The 110th Congress is expected also to work on foreign authorization legislation this year. The President sent his FY2008 budget to Congress on February 5, 2007. Included was the Department of State FY2008 budget request for $10,013.8 million—4.3% below the FY2006 level of $10,467.9 million, including rescissions and supplementals, but 10.5% above the FY2007 estimate of $8,964.1 million. The international broadcasting FY2008 budget request totals $668.2 million—a 1.7% decline from the FY2006 level, including rescissions and supplementals, but a 3.8% increase over the FY2007 estimate of $644 million. Along with the regular budget request, the Administration is requesting two emergency supplementals: an FY2007 supplemental request including $1,168 million for State and $10 million for international broadcasting and an FY2008 emergency funding request of $1,934.6 million for the Department of State. Both supplementals are largely for operations in Iraq and Afghanistan. In March, 2007, both the House and the Senate passed separate versions of the FY2007 supplemental funding (H.R. 1591, H. Rept 110-60 and S. Rept 110-37) including more than $1,168.0 million dollars for the Department of State operations and $10 million for international broadcasting. On April 25th and 26th, Congress passed H.R. 1591, including $1,265.2 million for State Dept operations in Iraq and $10.0 million for international broadcasting. The President vetoed the supplemental on May 1st. Congress was unable to override the veto. For FY2007, the President sent his budget request to Congress on February 6, 2006, seeking $9,502.4 million for the Department of State and $671.9 million for international broadcasting. The House passed its bill (H.R. 5672) on June 29, 2006. The Senate did not pass its bill (H.R. 5522). After several continuing resolutions, the 110th Congress enacted appropriations by passing the Revised Continuing Appropriations Resolution, FY2007 (H.J.Res. 20). It was signed into law (P.L. 110-5) on February 15, 2007. In January 2006, Secretary of State Rice presented her "Transformational Diplomacy" vision of the way the State Department will conduct foreign policy. Among other things, decisions have been made to reposition more than 200 jobs primarily from Europe and Washington, DC, to more challenging locations worldwide.

In the course of developing and executing a response to the September 11, 2001, terrorist attacks on the World Trade Center in New York City and the Pentagon in suburban Washington, DC, President George W. Bush set restrictive policy on the disclosure of related sensitive information to Congress. In an October 5 memorandum to the Secretaries of State, the Treasury, and Defense, the Attorney General, the Director of Central Intelligence, and the director of the Federal Bureau of Investigation, he indicated that "this Administration will continue to work to inform the leadership of the Congress about the course of, and important developments in, our critical military, intelligence, and law enforcement operations" while simultaneously honoring the "obligation to protect military operational security, intelligence sources and methods, and sensitive law enforcement investigations." Accordingly, your departments should adhere to the following procedures when providing briefings to the Congress relating to the information we have or the actions we plan to take: (i) Only you or officers expressly designated by you may brief Members of Congress regarding classified or sensitive law enforcement information; and (ii) The only Members of Congress whom you or your expressly designated officers may brief regarding classified or sensitive law enforcement information are the Speaker of the House, the House Minority Leader, the Senate Majority and Minority Leaders, and the Chairs and Ranking Members of the Intelligence Committees in the House and Senate. Released amidst allegations of congressional leaking and complaints that executive briefings for Congress had been inadequate, the new policy engendered almost universal opposition from the House and Senate membership. Five days after its prescription, the new policy was suspended, with an immediate effect being that members of the armed services committees and foreign affairs committees could be briefed by Pentagon and State Department leaders as they had been prior to the President's October 5 policy memorandum. Under the Constitution of the United States, the President is responsible for prosecuting war and directing the armed forces during military conflicts, including attacks upon the nation. Congress is constitutionally empowered to declare war, may otherwise authorize the involvement of American armed forces in military conflict, appropriates funds for government activities and operations, including military actions, and engages in oversight to assess the extent to which government operations have been efficiently, economically, and effectively conducted using appropriated funds. Congress also has a role in prescribing intelligence and foreign policy. In meeting these responsibilities, Congress expects and needs to be informed by executive branch leaders about relevant actions taken and being planned, policy developments, expenditures, and knowledge conditions. Consequently, the information restrictions prescribed in President Bush's October 5 memorandum drew critical reaction from various quarters of the House of Representatives and the Senate. Although the restrictive policy was quickly suspended by the President, questions have arisen concerning the role of the executive in times of war and military conflict in informing Congress regarding American involvement in such events. This report offers a brief review of executive-congressional relations in this regard for 1941-2001. The formal entry of the United States into World War II occurred on December 8, 1941, with a declaration of war against Japan in response to the attack on Pearl Harbor in the Hawaiian Islands that had occurred the previous day. Three days later, on December 11, war was declared against Germany and Italy. As a result of the 1940 elections, President Franklin D. Roosevelt had been returned to office for an unprecedented third term. His party held large majorities in both houses of Congress: 267 Democrats to 162 Republicans in the House and 66 Democrats to 28 Republicans in the Senate. During Roosevelt's first and second presidential terms (1933-1940), as totalitarian regimes began threatening the peace of Europe and Asia, Congress, led by large Democratic majorities, exhibited strong favor for isolationism and neutrality. The Johnson Debt Default Act of 1934 prohibited loans to any foreign government in default to the United States, an attempt to disentangle the United State from European economies. By June 15, 1934, Czechoslovakia, Great Britain, Italy, Latvia, Lithuania, and Rumania formally defaulted, leaving only Finland to meet its payments in full. In the wake of Italy's 1935 invasion of Ethiopia, the 1936 civil war in Spain, and aggressive actions by both Germany and Japan toward neighboring nations, Congress adopted a series of Neutrality Acts restricting arms shipments and travel by American citizens on the vessels of belligerent nations. Two months after war commenced in Europe in September 1939, Congress, at the President's request, modified the neutrality law by repealing the arms embargo and authorizing "cash and carry" exports of arms and munitions to belligerent powers. In April 1934, the Senate established the Special Committee on Investigation of the Munitions Industry to conduct an inquiry into the manufacture of, and traffic in, arms in the United States. Chaired by Senator Gerald P. Nye (R-ND), who had introduced the resolution for the panel's creation, the committee conducted public hearings stressing the heavy profits realized by financiers and armament makers during World War I. Continuing until 1936, the committee is credited with strengthening isolationist sentiment in Congress and the nation, and setting the background for the Neutrality Acts of 1935, 1936, and 1937. Thus, through its investigations, the climate of opinion it helped generate, and the neutrality legislation that it nurtured, the Nye committee constituted something of a brake on the efforts of the Roosevelt Administration to strengthen and expand the national defense program or to pursue a more internationalist foreign policy. The Nye committee was no longer a concern to FDR as America became engaged in World War II, but two other congressional panels likely occupied White House thinking as the President contemplated his wartime relationship with Congress. The first was a House creation, the Special Committee to Investigate Un-American Activities, initially established in 1938. The panel had a broad mandate to probe "un-American propaganda activities in the United States," the diffusion of "subversive and un-American propaganda that is instigated from foreign countries or of a domestic origin," and "all other questions in relation thereto that would aid Congress in any necessary remedial legislation." While the committee's primary target was the Communist Party and its affiliates, its mandate to pursue the perpetrators of "subversive and un-American propaganda" of either a domestic or foreign origin could be regarded as authority to investigate any private organization promoting social, political, or economic change; to probe any federal entity, including the armed forces, regarding public affairs and public education activities; or even to venture into the realm of foreign policy. However, the chairman of the committee, Representative Martin Dies (D-TX), was a conservative who was on record as an opponent of Roosevelt's New Deal and the political interests supporting it. House leaders from the President's party sought to keep Dies and his committee narrowly focused so as to avoid his wandering into any aspect of the war effort and making demands for sensitive information. Such a strategy of containment could not be contemplated in the case of the other committee of concern, the Senate Special Committee to Investigate the National Defense Program. Established in March 1941, war mobilization and defense production were the primary elements of its mandate. The panel had been created on the initiative of Senator Harry S. Truman (D-MO), who had just been elected to his second term and was concerned that defense contracts were not being fairly allocated within the country. Virtually unknown outside his home state, Truman gradually gained visibility by supporting the New Deal. Although the White House did not want a rogue committee producing unwelcomed publicity about defense contracting and the progress of mobilization efforts, Truman's proposal and the prospect of his leading such a panel proved to be an acceptable alternative to similar efforts by anti-New Dealers and Republicans. The attack on Pearl Harbor and the U.S. declaration of war the following day launched the President and Congress on their wartime relationship. Ironically, the circumstances of the attack and the immediate response of American armed forces to it became one of the first information issues for the two branches. Due to its insular location some 2,400 miles southwest of California and its totally military status, Pearl Harbor, in the aftermath of the Japanese attack, was impervious to the news media and the surrounding Territory of Hawaii was cloaked in martial law. The President seemingly had close control over information about the damage that had been inflicted. Yet, by the evening of December 8, New York Times Washington bureau chief Arthur Krock had learned that 90% of the fleet had been disabled at Pearl Harbor. Still, for many weeks, the public did not learn of the extent of the loss, those in possession of the information being afraid that its disclosure would invite a Japanese amphibious assault on the islands. Nonetheless, by February 1942, blame was being fixed. Senator David I. Walsh, the Chairman of the Naval Affairs Committee, advanced the theory that the Executive Branch was wholly responsible for Pearl Harbor, thus exculpating Congress and, inferentially, himself from blame. It was not fair to say "that there has been any failure on the part of Congress to act in any manner that would have prevented what happened at Pearl Harbor," he said. "The operations at Pearl Harbor were an executive function, and responsibility for them was lodged in the departments." Thus, a waiting game ensued. President Roosevelt sought to satisfy Congress and the public with a fact finding report prepared by an investigating commission under the chairmanship of Supreme Court Associate Justice Owen Roberts. Congress continued to hold the President and his subordinates, both civilian and military, responsible for American defenses at Pearl Harbor, continued to pursue its own avenues of information about the attack, and gave no indication that the Roosevelt Administration was absolved of any responsibility to inform the legislature about the prosecution of the war declared in response to the attack. As the course of the war became more certain and the prospect of the Japanese navy making any return to the Hawaiian Islands receded, Congress, in a 1944 extension of "all statutes, resolutions, laws, articles, and regulations, affecting the possible prosecution of any person or persons, military or civil, connected with the Pearl Harbor catastrophe of December 7, 1941, or involved in any other possible or apparent dereliction of duty, or crime or offense against the United States," also directed the Secretary of War and the Secretary of the Navy to create boards of inquiry to examine the Pearl Harbor attack. Finally, about a month after the surrender of Japan, Congress mandated the Joint Committee on the Investigation of the Pearl Harbor Attack to "make a full and complete investigation of the facts relating to the events and circumstances leading up to and following the attack made by Japanese armed forces upon Pearl Harbor." Chaired by Senator Alben W. Barkley (D-KY), the panel held extensive hearings between November 11, 1945, and May 31, 1946, and reviewed, as well, the work of the Roberts Commission and the Army and Navy boards investigating the Pearl Harbor attack. Reporting in July 1946, a bipartisan majority of the joint committee blamed the inadequacies of the national defense system for the poor response at Pearl Harbor, while a minority regarded the tragedy as "primarily a failure of men," but at this late date, such conclusions garnered little public interest. Immediately after the Pearl Harbor attack, Senator Arthur H. Vandenberg (R-MI) had advanced the idea of creating a single committee to serve as a congressional liaison to the executive branch on the conduct of the war. The model Vandenberg had in mind was the Joint Committee on the Conduct of the War from the Civil War era. Lacking in details regarding such important political considerations as the composition of the panel, the manner in which its members would be selected, and its mission and responsibilities, his proposal, and others like it, apparently had little appeal. Instead of centralizing control in a single war committee, Congress dispersed control over a wide number of standing committees and newly created investigation committees. During the war, also, the State, War, and Navy departments revealed information to relevant legislative committees which was not revealed to the whole Congress or to the public. In addition, the President held weekly "free and open discussions" with the political leaders of the House and Senate, and Speaker Sam Rayburn once told the House that "these are not blowpulling conferences." Among the initial investigating committees were the aforementioned Truman panel (established in 1941); the House Select Committee Investigating National Defense Migration (1940), which expanded its activities to parallel the Truman committee; the Senate Special Committee to Investigate Gasoline and Fuel-Oil Shortages (1941); and House and Senate committees on military affairs (1822, 1816), naval affairs (1822, 1816), and small business (1941, 1940). Other panels created during the war included the Senate Special Committee to Investigate Agricultural Labor Shortages in the West (1942); the Senate Committee to Investigate Production, Transportation, and Use of Fuels in Areas West of the Mississippi River (1942); the Senate Special Committee to Investigate the Effects of the Centralization of Heavy Industry (1943); the Senate Special Committee to Investigate Petroleum Resources (1944); the House Select Committee to Investigate the Federal Communications Commission (1943); the House Select Committee to Investigate Acts of Executive Agencies Beyond the Scope of Their Authority (1943); the House and Senate Special Committees on Postwar Economic Policy and Planning (1944, 1943); the House Select Committee on Post-War Military Policy (1944); the House Select Committee to Investigate Seizure of Montgomery Ward and Company (1944); the House Special Committee to Investigate Campaign Expenditures (1944); and the House Select Committee to Investigate Supplies and Shortages of Food, Particularly Meat (1945). The proliferation of investigation committees was one of the singular characteristics of the war Congress. The emphasis on investigation, on the control of policy after the passage of an Act, was a spontaneous congressional reaction, as it were, to the increasing number of activities with which the administrative branch was concerned. Nonetheless, because "[n]o method was worked out by which Congress as a whole was informed on the developments of the war, ... in the aggregate, members of Congress had no more intimate knowledge of how the war was going than the average reader of a metropolitan newspaper." When a secret session of the Senate was held in 1943 to hear the report of five Senators who had just returned from the battlefront and a badly reported version of the proceeding appeared in the press shortly thereafter, Senator Richard B. Russell (D-GA), who had been on the trip, correctly predicted that it would "probably be a long time before another executive session is held." For the most part, the army and the navy developed a "cooperative and sympathetic relationship" with the congressional armed services committees: senior officers "confided in these committees and relied on them for political support." Congress played a very small role, either as critic or as participant, in the several military and military-political conferences in which the United States participated during the war, although it was given some general information on the decisions made at these conferences. The President discussed the results of the Casablanca Conference (1943), where the policy of unconditional surrender was developed, in an off-the-record conversation with some eleven leaders from Congress and with representatives of the State, War, and Navy Departments. On the Quebec Conference (1943), the President sent a report to Congress in which he defended the policy of keeping some matters secret. It was difficult to remain silent, he said, "when unjustified attack and criticism come from those who are not in a position to have all the facts," and he asked for faith that decisions were being made on better evidence than critics had implied. Secretary [of State] Hull spoke before a joint session of Congress following the Moscow Conference (1943). President Roosevelt also addressed Congress—as it happened, for the last time—on the results of the Yalta Conference (1945). During the prosecution of the war, Congress appears to have been willing to allow the President to prescribe military strategy and foreign policy, and was seemingly satisfied, at the time, with the arrangements for being informed by the President about such matters. "Congress conducted more than a hundred investigations during the Second World War, exploring many aspects of war policy but falling short of investigating the actual conduct of the war." Prior to becoming Vice President in 1944, Senator Truman, as chairman of the Senate Special Committee to Investigate the National Defense Program, repeatedly renounced any desire to intrude into military strategy or tactics. When his investigators uncovered enormous and unexplained expenditures for something called the Manhattan Project, he telephoned Secretary of War Henry L. Stimson. Told "that's a matter which I know all about personally, and I am only one of the group of two or three men in the whole world who know about it ... a very important secret development," Truman assured Stimson that "you won't have to say another word to me." Ironically, with FDR's death in April 1945, it would be Stimson's duty to inform President Truman about the production of the atomic bomb by the Manhattan Project. The [Truman] committee performed splendidly in its principal role as production watchdog. Perhaps the greatest of the committee's accomplishments was the high level of public confidence in the Roosevelt Administration's conduct of the war. The committee served as an important source of information on what the government was doing to win the war, and most Americans accepted its assurances that the domestic war effort, despite administrative tangles and bureaucratic incompetence, was going well. Certainly there were those in the Roosevelt Administration who realized that the regime was the beneficiary of such public support because, with rare exception, they complied with the information requests of the Truman committee. The conclusion of World War II in 1945 brought changes to many parts of the world, Korea being one such area. A peninsular country extending some 620 miles southward from the Chinese province of Manchuria, Korea fell under Japanese control as a consequence of the Russo-Japanese War of 1904-1905. Annexed to Japan, only 125 miles away, in 1910, it remained under Japanese control until 1945. At the November 1943 Cairo Conference, Great Britain, the Republic of China, and the United States, pursuant to the Atlantic Charter of 1941, agreed that Korea would become a free and independent nation. The Soviet Union adhered to this agreement in its August 1945 declaration of war on Japan. In a modification on a prior agreement with the Soviet Union on an intended four-power trusteeship over Korea, the United States proposed in mid-August 1945 that the surrender of Japanese armed forces in Korea be accepted by the Americans in the area south of, and by the Soviets in the area north of, the bisecting 38 th degree parallel of north latitude. The Soviet Union quickly agreed to this arrangement and American troops arrived in Korea on September 8, 1945, to effect the repatriation of surrendering Japanese soldiers. Encountering Soviet obstruction of communication across the 38 th parallel, the United States, in the Moscow Agreement of December 27, 1945, obtained Soviet agreement to attempt to form a provisional government for all of Korea. Efforts in this regard in 1946 and 1947 failed on the issue of which Koreans were to be consulted on unification proposals. In September 1947, the United States placed the matter before the United Nations General Assembly, which resolved to hold Korea-wide elections for a united and independent Korea. Refused entry to the north by the Soviet occupation commander, the U.N. election commission was reauthorized to observe voting in the south alone. These May 10, 1948, elections laid the groundwork for a July 17 constitution and the August 15 establishment of the Republic of Korea (ROK). In the north, with Soviet assistance, a new government—the Democratic People's Republic of Korea (DPRK)—was established on September 9. American armed forces completed a staged withdrawal from the south in June 1949. As these troops and their Soviet counterparts departed, increasingly powerful Korean forces replaced them in both sectors. Preceded by hostilities and armed incidents along the 38 th parallel, an invasion of ROK territory across the 38 th parallel by DPRK forces occurred, June 25, 1950, with the aim of unifying the country by force. In America, news of the invasion was received in a highly unsettled political environment. First elected to the Senate in 1934, Harry S. Truman (D-MO) was selected by FDR to be his vice presidential running mate in 1944 for a number of reasons, not the least of which were his political loyalty to the President, personal integrity, and record of being a hard worker. Truman succeeded to the presidency in April 1945 when Roosevelt died suddenly in Warm Springs, Georgia. In the months that followed, he was called upon to lead the participation of the United States in the United Nations conference; to participate in the Potsdam conference on the occupation and control of Germany, as well as the settlement of various European questions; to direct the use of the atomic bomb against Japan; to accept the surrender of Japan; and to continue planning and directing the conversion of the American economy to peacetime conditions. The following year, he experienced growing hostilities with the Soviet Union, a World War II ally, and the onset of the Cold War. Early in 1947, he responded to the growing Soviet threat with the Truman Doctrine, calling for the containment of Soviet imperialist expansion and pledging U.S. economic and military aid to Greece and Turkey, and the Marshall Plan to assist European nations with economic recovery and a return to political stability. The 1946 elections brought Truman the loss of Democratic Party majorities in both houses for the 80 th Congress. These were regained in 1948, when Truman also won a surprise return to the White House after dissident factions of his party had bolted from the Democratic National Convention to form their own parties with presidential candidates—the States' Rights or "Dixiecrat" Party nominating Strom Thurmond and the Progressive Party selecting Henry Wallace. Such divisions were reflective of a number of fractious issues—racial equality, labor rights, anti-communism, military preparedness, and economic stability—that would continue to charge the political atmosphere. The years immediately following the conclusion of World War II were also a time of change for Congress. As had been the case after previous wars, the return to peace activated a congressional desire to dismantle the executive's war machinery. Much of Congress' antagonism to the war agencies stemmed from a recognition that the gigantic executive establishment was making it increasingly difficult for the legislature to maintain its function as a coequal branch of government. As the war progressed, the problem became so disturbing to the responsible leaders of both parties that there was general agreement that something would have to be done about it when the war was over. One of the first steps taken by Congress was to return to an issue that was under consideration when war came in 1941. This was legislation designed to bring order, uniformity, and visibility to the rulemaking activities of the federal agencies. It was enacted as the Administrative Procedure Act of 1946. Next, Congress "plowed through the job of trying to bring the executive back to manageable size (some twenty-nine war agencies had spring up under the Office of [sic] Emergency Management alone, which the President had created by an executive order). As quickly as it could, Congress reduced the massive wartime apparatus by repealing authorizations and grants of power, terminating agencies, abolishing administrative positions, and providing for the transfer of government undertakings to private business." To assist with this effort, Congress, in 1947, mandated the Commission on the Organization of the Executive Branch of the Government, which became known as the Hoover Commission, in popular reference to the panel's chairman, former President Herbert Hoover. Another accomplishment, the Legislative Reorganization Act of 1946, reduced the number of House and Senate standing committees; adjusted their legislative jurisdictions accordingly; encouraged "continuous watchfulness of the execution by the administrative agencies concerned of any laws, the subject matter of which is within the jurisdiction of" the standing committees; and expanded the capacity of the Legislative Reference Service as a congressional support agency. Carried over into standing status was the House Special Committee on Un-American Activities, which became a powerful and controversial investigative panel. Furthermore, the consolidation of the committees tended to strengthen the position of conservative chairmen, particularly Southern Democrats, who had opposed the New Deal and now were resistant to many of the initiatives of the Truman Administration. Subcommittees and special committees soon began to proliferate, and, in the view of historian Alvin Josephy, "the 1946 act failed to cope with the significant question of the distribution of power within Congress and the equality of power between Congress and the executive branch—two problems that dominated congressional history after World War II." A case in point, wrote Josephy, was the House Committee on Rules. In 1945, it turned down requests from President Truman for rules that would permit the House to vote on a bill for a permanent Fair Employment Practice Committee and consider raising the minimum wage. The Rules Committee the next year refused to clear for House discussion an administration labor-relations bill and instead reported out a stern antilabor measure .... When Congress, in a punitive postwar mood toward union labor, passed that bill, Truman vetoed it, but in 1947, the Eightieth Congress passed—and made stick over another Truman veto—the Taft-Hartley Act, which outlawed the closed shop. Five months before the June 25, 1950, DPRK invasion of South Korea, a junior Senator, Joseph R. McCarthy (R-WI), in a routine Lincoln Day speech in Wheeling, West Virginia, offered the startling revelation that he knew the names of a number of Communists working in the Department of State. He repeated his charges on the Senate floor on February 20. The following day, Senator Scott Lucas (D-IL), the Majority Leader, offered a resolution calling for an inquiry into the allegations by the Committee on Foreign Relations. It was approved, after lengthy debate, the following day. An inquiry, pursuant to the resolution, was begun by a subcommittee of the Senate Committee on Foreign Relations on March 8. Senator Millard E. Tydings (D-MD) chaired the subcommittee; Senator McCarthy was the initial witness; hearings were held on 31 days, concluding just after the invasion of South Korea. More allegations about Communists in government, however, would be made by Senator McCarthy. In the November 1950 congressional elections, Republicans gained five seats in the Senate and 28 in the House, but the Democrats held a two-seat margin in the Senate and 35-seat edge in the House. Two years later, on March 30, 1952, President Truman announced he was not a candidate for reelection. In November, the Republican candidate, former General Dwight D. Eisenhower, captured the presidency. Among the campaign issues was the Truman Administration's foreign policy and military efforts on behalf of South Korea. On December 2, President-elect Eisenhower, fulfilling a campaign pledge, visited South Korea. Republicans also gained a one-seat majority in the Senate and an eight-seat majority in the House. Senator McCarthy became the chairman of the Committee on Government Operations (now Governmental Affairs) and its Permanent Subcommittee on Investigations, which he led during 1953-1954 in a long series of hearings on the role of Communism in government and other areas of American life. On June 26, 1953, an armistice was signed in Panmunjon, halting the Korean hostilities. An uneasy truce subsequently prevailed, with numerous violations of the armistice agreement, but no renewal of open conflict. Such was the atmosphere surrounding the June 25, 1950, DPRK invasion of South Korea. In May, Senator Tom Connolly (D-TX), the chairman of the Committee on Foreign Relations and a man familiar with Korea's vulnerability, reportedly had commented that the Soviet Union could seize the southern territory without U.S. intervention because the ROK was not "very greatly important." Two days after the invasion, he was one of 15 congressional leaders invited to the White House by the President in order that, by Truman's own account, he "might inform them on the events and the decisions of the past few days." He next conferred with 21 congressional leaders on December 1. Truman's memoirs also indicate that Vice President Alben W. Barkley, who attended National Security Council meetings and was otherwise informed about the developing Korean situation, "associated daily" with his old Senate colleagues, informally advising them on various matters and making their views known to the President. Truman apparently preferred such White House meetings with congressional leaders to making a formal address to Congress because he thought "Korea was a United Nations matter" involving a collectivity of nations and, accordingly, "our country should not make an individual approach to it," as might be conveyed by the official remarks of the President speaking to a joint session of the legislature. At the December 1 meeting, Truman also told the congressional leaders that he would soon be sending a message to Congress requesting supplemental military appropriations, and that he "would be available to answer any questions that anyone might have about this request, and so would the members of my staff and administration." The President met with senior Democratic and Republican members of the House and Senate appropriations, armed services, and foreign affairs committees on December 13 to discuss "a sharp step-up in our mobilization," including the declaration of a national emergency, which would activate a broad variety of extraordinary statutory authorities. The following day, a meeting was held with congressional leaders to discuss economic mobilization plans, and another meeting with Representatives and Senators occurred thereafter, with "emphasis on the economic problems of allocations and wage and price controls." That these sessions did not satisfy the information desires of all Members of Congress regarding the Korean situation was reflected in a resolution introduced in December by Senator James P. Kem (R-MO) with 24 of his colleagues, calling on the President to give Congress the details of his recent talks with British Prime Minister Clement Atlee and to submit in treaty form any agreements reached. With the assistance of three Republican Senators, Senator Tom Connolly (D-TX) succeeded in having the resolution referred to his Committee on Foreign Relations, where it was held. Truman had initially responded to the June 25 invasion by authorizing, on June 27, the commitment of U.S. air and naval forces in support of the defending ROK army. Three days later, U.S. ground forces were committed. These actions were taken by the President without consulting Congress or seeking a declaration of war, and "there was little opposition to his intervention until the end of the year, after China had entered the war and inflicted serious reverses on the American forces." Thereafter, beginning in January 1951, a so-called "great debate" ensued in Congress and elsewhere over the nation's military commitments abroad. It ended in early April when resolutions were adopted supporting the dispatch of four U.S. Army divisions to Europe, but also stating the sense of the Senate that no additional ground forces should be sent to Europe by the President without congressional approval. Shortly thereafter, on April 11, 1951, President Truman, having twice earlier considered the matter, decided to relieve General Douglas MacArthur of his commands in the Far East. A venerated and legendary figure, MacArthur had a record of long and distinguished military service spanning two world wars and including duties as Army Chief of Staff, commander of the Philippine armed forces, and military governor of Japan. His unceremonious dismissal by Truman shocked the American public and many Members of Congress. Returning to the United States after a 14-year absence, he addressed a joint session of Congress, at the invitation of the congressional leadership, on April 19. The insistence of Senate Republicans for a special investigating committee with equal representation of both parties was successfully opposed in favor a joint effort by the Committee on Armed Services and the Committee on Foreign Relations "to conduct an inquiry into the military situation in the Far East and the facts surrounding the relief of General of the Army Douglas MacArthur from his assignments in that area." These hearings commenced on May 3 with MacArthur as the initial witness. His appearance before the committees continued during May 4 and 5, when he was followed by Secretary of Defense George C. Marshall, the Joint Chiefs of Staff, Secretary of State Dean Acheson, and other officials and military officers. The hearings consumed 43 days—almost all of May and June. Truman allowed his senior officials and military officers to appear before the panels, but was very attentive to protecting the advice they had provided to him regarding the Korean situation. By one account, having successfully weathered the "great debate" of a few months earlier, Truman "continued to disregard Congress in the matter of military commitments." Truce negotiations began at Kaesong on July 10, 1951, and were resumed at Panmunjon in October. The conflict in Korea was stalemated; negotiations for an armistice were deadlocked over the issue of forced repatriation of prisoners. Continued American involvement in Korea became a presidential campaign issue in 1952. By one estimate, the conflict there contributed to public agony and frustration that reverberated back onto the domestic political scene, creating a receptive climate for demagogic exploitation by the House Committee on Un-American Activities, Senator Joseph McCarthy, and others. Months before the armistice was signed in Panmunjon in June 1953, congressional interest in Korea had shifted to concern by many with Communists in American government and society, which would engender new controversies regarding congressional information needs. America's military involvement in Vietnam did not begin with a formal declaration of war, nor was one ever made. Instead, the nation's commitment to Vietnam evolved over a number of years, during the presidencies of Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, and Richard M. Nixon. In 1955, the U.S. government gave aid directly to the government in Saigon for the first time and agreed to train its army. A U.S. military assistance command was established in 1962, and, two years later, U.S. forces began bombing North Vietnam. The first American combat troops were deployed to South Vietnam in 1965. U.S. efforts to aid South Vietnam expanded to include Cambodia and Laos, where major offensives were carried out in 1970 and 1971, respectively. Public negotiations and secret peace talks, begun in the late 1960s, converged in the early 1970s, and culminated with the signing of the Paris peace accords on January 27, 1973. The last U.S. troops left South Vietnam on March 29, 1973, and American prisoners of war were released three days later. Critical to understanding the relationship between the President and Congress during the Vietnam conflict are five resolutions, only one of which, the Gulf of Tonkin resolution (Johnson), dealt exclusively with the use of U.S. military forces in Vietnam. Three others addressed the use of U.S. armed forces in other areas of the world: Formosa and the Middle East (Eisenhower), and Cuba (Kennedy). The fifth resolution dealt more broadly with war powers; it was passed during the Johnson Administration and repealed during Nixon's presidency. To a certain extent, the resolutions themselves, as well as how each Administration handled Congress, offer insight into the executive-legislative relationship, including the executive's willingness to consult with Members. Following World War II, a major foreign policy goal of the United States was to contain Communism. Concerns that the loss of one country to Communists would lead to a Communist takeover in another country, and so on, fueled the nation's preoccupation with the need to thwart Communist advances whenever and wherever possible. Evidence of those intentions was found in the Chinese Communists' success in driving Chiang Kai-shek, and his fellow Nationalists, from mainland China and establishing the People's Republic of China in 1949. Chiang maintained his Nationalist regime on the island of Formosa (also known as Taiwan). The invasion of South Korea by North Korea in 1950, with the People's Republic of China aiding North Korea, was additional confirmation that its adherents were seeking to spread their influence. The departure of the Nationalists from mainland China in 1949 did not end the dispute between the two adversaries, Chiang Kai-Shek and Mao Tse-tung, and their supporters. Communist China claimed several islands located off its coast that were occupied by Nationalist forces. When the Korean War broke out, President Harry S. Truman declared that the Straits of Formosa were neutral, and ordered the U.S. Navy to blockade the area, thus preventing either party, Nationalists or Communists, from using the islands as a base for launching an attack on the other. The blockade was lifted, by President Eisenhower, on February 2, 1953. In August 1954, the Nationalists strengthened their forces on the islands of Quemoy and Matsu. Mainland China responded, in September and November, with military attacks on several of the islands. On December 2, 1954, the U.S. and Taiwan signed a mutual defense treaty. After Communist forces had seized the island of Ichiang on January 18, 1955, and appeared to be threatening to invade the Tachens, President Eisenhower turned to Congress. On January 24, he asked for a resolution that would give him the authority to use U.S. forces to protect Taiwan and the other islands. In his message to Congress, Eisenhower noted that, as Commander in Chief, he already had authority to take some action. He was sensitive, though, to the need for the President and Congress to act together. ... a suitable Congressional resolution would clearly and publicly establish the authority of the President as Commander-in-Chief to employ the armed forces of this nation promptly and effectively for the purposes indicated if in his judgment it became necessary. It would make clear the unified and serious intentions of our Government, our Congress and our people. One matter that Eisenhower failed to address specifically was his Administration's intentions toward Quemoy, Matsu, and other islands located off the coast of mainland China. The general language of Eisenhower's message left the door open for American intervention in areas other than Formosa (Taiwan) and the Pescadores (both of which were identified by name in the President's message): Moreover, we must be alert to any concentration or employment of Chinese Communist forces obviously undertaken to facilitate attack upon Formosa, and be prepared to take appropriate military action. But unhappily, the danger of armed attack directed against that area [Formosa and the Pescadores] compels us to take into account closely related localities and actions which, under current conditions, might determine the failure or the success of such an attack. The authority that may be accorded by the Congress would be used only in situations which are recognizable as parts of, or definite preliminaries to, an attack against the main positions of Formosa and the Pescadores. The resolution itself specified Formosa (Taiwan) and the Pescadores as areas of interest, but then referred to "related positions and territories." Some congressional Democrats found this language suspect. They believed that the offshore islands, with the exception of Formosa, belonged to mainland China. Also, they were concerned about the possibility that Chinese Nationalists might attempt to use the vague references to manipulate the U.S. into going to war with China. Nevertheless, the resolution, H. J. Res. 159 (84 th Congress), passed both houses by wide margins, 410-3 in the House (January 25, 1955) and 85-3 in the Senate (January 28, 1955). Although the Democrats had gained control of both Houses in the 1954 election, their leads in the House (232-203) and Senate (48-47 with one independent) were not large. Eisenhower signed P.L. 84-4 (H. J. Res. 159; 69 Stat. 7) on January 29, 1955. The Formosa Resolution authorized the President "to employ the Armed Forces of the United States as he deems necessary for the specific purpose of securing and protecting Formosa and the Pescadores against armed attacks ...." The resolution would expire when the President determined that the "peace and security of the area [was] reasonably assured." In 1956, the Eisenhower Administration was faced with a new challenge in a different part of the world—the Middle East. The President of Egypt, Gamal Abdel Nasser, planned to build the Aswan High Dam on the Nile River. Late in 1955, he had secured offers of loans from the United States, Britain, and the World Bank. The United States withdrew its offer on July 19, 1956, in response to, among other things, the fact that Nasser had negotiated arms deals with the Soviet bloc. Britain followed suit, as did the World Bank. Nasser responded by nationalizing the company that operated the Suez Canal. Britain and France, both of which depended on the canal for the transportation of oil and had financial interests in the canal, reacted strongly. Israel launched an offensive on October 29; the British and the French attacked Egypt on October 31; the Soviet Union threatened, on November 5, to intervene militarily to restore peace in the region; and a cease-fire agreement was reached on November 6. While Britain and France immediately ended their military activities, the Soviet Union continued its activities for several days. The U.S. did not intervene, but it did expand its naval presence in the region before, and during, the crisis. Concerned about the volatility of the region, and the Soviet presence, following the Suez Canal crisis, the Administration once again determined that a resolution was necessary and approached Congress with its request. On January 5, 1957, President Eisenhower, addressing a joint session of Congress, asked for a resolution that would, among other things, authorize the United States to provide military aid and assist with economic development in the Middle East. Under the heading of military assistance and cooperation, Eisenhower sought to include "the employment of the armed forces of the United States...." In his message to Congress, he clearly stated why he believed it was necessary for the President and Congress to work together: ... I deem it necessary to seek the cooperation of the Congress. Only with that cooperation can we give the reassurance needed to deter aggression.... If, contrary to my hope and expectation, a situation arose which called for the military application of the policy which I ask the Congress to join me in proclaiming, I would of course maintain hour-by-hour contact with the Congress if it were in session. And if the Congress were not in session, and if the situation had grave implications, I would, of course, at once call the Congress into special session. Congress, as a whole, was much less receptive to what became known as the Middle East Resolution than it had been to the Formosa Resolution. Among the reasons cited for a hesitant response on the part of Congress were that the Middle East was not considered essential to the security of the United States and that the Administration had helped to precipitate the crisis when it withdrew its offer of a loan for the Aswan High Dam and, later, did not support a British-French proposal for dealing with Nasser. In January 1957, Secretary of State John Foster Dulles testified before the House Committee on Foreign Affairs and, in a combined session, the Senate Committees on Foreign Relations and the Armed Services. In response to Senators' concerns that his argument for the draft resolution was based on general, not specific, information, Dulles said: "If we have to pinpoint everything we propose to do, this program will not serve its purpose. If Congress is not willing to trust the President to the extent he asks, we can't win this battle." The House of Representatives responded to Dulles's entreaty, passing H.J.Res. 117 (85 th Congress) on a 355-61 vote. Democrats voted 118-35; Republicans 167-26. While the House passed the measure fairly quickly, the Senate did not. Instead, the Committees on Foreign Relations and the Armed Services, meeting jointly, voted 30-0 "for a complete review of U.S. policy in the Middle East since 1946." Eventually, the two committees reported the resolution after having changed some of the language in the Administration's draft. Specifically, the resolution was amended to say that the United States would be "'prepared' to use armed forces 'if the President determines the necessity thereof ...." After 12 days of sporadic debate on the measure, the Senate passed the resolution, as amended, by a vote of 72-19 on March 5 (Democrats 30-16; Republicans 42-3). The House passed the amended version, on March 7, 1957, by 350-60 vote. President Eisenhower signed P.L. 85-7 (H.J.Res. 117; 71 Stat. 5) on March 9, 1957. In the late 1940s and early 1950s, two forces were fighting for control of northern Vietnam. The French, who had taken control of Vietnam, and other parts of Southeast Asia, in the 19 th century, were locked in a war with Ho Chi Minh and his fellow indigenous Communists (who were also referred to as Viet Minh). While preparations were underway, in late 1953, for peace talks, the French military decided to launch a major attack, from the village of Dien Bien Phu, on Viet Minh forces. At the same time that the French were fortifying their military facilities and positions in and around Dien Bien Phu, the Communists were positioning their forces around the village. Viet Minh forces attacked on March 13, 1954, overrunning French bases located on the perimeter of Dien Bien Phu, which allowed them, in turn, to direct massive artillery fire on the village and the French forces stationed there. Until their defeat on May 7, the French requested, on several occasions, military assistance from the United States. While Eisenhower and his senior advisers believed that French forces needed military support if they were to succeed in thwarting the Communists, the Administration preferred multilateral action. Speaking at the Overseas Press Club on March 29, 1954, Secretary of State Dulles presented the Administration's concept of united action. In the week leading up to Dulles's speech, Administration officials consulted, on several occasions, with Members of Congress on the notion of united action. The record suggests that the President, Secretary Dulles, and Admiral Arthur W. Radford, chairman of the Joint Chiefs of Staff, made the decision, on March 21, 1954, to pursue a multilateral approach regarding Southeast Asia. The next morning, Eisenhower, Dulles, and Radford met with Republican congressional leaders. Dulles briefed them on the Administration's concept of united action and, later, he drafted a memorandum on this matter, which "was approved by Eisenhower and by congressional leaders of both parties." Other Members, including congressional leaders and members of the Senate Committee on Foreign Relations and members of the House Committee on Foreign Affairs, also were consulted by Dulles prior to March 29. At a meeting with Republican congressional leaders on the same day, the President informed them of several options he was considering in the event the situation at Dien Bien Phu deteriorated rapidly. Eisenhower said: I am bringing this up at this time because at any time within the space of forty-eight hours, it might be necessary to move into the battle of Dien Bien Phu in order to keep it from going against us, and in that case I will be calling in the Democrats as well as our Republican leaders to inform them of the actions we're taking. As the situation grew worse for the French troops, with a successful assault by the Viet Minh on March 30 and April 1, the Administration's discussions on the question of providing military support were infused with a sense of urgency. When the President, Secretary Dulles, Secretary of Defense Charles E. Wilson, and Admiral Radford gathered on April 2, 1954, Dulles presented a draft resolution. Eisenhower approved of the resolution, but thought that the proper way to approach Congress was "to develop first the thinking of congressional leaders" before showing them a resolution already drafted by the Administration. Dulles concurred, adding that he prepared the draft to confirm that they agreed on the Administration's course of action. Unlike the Gulf of Tonkin resolution, which would be passed in 1964 and which confirmed the President's authority to take action, Dulles's draft had Congress authorizing the President to act. The draft also contained this language: "This Resolution shall not derogate from the authority of the Congress to declare war and shall terminate on June 30, 1955, or prior thereto if the Congress by concurrent resolution shall so determine." On April 3, 1954, Administration officials and congressional leaders met at the Department of State. The thrust of the meeting was to ask Congress to support the President in the event air and sea power were necessary. Admiral Radford described the military situation, while Secretary Dulles explained the significance of Indochina. All eight Members at the meeting agreed that the U.S. ought to obtain commitments from its allies for political and military support. Dulles replied that he would try to obtain commitments from Britain and other countries, but did not broach the subject of a congressional resolution. The congressional leadership's "reaction appears to have prevented the realization of Dulles's hope, possibly even his intention, that the group would agree to support a congressional resolution authorizing the President to use air and naval forces, in order to strengthen the U.S. negotiating position ...." A benefit for the President was that the Members' position strengthened his own hand within the Administration. "In opposing military action which might lead to 'another Korea,' congressional leaders reinforced the President's own desire to avoid direct intervention with U.S. forces, thus helping to counter the arguments of Radford and others who favored military action." Administration officials continued to meet with Members of Congress, even as the situation in Dien Bien Phu worsened. Under Secretary of State Bedell Smith met with members of both congressional Far East subcommittees on April 26. Participants discussed the proposed resolution that would authorize the President to employ air and sea power. Another briefing was held, on May 5, for congressional leaders and chairmen and ranking members of the Senate and House Armed Services Committees. In his presentation, Dulles reviewed recent events and described the Administration's position on U.S. intervention, the need to establish a defense arrangement in Southeast Asia, and the importance of Britain and France. Two days later, Dien Bien Phu fell to the Viet Minh. Eisenhower's philosophy of working in concert with Congress did not carry over into covert operations. He did not believe that he needed congressional approval for clandestine activities. Eisenhower approved covert operations in Iran and Guatemala without seeking legislative authorization, and the planning for the Bay of Pigs invasion of Cuba began during his tenure. During his relatively brief time in office, President Kennedy expanded American involvement in Vietnam in a number of ways, moving the United States from an advisory capacity to partner status and expanding its military activities. Within six months of taking office, Kennedy decided that "the struggle against Communism" in Vietnam would be a "joint campaign." This expanded commitment by the President of the United States, with the acquiescence of Congress, raised the level and enlarged the scope of existing U.S. commitments to Vietnam. Previously the U.S. had taken the position that it was assisting Vietnam in its efforts to defend itself. Although in practice the United States was deeply involved in activities in Vietnam, it had never taken the position that this was a joint effort by the two countries—a concept with many implications for the role of the United States and the role of Vietnam, as well as for the relationship between the U.S. and Vietnam. Under President Kennedy, the United States initiated the strategic hamlet program, supported covert operations, and strengthened its command structure in South Vietnam. Kennedy formed the Military Assistance Command Vietnam (MACV), which was activated on February 8, 1962, and eventually replaced the Military Assistance Advisory Group-Vietnam (MAAG-V) that Eisenhower had established in 1955. The MACV was needed to manage expanding U.S. military operations in South Vietnam. A significant component of this expansion was an increase in the number of U.S. military advisers, from approximately 700 to nearly 15,000 by the end of 1963, and their participation in combat operations. The U.S. Air Force also was used for combat operations. On October 11, 1961, the President authorized the deployment of an Air Force unit to South Vietnam. Stationed north of Saigon, at Bien Hoa Air Base, the 4400 th Combat Crew Training Squadron flew 229 combat missions in support of South Vietnamese ground troops by January 31, 1962 . The flights were authorized as long as a Vietnamese crew member was on board; and the bombers were redesignated RB-26, for reconnaissance bomber, because the 1954 Geneva Conventions prohibited the introduction of bombers to Indochina. In seizing the initiative on Vietnam, and other foreign policy issues and operations, Kennedy was aided to some extent by Congress. Generally, Members agreed with U.S. policy in Vietnam. Another factor was fairly widespread agreement among Members that the President was best-suited for the job of directing foreign policy, and, as a corollary, that the President needed to have sufficient authority to conduct foreign policy. In a speech on June 3, 1962, Senator Mike Mansfield (D-MT), in referring to recent U.S. military operations in Thailand and Vietnam, said: Both steps represent a deepening of an already very deep involvement on the Southeast Asia mainland. In this, as in all cases of foreign policy and military command, the responsibility for the direction of the Nation's course rests with the President. Senator J. William Fulbright (D-AR), in an article published in 1961, explained why Presidents ought to have adequate authority to conduct foreign affairs. In the article, Fulbright took the position that "... for the existing requirements of American foreign policy we have hobbled the President by too niggardly a grant of power.... The overriding problem of inadequate Presidential authority in foreign affairs," Fulbright added, "derives ... from the 'checks and balances' of Congressional authority in foreign relations." Fulbright questioned "... whether in the face of the harsh necessities of the 1960's we can afford the luxury of 18 th century procedures of measured deliberation. It is highly unlikely that we can successfully execute a long-range program for the taming, or containing of today's aggressive and revolutionary forces by continuing to leave vast and vital decision-making powers in the hands of a decentralized, independent-minded and largely parochial-minded body of legislators.... I submit that the price of democratic survival in a world of aggressive totalitarianism is to give up some of the democratic luxuries of the past. We should do so with no illusions as to the reasons for its necessity. It is distasteful and dangerous to vest the executive with powers unchecked and unbalanced. My question is whether we have any choice but to do so." Mansfield's and Fulbright's comments were indicative, generally, of Congress's view of its role and the executive's role during the early stages of the Vietnam involvement, a view that would evolve considerably as involvement deepened. Accustomed to serving as a "silent partner," willing to defer to the expertise of military professionals and intelligence personnel, and unable to observe U.S. military operations and activities for themselves, Members seemed to be content to allow the President and his senior advisers to oversee the war. Helping to shore up South Vietnam militarily and politically was important to the Kennedy Administration, but an even more pressing problem was Cuba. The failed invasion of Cuba at the Bay of Pigs in April 1961 was one of a series of events and public statements that served to heighten the tension between the U.S. and Cuba following its establishment of diplomatic relations with the Soviet Union on May 7, 1960. While Robert F. Kennedy, in his capacity as Attorney General, sent a memorandum to the President on April 19, 1961, warning of the possibility that the Soviet Union might station ballistic missiles in Cuba, it was not until mid-1962 that the U.S. observed suspicious activities and shipments from the Soviets. President Kennedy responded at a news conference on September 13, 1962. Rather than request a joint resolution from Congress authorizing him to take action during the Cuban missile crisis, Kennedy opted to act unilaterally. Asserting his authority as Commander in Chief, Kennedy said: "'I have full authority now to take such action' militarily against Cuba." When asked whether, in light of his claim to have the constitutional authority necessary to act unilaterally, there was any reason for either or both chambers to pass a resolution authorizing him to act, he replied: No. I think the Members of Congress would, speaking as they do with a particular responsibility—I think it would be useful, if they desired to do so, for them to express their view. And as I've seen the resolutions which have been discussed—a resolution which I think Senator [Mike] Mansfield [D-Mont.] introduced and which Chairman [Carl] Vinson [D-Ga.] introduced in the House—and I would think that—I'd be very glad to have those resolutions passed if that should be the desire of the Congress. On October 3, 1962, the President signed a resolution on Cuba, S.J.Res. 230 (P.L. 87-733; 76 Stat. 697), but it did not address the issue of presidential authority. Instead of indicating what the President was authorized to do, the operative portion of the resolution began by stating "That the United States is determined ...." The Senate vote was 86-1; the House, 384-7. The lack of serious opposition to the President's assertion of authority apparently was a sign of deference. Senator Bourke Hickenlooper (R-IA) remarked: "Basically the Executive has the responsibility for and is in charge of foreign policy operations." In late October, the Administration took steps to interdict offensive weapons headed to Cuba. The idea of calling Congress back to Washington, DC, received only brief consideration. Former Secretary of State Dean Acheson, a member of the Kennedy Administration's team that considered various options, noted that "this was no time ... to worry about legal formalities." Kennedy used the Cuba resolution to legitimize his decisions by stating that they were based on "the authority entrusted to me by the Constitution as endorsed by the resolution of the Congress." The assassination of Kennedy on November 22, 1963, and the inauguration of Lyndon B. Johnson did not change United States policy toward Vietnam. Three days after Kennedy's death, President Johnson reaffirmed, in National Security Action Memorandum (NSAM) 273, that it was the goal of the United States to conquer Communist forces in Southeast Asia. Upon taking office, Johnson inherited a noticeably deteriorating situation in Vietnam. Three weeks before Kennedy was killed, Ngo Dinh Diem, prime minister of South Vietnam, was overthrown and murdered by several of his government's high-ranking military officers. Demonstrations in South Vietnam against Diem, and indications that he was considering entering into negotiations with the Communists, were cause for concern among officials in the Kennedy Administration. In all likelihood, the coup was seen by the Administration as an opportunity for South Vietnam to establish a government more willing and better equipped to repel Communist advances. Any improvement was short-lived, however. Reports that the new government was faltering, that the strategic hamlet program was not as effective as expected, and that the Communists were increasing their pressure on Vietnam, as well as Laos, prompted Johnson to send his Secretary of Defense, Robert McNamara, and others, to Vietnam in December 1963 to observe and report on the situation. McNamara's report portrayed a country that was, or soon would be, vulnerable to Communist takeover. Subsequent visits and additional reports yielded similarly bleak assessments. As early as February 13, 1964, the possibility of asking Congress for a resolution on the use of U.S. military forces in Vietnam was under consideration within the Administration. In a memorandum to Secretary of State Dean Rusk, Walt W. Rostow, director of the State Department's Policy Planning Council, wrote that some discussions had been held on the desirability of asking Congress for a resolution. "Even this early in the Johnson administration,"Rostow said subsequently, "word had gotten back to the bureaucracy that Johnson disapproved of Truman's failure to seek a congressional resolution in the Korean War. We understood that, should the occasion arise, he intended to be governed by Eisenhower's precedent in the Formosa and Middle East resolutions, where broad congressional support was sought before policies that might lead to military confrontations were carried out." On May 20, 1964, Johnson requested that a working group develop plans for a congressional resolution. In reporting to Johnson on the group's progress, McGeorge Bundy, the President's national security adviser, said that the team working with Under Secretary of State George W. Ball was "'drafting alternative forms of a congressional resolution so as to give you a full range of choice with respect to the way in which you would seek Congressional validation of wider action. The preliminary consensus is that such a resolution is essential before we act against North Vietnam, but that it should be sufficiently general in form not to commit you to any particular action ahead of time.'" From June 1 through June 3, 1964, top U.S. officials from Washington and Saigon convened in Honolulu to discuss how to proceed in Vietnam and Laos, and how to prepare the American public for an expanded war. A State Department cable that provided guidance for the meeting stated "that the President was consulting closely with congressional leaders, and that he 'will wish Congress associated with him on any steps which carry with them substantial acts and risks of escalation.'" Discussion within the Administration about the desirability and timing of a proposed congressional resolution continued. In a paper he prepared for a June 10 interdepartmental meeting, William Bundy, Assistant Secretary of State for East Asian and Pacific Affairs, suggested that, "in the absence of acute emergency," the Administration could request a resolution within the next three weeks. September and November were possibilities, too, Bundy wrote, should the situation change drastically. However, he recommended that the Administration wait, which also was the recommendation that came out of the meeting, as noted in a memorandum from McGeorge Bundy to the President: "... we do not now recommend an attempt to get an early resolution. We think the risks outweigh the advantages, unless and until we have a firm decision to take more drastic action than we currently plan." However, yet another memorandum from William Bundy, dated June 12, advised that a resolution be sent to Congress the week of June 22 (neither July nor August was suitable because of the Republican and Democratic party conventions). In his memorandum, Bundy wrote: It may be argued that a Congressional Resolution under present circumstances faces the serious difficulty that there is no drastic change in the situation to point to. The opposing argument is that we might well not have such a drastic change even later in the summer and yet conclude—either because of the Polish consultations [meetings then being planned for negotiating a new settlement in Laos] or because of the South Viet-Nam situation—that we had to act. Efforts to develop a resolution, and to determine when it should be proposed, were suspended in mid-June. A group of senior National Security Council officials, meeting on June 15, agreed with a White House memorandum that stated a resolution was not necessary at the time. In his account of this determination, William Bundy wrote: "... in the end the case against the resolution seemed overwhelming ... the general consensus was that in the absence of a considered decision for a sustained course of action, the need for a resolution was impossible to explain adequately to the Congress and the public." Later that summer, events in the Gulf of Tonkin provided the Johnson Administration with a rationale for proposing a congressional resolution. The following is a summary of events that served as the catalyst for the Administration's effort to secure the passage of a resolution in 1964. This account reflects the views of some that the Administration was not completely forthcoming with Congress in its portrayal of what occurred, and why, in the Gulf of Tonkin in August 1964. In June and July 1964, the United States was conducting both overt and covert operations in Southeast Asia. Two of the covert operations were 34-A raids, which were named for OPLAN 34-A and had been put into effect in February; and DE SOTO patrols, which began in mid-June. Commandos from South Vietnam (and other countries) carried out 34-A raids, using high speed boats to attack the coast of North Vietnam. These personnel had been recruited and were managed by the Central Intelligence Agency (CIA). DE SOTO patrols were intelligence gathering missions conducted by the U.S. Navy off the coast of North Vietnam. They were also intended to be a show of force. On the night of July 30, 1964, 34-A boats attacked two North Vietnamese islands in the Gulf of Tonkin. On July 31, the U.S.S. Maddox was headed to the same area to conduct a DE SOTO patrol. The Maddox was attacked by three North Vietnamese torpedo boats on August 2. It returned fire, as did aircraft from the U.S.S. Ticonderoga . "Though some of the President's advisers urged an immediate retaliatory move," said George W. Ball, Under Secretary of State, "the President wished for an even stronger record. So, rather than keeping our ships out of this now established danger zone, the President approved sending both the  Maddox and the destroyer C. Turner Joy back into the Gulf." On August 3, the C. Turner Joy joined the Maddox . Following a meeting with the President, McNamara, and General Earle G. Wheeler, chairman of the Joint Chiefs of Staff, during the afternoon of August 3, Secretary of State Rusk sent a cable to Maxwell Taylor, U.S. ambassador to Vietnam, informing him that 34-A operations had additional targets. [Rusk] also told Taylor, contrary to the denials of the executive branch is [sic] its discussions with Congress and in its public statements, that there was, indeed, a direct connection between the 34-A operations and the North Vietnamese attack on the Maddox , and that the attack on the Maddox , rather than being unprovoked, was directly related to the 34-A raids. This is what Rusk's cable said: 'We believe that present OPLAN 34A activities are beginning to rattle Hanoi, and MADDOX incident is directly related to their efforts to resist these activities .... We have no intention of yielding to pressure.' On the night of August 3, 34-A raiders attacked the coast of North Vietnam again. On August 4, Commander John J. Herrick, who was on board the Maddox , reported that both Navy ships were under "continuous torpedo attack." Several hours later, Herrick sent another message, in which he expressed his doubts that there had been an attack on August 4, citing poor weather, overeager sonarmen, and lack of sightings, and recommended a more thorough assessment of events before responding. Efforts to determine whether the Navy ships had been attacked on August 4 continued for some time, even as the Administration pressed on with its plans for a congressional resolution. A four-person team from the Department of Defense (DOD), sent on August 9 to investigate the incident, concluded an attack had occurred. However, Navy pilots stationed on board the Ticonderoga gave conflicting reports; two pilots apparently confirmed an attack had taken place while a third pilot disputed there had been a torpedo attack. The deputy director of the Central Intelligence Agency, Ray S. Cline, after reviewing the evidence, concluded, "within about three days after the incident" that an attack probably had not occurred. While McNamara and military officials were trying to confirm that a second attack had occurred, Abram Chayes, legal adviser for the State Department, and Ball were drafting, on August 4, a congressional resolution. According to Chayes, The main thing ... that Ball wanted me to deal with, ... was this question of Executive-Congressional relationships.... The whole problem ... was how do you get a resolution without acknowledging that Congress had any authority in this?... I didn't look at whatever the evidence was.... It was simply that he [Ball] wanted me to look at the resolution and make sure that we're not giving away any part of the President's power in this resolution. And so I spent ... a couple of hours, talking about the resolution, going over it and making sure that it didn't go beyond the earlier resolutions in the acknowledgment of a requirement of congressional participation. On the evening of August 4, Johnson, Rusk, McNamara, McCone, and Wheeler met with congressional leaders and committee chairmen and ranking members. Johnson offered an account of the attack and informed the Congressmen that he already had ordered a retaliatory strike and would address the nation later in the evening. Only Senator Mansfield opposed Johnson's decision, although when the President asked each Member to state his position on a congressional resolution, all indicated they would support the resolution. In a televised address the night of August 4, President Johnson announced that the U.S. would retaliate. The next day, aircraft from the Ticonderoga and the Constellation attacked North Vietnamese torpedo boats and support facilities along the coast. Though immediate efforts to determine what had taken place in the Gulf of Tonkin, with an eye toward confirming that two U.S. Navy ships had been attacked by North Vietnamese, continued for several days, Johnson was adamant that North Vietnamese forces had attacked "United States ships on the high seas in the Gulf of Tonkin," and he announced that the U.S. would respond with air strikes against North Vietnamese torpedo boat bases and supply depots. On August 5, the Administration sent a draft resolution to Congress. The resolution did not meet with serious opposition in either chamber. The urge to act apparently was the predominant motive in the House and is reflected in Representative Dante B. Fascell's (D-FL) recollections: My own impression of what happened at that time was that most everybody said, well, the President wants this power and he needs to have it. It had relatively little to do with the so-called incident. I don't know why so much stress has been made on whether or not there was an incident or whether or not the President was deceitful or whatever.... The President needed the authority. Who cared about the facts of the so-called incident that would trigger this authority? So the resolution was just hammered right on through by everybody. Senator Charles Mathias (R-MD), in reviewing how readily Congress accepted the Administration's draft resolution, focused on historical precedence and success. What we were familiar with was a pattern of practice that had existed since the end of World War II, whereby the United States, by merely passing a resolution of the Congress, could bring about certain dramatic events in the world.... So I think we were, to some extent, the victims of success, in dealing with the Tonkin Gulf Resolution. It had worked so well in those previous situations that, speaking for myself, I think I was over-confident that it would work again, and that merely by enacting a resolution which seemed, at least, to show a high degree of national unity, that we could in some way dissipate the forces which we at that moment, saw as a threat. Deputy Attorney General Nicholas deB. Katzenbach offered the upcoming presidential election as another factor in congressional Democrats' decisions to support the resolution. With his opponent, Senator Barry Goldwater, running as a "hawk," President Johnson needed to demonstrate his commitment and resolve in dealing with the North Vietnamese. While some Senators were apprehensive about the resolution and its implications, only one, Senator Wayne Morse (D-OR), was a persistent critic. He maintained that the United States had engaged in provocative acts; he questioned the constitutionality of the resolution; and he objected to using American forces to aid governments unworthy (i.e., dictatorships, fascist regimes, monarchies) of American support. The Senate passed H.J.Res. 1145 by a vote of 88-2. The vote in the House had been unanimous (416-0) in favor of the resolution. Passed as drafted by the White House, with only one minor change, the joint resolution (P.L. 88-408; 78 Stat. 384) was signed by the President on August 10, 1964. Unlike the Formosa Resolution, in which Congress authorized the President to use the armed forces, the Gulf of Tonkin resolution stated that Congress "approve[d] and support[ed] the determination of the President, as Commander in Chief, to take all necessary measures ..." which included the use of armed force. Expiration of the resolution was contingent upon the President's determination that the peace and security of Southeast Asia had been "reasonably assured." Growing dissatisfaction in Congress with the Gulf of Tonkin Resolution led to its repeal in 1970. The beginning of the end for the resolution may have been triggered by Johnson's use of it in 1965 to expand the war. In 1966, Senator Morse offered an amendment to repeal it. In 1967, approximately 25 Republicans in the House asked for hearings to consider the possibility of modifying or replacing the resolution. In that same year, the Senate Committee on Foreign Relations held hearings on a national commitments resolution. The committee report included this assessment of the resolution and the role of Congress in its passage: The Gulf of Tonkin resolution represents the extreme point in the process of constitutional erosion that began in the first year of this century. Couched in broad terms, the resolution constitutes an acknowledgment of virtually unlimited Presidential control of the Armed Forces. It is of more than historical importance that the Congress now ask itself why it was prepared to acquiesce in the transfer to the executive of a power which, beyond any doubt, was intended by the Constitution to be exercised by Congress. The report on national commitments from the Committee on Foreign Relations also suggested why Congress acted as it did in 1964. There was a sense of urgency. Congress believed it was demonstrating its unity with, and support for, the President by passing the resolution. The nation's leaders and the public focused on national security, yet paid little attention to the war power. The committee also stated that, ... in the case of the Gulf of Tonkin resolution, there was a discrepancy between the language of the resolution and the intent of Congress. Although the language of the resolution lends itself to the interpretation that Congress was consenting in advance to a full-scale war in Asia should the President think it necessary, that was not the expectation of Congress at the time. In adopting the resolution Congress was closer to believing that it was helping to prevent a large-scale war by taking a firm stand than it was laying the legal basis for the conduct of such a war. The committee concluded that in adopting a resolution with such ... sweeping language ... Congress committed the error of making a personal judgment as to how President Johnson would implement the resolution when it had a responsibility to make an institutional judgment, first, as to what any President would do with so great an acknowledgment of power, and, second, as to whether, under the Constitution, Congress had the right to grant or concede the authority in question. President Johnson lost one of his strongest supporters on Vietnam policy, Senator Fulbright, through his handling of the Dominican Republic crisis in 1965. On April 24, 1965, the capital of the Dominican Republic, Santo Domingo, was the scene of a rebellion. Johnson sent U.S. armed forces to the Dominican Republic on April 28. Their mission was to evacuate American citizens and other nationals. Initially, 400 Marines were deployed. By May 9, the U.S. had deployed nearly 19,000 troops. The Johnson Administration justified the large number of troops by expressing its concern about a Communist takeover of the Dominican Republic, but it did not ask for, or broach the subject of, a congressional resolution. Once the situation in the Dominican Republic had stabilized, Senator Fulbright, and other critics in Congress, questioned what the Administration had done. Of particular concern was the President's use of war powers. Hearings were held for nine days in fall 1965, but no committee report was issued. Fulbright's complaints, which were shared by others, were: "the change in emphasis from saving American lives to preventing a Communist takeover; the Administration's faulty evaluation of and overreaction to the threat of Communism; poor intelligence and advice from governmental officials on the scene; and, not least, the Administration's lack of candor with the American public." A staunch supporter of Johnson who played a crucial role in the passage of the Gulf of Tonkin resolution, Fulbright set out on a different path after Johnson's intervention in the Dominican Republic. Though eligible for reelection, Johnson declined to run again. A combination of factors, including growing criticism of the war, led him to announce early in 1968 that he would not seek reelection. Elected in 1968, Richard M. Nixon was the fourth President saddled with the Vietnam conflict. Consistent with his emphasis on the need for secrecy, Nixon was not inclined to share information, or consult, with Congress. From its portrayal of South Vietnam's ability to fend off the North Vietnamese to the series of secret peace talks conducted by national security adviser Henry Kissinger, the Administration tended not to make a consistent effort to keep Congress informed. In the year leading up to Nixon's inauguration, several significant events took place. Beginning in late January 1968, and continuing into February, North Vietnam launched the Tet offensive, a coordinated attack on South Vietnamese military and government facilities. Communist troops also attacked the American embassy compound in Saigon. Though producing, at best, mixed results in the eyes of the North Vietnamese, the Tet offensive surprised American forces in Vietnam and the U.S. government, and influenced the American public's view of the war, contributing to a decline in support for the war, a decline that had begun in 1967. On March 31, President Johnson announced, during a televised address, that he was ordering a partial halt to the bombing of North Vietnam. Johnson also announced that he would not seek reelection and asked North Vietnam to join in negotiations to end the war. From May 13 through October 30, the U.S. and North Vietnam met 28 times, eventually reaching an agreement on expanding the peace talks. As part of the agreement, Johnson ordered, on October 31, a complete halt to the bombing of North Vietnam. Discussions about expanded talks continued through the end of the year and into 1969, and, on January 18, all parties finally reached an agreement on procedural issues, which paved the way for the beginning of negotiations on substantive issues. In the United States, expectations of a negotiated settlement were fueled by the year-long peace talks. The public and Congress shared a desire for the U.S. to extricate itself, and particularly American troops, from Southeast Asia. By spring 1968, a majority of Americans had come to believe that U.S. involvement "in Vietnam had been a mistake." Widespread antiwar demonstrations and other activities were a highly visible reminder of the public's fatigue and disenchantment with the war. Nixon understood that a clear and decisive military victory in Southeast Asia was not possible, but he believed that his policy of Vietnamization, which was based on the Nixon Doctrine, would help him achieve a measure of success. Moreover, the policy of Vietnamization would allow him to begin bringing American troops home. Under President Johnson, the number of U.S. armed forces stationed in Vietnam had increased greatly so that, by the time Nixon was inaugurated, 530,000 American military personnel were deployed in the area. One of Nixon's first major actions was to announce, six months after he took office, the first withdrawal of U.S. troops. The thrust of Vietnamization was to couple the withdrawal of American forces with increasing reliance on South Vietnamese troops to carry on military operations on the ground. By November 1972, Nixon had reduced the number of U.S. troops to 27,000. All remaining troops were evacuated in early 1973, although U.S. air support for South Vietnamese combat troops continued. Troop withdrawals assuaged the American public to a certain extent and were touted by the Administration as evidence that Vietnamization was successful. Nixon was criticized, though, for the slow pace of bringing troops home. The President responded to such criticisms by describing the benefits of a gradual withdrawal. First, he tied the rate of withdrawal to South Vietnam's progress in developing its military capabilities and the lessening of enemy military activities. Aiding South Vietnam in these efforts, besides expectations of it ensuring success, was necessary, in Nixon's view, to avoid his being portrayed as the President who lost Vietnam and to avoid the accompanying political fallout. Another consideration was bringing the war to an end in an appropriate manner. For Nixon, and his Administration, this meant achieving "peace with honor." Time was needed for the Paris peace talks to progress satisfactorily so that the United States, and other signatories, could claim that peace with honor had been achieved. Time alone would not be sufficient, however, in bringing the war to an appropriate conclusion. As discussed below, the South Vietnamese were unable to fend off the Viet Cong by themselves, yet the White House, consistent with its policy of Vietnamization, had pledged to bring American troops home. Striving to meet its commitments on both fronts, the Nixon Administration resorted to secretive practices in employing the military. It "could escalate only covertly, since almost all Americans demanded that the war wind down on Nixon's watch." For example, very early in his first term, Nixon had U.S. military aircraft launch "thousands of 'legal' bombing raids against the North" in the name of protective reaction. Protective reaction strikes into North Vietnam were allowed, but only against antiaircraft sites in North Vietnam "whenever their radar locked on to American reconnaissance flights." In early 1969, the Administration also increased the number of raids into Laos and began bombing portions of Cambodia in an effort to disrupt the North Vietnamese supply system. The North Vietnamese used trails (such as the Ho Chi Minh trail) that ran through Laos and Cambodia to transport supplies to its forces in South Vietnam. Mindful of warnings from his Secretaries of Defense and State and the leader of Cambodia about possible repercussions if the bombing of Cambodia were made public, Nixon ordered that measures be taken to obscure the true purpose of bombing missions. These included tampering with the navigational systems on bombers and maintaining two sets of flight records, one with the actual targets and the other with targets in South Vietnam. Nixon's presidency coincided with legislative efforts by Congress to restore its role in foreign affairs and exercising war powers, which had eroded over the years. The Senate acted early in President Nixon's first term, passing a national commitments resolution, S.Res. 85, by a vote of 70-16, on June 25, 1969. Concern about U.S. commitments abroad, and a lack of complete information about commitments made by the executive branch, coalesced into support for a resolution. The resolution defined "national commitment" as "the use of the armed forces on foreign territory, or a promise to assist a foreign country, government or people by the use of the armed forces or financial resources ...." The resolution stated further that "a national commitment ... results only from affirmative action by the legislative and executive branches" of government. The proper vehicles for taking such action, as listed in the resolution, were a treaty, statute, or concurrent resolution. However, the resolution only expressed the sense of the Senate; it did not have the force and effect of law. The report accompanying the resolution described an imbalance between the legislative and executive branches, and explained how the imbalance came to be: Both the executive and the Congress have been periodically unmindful of constitutional requirements and proscriptions, the executive by its incursions upon congressional prerogative at moments when action seemed more important than the means of its initiation, the Congress by its uncritical and sometimes unconscious acquiescence in these incursions. If blame is to be apportioned, a fair share belongs to the Congress. It is understandable, though not acceptable, that in times of real or seeming emergency the executive will be tempted to take shortcuts around constitutional procedures. It is less understandable that the Congress should acquiesce in these shortcuts giving away that which is not its to give, notably the war power, which the framers of the Constitution vested not in the executive but, deliberately and almost exclusively, in the Congress. The fact that Congress has acquiesced in, or at the very least has failed to challenge, the transfer of the war power from itself to the executive, is probably the most important single fact accounting for the speed and virtual completeness of the transfer. Why has Congress agreed to this rearrangement of powers which is without constitutional justification, and at its own expense? Why did Congress acquiesce to the executive? Unfamiliarity with the nation's new role as a world power, "the cult of executive expertise," and efforts by Congress to atone for rejecting the Covenant of the League of Nations in 1919 by agreeing to proposals for international involvement are cited by the report as factors that contributed to a mindset that favored acquiescence in foreign affairs. In its assessment of Congress's actions on the Formosa, Middle East, Cuba, and Gulf of Tonkin resolutions, the committee report noted that each situation appeared to require urgent action, there were no "firm historical guidelines" on what to do, the resolutions were necessary as expressions of national unity, and executive actions ballooned beyond original congressional expectations. The report also noted that, following World War II, the government focused on national security, but paid little attention to constitutional matters. The committee recommended that, for any joint resolutions in the future "involving the use or possible use of the Armed Forces," Congress ought to debate thoroughly each one so that its intent becomes known; use "authorize," "empower," or similar words to show that Congress has the authority to "authorize the initiation of war," and that it is giving the President a power he would not otherwise have; be as explicit as possible in the resolution about the circumstances, place, and purpose for using military intervention; and include a sunset provision, which would assure that Congress would have an opportunity to review its decision and terminate or extend the grant of authority given to the President. Speaking at a news conference held prior to the resolution's passage, Nixon argued that a President should not have to consult with the Senate during a crisis. To bolster his argument, Nixon noted that the President had to respond immediately in 1958, when Eisenhower sent troops into Lebanon, and in 1964, when Johnson orchestrated the evacuation of missionaries from the Congo. Senator Mike Mansfield (D-MT), echoing Eisenhower's philosophy, countered that, by working in concert with the Senate and thus showing a united front, the President's hand would be strengthened. In March 1970, Nixon acknowledged publicly, for the first time, that the U.S. had been involved in Laos and that the involvement had begun in 1962. Several factors, including news reports of U.S. military activities in Laos and pressure from some Senators, led Nixon to release a statement about the involvement. Assuring the public that the U.S. did not have any ground troops in Laos, the President identified how many Americans were involved in logistics and how many were serving as advisers. (Several months prior to Nixon's public admission, he had signed P.L. 921-171 (H.R. 15090; 83 Stat. 469), a defense appropriations act, which included a provision that prohibited using any of the funds appropriated in the act "to finance the introduction of American ground combat troops into Laos or Thailand.") During his address on March 6, Nixon also stated that U.S. aircraft were used only for interdiction, reconnaissance, and combat support (when requested by the Laotian government). What Nixon did not mention in his statement were Central Intelligence Agency activities and the extent of U.S. air operations in Laos. The following month, Nixon turned his attention to Cambodia. On April 22, 1970, only two days after he had announced the withdrawal of 150,000 troops from Vietnam, Nixon began planning to invade Cambodia. Having made his final decision on April 28, the President informed the nation, in a televised address, on April 30. These troops were not an invasion force, Nixon said, but were needed along the border between Cambodia and South Vietnam to protect other U.S. troops as they withdrew, to defend Cambodia against the North Vietnamese, and to capture the enemy's Central Office for South Vietnam. Senate Foreign Relations Committee Chairman Fulbright promptly invited the President to meet with the committee on this matter. Nixon's response was to invite the Senate and House Committees on the Armed Services to meet with him the morning of May 5. The Senate Committee on Foreign Relations and the House Committee on Foreign Affairs were invited for the afternoon. Congressional reaction to the meeting was "mixed." During the meeting, Nixon pledged to withdraw American troops from Cambodia by June 30, 1970. He repeated this pledge during a news conference on May 8. News of the incursion into Cambodia was greeted by protests on most college campuses, including the fateful protests at Kent State University in Ohio on May 4 and at Jackson State University in Mississippi on May 15. As part of its effort to establish a role for itself in foreign policy, Congress revisited the Gulf of Tonkin resolution in February 1968, when the Senate Committee on Foreign Relations held closed hearings on the events which led to its passage. In 1970, the 91 st Congress approved a foreign military sales bill that included an amendment to repeal the Gulf of Tonkin resolution. President Nixon signed P.L. 91-672 (H.R. 15628; 84 Stat. 2053) on January 12, 1971. Initially, his Administration had opposed the repeal of the resolution, but later dropped its opposition. On the floor of the Senate, Senator Robert Dole (R-KS) noted: "The Tonkin Gulf resolution has never been used by President Nixon, and he has no intention of using it. Indeed, he has made it clear that he has never relied upon it in the conduct of American policy in Vietnam." Congress took additional steps in early 1971, with the passage of two bills, to insert itself into the foreign policy process. A supplementary foreign aid authorization act, P.L. 91-652 (H.R. 19911; 84 Stat. 1942); which the President signed on January 5, 1971, included the Cooper-Church amendment, which stated that: ... none of the funds authorized or appropriated pursuant to this or any other Act may be used to finance the introduction of United States ground combat troops into Cambodia, or to provide United States advisers to or for Cambodian military forces in Cambodia. The Cooper-Church amendment also stipulated that the President must inform the Speaker of the House of Representatives and the chairman of the Senate Foreign Relations Committee 30 days in advance if he intended to provide any additional assistance to Cambodia. In case of emergency, the President was required to inform Congress 10 days in advance. On January 11, 1971, Nixon signed P.L. 91-668 (H.R. 19590; 84 Stat. 2020), a defense appropriations act, which included a prohibition on using any funds appropriated under the act for the introduction of U.S. ground troops into Laos or Thailand. However, the prohibition against American ground troops in Laos did not stop Nixon from exercising other military options. On February 8, 1971, the U.S. assisted South Vietnam in invading Laos, with the U.S. military providing close air support to South Vietnamese ground troops. The objective was to neutralize North Vietnamese supply bases serving the Ho Chi Minh trail, and the offensive ended earlier than planned, on March 24. The invasion ... was a disaster. The North Vietnamese knew that the South Vietnamese were coming and were well dug in, and the South Vietnamese withdrew before achieving their goals.... The South Vietnamese lost 8,000 men and the North Vietnamese 12,000; the communists downed between 100 and 200 helicopters and damaged 600.... Nixon had told congressional leaders two days into the incursion that [the] Lam Son 719 [military operation] would prove that Vietnamization was working. Instead, Americans saw shocking films on the nightly newscasts of South Vietnamese clinging to helicopters taking them out of Laos.... [President Nixon] told a press conference on 17 February that everything "has gone according to plan" and that General Abrams assured him that the South Vietnamese "are fighting ... in a superior way." In a televised address on April 7, Nixon announced that 100,000 additional troops would be brought home. Nixon attributed his decision to the success of Vietnamization, although his candor has since been questioned. The American public was concerned, despite the announcement of another troop withdrawal, that Nixon was expanding the war. Fueling the public's mistrust of the Administration was the disclosure and publication, in June 1971, of a collection of documents and materials that came to be known collectively, and were published, as the Pentagon Papers , a government study of U.S. involvement in Southeast Asia. The study demonstrated "the comparative impotence of Congress in making foreign policy" and "also demonstrated the executive branch's general indifference to the constitutional prerogatives of Congress in the conduct of defense and foreign affairs." Concerned about the limits of executive privilege, the Senate Judiciary Subcommittee on Separation of Powers held hearings, in July and August 1971, on this issue and a bill that had been introduced by Senator Fulbright, S. 1125. No action was taken on the measure. If it had been enacted, S. 1125 would have required that an individual who claimed executive privilege would have to do so in person and present a written "assertion of the privilege from the President." The penalty for failure to comply would have been the loss of agency funds. Later in 1971, President Nixon shared his philosophy on executive privilege when he refused to submit to the Senate Committee on Foreign Relations information on a plan for military assistance to other countries. In a letter to the committee, Nixon wrote: The precedents on separation of powers established by my predecessors from first to last clearly demonstrate ... that the President has the responsibility not to make available any information and material which would impair the orderly function of the executive branch of the government, since to do so would not be in the public interest. Subsequently, in passing S. 596 (92 nd Congress) in 1972, Congress moved toward requiring the White House to provide it with information about international executive agreements. (Three years earlier, during the national commitments hearings, it was revealed that the number of executive agreements made by Presidents had grown and that some were kept secret.) S. 596 required the Secretary of State to send the text of an executive agreement to Congress within 60 days of the execution of the agreement. An exception was allowed for any agreement the President deemed to "be prejudicial to the national security of the United States." These agreements would be sent only to the Senate Committee on Foreign Relations and the House Committee on Foreign Affairs. Having been passed by the Senate (81-0) on February 16, 1972, and the House (voice vote) on August 14, 1972, the legislation, P.L. 92-403 (S. 596; 86 Stat. 619), was signed by the President on August 22, 1972. Four years after the Tet offensive, the North Vietnamese launched another major offensive operation against South Vietnam. Military attacks began on March 30, 1972, and, by May 1, the Communists had captured Quang Tri. The South Vietnamese were saved from defeat by U.S. air power, which attacked Communist targets in South Vietnam and bombed Hanoi and Haiphong in North Vietnam. South Vietnam was "still in desperate shape," however, so Nixon ordered the mining of the harbors in Hanoi and Haiphong. The President announced his decision on May 8, having alerted the Democratic and Republican leadership of the Senate and the House and the chairmen and ranking minority members of four committees of each house one hour before his televised speech. Senator Mansfield said that one-hour notice did not qualify as consulting with Congress, adding, "We were told after the fact." After unsuccessful efforts in 1970, 1971, and 1972 to pass war powers legislation, Congress, in 1973, overrode a veto to enact the War Powers Resolution. On July 18, 1973, the House of Representatives passed H.J.Res. 542 (93 rd Congress) by a vote of 244-170. The Senate passed its own version of war powers legislation, S. 440 (93 rd Congress), two days later by a vote of 72-18. Anticipating a presidential veto, congressional opponents did not mount a serious challenge to the resolution. As passed by the House, H.J.Res. 542 would have limited the commitment of U.S. troops abroad to 120 days (unless war had been declared or the time period had been extended by Congress) and would have allowed Congress to terminate the troop commitment at any time. As passed by the Senate, the legislation would have limited the commitment of troops to 30 days, unless Congress authorized, through a bill or a joint resolution, an extension. The result of conference on the measures was a revamped version of H.J.Res. 542. On October 10, 1973, the Senate approved the conference report by a vote of 75-20. The vote in the House, on October 12, was 238-123 for the conference report. President Nixon vetoed the resolution on October 24. In his message to Congress explaining the veto, Nixon stated that several of the provisions were unconstitutional and expressed his concern that the resolution would "seriously undermine this Nation's ability to act decisively and convincingly in times of international crisis." On November 7, 1973, Congress overrode Nixon's veto. In the House of Representatives, the vote was 284-135. Eighty-six of 189 Republicans and 189 of 230 Democrats voted to override the veto. In the Senate, the vote was 75-18. Twenty-five of 40 Republicans and 50 of 53 Democrats voted to override. The major provisions of P.L. 93-148 (H.J.Res. 542; 87 Stat. 555) are: The President may commit troops to hostilities or situations where hostilities are imminent only pursuant to a declaration of war, a specific statutory authorization, or a national emergency created by attack upon the United States, its territories or possessions, or its armed forces. The President shall consult in every possible instance with Congress before committing U.S. troops to hostilities or to situations where hostilities are imminent. The President shall consult regularly with Congress until U.S. troops are removed from hostilities or situations where hostilities are imminent. The President shall submit, within 48 hours of substantially expanding the number of U.S. combat troops already located in another nation or introducing U.S. troops into hostilities or situations where hostilities are imminent, a report to the Speaker of the House. The report shall explain the circumstances warranting U.S. military action, cite the constitutional and statutory authority the President is using, and provide an estimate of the scope and duration of the hostilities or U.S. involvement. Any commitment of troops shall be terminated within 60 calendar days after the President has submitted a report unless Congress has declared war, has specifically authorized the use of the armed forces, has extended by law the 60-day period, or is unable to meet as a result of an armed attack upon the United States. The initial period of 60 days "shall be extended for not more than an additional thirty days" if the President certifies, in writing, to Congress that such additional time is needed for the safe and prompt removal of American troops. Though some consider the War Powers Resolution a measure that benefits Congress by mandating its involvement in decisions to commit U.S. troops abroad, others maintain that the statute has not helped Congress restore the balance between itself and the presidency. Several assessments conclude that the War Powers Resolution helps to maintain the imbalance. As one of them asserted: "In fact, by recognizing that the President may use armed force for up to 90 days without seeking or obtaining legislative authority, the resolution sanctions a scope of independent presidential power that would have astonished the framers. The founding fathers vested in Congress the power to initiate hostilities against foreign nations. Some Members expressed the same concern that the statute failed to reclaim lost ground. Representative Vernon Thompson (R-WI) offered this assessment of the resolution: "The clear meaning of the words certainly points to a diminution rather than an enhancement of the role of Congress in the critical decisions [about] whether the country will or will not go to war." Another Member of the House, Robert Eckhardt (D-TX), commented that the measure would allow the President "to exercise a warmaking power" which the Constitution "exclusively assigned to the Congress." Even a principal sponsor of S. 440, Senator Thomas Eagleton (D-MO), was adamantly opposed to the bill that emerged from conference and supported Nixon's veto: What this bill says is that the President can send us to war wherever and whenever he wants to. Troops could be deployed tomorrow to the Mideast under this bill without our prior authority. All the President has to do is to make a telephone call to Senator Mansfield and Senator Scott and say, "The boys are on the way. I think you should know." Consultation. There they are; 60 to 90 days. Once those troops are committed the history of this country is replete with examples; that once committed they remain. ... Despite what has been written and said about [this bill], it does not limit the power of the President of the United States to wage war by himself. Quite to the contrary. It attempts to emblazon into law, that unilateral decisionmaking process. The tendency of the Nixon Administration to operate in secret was evident in national security adviser Henry Kissinger's activities. During Nixon's first term, Kissinger refused "to testify before committees on the conduct of the Vietnam war," which "distressed" Members of Congress. His refusal to testify may have been related to his participation in secret negotiations at the time. Although public negotiations with North Vietnamese officials began in 1968, on January 25, 1972, the President revealed that private peace negotiations had also been going on for two years between Kissinger and North Vietnamese diplomats. They met 12 times, beginning on August 4, 1969, and continued through August 1971. Kissinger continued to meet with North Vietnamese officials throughout 1972 and, on January 27, 1973, a peace treaty was signed in Paris. All remaining U.S. troops were withdrawn from Vietnam on March 28, 1973. Reelected in 1972 with 60.7% of the popular vote and 520 electoral votes, Nixon soon was embroiled in a scandal that eventually would lead to his resignation under the cloud of possible impeachment. On June 17, 1972, seven men broke into the headquarters of the Democratic National Committee at the Watergate hotel and office complex. They were tried in January 1973. Five pled guilty and two were convicted. After the break-in, Nixon learned about the connections among the seven Watergate burglars, the Committee to Reelect the President (CREEP), and the White House. Working with John Dean, White House counsel, John Ehrlichman, assistant to the President for domestic affairs, and H. R. Haldeman, his chief of staff, Nixon fashioned a plan for "political containment." Their efforts were for naught as the investigations into Watergate also examined the cover-up. The Washington Post reported, on June 3, 1973, that John Dean had told Senate and Justice Department investigators that he had discussed the cover-up with the President on a number of occasions. Watergate investigators also uncovered evidence that the White House had known about, if not authorized, the burglary of the office of Daniel Ellsberg's psychiatrist, which occurred on September 3, 1971. (Daniel Ellsberg, a former defense analyst, was responsible for leaking the Pentagon Papers to the press.) As additional information about White House activities was revealed or discovered, Nixon's ongoing attempts to limit the damage had negative consequences. For example, the President sparred with the Senate Select Committee on Presidential Campaign Activities over its request for presidential tape recordings, first refusing to turn over the tapes, then offering to provide edited versions, and so on, until compelled by a court order to produce the tapes. In the so-called "Saturday Night Massacre" on October 20, 1973, Nixon abolished the office of the special prosecutor for Watergate, headed by Archibald Cox, and had Solicitor General Robert H. Bork, in his capacity as acting attorney general, dismiss Cox. Attorney General Elliot L. Richardson had refused to remove Cox and then resigned. Deputy Attorney General William D. Ruckelshaus also refused and resigned. (In their absence, Bork, by law, became acting Attorney General.) Nixon continued to maintain his innocence, but, in late July 1974, the House Committee on the Judiciary approved three articles of impeachment. The charges were obstruction of justice (approved by a 27-11 vote), abuse of power (28-10), and contempt of Congress (21-17). On August 9, 1974, Nixon became the first President to resign from office. He was succeeded by Gerald Ford, whom Nixon had appointed to the vice presidency after Spiro Agnew had resigned on October 10, 1973. Under the leadership of Saddam Hussein, Iraq launched a predawn attack, on August 2, 1990, against Kuwait, its small southeastern neighbor bordering on the upper end of the Persian Gulf. Among the factors motivating this assault was an $8 billion debt incurred by Iraq as a result of its eight-year war with Iran. Approximately half of this amount was owed to Saudi Arabia, Kuwait, and other Persian Gulf States. Iraqi leaders thought that this debt should be forgiven in as much as Iraq had served as a shield against Iran. Moreover, Kuwait was contributing to low international oil prices by exceeding its oil production quota set by the Organization of Petroleum Exporting Countries (OPEC). As a result, Iraq's revenues from its own oil sales were adversely affected. Furthermore, Kuwait was seen as drawing oil from the Rumaila oilfield, only a small part of which lay beneath its territory. In mid-July 1990, Iraq accused Kuwait and the United Arab Emirates of exceeding their OPEC quotas, and charged the former with pumping $2.4 billion worth of oil that rightfully belonged to Iraq. Late in the month, Iraq began a buildup of troops and military equipment in an area near its border with Kuwait. An attempt at talks between Iraq and Kuwait in Jiddah, Saudi Arabia, on August 1 quickly broke down. Hours later, Iraqi armed forces invaded Kuwait, and, by August 8, Baghdad announced that the occupied nation was being annexed. Although American intelligence had detected the massing of Iraqi armed forces on the Kuwait border and their presence gave U.S. leaders concern, the sudden invasion of Kuwait was unexpected. Speaking with reporters at 8:05 a.m. on August 2, President George H. W. Bush said that "the United States strongly condemns the Iraqi military invasion of Kuwait," called "for the immediate and unconditional withdrawal of all the Iraqi forces," and characterized the assault as "raw aggression." He announced that United Nations Ambassador Thomas Pickering, in conjunction with representatives from Kuwait, had brought about an emergency convening of the Security Council for a "quick, overwhelming vote condemning the Iraqi action and calling for immediate and unconditional withdrawal." Finally, the President reported that "the Department of State has been in touch with governments around the world urging that they, too, condemn the Iraqi aggression and consult to determine what measures should be taken to bring an end to this totally unjustified act." Other steps included issuing E.O. 12722, which declared a national emergency with regard to the threat to the national security and foreign policy of the United States resulting from the Iraqi invasion, and invoking statutory authorities blocking Iraqi government property, freezing Iraqi government assets, and prohibiting transactions with Iraq. E.O. 12723 was issued to protect Kuwaiti government property and assets. These initial actions reflected the willingness of the Bush Administration to work through the United Nations (U.N.) and cooperatively, as well, with other nations having an interest in the region to reverse Iraq's aggression against Kuwait. In his initial meeting with the press regarding the Kuwait invasion, President Bush, when asked if he was contemplating any intervention or sending of troops, replied: "I'm not contemplating such action." Later that day, in an afternoon exchange with the press, the President indicated that he had discussed options on the Kuwait situation with relevant advisers, and proffered, "we're not ruling any options in, but we're not ruling any options out." However, as has been observed, the President was embarking on a course of unilaterally deciding American policy regarding the Kuwait crisis. Within Congress, many Members denounced Iraq's attack upon Kuwait, some hinting that the use of military force might be necessary as a response. In the House, on August 2, a bill ( H.R. 5431 , 101 st Congress) imposing sanctions on Iraq similar to those set by E.O. 12722 was expedited through two committees, brought to the floor, and, with virtually no debate, was adopted on a 416-0 vote. That same day, the Senate, on a 97-0 vote, approved a resolution ( S.Res. 318 ) endorsing the President's order. A primary concern for President Bush in the immediate aftermath of the Iraqi invasion of Kuwait was deterring further advance by Iraqi forces into Saudi Arabia, supplier of about 15% of U.S. oil imports alone. Supported by various congressional leaders in this strategy, the President actively sought to convince the Saudi king of the need for locating American armed forces within his nation. Apprised on August 6 of an Iraqi missile threat to his country, the king agreed to accept a U.S. military presence. However, reportedly only one Member of Congress—Senator Sam Nunn (D-GA), chairman of the Committee on Armed Services—was informed in advance of the actual deployment of U.S. troops to Saudi Arabia. Congressional leaders were informed shortly after the fact. By the end of the month, "the United States, Great Britain and several other nations assembled formidable air and naval forces in the Gulf region." With E.O. 12727 of August 22, President Bush called some 50,000 military reservists to active duty to support the growing U.S. military presence in Saudi Arabia. On August 28, the President held his first briefing with Members of Congress regarding the Gulf crisis, although a White House briefing on these matters had been held for a few congressional leaders on August 8. During August, President Bush also devoted considerable energy to building a broad international coalition to oppose the Iraqi invasion and occupation of Kuwait. This effort included not only political support rectifying the situation in Kuwait, but also the commitment of combat forces to participate, if necessary, in the repelling of the Iraqi invaders and the liberation of Kuwait. Among those Arab nations providing troops were Egypt, Saudi Arabia, and Syria, as well as Bahrain, Kuwait, Morocco, Oman, Qatar, and the United Arab Emirates. Other contributors included Bangladesh, Pakistan, and Turkey, as well as such traditional American allies as Canada, France, Great Britain, and Italy. The U.N. was another arena for retaliation against Iraq. On the day of the invasion of Kuwait, the Security Council, in emergency session, unanimously adopted Resolution 660 condemning the attack and calling for an immediate Iraqi withdrawal. Four days later, on August 6, the Security Council approved Resolution 661 establishing a nearly total embargo on Iraqi commerce, with exceptions for humanitarian shipments of medicine and some food. It did not, however, explicitly authorize a blockade, which resulted in some debate over the enforcement of its provisions. Eventually, on August 25, the Security Council, with Resolution 65, authorized the use of force to ensure compliance with the embargo. A few months later, on November 29, the Security Council, on a 12-2 vote, adopted Resolution 678, authorizing the use of force to expel Iraq from Kuwait after January 15, 1991, thereby providing 47 days for diplomats to attempt to persuade Iraq to withdraw peacefully from Kuwait. With the coming of fall, a broad consensus of public and congressional opinion continued to support opposition to Iraq's aggression and the protection of Saudi Arabia. However, views were shifting. On Capitol Hill, several congressional committees subjected administration representatives to unexpectedly tough questioning over proposed accelerated arms sales to Saudi Arabia. Many in Congress also began to insist that any move to war must include close consultation with Congress, as well as a formal congressional declaration or other authorization. Such sentiments came not only from Democratic leaders, but from such prominent Republicans as Senate Minority Leader Robert Dole (R-KS) and Senator Richard Lugar (R-IN). When resolutions supporting the actions taken by President Bush in response to the invasion of Kuwait came under congressional consideration, the House version ( H.J.Res. 658 , 101 st Congress) was adopted on October 1 on a 380-29 vote, while the Senate counterpart measure ( S.Con.Res. 147 ) received a 96-3 endorsement the following day. During the Senate discussion, Senators supporting the resolution sought to assure opponents that it was not a Tonkin Gulf resolution for the Persian Gulf. The exchange was somewhat reflective of more widespread public uncertainty about a U.S.-led offensive against Iraq. According to a New York Times /CBS News public opinion poll of October 8-10, the President's Gulf policies were supported by 57% of Americans, as compared with 75% in early August. A few weeks later, on November 8, the President announced that he was reinforcing the 230,000 American troops already in the Persian Gulf. The Pentagon indicated that some 200,000 personnel would be deployed, and the rotation of troops in and out of the region was being discontinued. Some critics thought the troop increase was premature and reflected a lack of confidence in the effects of economic sanctions to induce Iraq to leave Kuwait. Congressional leaders were taken by surprise because no mention of the anticipated personnel increase had been made at Gulf situation briefings held for them by the Vice President on October 24 and the President on October 30. At a White House conference on November 14, the President quelled demands for a special session of Congress (final adjournment of the 101 st Congress had occurred on October 28) and assured congressional leaders that he was not seeking to go to war. On November 20, 45 Democratic House members filed suit in U.S. District Court to obtain an injunction to bar Bush from using force to push Iraq from Kuwait without first seeking congressional authorization. The suit, Ronald V. Dellums et al. v. George Bush , was turned aside in a ruling handed down on December 12 by Judge Harold H. Green [sic]. In his opinion, Green said that the issue was not yet "ripe," meaning that it would have been premature for the court to rule since Congress as a whole had not yet taken any stand on the issue. At the same time, however, Green added that Congress alone possessed the power to declare war. Shortly thereafter, on November 29, the Bush Administration obtained Security Council agreement on Resolution 678, authorizing the use of force to expel Iraq from Kuwait after January 15, 1991. When the 102 nd Congress convened on January 3, 1991, the President's party was in minority status in both the House (267-167) and the Senate (56-44). With the January 15 deadline of Resolution 678 looming on the horizon, many Members wanted to give the sanctions more time to take effect and objected to going to war shortly after the time allowed for diplomatic resolve had expired. Congress and the Bush Administration also were in dispute over the President's constitutional authority to order offensive actions against Iraq when U.S. forces had not been attacked. The President had been reminded of this disagreement at a White House breakfast conference with the leadership on the morning of the day that the new Congress convened. With some sense that he had enough supporting votes, President Bush sent a January 8 letter to the congressional leadership requesting the adoption of a resolution "stating that Congress supports the use of all necessary means to implement UN Security Council Resolution 678," saying this "action would send the clearest possible message to Saddam Hussein that he must withdraw without condition or delay from Kuwait." Attempts to fashion such a resolution were briefly delayed by an attempt at negotiations between the United States and Iraq in Geneva on January 9. The meeting contributed nothing to realizing an Iraqi withdrawal, but the conduct of the Iraqi foreign minister "had the unintended effect of solidifying support among some members of Congress for the president's threat to use force." Congress returned to finalizing a resolution on the Persian Gulf crisis on January 10. In both chambers, competing resolutions calling for continued reliance on economic sanctions or authorizing the President to use "all means necessary" to expel Iraq from Kuwait were produced. Voting occurred on January 12. In the Senate, the economic sanctions resolution ( S.J.Res. 1 ) was defeated on a 46-53 vote; the other ( S.J.Res. 2 ) was approved on a bipartisan 52-47 vote. In the House, the economic sanctions resolution ( H.Con.Res. 33 ) was rejected on a 183-250 vote; the action authorization resolution ( H.J.Res. 77 ) was adopted on a bipartisan 250-183 vote. After the Senate agreed to the latter House resolution ( H.J.Res. 77 ), it was presented to the President and signed into law on January 14. For the United States, the offensive against Iraq—denominated "Operation Desert Storm"—began in the early afternoon of January 16, less than 17 hours after the expiration of the U.N. deadline. It began with attacks by aircraft and missiles against strategic targets in Iraq and Kuwait and to gain quick air superiority over the anticipated ground combat area. The next day, the Senate, on a 98-0 vote, adopted a resolution ( S.Con.Res. 2 ) commending and supporting the efforts and leadership of the President in the Persian Gulf crisis. The following day, the House approved the resolution on a 399-6 vote, the latter six Members voting "present." While the initial aerial assaults were "highly successful," Iraq struck back the following day with missile assaults against Israel, perhaps seeking to antagonize that nation sufficiently to enter the Gulf war and disrupt the coalition of forces marshaled against it. At the urging of the Bush Administration, Israel did not enter the war. Both houses of Congress adopted resolutions commending Israel's performance in this regard, the House doing so on January 23 ( H.Con.Res. 41 ) on a 416-0 vote and the Senate acting the next day ( S.Con.Res. 4 ) with a 99-0 vote. Aerial bombing of Iraqi territory continued for 38 days, but neither a capitulation nor an internal uprising against Saddam Hussein's regime resulted. A February 15 offer, qualified in various ways, from Iraq to withdraw from Kuwait was rejected by President Bush. On February 21, a withdrawal plan negotiated by the Soviet Union with Iraq was also turned down for failing to meet U.S. conditions for ending the war. Then, on February 22, President Bush gave Iraq an ultimatum to begin withdrawing from Kuwait by noon of the following day or face military reprisal. The deadline passed with no withdrawal of Iraqi troops. In the early morning hours of February 24, a massive American, British, and French ground force, moving far to the west of Iraq's frontline fortifications, began an offensive which, 100 hours later, would result in the liberation of Kuwait and the smashing of the Iraqi army. A cease fire was established in the region on February 28. In celebration of his accomplishments in the Persian Gulf crisis, President Bush was invited to address a joint session of Congress on March 6. On that occasion, before formally introducing the President, House Speaker Thomas S. Foley (D-WA), departing from tradition, expressed to him "on behalf of the Congress and the country, and through you to the members of our armed forces, our warmest congratulations on the brilliant victory of the Desert Storm Operation." A number of considerations affect a President's efforts to inform Congress about the commitment of American armed forces to a condition of overseas military conflict. Not the least of these are the majority or minority status of the President's political party in the House and the Senate; the extent of public, congressional, and international support for the President's action; the number of personnel committed and the conditions of harm they face; the anticipated duration of the commitment; and the diplomatic conditions surrounding the commitment. Other important considerations are the nature of the "informing" activity—a presidential speech to the nation or a joint session of Congress, informal remarks by the President at the White House, a briefing by an administration representative, testimony before a congressional committee by administration officials, proffered documents, or a conversation about a course of action. Also, who in Congress is being informed—the leadership of both houses, selected committee chairs of one or both chambers, certain Members who are supportive of the President's action, or the membership of the House and the Senate in joint session. Whether personally or through aides, the President usually offers Congress information about events that have already transpired. It is seemingly unusual for a President to include Members of Congress directly in his decisionmaking, although advice may be solicited (or offered without invitation) without any indication of its acceptability. Indeed, although a President may honor the perceived obligation to inform Congress about the commitment of American armed forces to a condition of overseas military conflict, Members may well be dissatisfied with the manner in which the information is provided, the contents offered, the continued unilateral direction of the commitment by the President, and, in some cases, the broad expansion of a commitment made by Congress in response to a specific incident.

Under the Constitution of the United States, the President is responsible for prosecuting war and directing the armed forces during military conflicts, including attacks upon the nation. Congress is constitutionally empowered to declare war, may otherwise authorize the involvement of American armed forces in military conflict, appropriates funds for government activities and operations, including military actions, and engages in oversight to assess the extent to which government operations have been efficiently, economically, and effectively conducted using appropriated funds. Congress also has a role in prescribing intelligence and foreign policy. In meeting these responsibilities, Congress expects and needs to be informed by executive branch leaders about relevant actions taken and being planned, policy developments, expenditures, and knowledge conditions. Consequently, the restriction of information disclosures to Congress prescribed in President George W. Bush's October 5, 2001, memorandum to top diplomatic, intelligence, and law enforcement officials drew critical reaction from various quarters of the House of Representatives and the Senate. Although the restrictive policy was quickly suspended by the President, questions have arisen concerning the role of the executive in times of war and military conflict in informing Congress regarding American involvement in such events. This report, which is intended to provide background information and will not be updated, provides a brief review of executive-congressional relations in this regard for 1941-2001.

After the bursting of the housing bubble and the ensuing financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203 ), a broad package of reforms that touched on many aspects of the financial system. It was intended to address the problems that led to turmoil and to ensure that the financial system and the economy are better positioned to withstand future market disruptions. While some view the Dodd-Frank Act as essential to ensure that consumers are not abused and to promote stability in the financial system, others believe the reforms have imposed an unnecessary burden on lenders—especially small lenders —and have made it more difficult for some consumers to receive loans, particularly mortgages. Critics have highlighted the Ability-to-Repay (ATR) and Qualified Mortgage (QM) rule, which implements a Dodd-Frank Act requirement, as a subject of particular concern. Among other things, they argue that the Small Creditor Portfolio QM, a compliance option under the rule that is intended to benefit small creditors that keep loans in portfolio, should be broadened. They propose modifying the rule to make it easier for a lender to comply if it keeps the loan instead of selling it to another institution. Supporters of expanded portfolio lending proposals argue that because the lender is holding the loan in its portfolio, it is exposed to the risks associated with the loan (such as the risk that the lender will not be repaid) and therefore has the incentive to ensure that the loan is safely underwritten. Critics of the expanded portfolio lending proposals argue that the incentives of holding the loan in portfolio are insufficient to protect consumers and that the existing protections in the rule are essential to ensuring that the failures of the past are not repeated. This report will briefly explain the ATR rule and will analyze the policy debate related to portfolio lending and qualified mortgages. Title XIV of the Dodd-Frank Act established the ATR requirement. Under the ATR requirement, a lender must determine based on documented and verified information that, at the time a mortgage loan is made, the borrower has the ability to repay the loan. A lender must consider and verify certain types of information prior to originating a loan, including the applicant's income or assets, credit history, outstanding debts, and other criteria. Lenders that fail to comply could be subject to legal liability, such as the payment of certain statutory damages. Under the Consumer Financial Protection Bureau (CFPB) rule implementing the ATR requirement, a lender can comply with the ATR requirement in two ways. First, a lender can originate a mortgage that meets the relatively less prescriptive underwriting standards of the General ATR Option. Under the General ATR Option, the loan does not need to satisfy specified criteria, but the lender must not make a mortgage "unless the creditor makes a reasonable and good faith determination at or before consummation that the consumer will have a reasonable ability to repay the loan according to its terms." Second, a lender could originate a mortgage that satisfies the more prescriptive standards of the QM rule. A QM is more prescriptive than the General ATR Option in the sense that, to receive QM status, the mortgage must satisfy specific underwriting and product-feature requirements and document compliance with the requirements. When a lender originates a mortgage that receives QM status, it is presumed to have complied with the ATR requirement, which consequently reduces the lender's potential legal liability of its residential mortgage lending activities. A lender can comply with the ATR rule by making a mortgage that is not a QM and instead satisfies the General ATR Option, but the lender will not receive the additional legal protections. The definition of a QM, therefore, is important to a lender seeking to minimize its legal risk of its residential mortgage lending activities, specifically its compliance with the statutory ATR requirement. Some are concerned that, at least in the short term, few mortgages will be originated that do not meet the QM standards due to the legal protections that QMs afford lenders, even though there are other means of complying with the ATR requirement. Underwriting and product-feature requirements of the QM categories are intended to ensure that a mortgage receiving QM status satisfies certain minimum standards, with the standards intended to offer protections to borrowers. A loan that satisfies the less strict General ATR Option, in contrast, is allowed to have a balloon payment, a term in excess of 30 years, and other features that are generally prohibited in a QM so long as the lender verifies that the borrower would have the ability to repay the loan. In the preamble to the final rule, the CFPB explained that the ATR requirement is intended to address certain market failures that policymakers identified in the housing finance system. Some attribute the expansion in mortgage credit that fueled the housing bubble to market failures that encouraged lenders to offer and borrowers to accept more credit than was socially optimal. Market failures can occur in many instances in the housing market, such as lenders and borrowers not accounting for societal costs outside of a transaction (such as foreclosure) and borrowers' difficulty in understanding mortgage terms and accurately assessing their ability to repay given that consumers typically have limited experience buying and financing a house. According to the CFPB, the "Dodd-Frank Act and the final rule address these potential market failures through minimum underwriting requirements at origination and new liability for originators ... in cases where the standards are found not to be met." The minimum standards and the new liability are intended to encourage lenders to account for costs in addition to those that they bear when extending credit and to make more informed underwriting decisions, potentially reducing market failures and resulting in a more socially optimal amount of credit being allocated. The underwriting requirements and new liability in the ATR rule are viewed as working in tandem to encourage the lender to determine that the borrower will be able to repay the loan. If the lender originates a loan that satisfies the minimum underwriting standards (the General ATR Option), then the lender is exposed to a certain amount of legal liability. But if the lender originates a mortgage that meets more prescriptive requirements and is therefore deemed a QM, then the lender is exposed to less legal risk. The reduced legal risk is warranted, the CFPB argues, because the QM's minimum underwriting and product-feature standards "are judged in the rule to be enough to ensure that the lender made a reasonable and good faith determination that the borrower will be able to repay the loan." The CFPB notes that lenders, therefore, face a tradeoff between (1) "exert[ing] greater care in underwriting the loan" to ensure that it receives QM status and the reduced liability associated with it or (2) performing a potentially less thorough and less costly initial underwriting of the General ATR Option and having a greater exposure to liability. In summary, the additional liability and the minimum underwriting standards enacted as part of the Dodd-Frank Act are intended to address market failures that some policymakers believed fueled the housing bubble that precipitated the financial crisis. As discussed in more detail later in this report, some argue that the QM rule is one size fits all, has led to an unnecessary constriction of credit, and has been unduly burdensome on lenders. For a more detailed overview of the ATR rule and QM compliance options, see CRS Report R43081, The Ability-to-Repay Rule: Possible Effects of the Qualified Mortgage Definition on Credit Availability and Other Selected Issues , by [author name scrubbed]. The Dodd-Frank Act defined a qualified mortgage but also provided the CFPB the authority to "prescribe regulations that revise, add to, or subtract from the criteria that define a qualified mortgage" under certain circumstances. The CFPB-issued QM regulations establish a Standard QM that meets all of the underwriting and product-feature requirements outlined in the Dodd-Frank Act. However, the QM regulations also establish several additional categories of QM that provide lenders the same presumption of compliance legal protections with the ATR requirement as a Standard QM. One of those additional categories is the Small Creditor Portfolio QM . The CFPB argues that the Small Creditor Portfolio QM is "necessary to preserve access to responsible, affordable mortgage credit for some consumers." It believes "that portfolio loans made by small creditors are particularly likely to be made responsibly and to be affordable for the consumer." To receive QM status under the Small Creditor Portfolio QM, three broad sets of criteria must be satisfied. First, the loan must be held in the originating lender's portfolio for at least three years (subject to several exceptions). Second, the loan must be held by a small creditor , which is defined as a lender who originated 2,000 or fewer mortgages in the previous year (excluding portfolio loans) and has less than $2 billion in assets. Third, the loan must meet certain underwriting and product-feature requirements. Compared with the Standard QM, the Small Creditor Portfolio QM has less prescriptive underwriting requirements and is intended to reduce the regulatory burden of the ATR rule for small creditors. To receive QM status under the Standard QM, a borrower must have a debt-to-income (DTI) ratio below 43% after accounting for the payments associated with the mortgage and other debt obligations. Under the Small Creditor Portfolio QM, the lender is required to consider and verify the borrower's DTI but does not have a specific numeric threshold that the borrower must be below. A lender, therefore, has the flexibility to offer a loan with a higher DTI ratio if the lender determines that the borrower is creditworthy. Because the DTI threshold is considered by some to be one of the factors limiting credit availability under the QM rule, relief from that threshold allows small creditors to originate mortgages that they may not otherwise have made. Though relief is provided from the DTI threshold for the Small Creditor Portfolio QM, the other underwriting and product-feature requirements for the Standard QM must still be followed. Although the Small Creditor Portfolio QM has less prescriptive underwriting requirements than the Standard QM, the Small Creditor Portfolio QM requires a lender to hold the loan in portfolio and limits the portfolio QM option to small creditors. The CFPB justified establishing the Small Creditor Portfolio QM on the basis that even though the underwriting standards have been reduced (potentially making it easier for some borrowers to qualify), certain factors unique to portfolio loans and to small creditors provide added incentives that ensure that a lender using the Small Creditor Portfolio QM will accurately assess whether a borrower can repay the mortgage. The CFPB believes both the portfolio requirement and small creditor limitation are necessary to justify the less prescriptive underwriting standards. Supporters of an expanded portfolio lending option contend that not all of the lender and underwriting requirements included in the Small Creditor Portfolio QM are essential to ensuring that a lender will extend credit to creditworthy borrowers and argue that a less burdensome approach can be employed. Some in Congress propose establishing an additional portfolio QM option that would have more relaxed eligibility criteria for the three major categories that serve as a framework for discussion—portfolio requirements, lender restrictions, and loan criteria. This report analyzes three legislative proposals that would establish alternative portfolio QM options. 1. S. 1484 , the Financial Regulatory Improvement Act of 2015, was reported by the Senate Banking Committee on June 2, 2015. 2. S. 1491 / H.R. 2642 , the Community Lender Regulatory Relief and Consumer Protection Act of 2015, have been characterized as an alternative to S. 1484 because the text was initially offered unsuccessfully as an amendment to S. 1484 during the Senate Banking Committee markup. 3. H.R. 1210 , the Portfolio Lending and Mortgage Access Act, was passed by the House on November 18, 2015. Table 1 summarizes these proposals and compares them to the Small Creditor Portfolio QM using the three-pronged framework. The next three sections assess the three primary factors on which the legislative proposals differ compared with the status quo—portfolio requirements, lender restrictions, and loan criteria. Each section first explains how the CFPB's Small Creditor Portfolio QM addresses that factor, and then it assesses how the legislative proposals would address the issue. The Small Creditor Portfolio QM requires a small creditor to retain the mortgage in its portfolio for three years in order for the mortgage to receive QM status. If the lender sells the mortgage before three years, the mortgage loses its status as QM, with some exceptions. The mortgage would retain its QM status if it is sold to another lender who meets the definition of small creditor. The mortgage would also maintain its QM status if it is acquired as a result of a merger of a lender with another lender or if the mortgage is sold because the sale is determined to be necessary by a regulator to revive or resolve a troubled lender. By keeping the loan in portfolio, the CFPB argues, creditors have added incentive to consider whether the borrower will be able to repay the loan. Keeping the loan in portfolio means that the lender retains the default risk and could be exposed to losses if the borrower does not repay. This exposure, the argument goes, would encourage creditors to provide additional scrutiny during the underwriting process, even in the absence of a legal requirement to do so. Keeping the mortgage in portfolio is intended to align "consumers' and creditors' interests regarding ability to repay." If the lender sold the mortgage immediately after origination, as is done under an "originate-to-distribute" business model, this incentive may not exist. According to the CFPB, the added incentive to do thorough underwriting that comes with holding the loan in portfolio is necessary to justify the less prescriptive underwriting standards of the Small Creditor Portfolio QM. Although retaining risk may bring creditors' and consumers' interests more in line, they may not be perfectly aligned. Lenders have the incentive to be repaid and consumers have the incentive to repay, but those two things are different. Even with the loan in portfolio, the lender may have the incentive to lend to borrowers who do not have sufficient liquid sources of repayment , such as an applicant's income and money in a checking account. The ATR requirement mandates a lender focus on a borrower's liquid sources of repayment in assessing a borrower's ability to repay. When performing its underwriting, the lender typically takes a broad view of the borrower's ability to repay, considering not only liquid sources of repayment but also the value of the house that is being purchased. Even though the home is an asset to the borrower, it is not typically a liquid source of repayment. The lender considers the value of the house during its underwriting because, in a mortgage, the house serves as the underlying collateral. So long as house prices are rising, the house can be sold to repay the lender the amount that it is owed if the borrower does not repay, allowing the lender to profit from the initial fees it is paid for originating the loan and then recouping its principal through the home sale, a process often referred to as collateral-dependent lending. In this instance, holding the loan in portfolio may not align the lender's and borrower's interests. As a response to collateral-dependent lending, the ATR rule requires the lender to consider and verify the borrower's ability to repay independent of the underlying value of the house. Lenders are required to focus on liquid sources of repayment as part of compliance with the rule. Although some of the underwriting requirements are less prescriptive for the Small Creditor Portfolio QM than the Standard QM, the lender is still required to assess the borrower's ability to repay independent of the underlying value of the house even though the mortgage is held in portfolio. Lenders consider the value of the house and other illiquid assets when performing their underwriting and use it to inform their decisions about whether to extend credit, but they assess a borrower's ability to repay in accordance with the ATR rule using liquid sources of repayment. As mentioned previously, the Small Creditor Portfolio QM requires a small lender to retain the mortgage in its portfolio for three years in order for the mortgage to receive QM status, subject to some exceptions. If the loan is sold before three years to a lender that does not meet the small creditor definition, then the mortgage would lose its QM status, but if it is sold to anyone after three years, then the mortgage retains its QM status. One of the reasons that the CFPB cites for why the lender must keep the loan in portfolio for three years is to prevent evasion. If a small creditor could originate a mortgage and was required to keep it in portfolio for only a short period of time prior to selling it, then the benefits associated with keeping it in portfolio would be reduced. The CFPB also chose three years for the length requirement in order "to conform to the statute of limitations for affirmative claims for violations of the ability-to-repay rules." If a borrower is going to initiate an affirmative claim against a lender under the ATR rule, the borrower must do so during the first three years. The borrower may cite the ATR at any point, however, as a defense against foreclosure. By holding the mortgage in portfolio for three years, the CFPB argues, the small lender "retains all of the litigation risk for potential violations of the ability-to-repay rules except in the event of a subsequent foreclosure." As mentioned before, the possibility of litigation is one of the tools to address market failures in the mortgage market and is intended to encourage lenders to account for not only their own costs but also the costs borne by others when extending credit. Similar to the Small Creditor Portfolio QM, all three proposals would require the mortgage to be held in a lender's portfolio, at least initially. They differ, however, in whether the mortgage retains its QM status if it is transferred from the originating lender's portfolio and whether the mortgage must be in a lender's portfolio (either the originator's or any lender's portfolio) indefinitely or for a limited period of time. Table 2 summarizes the differences. These policy issues, as well as several other issues related to lenders' portfolios, are discussed below. The Small Creditor Portfolio QM allows (and S. 1484 would allow) a mortgage to be transferred from the originator's portfolio to another eligible entity's portfolio and retain QM status. S. 1491 and H.R. 1210 , however, would require the mortgage to stay in the originator's portfolio; if it was transferred then it would lose its QM status (with some exceptions). As described below, the differences in the portfolio requirements can affect the borrower's cost of credit and the lender's incentive to perform thorough underwriting. A mortgage that can be transferred to another entity while retaining its QM status is, generally speaking, more liquid than a mortgage that would lose its QM status when transferred. (Liquid in this context refers to the ease with which a mortgage can be bought and sold.) If the mortgage cannot be transferred without losing its QM status, the originator may charge a higher rate to a borrower to account for this lack of liquidity and for the risks associated with the lack of liquidity. This liquidity premium would potentially vary based on the severity of the restrictions, with more restrictive portfolio requirements yielding a higher liquidity premium. The Small Creditor Portfolio QM, for example, would likely face a liquidity premium because, in the first three years, the mortgage could be transferred to another small creditor only to retain QM status. The restriction on transferring to only small creditors may make the liquidity premium higher for the Small Creditor Portfolio QM compared to S. 1484 , because S. 1484 would allow the mortgage to retain its QM status while being transferred to almost any lender. The liquidity premium could also be lower for the Small Creditor Portfolio QM, however, because after three years the mortgage would not need to be kept in portfolio to retain QM status, making it more liquid than would be the case under S. 1484 . In sum, more stringent portfolio requirements may make the mortgage more illiquid and could result in a higher rate that would be expected to be charged to the borrower. While more relaxed portfolio requirements could reduce the liquidity premium associated with the mortgage, more relaxed standards could also reduce the lender's incentive to thoroughly underwrite the mortgage. If the mortgage can be transferred without losing its QM status, there may be a weaker incentive for the originator to do thorough underwriting, because the originator knows that the mortgage can be sold, transferring both the credit risk and the liability risk to a new entity. (The liability risk also transfers to the new mortgage holder when the mortgage is sold. ) The market, however, could respond by developing legal contracts such that, when the mortgage is transferred, the new mortgage holder could have the ability to "put back" the risk on to the originator if certain specified conditions are met. In that case, the originator would still be exposed to the liability risk even if the originator did not hold the mortgage at the time the claim was brought by the borrower. The possibility that the originator could be exposed to liability even if the mortgage is sold could provide added incentive to thoroughly assess the borrower's ability to repay even if the originator does not intend to keep the mortgage in portfolio. This example serves to illustrate that while the legislative proposals may have one set of portfolio requirements, it is possible that the market would evolve to reach an alternative outcome. The CFPB and supporters of the legislative proposals often cite economic theory—the importance of retained risk and aligned incentives—to justify a portfolio QM. Empirical research, however, has found conflicting results about whether loans held in portfolio are less likely to default than loans that are securitized. Researchers have suggested alternative theoretical frameworks to explain their results. Several studies have found that loans held in portfolio were, in general, less likely to default than comparable loans that had been securitized. One study found that prime mortgages that had been securitized in private-label securities (PLS) were more likely to default than "observably similar" mortgages retained in a lender's portfolio. Mortgages securitized by Fannie Mae and Freddie Mac, however, were less likely to default than portfolio loans, though the effect was found to be small. The same study, when analyzing subprime loans, found that subprime loans that were securitized in PLS were less likely to default than portfolio loans, though the author attributes the result to early defaults , loans that were "so risky that it may not have been possible to securitize them before they defaulted, and thus, they end up being overrepresented in lender portfolios." The author argues that his results, especially for prime mortgages, provides evidence that lenders engage in adverse selection , that they "used private information to determine which loans to securitize" and chose to keep those that were less likely to default in their portfolios. Other research, however, found that some types of securitized loans had lower default rates than comparable loans held in portfolio. A 2012 study found that, in the prime mortgage market, lenders "chose to sell low-default-risk (not high-default-risk) and high-prepayment-risk loans to the secondary market in the pre-crisis period, 2004-2006." During this period default rates were relatively low, so lenders may not have been as concerned about default risk as they were about prepayment risk—the risk that borrowers will repay their mortgages before the full term. Keeping lower prepayment-risk loans and selling higher default-risk loans "would have been a profitable strategy [during 2004-2006] when prepayment risk driven by high refinancing activity was a bigger concern for lenders than default risk in the prime market." In addition to concerns about prepayment risk, lenders may have chosen to keep higher-default-rate mortgages in their portfolio because of regulatory capital requirements, which may give banks "incentives to retain riskier mortgage loans with higher expected return and securitize less risky mortgage loans, as long as both groups of loans have the same capital requirements when held on banks' balance-sheets." This is an example of regulatory arbitrage, a shift in activities in an attempt to circumvent regulation. In the subprime market, the authors did not "find a significant difference in the default and prepayment risks between portfolio and securitized loans." The authors also found that small lenders behaved differently than larger lenders during the period they studied. During certain years, small lenders were more likely to sell higher default risk loans than larger lenders. The authors attribute this to two different reasons. First, they argue that "small lenders are more likely to be small-town lenders who have private information about their borrowers to adversely select loans for securitization." Second, "small lenders are less likely to retain higher-default-risk loans even if the loans have lower prepayment probability because of their less diversified borrower base and their small cost of gaining a damaged reputation in the secondary market." In summary, different studies have found different results as to whether loans retained in portfolio are likely to have a higher or lower default rate. Among other things, the results are sensitive to the time period analyzed, whether the loans are prime or subprime, and whether the lenders are large or small. Although the CFPB and supporters of the legislative proposals emphasize the importance of retained risk to encourage lenders to originate lower default risk mortgages, the empirical research presents conflicting evidence. A less prescriptive portfolio QM option could affect the choice of business models that lenders use to fund mortgages in the mortgage market. Lenders may be more willing to retain mortgages they originate (rather than sell them to other market participants) if the portfolio QM standards are less prescriptive. As shown in Figure 1 , most mortgages originated in the past 15 years have not been held in portfolio; in the first two quarters of 2015, approximately 26% of mortgage originations were held in portfolio. An expanded portfolio QM could disadvantage mortgage bankers who follow a business model in which they do not hold the mortgages in portfolio. Some lenders, for example, engage in correspondent lending: the practice in which a lender originates a mortgage but sells it to an investor based on a prior agreement. A correspondent lender does not hold the mortgage in its portfolio. A correspondent lender could face higher funding costs if a mortgage that it originates does not receive QM status but would receive QM status if held in portfolio. Favoring portfolio lending over other business models could be one of the intended policy goals of an expanded portfolio QM because of the belief that portfolio loans better align lender and borrower incentives. As discussed below, more loans held in portfolio, however, could result in a further concentration of risk in the banking system. An expanded portfolio QM could encourage lenders to hold even more mortgages on their portfolios, a result that could be in conflict with regulators' attempts to ensure that lenders have diversified asset portfolios. As mentioned previously, when a bank holds a mortgage in portfolio, it is also holding the risks associated with the mortgage. If mortgage default rates increase or interest rates change in unanticipated ways, the lender could suffer losses. In addition, if a mortgage must be held in portfolio to retain QM status, it could be difficult for a lender to sell certain mortgages in the event of a downturn, which could have negative safety and soundness consequences. As the CFPB notes, "limitations on the ability of a creditor to sell loans in its portfolio may limit the creditor's ability to manage its regulatory capital levels by adjusting the value of its assets, may affect the creditor's ability to manage interest rate risk by preventing sales of seasoned loans, and may present other safety and soundness concerns." The portfolio requirement could also result in a change in the relative price of mortgage and non-mortgage assets, which could be a problem during market downturns. If a bank is facing financial distress and is attempting to sell assets to satisfy its regulatory requirements, it could respond to the mortgage portfolio requirement by selling higher quality non-mortgage assets that are more liquid because they do not face the same portfolio requirements. The bank may prefer to sell the mortgage assets rather than the non-mortgage assets but could have a difficult time doing so because of the requirement that the mortgage be held in portfolio. Selling the higher quality non-mortgage assets could put the already distressed bank in a worse financial condition than it would be in if it could sell the mortgage assets. In considering the Small Creditor Portfolio QM, the CFPB consulted with banking regulators on the safety and soundness concerns. To address some of the potential issues, the CFPB decided to allow a mortgage to retain QM status if the mortgage is sold because a regulator determined the sale to be necessary to revive or resolve a troubled lender. S. 1484 and H.R. 1210 have similar provisions. S. 1484 would also require lenders that would be deemed systemically important banks to have their mortgage portfolios subject to periodic review by bank regulators if their mortgage portfolios had elevated risk or an increase in delinquencies or if other criteria were met. A lender must meet the CFPB's definition of small creditor for a mortgage to receive QM status under the Small Creditor Portfolio QM. A lender is considered small if it originated 2,000 or fewer mortgages in the previous calendar year (excluding those held in portfolio) and has total assets of less than $2 billion (with the threshold to be adjusted for inflation). The CFPB limited the portfolio QM option to portfolio loans held by small lenders rather than to all portfolio loans because it believes that small creditors are a unique and important source of non-conforming mortgage credit and mortgage credit in rural areas for which there is no readily available replacement, that small creditors may be particularly burdened by the litigation risk associated with the ability-to-repay rules and are particularly likely to reduce or cease mortgage lending if subjected to these rules without accommodation, and that small creditors have both strong incentives and particular ability to make these loans in a way that ensures that consumers are able to repay that may not be present for larger creditors. This section assesses the CFPB's argument, starting with the assertion that small lenders are an important source of credit. The Small Creditor Portfolio QM is just one of several types of qualified mortgage compliance options. An understanding of how it relates to the other QM options is important to understanding why it was established by the CFPB. If a mortgage does not satisfy the Standard QM, it can also receive QM status through the government-sponsored enterprise (GSE) QM if it is eligible to be purchased by Fannie Mae or Freddie Mac, two GSEs in the housing finance system. Mortgages that are eligible to be purchased by a GSE are called conforming mortgages because they must conform to specific standards established by law through Fannie's and Freddie's statutory charters, as well as their implementing guidance in order to be eligible to be purchased by a GSE. Some of the underwriting criteria for conforming mortgages are broader than under the Standard QM (the acceptable DTI is higher for the GSEs, for example), allowing additional mortgages to receive QM status that would not qualify through the Standard QM option. A mortgage, regardless of whether or not it is held in portfolio, could receive QM status through either the Standard QM or the GSE QM. The CFPB argues that the Small Creditor Portfolio QM is necessary because small lenders are an important source of non-conforming credit, meaning mortgages that are ineligible to be purchased by the GSEs. The Small Creditor Portfolio QM can, therefore, be viewed as a complement to the existing compliance options. Under this line of argument, larger lenders are less likely to need an additional compliance option because they generally originate conforming mortgages that already receive QM status under the GSE QM. According to the CFPB, larger lenders are less likely to originate nonconforming loans because non-conforming loans involve consumers or properties with unique features that make them difficult to assess using larger creditors' underwriting standards or because larger creditors are unwilling to hold the loans in portfolio. Small creditors often are willing and able to consider these consumers and properties individually and to hold the loans on their balance sheets. Data cited by the CFPB in its 2013 final rule, however, presents a less clear picture. The CFPB found that "approximately one half of all nonconforming loans are originated by creditors with assets less than $2 billion and approximately one quarter are originated by creditors with total assets less than $2 billion that originate fewer than 500 first-lien mortgages annually." (The CFPB's original definition used a 500 mortgage threshold, but the threshold was raised to 2,000 mortgages in the amended final rule. ) Under the original definition of small lender, three-quarters of non-conforming loans, therefore, were originated by lenders that are not small creditors and would have been unable to take advantage of the Small Creditor Portfolio QM. In addition to non-conforming credit, the CFPB argues that small creditors are an important source of credit in rural communities. Failure to create an additional compliance option for small creditors could, they argue, result in restricted credit access in rural areas. The CFPB notes that "small creditors are significantly more likely than larger creditors to operate offices in rural areas, and there are hundreds of counties nationwide where the only creditors are small creditors and hundreds more where larger creditors have only a limited presence." The CFPB cites a study that found that in 2011 "there were 629 U.S. counties, with just over 6 million in population, where community banks operated offices, but where no noncommunity banking offices were present" and "another 639 counties where community banks operated offices but where fewer than three noncommunity banking offices were present." Collectively, these 1,268 counties accounted for 16.3 million people and include more than one-third of the approximately 3,200 counties in the United States. The CFPB emphasizes the importance of ensuring that non-conforming credit and credit in rural areas continues to be extended, but it addresses these concerns indirectly by providing an additional compliance option for small creditors. Alternatively, the CFPB could have provided compliance options that centered on whether the mortgage was non-conforming or originated to a borrower in a rural area rather than be dependent on the type of lender. The CFPB argues, however, that it is appropriate to focus on the small creditors because, as discussed in more detail in the next section, they believe small creditors have certain qualities and face certain incentives that make them more likely to thoroughly evaluate a borrower's ability to repay. It is unclear, however, what affect the Small Creditor Portfolio QM option has on credit availability in rural areas because the QM rule also has a separate compliance option for certain lenders operating in rural areas. The CFPB argues that small lenders "have both strong incentives and particular ability to make" portfolio mortgages that consumers are able to repay, but the strong incentives and particular ability "may not be present for larger lenders." The CFPB cites three factors unique to small lenders that, it argues, allow small creditors "to make more accurate assessments of consumers' ability to repay than larger creditors." First, a small lender's size, the CFPB argues, provides added incentive to accurately assess a consumer's ability to repay. When the loan is held in portfolio, the lender is exposed to the risk, and that risk "represents a proportionally greater risk to a small creditor than to a larger one." For any given mortgage, a small bank has a smaller base across which to spread any losses, so, the argument goes, a small lender would have more incentive to only originate mortgages that it expects consumers to be able to repay. Small size could, alternatively, mean that a small lender has less to lose and could restart as a new business if its investments fail to pay off. This is likely less of a concern for a bank or credit union that has to go through the process of receiving a charter than a non-bank entity that would face lower start-up costs. Second, the CFPB argues that small creditors are more likely to use a relationship-based lending model that may yield a more accurate assessment of the borrower. A relationship-based lending model is one in which lenders develop close familiarity with their respective customer bases. Relationship banking allows institutions to capture lending risks that are unique, infrequent, and localized. Underwriting in the relationship banking model often relies on "qualitative information gained from personal relationships between creditors and consumers." Qualitative or "soft" information, such as a consumer's character, "may be difficult to quantify, verify, and communicate through the normal transmission channels of a banking organisation." The relationship banking model emphasizes maintaining extended relationships with consumers, offering not just a mortgage but also holding their deposits and offering other services. Relationship-based lending can be contrasted with a "transactional banking" or high-volume lending business model that is often associated with larger lenders. These lenders are more likely to rely on automated underwriting methodologies that emphasize hard data—credit scores, income, and other quantifiable characteristics—that often cannot capture atypical lending risks, such as the uniqueness of a particular property that is collateralizing a mortgage loan in a rural area. The CFPB believes that lenders using the relationship-based model "may be better able to assess ability to repay because they are more likely to base underwriting decisions on local knowledge and nonstandard data and less likely to rely on standardized underwriting criteria." The CFPB cites several studies that found that lenders using soft information in their underwriting had lower default rates on mortgages than lenders that did not. Overreliance on soft information, however, could leave lenders susceptible to their biases. Third, small lenders' ties to their communities, the CFPB argues, provide added incentive to thoroughly underwrite their mortgages for the borrower's ability to repay. Small lenders are likely to provide financial services within a circumscribed geographical area, allowing them to "have specialized knowledge of the community in which they operate" and potentially "have a more comprehensive understanding of their customers' financial circumstances." A more comprehensive understanding would likely improve a lender's capacity to accurately assess a consumer's ability to repay. In addition, the emphasis on maintaining long-standing relationships with consumers and limiting their business to a specified geographic area, the CFPB argues, makes small lenders more concerned about their reputational risk. These three factors, the CFPB argues, provide small creditors with a better ability to assess a borrower's creditworthiness and offer strong incentives for the lender to internalize the costs of a borrower's default. Each of the three legislative proposals would expand lender eligibility for a portfolio QM compared with the Small Creditor Portfolio QM but to different degrees. Table 3 summarizes the different lender restrictions, dividing the requirements into size requirements, origination requirements, and other criteria that a lender would have to satisfy. As can be seen below, S. 1484 and H.R. 1210 would allow a lender of any size to take advantage of the portfolio QM, whereas S. 1491 and the Small Creditor Portfolio QM have size and origination requirements that a lender must satisfy. As mentioned in the previous section, the CFPB argues that it is important to limit the portfolio QM to small lenders because small lenders have a particular ability and incentive to accurately evaluate a borrower's creditworthiness. Those proposals that have less prescriptive lender restrictions rely less on size limitations to provide protections to borrowers but instead emphasize that the portfolio requirements and loan criteria encourage an accurate assessment of ability to repay. Several policy issues related to lender restrictions are discussed below. To provide context for the different asset thresholds contained in the Small Creditor Portfolio QM and the legislative proposals, Figure 1 shows the number of different banks by asset size. The number of small banks has decreased over time, with much of the decrease driven by the drop in the number of banks with less than $100 million in assets. Although the number of small banks has fallen, the vast majority of banks had less than $1 billion in assets, and just 107 banks had more than $10 billion in assets in 2014. Small banks make up the majority of institutions, but Figure 2 shows that most assets are held by banks over $10 billion. The CFPB's lender restrictions are stricter than those of the legislative proposals. The CFPB uses both an asset limit and origination threshold in its definition of small because it "believes that both elements of the threshold play independent and important roles." The CFPB contends the origination threshold is the best way of restricting the portfolio QM to small lenders that use the relationship-based business model that it believes is important. The CFPB intends the asset limit to prevent a large lender that has a low origination level and does not use the relationship-based business model from participating. Both factors impose limits on which lenders can participate. The CFPB estimates that "approximately 95 percent of creditors with less than $500 million in assets, approximately 74 percent of creditors with assets between $500 million and $1 billion, and approximately 50 percent of creditors with assets between $1 billion and $2 billion" would meet its original definition of small , which has since been expanded. S. 1491 would allow larger lenders—those with up to $10 billion in assets—to participate if the lender satisfied certain criteria. It is unclear how the CFPB would implement and define the other criteria, so it is unclear how many additional lenders would be eligible. Using $10 billion as a benchmark provides the upper bound for lender eligibility under S. 1491 . Approximately 98.2% of banks have less than $10 billion in assets, but banks with less than $10 billion in assets account for only 18.7% of the banking system's total assets. H.R. 1210 and S. 1484 have no asset or origination threshold for participating, and thus many additional lenders would be eligible to participate if the proposals were enacted. The CFPB had some discretion in setting the thresholds that it used, and the CFPB's rule implementing the Small Creditor Portfolio QM explained why it chose to limit eligibility to the smaller lenders that it did. The CFPB notes that "a creditor with assets between $1 billion and $2 billion has, on average, 16 branches, 252 employees, and operations in 5 counties. In contrast, a creditor with between $2 billion and $10 billion in assets has, on average, 34 branches, 532 employees, and operations in 12 counties." As the staff and geographic reach of the lender increases, the CFPB argues, "it becomes less and less likely that a creditor will engage in relationship lending or use qualitative or local knowledge in its underwriting. In addition, as an institution adds staff and branches, it is more likely from a systems perspective to handle compliance functions." Although the CFPB emphasizes the correlation between institution size and relationship lending, it is unclear why the CFPB originally chose the $2 billion in assets and 500 mortgages originated as the thresholds. In fact, the CFPB expanded the origination threshold to 2,000 mortgages per year (excluding mortgages held in portfolio). Although larger banks may be less likely to use a relationship lending business model, those who support eliminating size restrictions for portfolio QM in S. 1484 and H.R. 1210 would deem the quality of the mortgages they originate to be sufficiently high to warrant receiving QM status. The next section provides evidence on default rates and other performance measures for lenders of different sizes. In assessing eligibility requirements for a portfolio QM option, one factor to consider is the performance of mortgages originated by lenders of different sizes. In November 2012, former Federal Reserve governor and community banker Elizabeth Duke cited the better performance of community banks' mortgage portfolios after the bursting of the housing bubble as evidence of "the responsible lending practices of community banks" : Over the last several years as mortgage delinquencies reached record levels, the serious delinquency rate of mortgages held by community banks did not go much over 4 percent, far lower than the serious delinquency rates that climbed to almost 22 percent for subprime, fixed-rate loans and more than 46 percent for subprime, variable-rate loans. In fact, over the last several years, on average, mortgages held by community banks outperformed even fixed-rate, prime loans, the best performing mortgage category. In addition, research from the Federal Reserve Bank of Dallas, presented in Figure 4 , shows the delinquency rate of mortgages held in portfolio by banks of different sizes in the aftermath of the bursting of the housing bubble. Banks of all sizes had similar delinquency rates at the beginning of 2008, but the rates diverged over the next four years, just as argued by Governor Duke. The larger banks experienced higher delinquency rates, whereas smaller banks saw less of an increase. Performance during the most recent crisis, however, may not be indicative of future performance. Others highlight the fact that small institutions failed at a higher percentage during the Savings and Loan crisis in part because of mortgage-related losses, evidence that small institutions are capable of making significant mistakes that could lead to their failure. As previously explained in the portfolio requirements section, a mortgage that retains its QM status when transferred to a different lender's portfolio would have a lower liquidity premium (and potentially a lower rate for the borrower, all else equal) but may provide the originator with less incentive to perform thorough underwriting. Similarly, if the portfolio QM option is available to more types of lenders, such as large banks, a portfolio mortgage would have a lower liquidity premium (because there would be a larger pool of eligible purchasers of the mortgage), but the incentives to perform thorough underwriting that are associated with being small might be lost. Some argue that the added liquidity injected in to the market by allowing large banks to purchase mortgages, especially during a market downturn, would justify large banks' eligibility for the portfolio QM. S. 1484 would allow large banks to purchase mortgages that they did not originate, but if the mortgage was held in portfolio, the mortgage would receive QM status. H.R. 1210 would allow a large bank to originate a mortgage and have it receive QM status if the mortgage was retained in portfolio, but it would not allow a large bank to use the portfolio QM option for a mortgage that it acquired and did not originate. S. 1491 would not allow banks over $10 billion in assets to use the portfolio QM. Whether a large bank would actually provide support to the mortgage market during a downturn, however, depends on the nature of the particular episode. Figure 5 shows the change in mortgage portfolios relative to 2006 for all banks and the 10 largest banks (based on their mortgage portfolios) in any given year. As can be seen below, the banking system reduced the total amount of mortgages that were held in portfolio, and the largest banks shrank their mortgage portfolios by a similar amount. During this period, the largest banks, in aggregate, were not providing disproportionate support or drag on the market but were generally moving with the market. Past actions are not, however, necessarily predictive of future performance. The CFPB's Small Creditor Portfolio QM has the same product-feature requirements as the Standard QM—no negative amortization or terms longer than 30 years—but has less prescriptive underwriting standards. The main difference in underwriting standards is that the Small Creditor Portfolio QM does not have a numeric debt-to-income (DTI) threshold that must be met, unlike the Standard QM, which requires a borrower to have a DTI below 43%. Lenders are still required "to consider the consumer's debt-to-income ratio ... and to verify the underlying information" used to calculate the DTI under the Small Creditor Portfolio QM, but "there is no numeric limit." The CFPB removes the numeric DTI limit for portfolio loans offered by small lenders because it argues that the factors unique to portfolio loans and to small lenders (as explained earlier in this report) provide added incentives that ensure that a lender using the Small Creditor Portfolio QM accurately assesses a borrower's creditworthiness. Though the 43% limit is removed, the CFPB argues that lenders should still have to consider DTI because "consideration of debt-to-income ... is fundamental to any determination of ability to repay." The less prescriptive underwriting standards are intended to reduce the burden on small creditors and allow for greater credit availability. The legislative proposals have significant variation in how prescriptive they would be in setting underwriting and product-feature requirements for a loan that would be eligible for a portfolio QM option. Table 4 summarizes the requirements. H.R. 1210 has the fewest requirements, and S. 1491 has the most prescriptive requirements. In addition, H.R. 1210 and S. 1484 generally would limit the ability of the CFPB to add additional loan criteria beyond what is in the bills, but S. 1491 would allow the CFPB to add additional loan criteria for a mortgage to qualify for portfolio QM status. The CFPB intended the minimum underwriting standards and the possibility of a consumer bringing a lawsuit to work in tandem to protect consumers. A consumer can bring a suit claiming the lender failed to comply with the ATR rule, but the borrower's likelihood of success is partially dependent on the stringency of the loan criteria and the ease with which the lender can document that it complied with the requirement. If a lender must satisfy prescriptive or difficult to document criteria to have a loan receive QM status, then a borrower is likely to be more successful in showing that the lender failed to comply with those detailed standards. If a lender must satisfy less prescriptive criteria, such as simply documenting that the loan is currently held in portfolio, then it is likely to be more difficult for the borrower to win the suit. The more likely a borrower is to win, the argument goes, the more incentive a lender has to thoroughly underwrite the loan and address the market failures that are at the root of the ATR rule. Alternatively, the more prescriptive standards that may make it more likely for a borrower to win a suit could dissuade lenders from extending credit to borrowers who are not clearly within the required underwriting standards. Making the loan criteria easier to satisfy could reduce the burden on lenders and allow them to expand credit but could reduce consumer protections by making it harder for a borrower to win a suit. This highlights the tradeoff between consumer protection and access to credit when establishing minimum underwriting standards. One of the areas that has received particular attention is the treatment of borrowers who have atypical financial situations, such as self-employed individuals or seasonal employees. The CFPB has standards and definitions for terms such as income and debt in its Appendix Q that lenders use to ensure compliance with the ATR rule, and Appendix Q has specific information related to how to address certain atypical financial situations. Some industry groups argue, however, that Appendix Q is too complex. They contend that lenders are less likely to extend credit to atypical borrowers whom they otherwise deem creditworthy because of the complexity of Appendix Q and of the uncertainty lenders face as to whether they have appropriately applied its requirements to atypical borrowers. Supporters of the expanded portfolio QM options argue that the less prescriptive standards and easier to document criteria in their proposals would expand credit availability, especially for those with atypical financial situations. They contend that the lender should be given the discretion to set its own underwriting standards and product-feature standards because it holds the risk on its balance sheet. The ability to set their own standards, the argument goes, could allow lenders to extend loans to more types of borrowers. Supporters disagree, however, with how much discretion the lender should be given. H.R. 1210 , for example, provides lenders with the most discretion. It would not mandate any specific underwriting requirements and, for product-feature requirements, would limit only prepayment penalties. S. 1491 is at the other extreme, requiring the lender to satisfy prescriptive standards that are similar to those found in the CFPB's Small Creditor Portfolio QM. Supporters of the underwriting and product-feature requirements in S. 1491 and in the Small Creditor Portfolio QM argue that the criteria are essential to ensuring that the lender performs a thorough assessment of the borrower's ability to repay. Having assessed the three major parts individually—portfolio requirements, lender restrictions, and loan criteria—for the different proposals, what would the collective effect on credit availability and on regulatory burden be if an expanded portfolio QM were adopted? The effect on credit availability would depend on many different factors, including which expanded portfolio QM proposal (if any) was implemented. Even if the broadest and least prescriptive proposal were enacted, it is unclear how significant an effect it would have on credit availability. As a recent Government Accountability Office (GAO) report explains, "agencies, market participants, and observers estimated that the QM ... regulations would not have a significant effect initially because many loans made in recent years already met QM ... criteria before these regulations were promulgated." Based on GAO's analysis, an expanded QM option may not result in a significant expansion in credit availability, as many of the mortgages that would receive QM status under the new QM option would also receive QM status under the previously available options. Similarly, a December 2015 study by the Federal Reserve found "evidence that some market outcomes were affected by the new rules, but the estimated magnitudes of the responses are small." Others argue that QM's prescriptive criteria are preventing some lenders from lending to creditworthy borrowers. A portfolio QM, they argue, could increase credit availability by offering lenders more flexibility. Although GAO and the Federal Reserve found that the QM rule has had a small effect initially on credit availability, the Federal Reserve argues that the QM rule "could be more binding in the future." An expanded portfolio QM's longer-term effects on credit availability, therefore, are unclear. Market participants expect mortgage credit conditions to loosen as more time passes from the bursting of the housing bubble, meaning that lenders may want to expand credit availability, but it is unclear whether they would do so because of the restrictions in the QM rule. In addition, the Temporary GSE QM category—which, in general, has less prescriptive underwriting criteria than the Standard QM category—is scheduled to expire in 2021, which may restrain credit after its expiration for borrowers on the margins of creditworthiness. An expanded portfolio QM option may have a greater effect on credit availability at that time. Although the effect on credit availability may be minimal, an expanded portfolio QM option that has less prescriptive underwriting standards could have a greater impact on regulatory burden. As with many policy discussions related to regulatory burden, reducing the burden borne by the lender could reduce the protections available to consumers. As mentioned before, lenders point to the prescriptive underwriting standards found in the CFPB's Appendix Q as source of their unduly burdensome compliance costs. The less prescriptive portfolio options would not require lenders to underwrite using Appendix Q. So even if a mortgage would have received QM status under an alternative QM option, the fact that the less prescriptive portfolio QM option is available would mean that a lender would not necessarily have to perform as cost-intensive of an evaluation. The effect on credit availability may be small in this example, but the reduction in regulatory burden may be more meaningful. The CFPB and many in Congress generally agree that if a lender holds a mortgage in portfolio, then the incentives of the lender and borrower are more likely to be aligned than if the lender sold the mortgage. There is disagreement, however, on the policy implications of whether the incentive effects alone are sufficient or whether other types of restrictions are needed to ensure prudent lending and consumer protection. In establishing the Small Creditor Portfolio QM, the CFPB argued that because borrower and lender incentives were more correctly aligned, the underwriting criteria for the Small Creditor Portfolio QM could be less prescriptive than for the Standard QM, but the compliance option would be limited to small creditors. The Small Creditor Portfolio QM needs to contain certain lender restrictions and loan criteria rather than just apply to all portfolio loans offered by all lenders, the CFPB contends, because lender and borrower incentives are not perfectly aligned. The possibility of collateral dependent lending and other factors could result in a lender keeping mortgages in portfolio that may be profitable but not prudently underwritten. Although the lender restrictions and loan criteria are intended to ensure consumers are adequately protected, they may unnecessarily restrict credit and be unduly burdensome to lenders. The different legislative proposals that would expand the portfolio QM option vary in their implicit responses to the CFPB. S. 1491 is the most similar to the Small Creditor Portfolio QM in that it would require similar loan criteria to be followed for a mortgage to qualify for the expanded QM but it would allow larger lenders to be eligible. H.R. 1210 would have the least prescriptive loan criteria and lender requirements. Nearly any mortgage originated by any depository institution would be eligible for the expanded portfolio QM so long as it would be held in the originating lender's portfolio. S. 1484 would also have more expansive lender eligibility than the current CFPB rule allows and less prescriptive underwriting criteria, but it would require more documentation of a borrower's financial status than H.R. 1210 would require. The key questions that policymakers face in choosing which, if any, of the legislative proposals to support include the following: Are borrower and lender incentives sufficiently aligned so that consumers will be adequately protected and loans will be prudently underwritten when the lender keeps the mortgage in portfolio? Is it necessary to limit the portfolio QM option to small lenders because the relationship banking model that they often employ is believed to result in a more accurate assessment of a borrower's ability to repay? If so, lenders of what size? Should any type of mortgage held in portfolio—including balloon or interest-only mortgages—be eligible? Should the lender be required to follow certain prescribed underwriting procedures or to document a borrower's financial status? Could an expanded portfolio QM reduce lenders' regulatory burden while ensuring that consumers have sufficient protections? The answers to these and other questions, which have been explored in this report, may help policymakers in evaluating the legislation.

Title XIV of the Dodd-Frank Act established the ability-to-repay (ATR) requirement. Under the ATR requirement, a lender must determine based on documented and verified information that, at the time a mortgage is made, the borrower has the ability to repay the loan. Lenders that fail to comply with the ATR rule could be subject to legal liability, such as the payment of certain statutory damages. A lender can comply with the ATR requirement in different ways, one of which is by originating a Qualified Mortgage (QM). When a lender originates a QM, it is presumed to have complied with the ATR requirement, which consequently reduces the lender's potential legal liability for its residential mortgage lending activities. The QM rule has several compliance options that a lender can use to have a mortgage that it originates receive QM status, one of which is the Small Creditor Portfolio QM. Critics of the QM rule argue that the Small Creditor Portfolio QM, which is intended to benefit small creditors that keep loans in portfolio, should be broadened. They propose modifying the rule to make it easier for a lender to comply if it keeps the loan instead of selling it. Proponents of an expanded portfolio QM disagree on several policy issues, but, in general, they argue that because the lender is holding the loan in its portfolio, it is exposed to the risks associated with the loan (such as the risk that the lender will not be repaid) and therefore has the incentive to ensure that the loan is safely underwritten. The lender, the argument goes, should be allowed to follow less prescriptive underwriting criteria when the mortgage is held in portfolio, and more lenders should be allowed to avail themselves of this option than is currently allowed. Critics of the expanded portfolio lending proposals counter that the incentives of holding the loan in portfolio are insufficient to protect consumers and that the existing protections in the rule are needed to ensure that the failures of the past are not repeated. This report analyzes the policy debate related to portfolio lending and qualified mortgages, focusing on the legislation that is the subject of congressional debate: H.R. 1210, the Portfolio Lending and Mortgage Access Act; S. 1484, the Financial Regulatory Improvement Act; and S. 1491/H.R. 2642, the Community Lender Regulatory Relief and Consumer Protection Act. The analysis in this report raises several issues: Economic theory supports different arguments that are made about whether a mortgage that is kept in portfolio is more or less likely to be prudently underwritten. The retained risk associated with keeping a mortgage in portfolio may provide the lender an incentive to ensure that the borrower is creditworthy, but increasing home prices and issues related to the arbitrage of capital requirements may provide incentives to keep mortgages in portfolio that may be profitable but not prudently underwritten. Empirical research has also led to conflicting results. The Consumer Financial Protection Bureau argues that small creditors may have "strong incentives and particular ability" to make mortgages that accurately assess a borrower's ability to repay that larger lenders may not have. It is unclear, however, what the appropriate size thresholds should be and whether other factors, such as keeping the mortgage in portfolio, can compensate for a larger lender's possibly reduced incentives and ability. It is unclear how significant an effect an expanded portfolio QM option would have on credit availability, as the mortgages that would qualify for the expanded option may already receive QM status under existing options. The legislative proposals may, however, have a greater effect on reducing a creditor's regulatory burden, as the lender may be able to use less cost-intensive underwriting processes of the expanded QM option. Although the burden may be reduced for the lender, it could be borne by consumers if they have fewer consumer protections under an expanded portfolio QM.

This is an outline of two federal statutes: the Electronic Communications Privacy Act (ECPA) and the Foreign Intelligence Surveillance Act (FISA). Both evolved out of the shadow of the Supreme Court's Fourth Amendment jurisprudence. The courts play an essential role in both. Congress crafted both to preserve the ability of government officials to secure information critical to the nation's well-being and to ensure individual privacy. It modeled parts of FISA after features in ECPA. There are differences, however. ECPA protects individual privacy from the intrusions of other individuals. FISA has no such concern. FISA authorizes the collection of information about the activities of foreign powers and their agents, whether those activities are criminal or not. ECPA's only concern is crime. Prohibitions : In Title III, ECPA begins the proposition that unless provided otherwise, it is a federal crime to engage in wiretapping or electronic eavesdropping; to possess wiretapping or electronic eavesdropping equipment; to use or disclose information obtained through illegal wiretapping or electronic eavesdropping; or to disclose information secured through court-ordered wiretapping or electronic eavesdropping, in order to obstruct justice. Wiretapping : First among these is the ban on illegal wiretapping and electronic eavesdropping that covers: (1) any person who (2) intentionally (3) intercepts, or endeavors to intercept (4) wire, oral or electronic communications (5) by using an electronic, mechanical or other device, (6) unless the conduct is specifically authorized or expressly not covered, e.g. (a) one of the parties to the conversation has consent to the interception, (b) the interception occurs in compliance with a statutorily authorized, (and ordinarily judicially supervised) law enforcement or foreign intelligence gathering interception, (c) the interception occurs as part of providing or regulating communication services, (d) certain radio broadcasts, and (e) in some places, spousal wiretappers. Unlawful Disclosure : Title III has three disclosure offenses. The first is a general prohibition focused on the products of an unlawful interception: (1) any person [who] (2) intentionally (3) discloses or endeavors to disclose to another person (4) the contents of any wire, oral, or electronic communication (5) having reason to know (6) that the information was obtained through the interception of a wire, oral, or electronic communication (7) in violation of 18 U.S.C. 2511(1) (8) is subject to the same sanctions and remedies as the wiretapper or electronic eavesdropper. When the illegally secured information relates to a matter of usual public concern, the First Amendment precludes a prosecution for disclosure under §2511(c). Moreover, the legislative history indicates that Congress did not intend to punish the disclosure of intercepted information that is public knowledge. Finally, the results of electronic eavesdropping authorized under Title III may be disclosed and used for law enforcement purposes and for testimonial purposes. Title III makes it a federal crime to disclose intercepted communications under two other circumstances. It is a federal crime to disclose, with an intent to obstruct criminal justice, any information derived from lawful police wiretapping or electronic eavesdropping. A third disclosure proscription applies only to electronic communications service providers "who intentionally divulge the contents of the communication while in transmission" to anyone other than sender and intended recipient. Violators would presumably be exposed to criminal liability under the general disclosure proscription and to civil liability. Unlawful Use : The prohibition on the use of information secured from illegal wiretapping or electronic eavesdropping mirrors its disclosure counterpart: (1) any person [who] (2) intentionally (3) uses or endeavors to use to another person (4) the contents of any wire, oral, or electronic communication (5) having reason to know (6) that the information was obtained through the interception of a wire, oral, or electronic communication (7) in violation of 18 U.S.C. 2511(1), (8) is subject to the same sanctions and remedies as the wiretapper or electronic eavesdropper. The criminal and civil liability that attend unlawful use of intercepted communications in violation of paragraph 2511(1)(d) are the same as for unlawful disclosure in violation of paragraphs 2511(1)(c) or 2511(1)(e), or for unlawful interception under paragraphs 2511(1)(a) or 2511(1)(b). Possession of Intercept Devices : The proscriptions for possession and trafficking in wiretapping and eavesdropping devices are even more demanding than those that apply to the predicate offense itself. There are exemptions for service providers, government officials, and those under contract with the government, but there is no exemption for equipment designed to be used by private individuals, lawfully but surreptitiously. Government Access : Title III exempts federal and state law enforcement officials from its prohibitions on the interception of wire, oral, and electronic communications under three circumstances: (1) pursuant to or in anticipation of a court order, (2) with the consent of one of the parties to the communication; and (3) with respect to the communications of an intruder within an electronic communications system. To secure a Title III interception order as part of a federal criminal investigation, a senior Justice Department official must approve the application for the court order authorizing the interception of wire or oral communications. The procedure is only available where there is probable cause to believe that the wiretap or electronic eavesdropping will produce evidence of one of a long, but not exhaustive, list of federal crimes, or of the whereabouts of a "fugitive from justice" fleeing from prosecution of one of the offenses on the predicate offense list. Any federal prosecutor may approve an application for a court order under section 2518 authorizing the interception of e-mail or other electronic communications and the authority extends to any federal felony rather than more limited list of federal felonies upon which a wiretap or bug must be predicated. At the state level, the principal prosecuting attorney of a state or any of its political subdivisions may approve an application for an order authorizing wiretapping or electronic eavesdropping based upon probable cause to believe that it will produce evidence of a felony under the state laws covering murder, kidnaping, gambling, robbery, bribery, extortion, drug trafficking, or any other crime dangerous to life, limb or property. State applications, court orders and other procedures must at a minimum be as demanding as federal requirements. Applications for a court order authorizing wiretapping and electronic surveillance must include the identity of the applicant and the official who authorized the application; a full and complete statement of the facts including details of the crime; a particular description of the nature, location and place where the interception is to occur; a particular description of the communications to be intercepted; the identities (if known) of the person committing the offense and of the persons whose communications are to be intercepted; a full and complete statement of the alternative investigative techniques used or an explanation of why they would be futile or dangerous; a statement of the period of time for which the interception is to be maintained and if it will not terminate upon seizure of the communications sought, a probable cause demonstration that further similar communications are likely to occur; a full and complete history of previous interception applications or efforts involving the same parties or places; in the case of an extension, the results to date or explanation for the want of results; and any additional information the judge may require. Before issuing an order authorizing interception, the court must find: probable cause to believe that an individual is, has, or is about to commit one or more of the predicate offenses; probable cause to believe that the particular communications concerning the crime will be seized as a result of the interception requested; that normal investigative procedures have been or are likely to be futile or too dangerous; and probable cause to believe that the facilities from which, or the place where, the wire, oral, or electronic communications are to be intercepted are being used, or are about to be used, in connection with the commission of such offense, or are leased to, listed in the name of, or commonly used by such person. Subsections 2518(4) and (5) demand that any interception order include the identity (if known) of the persons whose conversations are to be intercepted; the nature and location of facilities and place covered by the order; a particular description of the type of communication to be intercepted and an indication of the crime to which it relates; the individual approving the application and the agency executing the order; the period of time during which the interception may be conducted and an indication of whether it may continue after the communication sought has been seized; an instruction that the order shall be executed; as soon as practicable, and so as to minimize the extent of innocent communication seized; and upon request, a direction for the cooperation of communications providers and others necessary or useful for the execution of the order. The court orders remain in effect only as long as required but not more than 30 days. After 30 days, the court may grant 30-day extensions subject to the procedures required for issuance of the original order. During that time the court may require progress reports at such intervals as it considers appropriate. Intercepted communications are to be recorded and the evidence secured and placed under seal (with the possibility of copies for authorized law enforcement disclosure and use) along with the application and the court's order. Within 90 days of the expiration of the order, those whose communications have been intercepted are entitled to notice, and evidence secured through the intercept may be introduced into evidence with 10 days' advance notice to the parties. Title III also describes conditions under which information derived from a court-ordered interception may be disclosed or otherwise used. It permits disclosure and use for official purposes by: other law enforcement officials including foreign officials; federal intelligence officers to the extent that it involves foreign intelligence information; other American or foreign government officials to the extent that it involves the threat of hostile acts by foreign powers, their agents, or international terrorists. It also allows witnesses testifying in federal or state proceedings to reveal the results of a Title III tap, provided the intercepted conversation or other communication is not privileged. Consequences of a Violation : Criminal Penalties : Interception, use, or disclosure in violation of Title III is generally punishable by imprisonment for not more than five years and/or a fine of not more than $250,000 for individuals and not more than $500,000 for organizations. In addition to exemptions previously mentioned, Title III provides a defense to criminal liability based on good faith. Civil Liability : Victims of a violation of Title III may be entitled to equitable relief, damages (equal to the greater of actual damages, $100 per day of violation, or $10,000), punitive damages, reasonable attorney's fees, and reasonable litigation costs. A majority of federal courts hold that governmental entities other than the United States may be liable for violations of §2520 and that law enforcement officers enjoy a qualified immunity from suit under §2520. The cause of action created in §2520 is subject to a good faith defense. Efforts to claim the defense by anyone other than government officials or someone working at their direction have been largely unsuccessful. Finally, the USA PATRIOT Act authorizes a cause of action against the United States for willful violations of Title III, the Foreign Intelligence Surveillance Act, or the provisions governing stored communications in 18 U.S.C. 2701-2712. Successful plaintiffs are entitled to the greater of $10,000 or actual damages, and reasonable litigation costs. Administrative and Professional Disciplinary Action: Upon a judicial or administrative finding of a Title III violation suggesting possible intentional or willful misconduct on the part of a federal officer or employee, the federal agency or department involved may institute disciplinary action. It is required to explain to its Inspector General's office if it declines to do so. Attorneys who engage in unlawful wiretapping or electronic eavesdropping remain subject to professional discipline in every jurisdiction. Courts and bar associations have had varied reactions to lawful wiretapping or electronic eavesdropping by members of the bar. Exclusion of Evidence : When the Title III prohibits disclosure, the information is inadmissible as evidence before any federal, state, or local tribunal or authority. Individuals whose conversations have been intercepted or against whom the interception was directed have standing to claim the benefits of the §2515 exclusionary rule through a motion to suppress. Section 2518(10)(a) bars admission as long as the evidence is the product of (1) an unlawful interception, (2) an interception authorized by a facially insufficient court order, or (3) an interception executed in manner substantially contrary to the order authorizing the interception. Mere technical noncompliance is not enough; the defect must be of a nature that substantially undermines the regime of court-supervised interception for law enforcement purposes. Prohibitions : The SCA has two sets of proscriptions: a general prohibition and a second applicable to only certain communications providers. The general proscription makes it a federal crime to: (1) intentionally (2) either (a) access without authorization or (b) exceed an authorization to access (3) a facility through which an electronic communication service is provided (4) and thereby obtain, alter, or prevent authorized access to a wire or electronic communication while it is in electronic storage in such system. Section 2701's prohibitions yield to several exceptions and defenses. First, the section itself declares that Subsection (a) of this section does not apply with respect to conduct authorized—(1) by the person or entity providing a wire or electronic communications service; (2) by a user of that service with respect to a communication of or intended for that user; or (3) in section 2703 [requirements for government access], 2704 [backup preservation] or 2518 [court ordered wiretapping or electronic eavesdropping] of this title. Second, there are the good faith defenses provided by section 2707. Third, there is the general immunity from civil liability afforded providers under subsection 2703(e). A second set of prohibitions appears in section 2702 and supplements those in section 2701. Section 2702 bans the disclosure of the content of electronic communications and records relating to them by those who provide the public with electronic communication service or remote computing service. The section forbids providers to disclose the content of certain communications to anyone or to disclose related records to governmental entities. Section 2702 comes with its own set of exceptions which permit disclosure of the contents of a communication: (1) to an addressee or intended recipient of such communication or an agent of such addressee or intended recipient; (2) as otherwise authorized in section 2517 [relating to disclosures permitted under Title III], 2511(2)(a)[relating to provider disclosures permitted under Title III for protection of provider property or incidental to service], or 2703 [relating to required provider disclosures pursuant to governmental authority] of this title; (3) with the lawful consent of the originator or an addressee or intended recipient of such communication, or the subscriber in the case of remote computing service; (4) to a person employed or authorized or whose facilities are used to forward such communication to its destination; (5) as may be necessarily incident to the rendition of the service or to the protection of the rights or property of the provider of that service; (6) to the National Center for Missing and Exploited Children, in connection with a report submitted thereto under section 227 of the Victims of Child Abuse Act of 1990; (7) to a law enforcement agency—(A) if the contents—(i) were inadvertently obtained by the service provider; and (ii) appear to pertain to the commission of a crime; or (8) to a federal, state, or local government entity, if the provider, in good faith, believes that an emergency involving danger of death or serious physical injury to any person requires disclosure without delay of communications relating to the emergency. The record disclosure exceptions are similar. Government Access : The circumstances and procedural requirements for law enforcement access to stored wire or electronic communications and transactional records are less demanding than those under Title III. They deal with two kinds of information—often in the custody of the communications service provider rather than of any of the parties to the communication—communications records and the content of electronic or wire communications. The Stored Communications Act provides two primary avenues for law enforcement access: permissible provider disclosure (section 2702) and required provided access (section 2703). As noted earlier in the general discussion of section 2702, a public electronic communication service (ECS) provider or a public remote computing service (RCS) provider may disclose the content of a customer's communication without the consent of a communicating party to a law enforcement agency in the case of inadvertent discovery of information relating to commission of a crime, or to any government entity in an emergency situation. ECS and RCS providers may also disclose communications records to any governmental entity in an emergency situation. Federal, state, and local agencies, regardless of the nature of their missions, all qualify as governmental entities for purposes of section 2702. Section 2702 authorizes voluntary disclosure. Section 2703 speaks to the circumstances under which ECS and RCS providers may be required to disclose communications content and related records. Section 2703 distinguishes between recent communications and those that have been in electronic storage for more than 180 days The section insists that government entities resort to a search warrant to compel providers to supply the content of wire or electronic communications held in electronic storage for less than 180 days. It permits them to use a warrant, subpoena, or a court order authorized in subsection 2703(d) to force content disclosure with respect to communications held for more than 180 days. A subsection 2703(d) court order may be issued by a federal magistrate or by a judge qualified to issue an order under Title III. It need not be issued in the district in which the provider is located. The person whose communication is disclosed is entitled to notice, unless the court authorizes delayed notification because contemporaneous notice might have an adverse impact. Government supervisory officials may certify the need for delayed notification in the case of a subpoena. Subsection 2703(d) authorizes issuance of an order when the governmental entity has presented specific and articulable facts sufficient to establish reasonable grounds to believe that the contents are relevant and material to an ongoing criminal investigation. Some courts have held that this "reasonable grounds" standard is a Terry standard, a less demanding standard than "probable cause," and that under some circumstances this standard may be constitutionally insufficient to justify government access to provider-held e-mail. A Sixth Circuit panel has held that the Fourth Amendment precludes government access to the content of stored communications (e-mail) held by service providers in the absence of a warrant, subscriber consent, or some other indication that the subscriber has waived his or her expectation of privacy. Where the government instead secures access through a subpoena or court order as section 2703 permits, the evidence may be subject to both the Fourth Amendment exclusionary rule and the exceptions to the rule. The SCA has two provisions which require providers to save customer communications at the government's request. One is found in subsection 2703(f). It requires ECS and RCS providers to preserve "records and other evidence in its possession," at the request of a governmental entity pending receipt of a warrant, court order, or subpoena. Whether providers are bound to preserve e-mails and other communications that come into their possession both before and after receipt of the request is unclear. The second preservation provision is more detailed. It permits a governmental entity to insist that providers preserve backup copies of the communications covered by a subpoena or subsection 2703(d) court order. It gives subscribers the right to challenge the relevancy of the information sought. It might also be read to require the preservation of the content of communications received by the provider both before and after receipt of the order, but the requirement that copies be made within two days of receipt of the order seems to preclude such an interpretation. Section 2703 provides greater protection to communication content than to provider records relating to those communications. Under subsection 2703(c), a governmental entity may require a ECS or RCS provider to disclose records or information pertaining to a customer or subscriber—other than the content of a communication—under a warrant, a court order under subsection 2703(d), or with the consent of the subject of the information. An administrative, grand jury, or trial subpoena is sufficient, however, for a limited range of customer or subscriber related information. The customer or subscriber need not be notified of the record disclosure in either case. The district courts have been divided for some time over the question of what standard applies when the government seeks cell phone location information from a provider, either current or historical. The Third Circuit has held that while issuance of an order under subsection 2703(d) does not require a showing of probable cause as a general rule, the circumstances of a given case may require it. In United States v. J ones , five members of the Supreme Court seemed to suggest that a driver has a reasonable expectation that authorities must comply with the demands of the Fourth Amendment before acquiring access to information that discloses the travel patterns of his car over an extended period of time. There, the Court unanimously agreed that the agents' attachment of a tracking device to Jones' car and long-term capture of the resulting information constituted a Fourth Amendment search. For four Justices, placement of the device constituted a physical intrusion upon a constitutionally protected area. For four others, long-term tracking constituted a breach of Jones' reasonable expectation of privacy. For the ninth Justice, the activity constituted a Fourth Amendment search under either rationale. It remains to be seen whether the Supreme Court's decision in Jones will contribute to resolution of the issue. Consequences : Breaches of the unauthorized access prohibitions of section 2701 expose offenders to possible criminal, civil, and administrative sanctions. Violations committed for malicious, mercenary, tortious, or criminal purposes are punishable by imprisonment for not more than five years (not more than 10 years for a subsequent conviction) and/or a fine of not more than $250,000 (not more than $500,000 for organizations); lesser transgressions, by imprisonment for not more than one year (not more than five years for a subsequent conviction) and/or a fine of not more than $100,000. Victims of a violation of subsection 2701(a) have a cause of action for equitable relief, reasonable attorneys' fees and costs, and damages equal to the amount of any offender profits added to the total of the victim's losses (but not less than $1,000 in any event). Violations by the United States may give rise to a cause of action and may result in disciplinary action against offending officials or employees under the same provisions that apply to U.S. violations of Title III. Unlike violations of Title III, however, there is no statutory prohibition on disclosure or use of the information through a violation of section 2701; nor is there a statutory rule for the exclusion of evidence as a consequence of a violation. Yet, violations of SCA, which also constitute violations of the Fourth Amendment, will trigger both the Fourth Amendment exclusionary rule and the exceptions to that rule. No criminal penalties attend a violation of voluntary provider disclosure prohibitions of section 2702. Yet, ECS and RCS providers—unable to claim the benefit of one of the section's exceptions, of the good faith defense under subsection 2707(e), or of the immunity available under subsection 2703(e)—may be liable for civil damages, costs, and attorneys' fees under section 2707 for any violation of section 2702. Prohibitions : A trap and trace device identifies the source of incoming calls, and a pen register indicates the numbers called from a particular instrument. Since they did not allow the user to overhear the "contents" of the phone conversation or to otherwise capture the content of a communication, they were not considered interceptions within the reach of Title III prior to the enactment of ECPA. Although Congress elected to expand the definition of interception, it chose to regulate these devices beyond the boundaries of Title III for most purposes. Nevertheless, the Title III wiretap provisions apply when, due to the nature of advances in telecommunications technology, pen registers and trap and trace devices are able to capture wire communication "content." Subsection 3121(a) outlaws installation or use of a pen register or trap and trace device, except under one of seven circumstances: (1) pursuant to a court order issued under sections 3121-3127; (2) pursuant to a Foreign Intelligence Surveillance Act (FISA) court order; (3) with the consent of the user; (4) when incidental to service; (5) when necessary to protect users from abuse of service; (6) when necessary to protect providers from abuse of service; or (7) in an emergency situation. Government Access : Federal government attorneys and state and local police officers may apply for a court order authorizing the installation and use of a pen register and/or a trap and trace device upon certification that the information that it will provide is relevant to a pending criminal investigation. The order may be issued by a judge of "competent jurisdiction" over the offense under investigation, including a federal magistrate judge. Senior Justice Department or state prosecutors may approve the installation and use of a pen register or trap and trace device prior to the issuance of court authorization in emergency cases that involve either an organized crime conspiracy, an immediate danger of death or serious injury, a threat to national security, or a serious attack on a "protected computer." Emergency use must end within 48 hours, or sooner if an application for court approval is denied. Federal authorities have applied for court orders, under the Stored Communications Act (18 U.S.C. 2701-2712) and the trap and trace authority of 18 U.S.C. 3121-3127, seeking to direct communications providers to supply them with the information necessary to track cell phone users in conjunction with an ongoing criminal investigation. Thus far, their efforts have met with mixed success. Consequences : The use or installation of pen registers or trap and trace devices by anyone other than the telephone company, service provider, or those acting under judicial authority is a federal crime, punishable by imprisonment for not more than a year and/or a fine of not more than $100,000 ($200,000 for an organization). Subsection 3124(e) creates a good faith defense for reliance upon a court order under subsection 3123(b), an emergency request under subsection 3125(a), "a legislative authorization, or a statutory authorization." There is no accompanying exclusionary rule, and consequently a violation of section 3121 will not serve as a basis to suppress any resulting evidence. Moreover, unlike violations of Title III, there is no requirement that the target of an order be notified upon the expiration of the order; nor is there a separate federal private cause of action for victims of a pen register or trap and trace device violation. One court, in order to avoid First Amendment concerns, has held that the statute precludes imposing permanent gag orders upon providers. Nevertheless permitting providers to disclose the existence of an order to a target does not require them to do so. Some of the states have established a separate criminal offense for unlawful use of a pen register or trap and trace device, yet most of these seem to follow the federal lead and have not established a separate private cause of action for unlawful installation or use of the devices. The Foreign Intelligence Surveillance Act (FISA) authorizes special court orders for several purposes: electronic surveillance, physical searches, installation and use of pen registers and trap and trace devices, and orders to disclose tangible items. It once authorized surveillance orders which targeted the communications of persons overseas. Its replacement provisions for the review of orders directed at persons abroad expire on December 31, 2017. FISA insists that Congress be informed as to the extent that its authority has been used and establishes a safe harbor for those who help carry out its orders. The Foreign Intelligence Surveillance Court (the FISA court) is a creature of FISA. The FISA court consists of eleven federal district court judges from throughout the country, designated by the Chief Justice of the United States. The individual members of the court receive and act upon FISA order applications. Federal magistrate judges, designated by the Chief Justice, may also perform those functions with respect to pen register/trap and trace orders. Members of the FISA court, sitting in panels, pass upon challenges associated with the execution of tangible item and overseas targeting orders. These panels also rule upon requests to modify or set aside gag orders issued in connection with the execution of tangible item orders. The government may appeal the denial of a FISA application to a Foreign Intelligence Surveillance Court of Review made up of three federal judges designated by the Chief Justice. Government Access : The FISA electronic surveillance and physical search components use generally parallel procedures. Both draw from their law enforcement counterparts, but with important differences. A FISA electronic surveillance or physical search application must include (1) the identity of the individual submitting the application; (2) the identity or a description of the person whose communications are to be intercepted; (3) an indication of (a) why the person is believed to be a foreign power or the agent of a foreign power, and (b) why foreign powers or their agents are believed to use the targeted facilities or places; (4) a summary of the minimization procedures to be followed; (5) a description of the communications to be intercepted and the information sought; (6) certification by a senior national security or senior defense official designed by the President that (a) the information sought is foreign intelligence information, (b) a significant purpose of interception is to secure foreign intelligence information, (c) the information cannot reasonably be obtained using alternative means; (7) a summary statement of the means of accomplishing the interception (including whether a physical entry will be required); (8) a history of past interception applications involving the same persons, places, or facilities; and (9) the period of time during which the interception is to occur, whether it will terminate immediately upon obtaining the information sought, and if not, the reasons why interception thereafter is likely to be productively intercepted. The judges issue orders approving electronic surveillance or physical searches upon a finding that the application requirements have been met and that there is probable cause to believe that the target is a foreign power or the agent of a foreign power and that the targeted places or facilities are used by foreign powers or their agents. Orders approving electronic surveillance must (1) specify: (a) the identity or a description of the person whose communications are to be intercepted, (b) the nature and location of the targeted facilities or places, if known, (c) type of communications or activities targeted and the kind of information sought, (d) the means by which interception is to be accomplished and whether physical entry is authorized, (e) the tenure of the authorization, and (f) whether more than one device are to be used and if so their respective ranges and associated minimization procedures; (2) require: (a) that minimization procedures be adhered to, (b) upon request, that carriers and others provide assistance, and (c) that those providing assistance observe certain security precautions, and be compensated; (3) direct the applicant to advise the court of the particulars relating to surveillance directed at additional facilities and places when the order permits surveillance although the nature and location of targeted facilities and places were unknown at the time of issuance; and (4) expire when its purpose is accomplished but not later than after 90 days generally (after 120 days in the case of certain foreign agents and after a year in the case of foreign governments or their entities or factions of foreign nations) unless extended (extensions may not exceed one year). As in the case of law enforcement wiretapping and electronic eavesdropping, there is authority for interception and physical searches prior to approval in emergency situations. However, there is also statutory authority for foreign intelligence surveillance interceptions and physical searches without the requirement of a court order when the targets are limited to communications among or between foreign powers or involve nonverbal communications from places under the open and exclusive control of a foreign power. The second of these is replete with reporting requirements to Congress and the FISA court. These and the twin war time exceptions may be subject to constitutional limitations, particularly when Americans are the surveillance targets. FISA has detailed provisions governing the use of the information acquired through the use of its surveillance or physical search authority that include confidentiality requirements; notice of required Attorney General approval for disclosure; notice to the "aggrieved" of the government's intention to use the results as evidence; suppression procedures; inadvertently captured information; notification of emergency surveillance or search for which no FISA order was subsequently secured; and clarification that those who execute FISA surveillance or physical search orders may consult with federal and state law enforcement officers. Exclusivity : Title III has long declared that it should not be construed to confine governmental activities authorized under FISA, but that the two—Title III and FISA—are the exclusive authority under which governmental electronic surveillance may be conducted in this country. The Justice Department suggested, however, that in addition to the President's constitutional authority the Authorization for the Use of Military Force Resolution, enacted in response to the events of September 11, 2001, established an implicit exception to the exclusivity requirement. Section 102 of 2008 FISA Amendments Act seeks to overcome the suggestion by establishing a second exclusivity section which declares that exceptions may only be created by explicit statutory language. Prohibitions and Consequences : Criminal : It is a federal crime for federal officials to abuse their authority under either the FISA electronic surveillance or physical search provisions. The prohibitions cover illicit surveillance and searches as well as the use or disclosure of such unlawful activities. Violations are punishable by a fine and/or imprisonment for not more than five years. Federal law enforcement and investigative officers enjoy the benefit of a defense, if they are acting under the authority of warrant or court order. Civil : Violations may also expose the offender to civil liability. Those directed to assist authorities in execution of an electronic surveillance or physical search order are immune from civil suit. Moreover, even in the absence of a court order, the 2008 FISA Amendments Act bars the initiation or continuation of civil suits in either state or federal court based on charges that the defendant assisted any of the U.S. intelligence agencies. Dismissal is required upon the certification of the Attorney General that the person either: (1) did not provide the assistance charged; (2) provided the assistance under order of the FISA court; (3) provided the assistance pursuant to a national security letter issued under 18 U.S.C. 2709; (4) provided the assistance pursuant to 18 U.S.C. 2511(2)(a)(ii)(B) and 2518(7) under assurances from the Attorney General or a senior Justice Department official, empowered to approve emergency law enforcement wiretaps, that no court approval was required; (5) provided the assistance in response to a directive from the President through the Attorney General relating to communications between or among foreign powers pursuant to 50 U.S.C. 1802(a)(4); (6) provided the assistance in response to a directive from the Attorney General and the Director of National Intelligence relating to the acquisition of foreign intelligence information targeting non-U.S. persons thought to be overseas pursuant to 50 U.S.C. 1881a(h); or (7) provided the assistance in connection with intelligence activities authorized by the President between September 11, 2001, and January 17, 2007, relating to terrorist attacks against the United States. Only telecommunications carriers, electronic service providers, and other communication service providers may claim the protection afforded those who assisted activities authorized between 9/11 and January 17, 2007. The group which may claim protection for assistance supplied under other grounds is larger. It includes not only communication service providers but also any "landlord, custodian or other person" ordered or directed to provide assistance. The Attorney General's certification is binding if supported by substantial evidence, and the court is to consider challenges and supporting evidence ex parte and in camera where the Attorney General asserts that disclosure would harm national security. Cases filed in state court may be removed to federal court. The courts have rejected arguments that immunity procedure violates the Due Process Clause, the First Amendment, separation of powers, and the Administrative Procedure Act in multi-district civil litigation arising out of the National Security Agency program. With the reduced availability of individual defendants, the USA PATRIOT Act amendments afford victims of any improper use of information secured under a FISA surveillance, physical search, or pen register order a cause of action against the United States for actual or statutory damages. No comparable cause of action against the United States exists for other FISA violations. Evidentiary : FISA also has its own exclusionary rules for evidence derived from unlawful FISA electronic surveillance or physical searches. Nevertheless, Congress anticipated, and the courts have acknowledged, that lawful surveillance and searches conducted under FISA for foreign intelligence purposes may result in admissible evidence of a crime. Government Access : FISA pen register and trap and trace procedures are similar to those of their law enforcement counterparts, but with many of the attributes of other FISA provisions. The orders may be issued either by a member of the FISA court or by a FISA magistrate upon the certification of a federal officer that the information sought is likely to be relevant to an investigation of international terrorism or clandestine intelligence activities. The order may direct service providers to supply customer information related to the order. The statute allows the Attorney General to authorize emergency installation and use as long as an application is filed within 48 hours, and restricts the use of any resulting evidence if an order is not subsequently granted. The provisions for use of the information acquired run parallel to those that apply to FISA surveillance and physical search orders. Prohibition and Consequences : The pen register/trap and trace portion of FISA declares that information acquired by virtue of a FISA pen register or trap and trade order may only be used and disclosed for lawful purposes and only consistent with FISA's use restrictions. It is a federal crime to install or use a pen register or trap and trace device unless authorized to do so under either ECPA or FISA. Offenders face the prospect of imprisonment for not more than one year and/or a fine of not more than $100,000. Good faith reliance on a statutory authorization, such as the authority FISA provides, constitutes a defense. Those who assist are immune from civil liability, but victims of the unlawful use of information derived from a FISA pen register or trap and trace device order have a cause of action against the United States. The exclusionary rule for a FISA pen register or trap and trace order is comparable to that which applies in the case of evidence derived from FISA electronic surveillance or a FISA physical search. FISA's tangible item orders are perhaps its most interesting feature. Prior to the USA PATRIOT Act, senior FBI officials could approve an application to the FISA court for an order authorizing common carriers, or public accommodation, storage facility, or vehicle rental establishments to release their business records based upon certification of a reason to believe that the records pertained to a foreign power or the agent of a foreign power. The USA PATRIOT Act and later the USA PATRIOT Improvement and Reauthorization Act temporarily rewrote the procedure. In its temporary form, it requires rather than authorizes access; it is predicated upon relevancy rather than probable cause; it applies to all tangible property (not merely business records); and it applies to the tangible property of both individuals or organizations, commercial and otherwise. It is limited, however, to investigations conducted to secure foreign intelligence information or to protect against international terrorism or clandestine intelligence activities. Recipients are prohibited from disclosing the existence of the order, but are expressly authorized to consult an attorney with respect to their rights and obligations under the order. They enjoy immunity from civil liability for good faith compliance. They may challenge the legality of the order and/or ask that its disclosure restrictions be lifted or modified. The grounds for lifting the secrecy requirements are closely defined, but petitions for reconsideration may be filed annually. The decision to set aside, modify, or let stand either the disclosure restrictions of an order or the underlying order itself are subject to appellate review. The 2008 FISA Amendments Act established a temporary set of three procedures which authorize the acquisition of foreign intelligence information by targeting an individual or entity thought to be overseas. One, 50 U.S.C. 1881a, applies to the targeting of an overseas person or entity that is not a U.S. person. Another, 50 U.S.C. 1881b, covers situations when the American target is overseas but the gathering involves electronic communications or stored electronic communications or data acquired in this country. The third, 50 U.S.C. 1881c, applies to situations when the American target is overseas, but section 1881b is not available, either because acquisition occurs outside of the United States or because it involves something other than electronic surveillance or the acquisition of stored communications or data, e.g., a physical search. In the case of targets who are not U.S. persons, section 1881a(a) declares "upon the issuance of an order in accordance with subsection (i)(3) or a determination under subsection (c)(2), the Attorney General and the Director of National Intelligence may authorize jointly, for a period of up to 1 year from the effective date of the authorization, the targeting of persons reasonably believed to be located outside the United States to acquire foreign intelligence information." It makes no mention of authorizing acquisition. It merely speaks of targeting with an eye to acquisition. Moreover, it gives no indication of whether the anticipated methods of acquisition include the capture of a target's communications, of communications relating to a target, of communications of a person or entity related to the target, or information concerning one of the three. The remainder of the section, however, seems to dispel some of the questions. Section 1881a is intended to empower the Attorney General and the Director of National Intelligence to authorize the acquisition of foreign intelligence information and the methods that may be used to the capture of communications and related information. The procedure begins either with a certification presented to the FISA court for approval or with a determination by the two officials that exigent circumstances warrant timely authorization prior to court approval. In the certification process, they must assert in writing and under oath that (1) a significant purpose of the effort is the acquisition of foreign intelligence information; (2) the effort will involve the assistance of an electronic communication service provider; (3) the court has approved, or is being asked to approve, procedures designed to ensure that acquisition is limited to targeted persons found outside the United States and to prevent the capture of communications in which all the parties are within the United States; (4) minimization procedures, which the court has approved or is being asked to approve and which satisfy the requirements for such procedures in the case of FISA electronic surveillance and physical searches, will be honored; (5) guidelines to ensure compliance with limitations imposed in the section have been adopted and the limitations will be observed; and (6) these procedures and guidelines are consistent with Fourth Amendment standards. The certification is be accompanied by a copy of the targeting and minimization procedures, any supporting affidavits from senior national security officials, an indication of the effective date of the authorization, and a notification of whether pre-approval emergency authorization has been given. The certification, however, need not describe the facilities or places at which acquisition efforts will be directed. The limitations preclude intentionally targeting a person in the United States, "reverse targeting" (intentionally targeting a person overseas purpose of targeting a person within the United States), intentionally targeting a U.S. person outside the United States, intentionally acquiring a communication in which all of the parties are in the United States, or conducting the acquisition in a manner contrary to the demands of the Fourth Amendment. The Attorney General, in consultation with the Director of National Intelligence, is obligated to promulgate targeting and minimization procedures and guidelines to ensure that the section's limitations are observed. The minimization procedures must satisfy the standards required for similar procedures required for FISA electronic surveillance and physical searches. The targeting procedures must be calculated to avoid acquiring communications in which all of the parties are in the United States and to confine targeting to persons located outside the United States. Both are subject to review by the FISA court for sufficiency when it receives the request to approve the certification. Copies of the guidelines, which also provide directions concerning the application for FISA court approval under the section, must be supplied to court and to the congressional intelligence and judiciary committees. The Attorney General and Director of National Intelligence may instruct an electronic communications service provider to assist in the acquisition. Cooperative providers are entitled to compensation and are immune from suit for their assistance. They may also petition the FISA court to set aside or modify the direction for assistance, if it is unlawful. The Attorney General may petition the court to enforce a directive against an uncooperative provider. The court's decisions concerning certification approval, modification of directions for assistance, and enforcement of the directives are each appealable to the Foreign Intelligence Court of Review and on certiorari to the Supreme Court. Except with respect to disclosure following a failure to secure court approval of an emergency authorization, section 1806, discussed earlier, governs the use of information obtained under the authority of section 1881a. When the overseas target is an American individual or entity and acquisition is to occur in this country, the court may authorize acquisition by electronic surveillance or by capturing stored electronic communications or data under section 1881b. The Attorney General must approve the application which must be made under oath and indicate: (1) the identity of the applicant; (2) the identity, if known, or description of the American target; (3) the facts establishing that reason to believe that the person is overseas and a foreign power or its agent, officer, or employee; (4) the applicable minimization procedures; (5) a description of the information sought and the type of communications or activities targeted; (6) certification by the Attorney General or a senior national security or defense official that (a) foreign intelligence information is to be sought, (b) a significant purpose of the effort is to obtain such information, (c) the information cannot otherwise reasonably be obtained (and the facts upon which this conclusion is based), and (d) the nature of the information (e.g., relating to terrorism, sabotage, the conduct of U.S. foreign affairs, etc.)(and the facts upon which this conclusion is based); (7) the means of acquisition and whether physical entry will be necessary; (8) the identity of the service providing assisting (targeted facilities and premises need not be identified); (9) a statement of previous applications relating to the same American and actions taken; (10) the proposed tenure of the order (not to exceed 90 days), and (11) any additional information the FISA court may require. The court must issue an acquisition order upon a finding that the application satisfies statutory requirements, the minimization procedures are adequate, and there is probable cause to believe that the American target is located overseas and is a foreign power or its agent, officer, or employee. The court must explain in writing any finding that the application's assertion of probable cause, minimization procedures, or certified facts is insufficient. Such findings are appealable to the Foreign Intelligence Surveillance Court of Review and under certiorari to the Supreme Court. The court's order approving acquisition is to include the identity or description of the American target, the type of activities targeted, the nature of the information sought, the means of acquisition, and duration of the order. The order will also call for compliance with the minimization procedures, and when appropriate, for confidential, minimally disruptive provider assistance, compensated at a prevailing rate. Providers are immune from civil liability for any assistance they are directed to provide. As in other instances, in emergency cases the Attorney General may authorize acquisition pending approval of the court. The court must be notified of the Attorney General's decision and the related application must be filed within seven days. If emergency acquisition is not judicially approved subsequently, no resulting evidence may be introduced in any judicial, legislative, or regulatory proceedings unless the target is determined not to be an American, nor may resulting information be shared with other federal officials without the consent of the target, unless the Attorney General determines that the information concerns a threat of serious bodily injury. Except with respect to disclosure following a failure to court approval of an emergency authorization, section 1806, discussed earlier, governs the use of information obtained under the authority of section 1881a. The second provision for targeting an American overseas in order to acquire foreign intelligence information, section 1881c, is somewhat unique. Both FISA electronic survellinace and Title III have been understood to apply only to interceptions within the United States. Neither has been thought to apply overseas. Section 1881c, however, may be used for acquisitions outside the United States. Moreover, it may be used for acquisitions inside the United States as long as the requirements that would ordinarily attend such acquisition are honored. Otherwise, section 1881c features many of the same application, approval, and appeal provisions as section 1881b. Authorization is available under a court order or in emergency circumstances under the order of the Attorney General. Acquisition activities must be discontinued during any period when the target is thought to be in the United States. Unlike 1881b, however, it is not limited to electronic surveillance or the acquisition of stored electronic information. Moreover, it declares that in the case of acquisition abroad recourse to a court order need only be had when the target American, found overseas, has a reasonable expectation of privacy and a warrant would be required if the acquisition efforts had taken place in the United States and for law enforcement purposes. A challenge to the constitutionality of section 1881a was initially dismissed because the district court did not believe the plaintiffs had shown that they had standing (i.e., a sufficient individual injury attributable to execution of the statute's authority). The Second Circuit disagreed. The Supreme Court has agreed to consider the case. Every six months, the Attorney General must report on the use of FISA authority. Recipients are the House and Senate Judiciary Committees and the House and Senate Intelligence committees. In a manner consistent with the protection of national security, the transmission must provide: (1) the number of persons targeted under: (a) FISA electronic surveillance orders, (b) FISA physical search orders, (c) FISA pen register/trap and trace orders, (d) FISA tangible item orders, and (e) FISA acquisitions relating to U.S. persons overseas; (2) the number of persons covered as lone wolf terrorists; (3) the number of times the Attorney General has authorized the use of FISA material in a criminal proceeding; (4) a summary of the signification legal interpretations of the FISA court or the FISA Court of Review; and (5) copies of the decisions, orders, and opinions of those courts.

This report provides an overview of the Electronic Communications Privacy Act (ECPA) and the Foreign Intelligence Surveillance Act (FISA). ECPA consists of three parts. The first, often referred to as Title III, outlaws wiretapping and electronic eavesdropping, except as otherwise provided. The second, the Stored Communications Act, governs the privacy of, and government access to, the content of electronic communications and to related records. The third outlaws the use and installation of pen registers and of trap and trace devices, unless judicially approved for law enforcement or intelligence gathering purposes. FISA consists of seven parts. The first, reminiscent of Title III, authorizes electronic surveillance in foreign intelligence investigations. The second authorizes physical searches in foreign intelligence cases. The third permits the use and installation of pen registers and trap and trace devices in the context of a foreign intelligence investigation. The fourth affords intelligence officials access to business records and other tangible items. The fifth directs the Attorney General to report to Congress on the specifics of the exercise of FISA authority. The sixth, scheduled to expire on December 31, 2017, permits the acquisition of the communications of targeted overseas individuals and entities. The seventh creates a safe harbor from civil liability for those who assist or have assisted in the collection of information relating to the activities of foreign powers and their agents. This report is an abridged version of CRS Report 98-326, Privacy: An Overview of Federal Statutes Governing Wiretapping and Electronic Eavesdropping, by [author name scrubbed] and [author name scrubbed], without the footnotes, attributions to authority, the text of ECPA or FISA, or appendices found there. The ECPA sections of the longer report are available separately as CRS Report R41733, Privacy: An Overview of the Electronic Communications Privacy Act, by [author name scrubbed], which in turn is available in abridged form, CRS Report R41734, Privacy: An Abridged Overview of the Electronic Communications Privacy Act, by [author name scrubbed]. Related CRS reports include CRS Report R42725, Reauthorization of the FISA Amendments Act, by [author name scrubbed], and CRS Report R40138, Amendments to the Foreign Intelligence Surveillance Act (FISA) Extended Until June 1, 2015, by [author name scrubbed].

A period of unemployment greatly increases the odds that a worker and members of the worker's family will be counted among the nation's poor. For example, among persons between the ages of 16 and 64 who were unemployed in March 2012, about one in four (27.6%) were poor based on their families' incomes in 2011; among those who were employed, 6.9% were poor. A variety of social insurance benefits may be available for unemployed workers. The benefits analyzed in this report can be generically grouped into the category of Unemployment Insurance (UI) benefits. UI benefits provide a cash supplement to replace a portion of lost wages to qualified unemployed individuals. Two main objectives of the joint federal-state unemployment insurance program are to provide temporary and partial wage replacement to involuntarily unemployed workers and to stabilize the economy during recessions. As a temporary, partial replacement of lost earnings due to job loss, the benefits workers receive may help to prevent them and their family members from reaching poverty, an ancillary but important role of the program. Unemployment benefits are an individual worker's entitlement (as long as that worker meets the criteria for the benefit) and are not means tested. In this regard, the UI program, while not a poverty program per se, can play an important role in reducing poverty associated with job loss. In addition, as a countercyclical program UI has a macroeconomic effect in reducing poverty. By injecting dollars into the economy directed toward those who have experienced job loss, UI helps to partially mitigate income loss among a group directly affected by economic downturn. UI temporarily augments the ability of unemployed workers to meet basic needs, which further stimulates the economy. In this regard, the macroeconomic effect of UI helps dampen the tendency for poverty to increase during periods of economic downturn. This report examines the antipoverty effects of UI benefits over the past three recessions. The analysis especially focuses on the most recent recession, from which the economy has only just begun to recover. It highlights the impact of the additional and expanded benefits available to unemployed workers in response to the most recent recession. Estimates presented in this report are based on Congressional Research Service (CRS) analysis of 25 years of data from the U.S. Census Bureau's Annual Social and Economic Supplement to the Current Population Survey (CPS/ASEC), administered from 1988 to 2012. The period examined includes three economic recessions (July 1990 to March 1991, and March 2001 to November 2001, each lasting 8 months; and December 2007 to June 2009, lasting 18 months). In examining the role of UI benefits in alleviating poverty, this report does not consider any behavioral changes that individuals, employers, or government would have made had the UI benefit structure remained at permanent law levels throughout the period of analysis. In fact, if the temporary congressional changes in UI benefits had not existed, economic conditions would have been different. Some beneficiaries would have altered their behavior in a variety of ways. Some would have taken a job earlier or relied on additional hours of work from a spouse. Some would have chosen to terminate their job search earlier and move into retirement or apply for disability benefits. Absent the additional UI benefits, some might have qualified for other government benefits (e.g., food stamps) for which they otherwise would not have been eligible. In addition, some employers also would have made different decisions about hiring and laying off workers. This report also ignores several important changes in the labor market that have affected both the unemployment rate and the poverty rate during this period. The aging of the labor market over time has generally decreased the unemployment rate. This decrease is tempered by the increased duration of unemployment as a result of the older profile of the labor market. At the same time, workers are less likely to be laid off temporarily and more likely to become permanently separated from their former job. The report begins with a short section depicting labor market conditions over the 25-year period examined. The next section describes the Unemployment Insurance system, in terms of the permanent UI structure as well as the temporary measures Congress has enacted in reaction to poor economic conditions. A third section examines the effect of UI benefit receipt on an individual's poverty status. It provides estimates of the number of persons who would fall below the nation's official income poverty threshold if UI benefits received were not counted as income. It also provides estimates on the number of persons lifted above the poverty threshold and the share of unemployed persons who are poor, according to whether they received UI benefits during the year. A brief summary assesses the relative effects of the Unemployment Insurance system on poverty during the past recession compared with two preceding recessions. The report contains three appendixes. Appendix A provides additional legislative details on the temporary measures enacted by Congress during the most recent recession—the Emergency Unemployment Compensation (EUC08) program. Appendix B provides data on trends in UI receipt by an individual's labor market status during a year. It provides contextual reference of different measures of labor "underutilization," including monthly and annual monthly averages of unemployment compared with estimates for persons unemployed at any time during the year (the definition of unemployed used in the report's CPS/ASEC analysis). It also examines more expansive definitions of labor utilization, which in addition to the unemployed (persons without a job who looked for work) includes involuntary part-time workers and discouraged workers (those who did not search for work, believing suitable work is not available). This appendix examines UI receipt reported on the CPS/ASEC among persons of the above, and other, labor force statuses. Appendix C compares CPS/ASEC estimates to UI administrative data benchmarks. It assesses the relative quality of the CPS/ASEC UI estimates over the 25-year period examined in the report. The CPS/ASEC data undercount UI benefit receipt. As a result, this report may underestimate the effect of unemployment insurance upon poverty rates. Figure 1 depicts the U.S. monthly and annual average monthly unemployment rate from January 1987 to August 2012. The figure shows that in each of the three recessions over the period, the unemployment rate is typically at a cyclical low just prior to the onset of economic recession, and it tends to continue to rise well beyond the recession's official end. As economic growth begins to take hold at a recession's end, employers are typically cautious in hiring new workers, waiting to be assured that economic growth is likely to persist. Job growth begins to take hold once existing labor capacity becomes stretched and the hiring of additional workers is required to meet increasing demand for employer-provided goods and services. The figure shows that in the 1990-1991 recession, unemployment rose from a pre-recession low of 5.0% in March 1989 to a post-recession high of 7.8% in June 1992, which was some 15 months after the recession's official end. In the subsequent 2000 recession, the unemployment rate rose from a pre-recession low of 3.8% in April 2000 to a high of 6.3% in June 2003, which was some 19 months after the recession's end. In the most recent recession, the unemployment rate rose from a pre-recession low of 4.4% in May 2007 to a post-recession high of 10.0% in October 2009, which was four months after the recession's official end. Almost three years since its most recent peak, the unemployment rate remained higher than the peak unemployment rate of the previous two recessions at 8.1% for August 2012. In addition to the recession's length and sustained elevated unemployment rate, the duration of an individual's spell of unemployment is another indicator of labor market stress. Figure 2 depicts the median number of weeks workers report having been unemployed. The figure shows that among unemployed workers, the peak median duration of unemployment for the most recent recession occurred in June 2010 and was 25.0 weeks. This suggests that at the peak over half of unemployed persons had been without work for just less than six months. This peak was over twice as long as the two previous recessions (11.5 weeks in June 2003, and 10 weeks in October 1994). Since peaking in June 2010, median duration of unemployment in August 2012 stood at 18.0 weeks. An economic downturn may have other effects on the labor market than what is measured by the unemployment rate alone. For example, some former workers may drop out of the labor force all together and not bother to search for work, believing that no work is available and that job search would be fruitless—a category referred to as "discouraged workers." Others may have recently searched for work, but are not currently looking for work because of other impediments, such as transportation problems or problems with child care arrangements, that keep them from actively searching for a job. The Bureau of Labor Statistics (BLS) refers to this group as "marginally attached" workers. For some, an economic downturn may result in a situation where they are working part time but desire full-time work—a category sometimes referred to as "underemployed" or "employed part time for economic reasons." In addition to the unemployment rate, the BLS publishes alternative measures of labor underutilization. The most comprehensive alternative measure, U-6, includes the "unemployed" plus "discouraged" and other "marginally attached" workers, as well as persons who are "employed part time for economic reasons." The "official" unemployment rate is based on the total number of unemployed as a percentage of the civilian labor force (employed and unemployed workers, excluding the military). Under the alternative U-6 measure, "discouraged, marginally attached, and part-time workers for economic reasons" are added to the numerator of the "official" measure, and "discouraged and marginally attached" workers are added to the denominator. Figure 3 compares the BLS alternative U-6 rate of labor underutilization with the "official" unemployment rate. Estimates for the U-6 rate are first available in January 1994. In any period, the alternative expanded measure of labor underutilization, U-6, is considerably higher than the "official" unemployment rate; but in the wake of economic contractions, in particular, the U-6 measure emphasizes a heightened level of labor market distress compared with the unemployment rate alone. Over the period examined, the U-6 rate was, on average, 75% above the "official" unemployment rate, and it ranged from 63% (December 2002) to 83% (April 2008) above. In October 2009, for example, the unemployment rate was at an historical peak of 10.0%, while the U-6 labor underutilization rate, also at an historical peak, was 17.2%—7.2 percentage points (72%) above the "official" unemployment rate. In August 2012, the U-6 labor underutilization rate was 14.7%—5.6 percentage points (62%) above the "official" unemployment rate. Workers who lose their jobs face serious long-term economic implications. In general, they face a substantially reduced probability of full-time employment and an increased probability of part-time employment. Permanently displaced workers (rather than job leavers or those who were on temporary lay-off) who find new full-time employment experience, on average, significantly decreased earnings relative to what they earned before they lost employment. A variety of benefits may be available for unemployed workers. Those examined in this report can be generically grouped into the category of Unemployment Insurance benefits, which provide a cash supplement to replace a portion of lost wages to qualified unemployed individuals. Most unemployed workers who receive benefits generally receive benefits from the Unemployment Compensation (UC) program first. Those who exhaust UC benefits may be eligible for additional weeks of unemployment insurance through the temporary Emergency Unemployment Compensation (EUC08) benefit or through the permanent extended benefit (EB) program. These three benefits are often collectively referred to as Unemployment Insurance (UI) benefits. Generally, an unemployed worker would not notice a change in the type of benefit, as the weekly benefit amount remains constant while the funding stream or the legislative authority for the benefit changes as the unemployed worker moves from one benefit type to another over the course of his or her spell of unemployment. Federal laws and regulations provide broad guidelines on UC benefit coverage, eligibility, and benefit determination, but the specifics of regular UC benefits are determined by each state. This results in essentially 53 different programs. States determine UC benefit eligibility, payments, and duration through state laws and program regulations. Generally, UC eligibility is based on attaining qualified wages and employment in covered work over a 12-month period (called a base period) prior to unemployment. The UC program pays benefits to workers in covered employment who become involuntarily unemployed for economic reasons and meet state-established eligibility rules. The UC program generally does not provide UC benefits to the self-employed, to those who are unable to work, or to those who do not have a recent earnings history. States usually disqualify claimants who lost their jobs because of inability to work or unavailability for work, who voluntarily quit without good cause, who were discharged for job-related misconduct, or who refused suitable work without good cause. This UC benefit is intended to help meet an unemployed worker's basic obligations until the worker finds a new position. Generally, states base benefit calculations on wages for covered work over a 12-month period, and in many states a full-time year-round worker would be eligible for 26 weeks of benefits. The entitlement formula varies by state, typically requiring a substantial work history and replacing up to 50% of a worker's wages. Generally, benefits are capped at a percentage of the average wage for workers in the state and some states do not automatically link benefits to wage growth; these actions lowered the wage replacement rate for unemployment benefits to 33% of the average weekly wage in the second quarter of 2012. The permanent law EB program was established by the Federal-State Extended Unemployment Compensation Act of 1970 (EUCA; P.L. 91-373; 26 U.S.C. 3304, note). This program was intended to be the permanent law solution for automatically creating a federal response to economic downturns. The program may extend receipt of unemployment benefits (extended benefits) at the state level if certain economic situations exist within the state. Under permanent law, the costs of these benefits are shared—with 50% paid by federal funds and 50% by state funds. All states must pay up to 13 weeks of EB if the insured unemployment rate (IUR) for the previous 13 weeks is at least 5% and is 120% of the average of the rates for the same 13-week period in each of the two previous years. There are two other optional thresholds that states may choose. (States may choose one, two, or none.) If the state has chosen a given option, they would provide the following: Option 1: an additional 13 weeks of benefits if the state's IUR is at least 6%, regardless of previous years' averages. Option 2: an additional 13 weeks of benefits if the state's total unemployment rate (TUR) is at least 6.5% and is at least 110% of the state's average TUR for the same 13 weeks in either of the previous two years; or an additional 20 weeks of benefits if the TUR is at least 8% and is at least 110% of the state's average TUR for the same 13 weeks in either of the previous two years. Recent studies have suggested that whether an IUR or TUR trigger is used, the secular decline in unemployment over the past several decades has resulted in the current trigger levels being relatively difficult to attain. The current EB triggers have been criticized for deploying in many states long after a recession has started, for not deploying at all in some states with high unemployment, and for triggering off too quickly in some states. Analysts cite several reasons for this: (1) the general long-term decline in unemployment rates has made the current triggers irrelevant; (2) the rate and lookback provisions work against each other; and (3) amendments to the program in the early 1980s changed the unemployment calculation in a way that made EB activation less likely. This section briefly describes the various temporary unemployment benefit programs available in the last three recessions. Additionally, it attempts to explain how the current program and the ARRA provisions are intertwined and how they impact the amount of available unemployment benefits. In response to economic recessions, the federal government sometimes has augmented the regular (UC) benefit with both the permanent EB program and temporary expansions of unemployment benefits, including the current EUC08 program. These programs extended the duration (in addition to the potential maximum of up to 26 weeks of regular state UC benefits) an individual might claim benefits (up to an additional 20 weeks of EB and up to an additional 53 weeks of EUC08 throughout 2011, with several complicated changes in EUC08 during 2012). Some extensions took into account state economic conditions; many temporary programs considered the state's average unemployment rate or the state's insured unemployment rate, or both. From 1987 through 2013, there were three temporary programs that were in effect at different times. Table 1 on the following page provides basic information on the programs' beginning and ending dates, and the lowest maximum duration and highest maximum duration for potential receipt of benefits during the programs' existences. The 1991 Emergency Unemployment Compensation (EUC) program provided a maximum of between 13 and 33 weeks of benefits over its duration. The 2002 Temporary Emergency Unemployment Compensation (TEUC) program provided up to 26 weeks of temporary benefits for its duration. The current EUC08 program began in July 2008 and provided up to 20 weeks of benefits; over time the program has been modified several times to provide up to 53 weeks of benefits (63 weeks for a few months in 2012, 47 weeks since September 2012). Additionally, ARRA supplemented all unemployment benefits with an additional $25/week benefit (Federal Additional Compensation [FAC]) from March 2009 through May 2010. ARRA contained several provisions affecting unemployment benefits. Through the FAC program, ARRA temporarily increased all types of unemployment benefits, by $25 per week for all recipients of any type of unemployment insurance, and excluded $2,400 in UI benefits from gross income under the federal income tax for 2009. ARRA extended the temporary EUC08 program through December 26, 2009 (with grandfathering). The EUC08 program's expiration date has since been extended further, through the week ending on or before December 31, 2013. ARRA, as amended, provides for temporary 100% federal financing of the permanently authorized EB program through December 31, 2013. It also allows states the option of temporarily ignoring the programmatic "benefit year" requirement. Instead, states can choose to use exhaustion of EUC08 benefits as an eligibility requirement for weeks of EB benefit payments that fall between ARRA's enactment and expiration of 100% federal funding of the EB program, and as long as the state was triggered "on" for EB during the period when the individual was receiving EUC08. This has the effect of allowing more individuals to be eligible for the EB program. States have been able to take advantage of this temporary financing structure by linking optional ways to have an active EB program with the temporary ARRA 100% federal financing scheme for EB. Furthermore, ARRA prohibited states from decreasing average weekly benefits. In addition, ARRA provided up to a total of $7 billion in "modernization" payments as incentives to states to modify their basis for computing UI benefits and for extending benefits to currently ineligible individuals. Two-thirds of the $7 billion available to states was contingent on states first adopting an alternative method of determining eligibility for individuals who do not qualify under the regular method based on their wage and employment history. The states were then eligible for the remaining two-thirds of the $7 billion if they adopted at least two of the following four provisions: 1. permit former part-time workers to seek part-time work; 2. permit voluntary separations from employment for compelling family reasons, under all of the following situations: (1) domestic violence, (2) illness or disability of an immediate family member, or (3) the need to accompany a spouse who is relocating for employment; 3. provide extended compensation to UC recipients in qualifying training programs for high-demand occupations; or 4. provide dependents' allowances to UC recipients with dependents. A total of 36 states received the full amount available to them under the modernization law. An additional 5 states received the first one-third payment for allowing an alternative base period calculation. A total of $4.4 billion was distributed to these 41 states. It is difficult to assess the exact monetary impact of ARRA and the EUC08 program on the unemployed. However, data do exist to explain what percentage of the unemployed received unemployment benefits that were deployed on account of high unemployment (either the temporary benefit or the EB benefit). Figure 4 displays two data series. The lower line is the percentage of unemployed persons who received the regular (up to the first 26 weeks) state UC benefit. The upper line includes this group combined with the unemployed who received additional temporary unemployment benefits (such as the EUC08 benefit) or EB payments. Generally, as a recession winds down the percentage of unemployed who are receiving regular UC declines, as most of the unemployed are the long-term unemployed who have exhausted benefits or are new (or returning) labor market participants who may be ineligible for regular UC benefits. The percentage of the unemployed receiving any UI benefit continues to increase as the proportion of long-term unemployed in the pool of unemployed workers increases. The ARRA provisions and the EUC08 program temporarily expanded both the potential amount and the duration of unemployment benefits, exceeding the generosity of any previous congressional intervention. This can be seen in the increased percentage of the unemployed receiving UI benefits in 2009 and 2010—almost two-thirds of all unemployed persons were receiving unemployment benefits (the highest level since 1976). The percentage of unemployed workers receiving unemployment benefits declined in 2011, continued to be above half (56%) of all unemployed workers. Figure 5 depicts the average percentage of workers who received some kind of additional benefit beyond regular UC payments. In 2010, the percentage of unemployed who received additional benefits beyond regular UC (35%) was at least 17 percentage points higher than any other year in the previous two post-recession periods. By 2012, the percentage had dropped to 24%, which was still 6 percentage points higher than any other year in the previous two post-recession periods. The role unemployment insurance plays in poverty among the unemployed is well documented. A Congressional Budget Office (CBO) study found that the UI benefits reduced the 2009 poverty rate by 1.1 percentage points to 14.3%. Recent research by Vroman examined UI benefits and all other types of federal transfer payments from 2001 through 2008 and found that while the overall effect on the poverty rate was small the impact increases as the duration of unemployment increases. In a brief analysis of the impact of the 2009 American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ), Sherman estimated that 1.3 million people were kept out of poverty through additional temporary UI benefits. This report contributes to this recent research on the antipoverty effects of unemployment insurance in several ways. Its period of analysis is longer and allows comparisons across the three most recent recessions. The report includes estimates of the effects on the poverty rate for the unemployed, those receiving UI, and for families that report at least one family member receiving UI. It also estimates how much of the total reported UI benefits went directly to decreasing family poverty levels. This section examines the antipoverty effects of UI benefits primarily for all persons who received UI benefits (not just those who had limited labor force attachment due to economic reasons). Because the U.S. poverty measure is based on the income of all co-resident related family members, UI receipt affects not only the poverty status of the person receiving the benefit, but the poverty status of all related family members, as well. In 2011, while an estimated 10.2 million people reported UI receipt during the year, an additional 15.8 million family members lived with the 10.2 million receiving the benefit. Consequently, UI receipt in 2011 affected the income status of some 26.0 million persons. Figure 6 shows the effect of UI benefit receipt on the overall poverty rate. The figure shows the percentage of persons in poverty—both before counting UI benefits as income and after—using Census Bureau poverty income thresholds. The figure shows, for example, that in 2011, under the pre-UI benefit poverty measure, an estimated 15.7% of the population would have been counted as poor; the receipt of UI benefits reduced the poverty rate by 0.7 percentage points, to 15.0%, the "official" U.S. poverty rate. The antipoverty effect of UI benefits was somewhat reduced in 2011 as compared with 2010 (a 1.1 percentage point reduction, from 16.2% to 15.1%), reflecting the general trend of decreasing percentages of the unemployed receiving UI benefits. Note that 1993 marked a previous peak in the "official" poverty rate, at 15.1%, but UI benefits contributed to only a 0.5 percentage point reduction in poverty (i.e., from 15.6% to 15.1%) in that year. By this measure, the poverty reducing effect of UI in both 2009 and 2010 was about twice that of 1993, although by 2011 the effect was substantially muted. Figure 7 shows the number of persons (in millions) lifted above poverty by the receipt of UI benefits. The figure shows that in both 2009 and 2010, well over 3 million people (3.3 and 3.2 million, respectively) were lifted above the official poverty line as the result of UI benefit receipt. The number of persons lifted above the official poverty line in 2011 was lower than in the previous two years; but it was still substantial at just over 2.3 million. UI benefits lifted nearly a million children (956,000) above the poverty line in 2009. In 2010 and 2011, the number of children lifted about the poverty line declined to 861,000 and 620,000, respectively. In contrast, in 1992, UI lifted about 1.5 million persons out of poverty, of whom nearly a half million (479,000) were children. Figure 8 shows pre- and post-UI poverty rates among persons in which they or another family member received UI benefits during the year. The figure is similar to Figure 6 , except that figure showed the effect of UI benefit receipt on the overall U.S. poverty rate, whereas Figure 8 is only for persons in families that received UI benefits. The figure shows, for example, that in 2011, among individuals and families in which someone received UI benefits during the year, well over one-fifth of persons (22.5%) would have been considered poor absent the UI benefits they received; UI benefits cut their prevalence of poverty by almost 9 percentage points to between one in seven and one in eight persons (13.6%). Figure 9 shows calculations derived from the data presented in Figure 6 and Figure 8 . Figure 9 shows that UI benefits in 2009, 2010, and 2011 reduced the overall poverty rate by 7.1%, 6.5%, and 4.7%, respectively—in 2009, almost twice the next largest reduction of poverty attributable to UI benefits in 1992, when UI cut the overall poverty rate by 3.8%. Among persons in families and unrelated individuals that received UI benefits, those benefits cut their poverty rate nearly in half (48.0%) in 2009, by 44.0% in 2010, and by 39.4% in 2011, compared with about two-fifths (38.1%) in 2002, and about one-third in 1992 (32.5%). Figure 10 shows that aggregate UI benefits reported on the CPS in 2009 and 2010 ($102.3 billion and $98.5 billion, respectively in 2011 constant dollars) were over twice those reported in 1992 ($43.8 billion in 2011 constant dollars) and in 2002 ($46.6 billion in 2011 constant dollars). Aggregate UI benefits in 2011 ($68.5 billion) decreased from the previous two years but were still substantially above previous recession's peaks. In 2009, an estimated $18.5 billion in UI benefits went towards reducing poverty (18.1% of all UI dollars), $20.0 billion in 2010 (20.3% of all UI dollars), and $14.8 billion in 2011 (21.6% of all UI dollars). In 1992, about $7.3 billion (16.7% of all UI dollars), and in 2003, an estimated $6.0 billion (13.6% of all UI dollars) went toward poverty reduction. Notice that actual benefits paid out exceed the amount captured by the CPS/ASEC, as income amounts from virtually all income sources reported on the survey tend to fall short of administrative or other benchmarks (see Appendix C for further discussion). Figure 11 uses calculations from the data presented in Figure 10 to show the proportion of UI dollars that reduced poverty to all UI dollars. Figure 11 shows, for example, that even though aggregate UI benefits received by families decreased from 2011 to 2010 ( Figure 10 ) the share that went towards poverty reduction increased to an historic peak (21.6%) in 2011. In 2011, over one-fifth of UI benefits families' received went toward reducing poverty. Figure 12 compares poverty rates among unemployed persons by whether they received UI benefits during the year, or not. (The figure differs from Figure 8 , shown previously, which was for all persons in families that received UI benefits.) For those that received UI benefits, both their pre-UI poverty rates and post-UI poverty rates are shown. The figure shows, for example, that unemployed persons who received UI benefits had lower poverty rates, before counting any UI benefits they received, than unemployed persons who did not receive UI benefits. Over the past recession, and the subsequent economic recovery, poverty rates among the unemployed have increased over their pre-recession levels, regardless of whether they received UI benefits. The poverty rate among the unemployed not receiving UI benefits increased from a pre-recession low of 23.6% in 2006, to recent high of 30.1% in 2011 (top line). In contrast, among the unemployed who received UI benefits, their pre-UI poverty rate increased from 13.4% in 2007 to a recent high of 27.5% in 2010 (middle line). Over this period, UI recipients' pre-UI poverty status converged on that unemployed non-recipients—in 2007, UI recipients' pre-UI poverty rate was 10.4 percentage points below that of unemployed non-recipients (13.4% and 23.8%, respectively), and by 2010, just 2.2% below (27.5% and 29.7%, respectively). From 2010 to 2011, the gap has widened somewhat as the pre-UI poverty rate of UI recipients fell somewhat over the period, whereas that of non-recipients continued to increase. In most years, other than those immediately around recessionary periods, pre-UI poverty rates of persons who received UI benefits (middle line) ranged from 40% to 50% below those of their unemployed counterparts who did not receive UI benefits (top line). Immediately after recessionary periods the differences in poverty rates before UI receipt is calculated narrows. For example, in 1993, the pre-UI poverty rate of persons receiving UI benefits was 36% below that of persons not receiving UI; in 2003, 26% below; in 2009, 16% below, in 2010, just 7% below, and in 2011, 9% below. UI benefits dramatically reduced the prevalence of poverty among the population who received them in the past recession and current recovery. In 2010, for example, over one quarter (27.5%) of unemployed people who received UI benefits would have been considered poor prior to counting the UI benefits they received (middle line); after counting UI benefits, their poverty rate was cut by well over half, to 12.5% (bottom line). In contrast, in the two previous recessions, UI benefits to the unemployed reduced their incidence of poverty from a pre-UI poverty rate of 18.9% to a post-UI poverty rate of 10.1% in 2003 and from 18.3% to 11.2% in 1993. Based on this, and the other evidence presented in this analysis, UI benefits in the most recent recession appeared to have played a significantly greater role in reducing poverty than in either of the two previous recessions. Figure 13 depicts the share of unemployed persons who had no earnings during the year, by whether the individual received UI benefits during the year or not. The figure shows, for example, that in 2007, among unemployed during the year who received UI benefits, just over 1-in-20 persons (5.6%) had no earnings during the year. In comparison, among those unemployed who reported no UI receipt, over 1-in-5, 21.7%, had no earnings in 2007. The share of unemployed UI recipients who had no earnings during the year increased during the most recent recession: from 1-in-10 (10.1%) in 2008; to over 1-in-5 (20.7%) in 2009; to over 1-in-4 (25.7%) in 2010; and just under that ratio (23.2%) in 2011. This trend corresponds to an increase in the median duration of unemployment among unemployed workers from 2007 to 2010, shown earlier in Figure 2 . This pattern also is apparent in the administrative data shown earlier in Figure 4 which showed an increased reliance among the unemployed on EB and EUC08, relative to regular UC benefits. The increase in pre-UI poverty rates of unemployed UI recipients, the increased proportion of the unemployed receiving EB or EUC08 benefits, and the increased likelihood that unemployed UI recipients reported no earnings in the past year, suggest that the convergence of the pre-UI poverty rates (shown earlier in Figure 12 ) is a result of the increased duration of unemployment. In terms of the most recent recession and its aftermath, UI benefits (UC, EB, and EUC08) continue to appear to have a large poverty-reducing effect among unemployed workers who receive them. In particular, given the extended length of unemployment among jobless workers, the additional weeks of UI benefits beyond the regular UC program's approximately 26-week limit appear to have had an especially important effect in poverty reduction. The report shows that UI benefits appear to significantly reduce the incidence of poverty among the population who receives them. The UI benefits' poverty reduction effects appear to be especially important during and immediately after recessions. The analysis finds that there was a markedly higher impact on poverty in 2009 and 2010 than in the previous two recessionary periods. The estimated antipoverty effects of UI benefits in 2009 and 2010 were about twice that of two previous peak years of unemployment, in 1993 and 2003. This may be attributable to the temporary provisions of ARRA and the EUC08 program, which increased both benefit levels and benefit duration. As mentioned in the " Roadmap " section of this report there are many caveats to these statistics. This report did not consider any behavioral changes that individuals, employers, or government would have made had the UI benefit structure remained at permanent law levels throughout the period of analysis. Additionally, the report also ignored several important changes in the labor market that have affected both the unemployment rate and the poverty rate during this period. In 2011, well over one-quarter (26.5%) of unemployed people who received UI benefits would have been considered poor prior to counting the UI benefits they received; after counting UI benefits, their poverty rate was cut by almost half, to 13.8%. Because the U.S. poverty measure is based on the income of all co-resident related family members, UI receipt affects not only the poverty status of the person receiving the benefit, but the poverty status of all related family members, as well. In 2011, while an estimated 10.2 million people reported UI receipt during the year, an additional 15.8 million family members lived with the 10.2 million receiving the benefit. Consequently, UI receipt in 2011 affected the income status of some 26.0 million persons. The poverty rate for persons in families who received unemployment benefits in both 2009 and 2010 was approximately half of what it would have been without those unemployment benefits. In 2011, the poverty rate was 40% less than it would have been without these unemployment benefits. In 2011, UI benefits lifted an estimated 2.3 million people out of poverty, of which well over one-quarter (26.8%; 620,000) were children living with a family member who received UI benefits. Appendix A. Legislative Details of the Emergency Unemployment Compensation Program On June 30, 2008, President George W. Bush signed the Supplemental Appropriations Act of 2008 ( P.L. 110-252 ) into law. Title IV of this act created a new temporary unemployment insurance program, the Emergency Unemployment Compensation (EUC08) program. This was the eighth time Congress had created a federal temporary program that has extended unemployment compensation during an economic slowdown. The authorization for this program continues until the week ending on or before January 2, 2012. The EUC08 program has been amended by P.L. 110-449 , P.L. 111-5 , P.L. 111-92 , P.L. 111-118 , P.L. 111-144 , P.L. 111-157 , P.L. 111-205 , P.L. 111-312 , P.L. 112-78 , P.L. 112-96 , and P.L. 112-240 . In July 2008, the program began with a flat 20 weeks of entitlement. In November 2008, P.L. 110-449 created an additional 13 week entitlement for workers in states with high unemployment for a total of 33 weeks of benefits available. This entitlement was expanded by an additional 20 weeks (up to 14 additional weeks in all states and 6 additional weeks in very high unemployment states) resulting in a potential of 53 weeks as required by P.L. 111-92 in November 2009. From November 2009 through February 2012, this temporary unemployment insurance program provided up to a total of 53 additional weeks of UI benefits ( P.L. 111-118 , P.L. 111-144 , P.L. 111-157 , P.L. 111-205 , P.L. 111-312 , and P.L. 112-78 ). P.L. 112-96 created a complex set of alterations to the EUC08 program. From February 2012 through May 2012, EUC08 provided up to 63 additional weeks and then returned to providing up to 53 weeks in June 2012. Beginning in September 2012 through December 2013 (as amended by P.L. 112-240 ), the program provides up to 47 weeks of additional UI benefits. Appendix B. Trends in Labor Force Status and UI Receipt Over Time This appendix presents an analysis of trends in labor force status and UI receipt, as reported in the U.S. Census Bureau's Annual Social and Economic Supplement to the Current Population Survey (CPS/ASEC). The analysis is based on labor force status in the year preceding the CPS/ASEC survey, based on survey respondents' accounts. The appendix provides contextual reference of different measures of labor "underutilization," including monthly and annual monthly averages of unemployment compared to estimates for persons unemployed at any time during the year (the definition of unemployed used in the report's CPS/ASEC analysis). It also examines and more expansive definitions of labor utilization, which in addition to unemployed (persons without a job who looked for work) includes involuntary part-time workers and discouraged workers (those who did not search for work believing suitable work is not available). The appendix examines UI receipt reported on the CPS/ASEC among persons of the above, and other, labor force statuses. The CPS/ASEC collects information on over 50 sources of income, and up to 27 individual income values—UI benefits are among the many income sources and amounts captured by the survey, since 1988. CPS/ASEC survey respondents report their yearly income from each specific source. See Appendix C for a comparison of CPS/ASEC estimates of UI receipt and amounts with administrative benchmarks of UI claims and benefit amounts. Unemployed Persons and Those with Limited Labor Force Attachment Relating to Economic Conditions Who Reported UI Receipt Figure B -1 and Figure B -2 show persons who reported UI benefit receipt and their labor force status in 2011, based on CRS analysis of the 2012 CPS/ASEC. The analysis primarily focuses on several groups of persons who are unemployed or who have limited labor force attachment over the year that may be associated with economic conditions. These groups are represented in Figure B -1 . Among these groups are those who most likely might qualify for UI benefits. The groups (with the percentage of each group represented among persons who reported UI receipt in 2011) include "Unemployed" (70.3%): persons who reported having worked less than full year and looked for work during the year or were on layoff; "Involuntary part-time workers" (3.9%): persons who worked all year but reported having worked less than full time (35 or more hours per week) due to slack work or because they could only find part-time work; "Part-year discouraged workers" (2.6%): persons who worked only part year, but did not search for work because they believed no work was available. In addition to the groups above, who were all in the labor force during the year by virtue of having had a job or looking for work, the analysis includes "Discouraged potential workers, outside the labor force" (2.5%): persons who were out of the labor force for the entire year and reported that they did not look for work because they believed no work was available. The four groups delineated above represent those respondents on the CPS/ASEC who might most reasonably be expected to be among the population potentially qualified to receive UI benefits. They represent the majority of persons, 8.1 million (79.2%) of 10.2 million who reported receiving UI benefits in 2011, and constitute the major groups that appear to have had limited work force/labor force attachment associated with economic conditions . Other Labor Force Statuses of Persons Who Reported UI Receipt Included among persons on the CPS/ASEC who report UI receipt, not all appear to have limited labor force attachment that might seem to be directly associated with economic conditions. These groups are depicted in Figure B -2 . Reported receipt of UI among these cases is somewhat incongruent with their reported labor force status during the year. These groups that reported UI receipt include "Full-time, Full-Year Workers" (6.1%): persons who reported having worked full-time (35 or more hours per week), full-year (50 to 52 weeks) and did not look for work during the year; "Out of the labor force (OLF), full or part-year, for personal reasons" (12.6%): persons who were out of the labor force for part or the entire year (i.e., did not look for work during the period they were without work) and reported that the primary reason they were not working was because they were ill or disabled, taking care of home or family, going to school, or retired; "Voluntary part-time workers" (1.9%): persons who worked part time for the entire year, because they wanted part time work ; "Persons in the armed forces living off base" (negligible, 0.2%). The somewhat anomalous report of UI among the above groups may be due to misreporting of UI benefit receipt itself, or imprecise reporting of their labor force attachment over the course of the year. For example, in the latter case, a respondent may have been unemployed during part of the year, and later in the year enrolled in school, or decided to retire. Individuals who were enrolled in school may be eligible for unemployment benefits while attending Workforce Investment Act (WIA)-approved training programs. Comparing the Share of Unemployed and Underutilized Workers at Any Time During the Year to Monthly and Annual Average Unemployment Statistics Figure B -3 compares annual measures of unemployment and labor underutilization derived from CRS analysis of CPS/ASEC data with the monthly unemployment rate, and annual average monthly employment rate (as published by the BLS, based on the monthly CPS, presented at the beginning of this report in Figure 1 ). It is important to note that CRS CPS/ASEC unemployment and labor underutilization rate estimates are based on survey respondents' accounting of their labor force status over an entire year. By this measure, a respondent would be considered unemployed if they were unemployed at any time during the year. The odds are greater that a person will be unemployed at any time during the year, than at a particular point in time during the year. Consequently, the CRS CPS/ASEC unemployment and labor underutilization measures are both higher than corresponding BLS monthly and annual average monthly measures. The BLS monthly unemployment rate peaked at 10.0% in October 2009; whereas, the annual average monthly rate for 2009 was 9.3%. In contrast, the CRS CPS/ASEC unemployment rate, measuring persons who were ever unemployed during the year as share of the labor force, was 13.0%—a full 3.3 percentage points above the annual average monthly rate. Similarly, the CRS CPS/ASEC underutilized worker rate was 19.5% in 2009; this compares with an annual average monthly rate for the BLS U-6 alternative unemployment measure of 16.3% for 2009. Trends in Unemployment and Alternate Measures of Labor Underutilization Figure B -4 provides estimates of the number of persons whose job attachment may have been limited due to economic conditions. The labor force definition used here includes all civilians age 15 and older who held a job at any time during the year, or looked for work. In addition, it includes persons who were outside the labor force (OLF) for the entire year, who indicated that they did not search for work because they believed no work was available—a group categorized as "discouraged potential workers." This group is generally not included in the standard labor force definition. For brevity, the term labor force is used throughout the analysis, but it should be kept in mind that it includes "discouraged potential workers (DPW)." As shown in Figure B -4 , an estimated 23.8 million persons were unemployed at some time during 2011. Another 8.2 million were involuntary part-time workers, who desired more hours of work. An additional 1.7 million persons worked only part year, but did not search for work because they believed no work was available. Finally, another 1.9 million discouraged potential workers were outside the labor force for the entire year, indicating that they did not search for work because they believed no work was available. In total, in 2011, an estimated 35.6 million persons had limited or no labor force attachment during the year that may have been associated with economic conditions. This compares with an estimated 29.4 million such persons in 1993, and 24.2 million in 2003, which marked previous peaks of slack employment in the U.S. economy. Figure B -5 shows that in 2009, an estimated 13.0% of the labor force was unemployed at some time during the year, which was similar to the earlier peak in 1991 and 1992 (12.9%). The 1990-1991 recession contributed to the share of the labor force experiencing some period of unemployment rising from a pre-recession low of 10.9% in 1988, to a high of 12.9% in 1991 and 1992 (a 3 percentage point increase). In contrast, under the most recent recession, the share of the labor force experiencing some period of unemployment during the year rose from a pre-recession low of 8.0% in 2006, to 13.0% in 2009 (a 5.0 percentage point increase). The figure shows that in 2011 over one-sixth of the labor force (18.0%) had limited labor force attachment for economic reasons, up from a pre-recession low of 12.1% in 2006 (a 6.1 percentage point increase). In addition to the unemployed, involuntary part-time workers accounted for 4.1% of the labor force, and part-year discouraged workers and discouraged potential workers each accounted for 0.9% of the labor force. The top line in Figure B -5 presents the sum of each of these groups to create a total unemployment rate using this expanded definition of individuals who were unemployed and is the same as the top line in Figure B -3 . While, much reduced from 2009 and 2010, the share of the labor force under this expanded definition of unemployed in 2011 continued to exceed (by 0.4 percentage points) the previous high of 17.6% in 1992. Unemployment Insurance Receipt Among Persons Who Were Unemployed or Who Had Limited or No Labor Force Attachment for Economic Reasons Figure B -6 shows the share of persons who reported receiving UI benefits, by their labor force status during the year. The figure includes only persons who had limited or no labor force attachment during the year due to economic reasons or who met the CPS definition of unemployed. In 2011, these groups accounted for 8.1 million persons, or four-fifths (79.2%) of the 10.2 million who reported receiving UI benefits. The figure shows that 30.2% of persons who were unemployed received UI benefits in 2011, down from 2009 (36.1%), which was above the peak rates associated with previous recessions (34.4% in 1992 and 32.7% in 2002). The figure shows that the UI recipiency rate among discouraged potential workers who had been out of the labor force for the entire year remained high (13.5% in 2011, compared with highs of 12.5% in 1992, and 10.2% in 2003). However, as shown earlier in Figure B -6 , this group accounts for only a small share of persons who had limited or no labor force attachment due to economic reasons. Among all persons with limited or no labor force attachment for economic reasons, 22.8% reported receipt of UI benefits in 2011, down from 2009 (27.4%)—the same share as the peak recipiency rate of 1992—and also below the 25.7% rate in 2002. Appendix C. CPS/ASEC Estimates Versus Administrative Benchmarks It is difficult to compare the monthly administrative UI data on the number of individuals receiving unemployment benefits to the one-time monthly survey CPS/ASEC data of those individuals who have reported receiving unemployment benefits in the past year. According to the U.S. Department of Labor (DOL) in 2011, approximately $103.7 billion in "unemployment benefits" were distributed to individuals. These benefits included UC, EB, and EUC08 as well as several smaller benefits such as the Disaster Unemployment Assistance and Trade Re-Adjustment Allowances. In comparison $68.5 billion in aggregate UI benefits were reported in the CPS/ASEC. Thus, in 2011, aggregate UI benefits reported on the CPS/ASEC accounted for about 66% of the administrative benchmark; approximately 34% of UI benefits in the aggregate were either not reported or were underreported—the largest level over the 25-year period examined (see the top line in Figure C -1 ). The U.S. DOL does not calculate the number of individuals who received unemployment benefits at any point during the year , but rather it reports the number of individuals receiving benefits as a monthly statistic. Approximately 51% of the unemployed received unemployment benefits on average in any given month in 2011. Using the CPS/ASEC data, this analysis estimated that approximately 30% of the unemployed reported receiving a UI benefit at least for some point during the year . There may be empirical reasons for the yearly ratio to be lower than the monthly ratio. One such reason is that generally those who receive unemployment benefit are likely to remain unemployed longer than those who do not receive such benefits. Thus, UI recipients may appear in the monthly calculations for more months than non-UI recipients driving up the percentage of UI beneficiaries in the monthly calculations relative the annual calculations where both UI beneficiaries and non-beneficiaries are each counted one time. Given that the ratio of underreporting the total value of UI benefits is less than the ratio of underreporting UI benefit receipt this suggests that those who received lower values of aggregated UI benefits are more likely to not report benefit receipt. Figure C -1 examines this pattern of under-reporting UI benefits by comparing estimates of aggregate UI benefits and number of recipients on the CPS/ASEC relative to DOL administrative benchmarks, from 1987 through 2011. The two lines depict the CPS/ASEC estimate as a percent of DOL administrative benchmarks based on UI spending and benefits data. CPS/ASEC estimates are for persons who reported having received any type of UI benefits at any time during the year. Estimates of the number of recipients from DOL UI administrative data are based on the total number of persons receiving UC benefits at the beginning of the year plus the total number of persons receiving initial monthly UC benefits during the year plus the number of persons receiving UC for former federal workers (UCFE), UC for former service members (UCX), Disaster Unemployment Assistance (DUA), Trade Readjustment Assistance (TRA), EB, EUC08 and the other temporary extended benefits at the beginning of the year . Figure C -1 shows that aggregate benefits reported on the CPS/ASEC ranged from a low of 66% of the administrative benchmark in 2010 and 2011, to a high of 88% in 1995. As noted above, the CPS/ASEC does an apparently better job at capturing UI dollars, in the aggregate, than it does in the number persons receiving benefits. Over the period examined, the CPS/ASEC appears to capture roughly 59% of persons who receive UI benefits based on claims data with the ratio generally increasing during recessions and decreasing as the recovery takes hold. The ratio ranges from a low of 49% in 2004, 2006, and 2007, to a high of 73% in 1993. As noted above, the CPS/ASEC appears to do a better job in capturing aggregate UI dollars than it does in capturing UI recipients would suggest that persons who receive comparatively small UI benefits, and/or claim benefits for a comparatively short period of time, are less likely to report UI benefit receipt on the CPS/ASEC.

This report examines the antipoverty effects of unemployment insurance benefits during the past recession and the economic recovery. The analysis highlights the impact of the additional and expanded unemployment insurance (UI) benefits available to unemployed workers through the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) and the Emergency Unemployment Compensation (EUC08) program (Title IV of P.L. 110-252). In 2011, approximately 56% of all unemployed individuals were receiving UI benefits (down from a high of 66% in 2010) and thus were directly affected by legislative changes to the UI system. UI benefits appear to have a large poverty-reducing effect among unemployed workers who receive them. Given the extended length of unemployment among jobless workers, the additional weeks of UI benefits beyond the regular program's 26-week limit appear to have had an especially important effect in poverty reduction. Estimates presented in this report are based on Congressional Research Service (CRS) analysis of 25 years of data from the U.S. Census Bureau's Annual Social and Economic Supplement to the Current Population Survey (CPS/ASEC), administered from 1988 to 2012. The period examined includes the three most recent economic recessions. This report contributes to recent research on the antipoverty effects of unemployment insurance in several ways. Its period of analysis allows comparisons across the three most recent recessions. The report includes estimates of the effects on the poverty rate for the unemployed, for those receiving UI, and for families that report at least one family member receiving UI. It also estimates how much of reported UI benefits went directly to decreasing family poverty levels. This report's analysis shows that UI benefits appear to reduce the prevalence of poverty significantly among the population that receives them. The UI benefits' poverty reduction effects appear to be especially important during and immediately after recessions. The analysis also finds that there was a markedly higher impact on poverty in the most recent recession than in the previous two recessionary periods. The estimated antipoverty effects of UI benefits in 2011 were about 50% higher than that of two previous peak years of unemployment—1993 and 2003. In 2011, over one quarter (26.5%) of unemployed people who received UI benefits would have been considered poor prior to taking UI benefits into account; after counting UI benefits, their poverty rate decreased by just under half, to 13.8%. UI receipt affects not only the poverty status of the person receiving the benefit, but the poverty status of all related family members, as well. In 2011, while an estimated 10.2 million people reported UI receipt during the year, an additional 15.8 million family members lived with the 10.2 million receiving the benefit. Consequently, UI receipt in 2011 affected the income status of some 26.0 million persons. In 2011, the poverty rate for persons in families who had received unemployment benefits was almost 40% less than it otherwise would have been. In 2011, UI benefits lifted an estimated 2.3 million people out of poverty, of which well over one quarter (26.8%; 620,000) were children living with a family member who received UI benefits.

This report examines the role played by Senators in the selection of nominees to two kinds of lower federal court judgeships. Specifically, the judgeships in question, over which Senators have historically played a role in nominee selection, are those (1) in the U.S. district courts lying geographically within the Senators' states and (2) in the U.S. court of appeals circuits of which the Senators' states are a geographic part. By long-standing custom, Senators of the President's party, as a general rule, have played the primary role in selecting candidates for the President to nominate to federal district court judgeships in their states. They also generally have played an influential, if not primary, role in recommending candidates for federal circuit court judgeships associated with their states. For Senators who are not of the President's party, a consultative role, with the opportunity to convey to the President their views about candidates under consideration for judgeships in their states, has been a long-standing practice as well. In recent years, however, the role to be played by "home state Senators" in the selection process for lower court judges has periodically been the subject of debate. With controversy frequently arising in the Senate over whether that body should confirm various of the President's judicial nominees, part of the contention sometimes has involved the question of whether, or to what degree, Senators should play a role in advising the President on whom to select as judicial nominees from their states. To assist in examining that question, this report provides an analysis of the role that home state Senators, historically and in the contemporary era, have played in the lower court selection process. In separate sections this report discusses the historical origins of the role of Senators recommending persons for nomination to lower court judgeships—particularly, the custom of "senatorial courtesy" and the Senate Judiciary Committee's long-standing "blue slip" procedure; the effect of Senators' political party affiliation on their role as recommenders of judicial candidates from their state; the lesser role that Senators play generally when recommending circuit court, as opposed to district court, candidates; the processes by which Senators evaluate and select judicial candidates; Senators' contacts with a President's Administration after they make their recommendations but before the President selects a nominee; the options available to home state Senators when the President selects a judicial nominee against their advice, or without consulting them; and issues that have arisen in recent years over the proper role, and degree of influence, of home state Senators in the selection of nominees for U.S. district and circuit court judgeships. Before proceeding with these sections, however, Figure 1 , below, provides a visual overview of the judicial districts in each state and the judicial circuit of which each state is a part. Figure 1 does so, for the judicial districts, by showing the geographic boundaries for the 89 district courts that lie within the 50 states. Dotted lines within a state indicate the division of that state into two or more judicial districts, showing the geographic areas the districts cover in the state. The absence of dotted lines within a state, on the other hand, indicates that the state constitutes one undivided judicial district. (For an alphabetical listing of the 50 states, indicating which states have multiple judicial districts as well as the number of authorized judgeships for each of the districts, see 28 U.S.C. §133.) Courts within the U.S. courts of appeals system are divided geographically into 11 enumerated circuits, with each of these circuit courts including at least three states. Figure 1 shows the states (as well as, in some cases, U.S. territories) located within each of the enumerated circuits by the different areas of shading associated with the circled numbers 1 through 11. The President's appointments of judges in the federal court system are made subject to the approval of the Senate. These appointments take place through a process, provided for in the Constitution, in which the President nominates and appoints persons to federal office "by and with the Advice and Consent of the Senate." Exceptions to this rule are the relatively rare judicial appointments which the President alone makes, without the requirement of Senate approval, through his power, under the Constitution, to make temporary "recess appointments." The Senate most visibly exercises its "advice and consent" role with respect to judicial appointments when Senators vote on a nomination—either in committee (on whether and how to report a nomination to the Senate) or on the Senate floor (on whether to confirm). Another significant, though less public, exercise of Senate "advice and consent" on judicial nominations, it can be argued, occurs when individual Senators provide actual advice to the President on whom to nominate to particular federal judgeships. By long-standing custom, dating back to the early 1800s, Senators of the President's party, in their capacity as home state Senators, have regularly provided Presidents such advice, recommending candidates for judgeships situated in their states or linked by tradition to their states. For Senators who are not of the President's party, a consultative role, with the opportunity to convey to the President their views about candidates under consideration for judgeships in their states, also has been a long-standing practice. Technically, each Senator is free to recommend candidates for any federal judgeship to be filled by presidential nomination. In reality, however, the ability of Senators to have their judicial recommendations heeded by a President will, in most cases, depend on the judgeship in question having a geographic link to a Senators' own state. A Senator, for instance, rarely will be able to exert influence on behalf of a judicial candidate for a geographically based court, such as a U.S. district court or a U.S. court of appeals, if the court is not geographically all or in part within the Senator's state. Similarly, most Senators, on any particular occasion, might have little basis on which to make judicial recommendations for a nationwide court of specialized subject matter jurisdiction (such as the Tax Court or the Court of Appeals for Veterans Claims), unless they are members of a Senate committee having jurisdiction over the court, have expertise in the court's subject matter, or have some other special interest in the court. By contrast, every U.S. Senator makes recommendations or in some way is consulted about potential candidates for judgeships in (1) the U.S. district court or courts which geographically fall within the Senator's state, and (2) the U.S. court of appeals circuit of which the Senator's state is a geographic part—provided the circuit judgeship has historically been filled by a resident of the Senator's state. For these judgeships, long-standing Senate customs, as well as norms in Senate-presidential relations, govern, to a great extent, the role of individual Senators in the appointment process. The two most important of these customs arguably are "senatorial courtesy" and the "blue slip" practice of the Senate Judiciary Committee. Dating back to 1789, senatorial courtesy, as defined by one authority, is the "Senate's practice of declining to confirm a presidential nominee for an office in the state of a senator of the president's party unless that senator approves." Another scholar has written, "senatorial courtesy has come to mean that senators will give serious consideration to and be favorably disposed to support an individual senator of the president's party who opposes a nominee to an office in his state." This scholar noted, however, that, as the practice of senatorial courtesy had evolved in the contemporary period, the Senate could not be expected to automatically support a Senator opposing a nomination if "his reasons are not persuasive to other senators or if he is not a respected member of the Senate." The custom of senatorial courtesy provides the foundation for a special role in the nomination and confirmation process for a Senator of the President's party, whenever a presidential nomination is for a federal office in the Senator's state. The Senator's role is essentially a negative one in those relatively rare instances when the Senator opposes, and thereby seeks to block, a nominee's confirmation. In these situations, the Senator, by invoking senatorial courtesy, ordinarily can look to the rest of the Senate's Members to join the Senator in opposing the nomination. Much more frequently, however, the Senator's role is positive in nature when, periodically, he or she engages in making recommendations to the President about whom to nominate to federal offices in the Senator's state. In these situations, the custom of senatorial courtesy, it can be argued, encourages the President to be receptive to the Senator's recommendations—rather than risk selecting nominees opposed not only by the Senator, but potentially by the Senate as a whole, united in support of its colleague. The precedent of senatorial courtesy, according to Joseph P. Harris, in his landmark study, The Advice and Consent of the Senate, was set in 1789. Congress had been in session for only three months of its first term when the Senate rejected its first presidential nominee—one Benjamin Fishbourn, whom President George Washington had nominated to the post of naval officer of the Port of Savannah. Though Fishbourn apparently had excellent qualifications for the position, the Senate rejected the nomination as a courtesy to the two Senators from Georgia, who had a candidate of their own. The next day, Washington withdrew the Fishbourn nomination and nominated the candidate desired by the two Georgia Senators. In the Fishbourn episode, the courtesy that the Senate's Members as a whole extended to their two colleagues from Georgia—by rejecting the nomination that the two Senators opposed—was an important precedent. As Harris explained: The Fishbourn case initiated the custom which requires the President to consult with the senators from the state in which a vacancy occurs, and to nominate a person acceptable to them; if he fails to do so, the Senate as a courtesy to these senators will reject any other nominee regardless of his qualification. The custom is usually invoked, however, only by senators of the same party as the President. It did not become firmly established in Washington's administration, for he continued to hold to the doctrine that the power of nomination belonged exclusively to the President and continued to consult widely in making his selections. Under later Presidents with less prestige, less force of character and less determination, the rule became firmly established with respect to senators of the same political party as the President. Harris, writing in 1953, described what was then the "well-established custom, which has prevailed since about 1840," wherein U.S. district judges "are normally selected by senators from the state in which the district is situated, provided they belong to the same party as the President." (By contrast, the President was said to have "a much freer hand in the selection of judges to the circuit courts of appeal, whose districts cover several states." ) Another scholar, less than a decade earlier, in 1944, had described as near-absolute the power of home state Senators of the President's party to select district court nominees. The Senate, he maintained, had "expropriated the President's power of nomination so far as concerns appointments of interest to senators of the party in power; and the President has virtually surrendered his power directly to local party politics as to appointments in states where the senators are of the opposition." According to two other scholars, Senators, from the very beginning, "recognized that judgeships could be used effectively to reward loyal supporters back home." Senators also realized: that it would be damaging to their prestige if the President appointed to a judgeship within their own state someone of whom they disapproved. As a result, senators joined together to protect their individual interests in judicial appointments. The custom of "senatorial courtesy" grew out of these considerations. In the latter half of the 20 th century, it continued to be common for Senators to regard their role in the appointment of U.S. district judges as more in the nature of selection than of recommendation. In 1977, former Senator Joseph W. Tydings wrote that selection of a U.S. district judge "is a power jealously guarded by many senators. It is an extremely important source of political patronage, and many senators consider judicial selection to be one of the duties they were elected to perform." In 1989, similar sentiments were expressed by Senator Thad Cochran amid a controversy involving the reluctance of President George H. W. Bush to nominate to a Vermont district judgeship a candidate recommended by Senator James M. Jeffords (R-VT). "As a matter of custom and tradition in the Senate," Senator Cochran declared, "the senators of the president's party's recommendations for district court judgeships have been tantamount to selection of that nominee," adding that selecting judicial nominees was "one of the few patronage positions that senators have" outside their staffs. Echoing Senator Cochran's views, the Senate Republican Conference, it was reported, "went to Jeffords' defense with a resolution asking conference chairman John H. Chafee (R-RI) to advise President Bush of the senators' support for Jeffords' choice." Ultimately, the candidate recommended by Senator Jeffords was nominated by President Bush and confirmed by the Senate by a voice vote. The view of Senators over time, in other words, has been that the President should defer to Senators of the President's party in the selection of home state judicial appointees, rather than vice versa. This view is reinforced by the custom of senatorial courtesy, in which the Senate as a collegial body customarily supports Senators of the President's party in disputes with the President over judicial appointments in their state. The custom serves as an inducement to the President to try to reach accommodation with home state Senators, rather than risk Senate rejection of a nominee whom they oppose. As a result, Presidents have rarely gone forward with a nomination for a district court judgeship if a home state Senator of the President's party has indicated beforehand a readiness to oppose the nominee in the Senate. The role of home state Senators of the President's party, however, is no longer one of unquestioned power to select district court nominees, as it had generally been portrayed in the past. A judicial appointments scholar observed in 1972 that "even granting that senators of the party in power may have 'owned' district judgeships at an earlier time in our history, they have not during the incumbency of the presidents since Truman." In recent decades, Senators, when recommending judicial candidates, increasingly have found it necessary to accommodate new demands or calls from the President, which have made their selection power less absolute. For instance, recent Presidents have insisted that candidates whom Senators recommend for district judges, besides having necessary professional qualifications, meet other criteria of particular importance to the President or that the Senators submit a number of candidates for a vacant judgeship, rather than only the name of the one candidate they most favor. Further, one recent President (Jimmy Carter), through forceful advocacy, persuaded nearly all of the home state Senators of his party to establish nominating commissions for the selection of district court judges. In so doing, the Senators relinquished a substantial part of their traditional role in recruiting, evaluating, and recommending district court candidates. Subsequent Presidents, however, did not insist, as President Carter did, that Senators use nominating commissions to select district court candidates, and over the next few decades their use was discontinued by most Senators. Nonetheless, the last five years have witnessed somewhat of a comeback for nominating commissions, with more than one-third of the Senate's Members recently reported to be using them. Senatorial courtesy, as has been shown, historically has contemplated a role for Senators of the President's party in providing advice to the President on nominees—but not necessarily a role for opposition party Senators. Nevertheless, even when neither of a state's Senators is of the President's party, a consultative role is contemplated, if not mandated, for them in the appointment process by means of the Senate Judiciary Committee's "blue slip" policy. Under this policy, as it has evolved in recent decades, the Judiciary Committee has come to expect that, as a courtesy, a state's Senators, no matter what their party affiliation, will be consulted by the Administration prior to the President nominating persons to U.S. district judgeships in the state as well as to U.S. circuit court judgeships historically associated with their state. The blue slip policy of the Senate Judiciary Committee, as set by its chair, dates back at least to 1917. Under this policy, the committee chair seeks the assessment of Senators regarding district court, circuit court, U.S. attorney, and U.S. marshal nominations in their state. In practice, the chair sends a blue-colored form to home state Senators regarding these nominations. If a home state Senator has no objection to a nominee, the blue slip is returned to the chair with a positive response; however, if a Senator has some objection to the nominee and wants to stop or slow committee action, he or she can decide not to return the blue slip or to return it with a negative response. Some, but not all, chairs of the Judiciary Committee have required a return of a positive blue slip by both of a state's Senators before allowing consideration of a nomination. For more than two decades, from 1956 through 1978, when a Senator returned a negative blue slip or failed to return a blue slip for a judicial nomination, it was the policy of the committee chair, in deference to the Senator, to decline to schedule a hearing or other committee action on the nomination. In other words, a home state Senator, by not returning a blue slip or by returning it with a negative response, could halt all further action on a nominee from the state. This policy, in effect, gave Senators of either party, if they wished to exercise it through the blue slip, a veto over any home state judicial nomination to which they were opposed. In so doing, the committee policy, some scholars have suggested, also had the effect of encouraging presidential Administrations to consult beforehand with Senators of the opposition party, as well as of the President's party, to be sure that they would not oppose a person being considered for a judicial nomination in the state in question. Since 1979, however, deference to home state Senators using the blue slip to block or delay judicial nominees has not always been automatic. Some chairs of the Judiciary Committee, including those from the 109 th through the 112 th Congresses, have permitted committee action on a judicial nomination only when both home state Senators returned positive slips . The committee under other chairs, by contrast, has considered a judicial nomination with receipt of only one positive blue slip, or on a few occasions, without a blue slip from either home state Senator." While the blue slip policies of recent chairs of the Judiciary Committee have varied, nearly all policies, when articulated in writing, have communicated to the President the importance of pre-nomination consultation with both home state Senators. Pre-nomination consultation, a 2003 analysis concluded has been a key expectation of recent [Judiciary Committee] chairmen in the evaluation of negative blue slips. The President is now expected to consult and involve each home state Senator in the pre-nomination phase of the selection process. Without evidence of consultation by the White House, various chairmen have appeared, as a matter of policy, to accord greater value to a negative blue slip submitted by a non-consulted home state Senator. Moreover, the role contemplated for Senators not of the President's party, when engaging in pre-nomination consultation with the President, has been expanded. Official blue slip policy statements by recent chairs of the Judiciary Committee, for instance, have not only called for the opportunity for opposition party Senators to express opinions about judgeship candidates being considered by the Administration, but also the opportunity to propose their own candidates to the Administration. In sum, the Judiciary Committee's blue slip policy in recent decades, as applied in somewhat varying ways by different chairs, appears always to be intended to promote some measure of an advisory role for home state Senators of both parties in the judicial nominee selection process. Moreover, the contemplated advisory role has included the opportunity, if Senators wish, to make recommendations to the President about whom to nominate. As a caveat, however, it should be kept in mind that the blue slip policy is set by the committee's chair and is not a part of the committee's written rules. As a result, the policy's key elements, including the degree of importance placed on Administration consultation with home state Senators, is always subject to change, in keeping with the prerogatives of the committee chair. The political party affiliations of a state's Senators usually, if not always, are an important determinant of what role they play in the selection of federal judicial nominees in their state. As a general rule, a Senator who belongs to the President's party has the primary role in recommending candidates for federal district court judgeships in the home state, and an influential, if not the primary, role in recommending candidates for federal circuit court judgeships associated with the home state. These roles, as a general rule, are in contrast to the much lesser roles in recommending district and circuit court candidates played by a Senator who is of the opposite party. If both of a state's Senators are of the President's party, they usually, although not always, share the responsibility of recommending judicial candidates to the President. If neither Senator is of the President's party, some other official or officials in their state typically assume the primary role of recommending judicial candidates. Senators not of the President's party, however, sometimes are in a position to establish for themselves a more influential role in recommending judicial candidates than just described. This particularly might prove to be the case if the Senators are perceived as having an ability and inclination to block nominations (either through use of the Judiciary Committee's blue slip procedure or through Senate floor tactics such as the filibuster), unless afforded an enhanced role in judicial nominee selection. As already discussed, Senators of the President's party, by well-established custom, are the key persons who provide the President's Administration with recommendations for U.S. district court judgeships in their state. One authority on the judicial appointments process, writing in 1987, noted: A senator of the president's party expects to be able to influence heavily the selection of a federal district judgeship in the senator's state; indeed, most such senators insist on being able to pick these judges, and they expect judgeships on the federal courts of appeals going to persons from their states to be "cleared" by them. When only one of a state's Senators is of the President's party, he or she alone, by custom, is entitled to select all candidates for district judgeships in that state. If the Administration has concerns about a Senator's recommendation, it is expected to resolve those concerns with the Senator. If the Administration continues to have a concern over a candidate, finding him or her unacceptable or in some way problematic as a nominee, the Senator, and not any other official outside the Administration, is called on to provide a different recommendation. If the Administration prefers its own candidate, it in turn must persuade the Senator to agree to its choice. For the Administration to do otherwise, and push forward with a nominee objected to by the Senator, is to risk rejection by the Senate, given the custom of senatorial courtesy, discussed earlier. The latter scenario is very rare, however, for "[n]o administration deliberately seeks to alienate senators of their own party or to run the risk of a senator's sabotaging a nomination once it has been sent to the Senate." When only one of a state's Senators is of the President's party, that Senator will have almost complete discretion as to whether or how to consult with the state's other Senator about judicial nominations. There is no requirement that the former consult with the latter, and some Senators in such a situation may decline to consult with their home state colleague in any way. On the other hand, many Senators in such situations have consulted with their home state colleague, in various ways, and some have gone so far as to involve them in a joint or coordinated process of recommending judicial candidates to the President. The following list notes some options available to a Senator of the President's party when considering whether or how to consult or cooperate with a home state colleague of the opposite party about judicial nominee recommendations. The options are not exhaustive but, rather, identify different degrees of consultation or cooperation about judicial candidates that could exist between home state Senators of opposite political parties: The Senator of the President's party makes recommendations to the Administration without consulting the other home state Senator at any stage—apprising the latter neither of persons under consideration early in the process nor of persons actually recommended later in the process. The Senator as a courtesy informs the other home state Senator of the person whom the former has recommended for a judicial nomination, without, however, soliciting the latter's views about the candidate or about other possible candidates. The Senator informs the other home state Senator of persons under consideration as potential judicial nominees, welcoming input from the latter about these candidates as well as suggestions as to other possible candidates. The Senator agrees to allow the other home state Senator to select a minority of the members of an advisory panel that evaluates and screens judicial candidates before the first Senator decides whom to recommend. The Senator shares the recommending function with the other home state Senator, allowing the latter to select candidates for a minority of the judgeships which become vacant in the state (for example, for every fourth judgeship). The two Senators work as co-equals in the selection process—for example, by using a completely bipartisan panel or commission to identify and screen applicants, and with all candidate recommendations to the President made by the Senators jointly. These options, as mentioned, are almost entirely at the discretion of the Senator of the President's party, with his or her views about the judicial appointment process largely determining the extent to which there will be consultation or cooperation with the other home state Senator. Such views, in turn, may be influenced by the immediate political environment, including (1) the nature of working relations between the two Senators in general (e.g., strained or cordial); (2) the past practices of Senators in the state regarding judicial patronage (i.e., whether Senators in the state previously worked closely together on judicial appointments); (3) the degree of Administration support for consultation or cooperation between Senators of opposite political parties on home state appointments; and (4) the extent to which the other Senator is perceived as able or inclined to block home state nominations either in committee or in the full Senate. If both of a state's Senators are of the President's party, they may share the role of recommending judicial candidates to the President or, alternately, one of them may take the lead role. Senatorial custom, particularly in recent decades, provides ample support for both Senators having an active role in recommending judicial candidates in their states, if each wishes to participate in the process. In many states in which both home state Senators are of the President's party, both may be engaged in evaluating and selecting judicial candidates. One option within this arrangement is for both Senators to review and evaluate judicial candidates for every judicial vacancy that arises in their state. At their discretion, the Senators may use an informal process to select candidates, for example, relying on their personal knowledge of likely candidates or on input from close advisers or friends in the legal community. Alternately, they may use a more formal process, for example, relying on advisory panels to review applications, interview candidates, and make recommendations for the Senators to choose from. At the end of the screening process, the Senators may agree on one or more candidates to recommend to the President for the judgeship, or, if they cannot reach agreement, they might combine their individual recommendations into one list to submit to the Administration. Another option, by contrast, is for both Senators to be active in the judicial candidate selection process, but to take turns—alternating in the role every time there is a court vacancy in their state. Alternating, from the workload standpoint (in time required to screen judicial candidates), might appear more attractive for Senators in states having a relatively large number of district judgeships, where vacancies occur periodically. It, however, might appear less attractive for Senators in states having only a handful of district judgeships, where vacancies occur infrequently. Senators agreeing to alternate may decide, individually, to select candidates through either an informal or a formal process (as described in the previous paragraph). In cases where both Senators wish to rely on advisory panels to screen candidates, they have the choice of using joint panels (which serve on behalf of both Senators—with each Senator typically choosing some of the panel's members) or of using their own separate panels. At the end of such an alternating screening process, only the Senator involved submits a recommendation (or a list of recommendations) to the President for the vacant judgeship in question. Sometimes, however, in a state having two Senators of the President's party, one Senator may opt out of an active role in recommending judicial candidates, leaving the task primarily to his or her home state colleague. A Senator might do so for a variety of reasons—lack of interest in judicial appointments, insufficient time available for the role (given other Senate responsibilities), or out of deference to the state's other Senator, due to the latter's seniority, interests, committee assignments, or greater experience in evaluating judicial candidates. In such cases, the more involved Senator, proceeding alone as the lead Senator, may review the backgrounds and qualifications of judicial applicants with informal support or input from others or, in a more formal arrangement, receive evaluations of the applicants, or recommendations, from an advisory panel established specifically on behalf of the Senator to screen judicial candidates. At one or more points during the screening process, the lead Senator can be expected to consult with the other Senator—especially at the point at which the latter can be advised of the candidate or candidates whom the lead Senator believes should be recommended or who have received advisory panel recommendations. The lead Senator, before finalizing his or her choice of a candidate, will want the other Senator's approval—or, failing that, at the very least the other Senator's willingness not to object to the candidate's nomination later. Once a candidate is selected, the actual recommendation may be made singly, by the lead Senator, or jointly, by both Senators. Likewise, a public statement noting a candidate's nomination by the President may be made solely by the lead Senator or jointly by both Senators. If both of the state's Senators are of the President's party, the prospects for a district court candidate's nomination in that state are bolstered if both Senators have recommended that candidate to the President. A scholar on the judicial appointment process has noted, "If there are two senators of the president's party from a particular state, [Justice] department arithmetic has it that the effect of two senators" wanting a particular nominee for a district judgeship in their state "is more than one plus one. The sum is more like infinity, for it would only be with great trepidation" that the Administration "would attempt to counter the will of both senators." If neither Senator in a state is of the President's party, each usually, by custom, plays at most only a secondary role in recommending judicial candidates for the President's consideration, with the primary role assumed by other officials from the state who are of the President's party. On occasion, however, exceptions to this rule do occur, with a President sometimes acquiescing to active senatorial participation in judicial candidate selection in states having two opposition party Senators. On other occasions, an agreed-upon arrangement in a state might be that, while officials of the President's party would be the ones recommending judicial candidates, the state's opposition party Senators would exercise a veto power over any recommendations they found objectionable. By custom, when neither of a state's Senators is of the President's party, the primary role in recommending candidates for district court judgeships is assumed by officials in the state who are of the President's party. Historically, in the absence of a Senator of the President's party, the state official or officials who most frequently have exercised the judicial "patronage" function have been the most senior Member, or one of the most senior Members, of the party's House of Representatives delegation, the House party delegation as a whole, the governor, or state party officials. In any given state, one of these officials may exercise the recommending function exclusively, or share it with one or more of the others. A survey published in April 1993 illustrates the customary options used to select candidates for district judgeships in states not having Senators of the President's party. The survey, by the interest group Alliance for Justice, was published shortly after the start of the presidency of William J. Clinton in January 1993. It was based primarily on interviews with staff members in the offices of Democratic Senators and House Members, with additional information obtained through interviews of Democratic Party officials. At the time of the survey, there were 11 states in which neither Senator was a Democrat. In one of the 11 states, a judicial candidate selection process was not yet in place, and no judicial vacancies were pending there. In the other 10 states, according to the survey, judicial selection procedures were set or being put in place. The numerical breakdown of these 10 states, according to the type of Democratic official acting as the "chief sponsor" of judicial candidates, was as follows: 5 states—a House of Representatives Member; 2 states—the governor; 2 states—a House of Representatives Member and the governor; 1 state—the U.S. Department of Agriculture Secretary. In June 1993, a few months after the survey's publication, another state, Texas, joined the ranks of states in which neither Senator was of the President's party. (This occurred when a Republican was elected to a Senate seat in a special election, giving Texas two Republican Senators.) At that point, it was reported, "the traditional authority to make recommendations to the President fell to ... Texas's senior congressional Democrat" (the state's senior Democratic House Member). Likewise, at the start of the presidency of George W. Bush, a Republican, in January 2001, the new Administration looked to other than senatorial sources for advice on judicial candidates in states having two opposition party Senators. The Legal Times reported that in "the 18 states where both senators are Democrats, Bush will be getting advice on potential nominees from a high-ranking Republican House member or the state's Republican governor." Without listing the selection methods for each of the 18 states, the article noted, as examples, that in two of the states a senior Republican House Member would be working together with the Republican governor on judicial recommendations, while in a third state a Republican House Member expected to be the President's "point man on judicial nominations." Subsequently, after the presidential inauguration of Barack Obama in January 2009, Democratic officials in some states without Republican Senators assumed the role of recommending judicial candidates in arrangements consistent with those reached between non-Senators and previous Presidents. By custom, the role of a state's Senators in judicial candidate selection, when neither is of the President's party, is secondary to the role of those officials discussed above, who actually choose candidates to recommend to the President. Customarily, in these circumstances, the state's Senators, if they are consulted by state officials of the President's party, are consulted for their reactions to candidates under consideration, but not for their own preferences. Where consultations of this sort are done in good faith, negative as well as positive feedback from the Senators would be welcomed, but typically they would not be called upon to make their own candidate recommendations. As a scholarly study has noted, until recent decades, senators who were not of the president's party in any given administration played little or no role in district judge selection, except as permitted in informal agreements between senators and any given administration or by the Senate Judiciary Committee through the blue slip. Moreover, that role ... was generally a negative role: a senator who was not of the President's party from the state in which a judicial nominee would serve could delay or prevent confirmation of a nominee by refusing to return the blue slip, but the senator could not compel the President to choose his or her candidates. The secondary role of Senators in judicial candidate selection in states where both are of the opposition party was stated as formal Administration policy early in Ronald Reagan's presidency. In a March 1981 memorandum on judicial selection procedures, the Department of Justice discussed, among other things, the procedure that would apply in states with no Republican Senators. In these cases, the memorandum said: the Attorney General will solicit suggestions and recommendations from the Republican members of the congressional delegation, who will act in such instances as a group, in lieu of Senators from their respective states. It is presumed that congressional members in such cases would consult with Democratic Senators from their respective states. Sometimes, however, in states having two opposition party Senators, Presidents agree to a more active form of senatorial involvement in judicial selection. In these cases, a more active role for a state's Senators might consist of actually serving as a primary source for judicial candidate recommendations or selecting at least some of the members of an advisory panel or commission, if one is established in cooperation with officials of the President's party to make judicial candidate recommendations. In recent decades, various Presidents, in a limited number of situations, have allowed a state's Senators, when both were of the opposition party, an involvement in judicial candidate selection entailing more than simply being consulted during the selection process. For example, in states having two opposition party Senators, President John F. Kennedy, a scholar has written, was sometimes inclined to select persons of the opposition party for judicial appointments. In these situations President Kennedy used Republican Minority Leader Everett Dirksen as a liaison between the White House and Republican senators. Dirksen was asked to solicit suggestions from the senators in those states which had two Republican senators, though suggestions of names made directly by the senators were accorded equal treatment. During the presidency of Gerald R. Ford, a Republican, Florida's two Democratic Senators increased their involvement in the selection of federal district judges in that state—through establishment of a commission to recruit and evaluate judicial candidates. The nine-member Federal Judicial Nominating Commission, which began operations in 1975, was created and chartered by the state of Florida, at the impetus of the two Senators, in conjunction with the state bar association. Under the charter, each of the three sponsors—the two Senators and the bar association—chose one commissioner from each of Florida's three federal judicial districts. After evaluating applicants, the commission was to recommend not fewer than five candidates per vacancy to the Senators, who would then recommend one candidate for each vacancy. In its first year of operation, the commission recommended candidates for nomination for two district court vacancies and one circuit court vacancy. President Ford and the Florida Senators cooperated to fill two of three vacancies with nominees selected from the commission's candidates. In 1976, the second year of the commission's operation, and President Ford's last full year in office, the President continued to accept and select his nominees from the commission's candidates. The Florida commission marked "the first time in more than 135 years" that Senators "who were not in the President's party played a substantial formal role at the stage before the official nominations of persons for district court judgeships." Other Senators of the opposition party also, on occasion, have successfully bargained for power over judicial patronage. During the presidency of Richard M. Nixon, a Republican, California's two Democratic Senators, it was reported, reached an agreement with the Administration that every third federal judgeship in that state would go to a judicial candidate suggested by the Senators. In a number of states, the Administration of President William J. Clinton, a Democrat, spent "considerable time," according to one legal scholar, "treating Republican senators' demands that they be involved" in judicial candidate selection. In a few of these states, Republican Senators "insisted that they be permitted to participate in choosing the candidates and even that they [were] entitled to propose nominees." More recently, the Republican Administration of President George W. Bush, in a few cases, accepted a formal role for a state's two Democratic Senators in judicial candidate selection. In at least four instances, the Bush Administration reportedly reached understandings with opposition party Senators to engage in a judicial selection process largely, if not entirely, reliant on candidate recommendations made by judicial nominating commissions from the Senators' states. These understandings were reached when the states involved—California, Florida, Washington, and Wisconsin—were represented by two Democratic Senators. In each of the aforementioned four states, the role of opposition party Senators in the selection process entailed more than simply being consulted about possible nominees. In each state, a judicial nominating commission was established prior to, or during, the Bush presidency, to evaluate the qualifications of judicial candidates and to make nominee recommendations—with the Senators, in each case, responsible for selecting at least some of the commission's members. After a commission made its evaluations, its recommendations were forwarded to the Senators for their review. (A commission's recommendations, in some of the states, were also reviewed by House Members of the President's party.) In turn, the Senators were afforded the opportunity to indicate which candidates they preferred, before those names were forwarded to the President. Most recently, during the presidency of Barack Obama, district court nominees in at least one state, Texas, reportedly have been selected only after being formally recommended by the state's two opposition party Senators. For each vacant U.S. district court judgeship in Texas, President Obama has received judicial candidate recommendations from both the Senators as well as from Texas's Democratic congressional delegation. In each case, the President reportedly has selected a nominee who was recommended by both the Senators and the House Members. To assist them in making their recommendations, the Senators used a judicial evaluation committee that vetted judgeship applicants. In another kind of arrangement for a state, officials of the President's party would be the ones recommending judicial candidates, but with the state's opposition party Senators exercising a veto power over any recommendations they found objectionable. Such an arrangement, for instance, was in place in Illinois during the final two years of the last Bush Administration, according to the state's two Democratic Senators. Senators generally exert less influence over the selection of circuit court nominees than over the selection of district court nominees. Whereas home state Senators of the President's party often, if not always, dictate whom the President nominates to district judgeships, their recommendations for circuit court nominees, by contrast, typically compete with names suggested to the Administration by other sources or generated by the Administration on its own. The lesser role for Senators, and the more independent role of the President, in the selection of circuit court nominees is well established by custom. In a landmark 1953 study of the appointment process, the President was said to have "a much freer hand in the selection of judges of the circuit courts of appeal, whose districts cover several states, than of district judges, who serve within individual states." In 1971, during the presidency of Richard M. Nixon, a scholar wrote, "When it comes to making appointments to circuit courts, the balance of power shifts markedly [away from Senators] to favor decision-making by the President's men." In a 1977 analysis, a former U.S. Senator observed that, while many Senators had the "power" to select district court nominees from their states, "no single senator automatically controls" who is appointed to circuit judgeships. The Senator's statement proved to be an understatement, for during the years of Jimmy Carter's presidency (1977-1980), his Administration relied almost entirely upon a circuit judge nominating commission to identify candidates for circuit court nominations. In so doing, the Administration largely excluded home state Senators of the President's party from the process of recommending persons for circuit judgeships. (The Senators, however, were consulted for their views about the commission's recommendations before President Carter actually selected a nominee.) President Ronald Reagan disbanded the circuit judge nominating commission created by President Carter, which restored for home state Senators a role in recommending circuit court candidates. The role, however, was not a dominant one, for during the Reagan presidency, one scholar has written, the process for selecting circuit nominees was marked by "tight administration control over the screening process." At the start of the Clinton presidency, in 1993, a somewhat similar picture was portrayed of Senators playing a subordinate role to the Administration when identifying candidates for circuit court judgeships. In comparison with their role in recommending district court nominees, a report found, Senators were said to "have less influence over the President's selection of nominees to the 12 circuit courts"—with Senators free to "suggest [circuit] candidates to the White House," but with the President "traditionally not bound by such suggestions." At the end of the Clinton presidency, an outgoing Department of Justice official noted that, while Senators usually "pretty much decided" who was nominated for district court judgeships, the appellate court selections were "primarily controlled, decided by the White House and the Justice Department, mostly the White House." Subsequently, in the presidencies of George W. Bush and Barack Obama, the role of Senators in recommending circuit court nominees continued, as a general rule, to be less significant than their role in recommending district court nominees; the names of President Bush's circuit nominees tended "to be generated more by the Administration" than by Senators, with instances of Senators having President Bush select their candidates for circuit judgeships being exceptions to the rule. Similarly, President Obama, an Administration source said early in the Obama presidency, "retains the prerogative" to select circuit court nominees on his own, independently of Senators' recommendations. By early April 2010, according to another Administration source, of 18 persons nominated by that point to circuit judgeships, President Obama had selected 12 who were not candidates recommended by home state Senators. Eleven of the 13 U.S. circuit courts of appeals, it will be recalled, are geographically based courts encompassing three or more states. In each of these circuit courts, many of the seats on the bench have traditionally been linked to a particular state. "And historically, overwhelmingly," one scholar has observed, "the majority of replacement appointments for appeals court vacancies have, indeed, gone to judges from the state in which the vacancy arose." Hence, each time one of these judgeships is vacated, Senators of the state involved usually can be expected to cite the tradition of the "state seat" and seek, through their own candidate recommendations, to preserve the judgeship for a nominee from their state. For their part, Presidents in recent decades usually, but not always, have been inclined to make a circuit court appointment in keeping with the "state seat" tradition, by selecting a nominee from the same state as the vacating judge. While Presidents usually observe the traditions of state seats on the circuit courts, in most cases they are not required to do so. A President will be required to select a resident from a particular state for a circuit court vacancy only when necessary to assure that the court is represented by at least one appointee from that state. In all other circumstances, a President is free to appoint a resident from any state within the circuit to a judgeship, in spite of any historical association a particular state might have with the judgeship. This latitude of the President, to select a circuit court nominee from candidates in more than one state, prevents Senators from being able to assert an absolute claim for their state over any circuit judgeship (unless the judgeship's vacancy would leave the Senators' state without representation on the circuit). When a President selects a different state to be represented by a circuit judgeship, he in effect gives the senatorial prerogatives associated with the judgeship to a different pair of Senators. While Senators usually are not the dominant or decisive players in the process of selecting circuit court nominees, they, nonetheless, do enjoy certain prerogatives in the process. Once a judgeship in a circuit becomes vacant, Senators in states falling within the circuit are free to suggest names to the President's Administration regarding possible nominees. If the Administration has indicated which state it wants the judgeship to represent—whether in keeping with a traditional state seat or in a break with that tradition—the Senators of that state, if they are of the President's party, customarily are among those who recommend candidates for the judgeship. Senators of the President's party, one authority has written, "expect judgeships on the federal courts of appeals going to persons from their states to be 'cleared' by them." If the home state Senators are not of the President's party, they nonetheless have expectations—based on the Senate Judiciary Committee's long-standing blue slip policy—that they, too, will be consulted by the Administration for their views about the prospective nominee. Perhaps the most forceful input Senators can provide to a President's Administration regarding potential circuit court nominees is strong disapproval of a particular candidate from their state. If the candidate is nominated in spite of their objections, the Senators, whether of the President's party or not, will have important Senate traditions in their favor if they decide to oppose the nominee in the Senate. If they are of the President's party, the Senators know (and the Administration will know as well) that they have the tradition of senatorial courtesy to call upon. As one scholar has noted, Senators can invoke senatorial courtesy effectively against a circuit court nominations, provided they are of the President's party and the nominee is a resident of their state. Hence, input from such Senators in forceful opposition to the candidate amounts to a "negative recommendation" that the Administration would likely take very seriously, to avoid Senate rejection of the candidate based on senatorial courtesy. Senators who are not of the President's party, by contrast, ordinarily would not be expected to invoke senatorial courtesy to oppose a circuit court nominee from their state. They, however, can take advantage of the Senate Judiciary Committee's blue slip procedure to bolster their opposition. In the event a candidate objectionable to them is nominated, the Senators, as discussed above, may register their disapproval at the committee stage by declining to return a blue slip or returning a negative blue slip to the Judiciary Committee. Such action by a home state Senator, experience has shown, can jeopardize or doom a nomination, depending on the blue slip policy of the committee's chair. During some chairmanships in recent decades, the policy of the Judiciary Committee has been to allow, in some instances, committee consideration of a judicial nomination receiving a negative blue slip, or no blue slip, from one or both of the nominee's home state Senators. When such a policy is in effect, a Senator's negative blue slip, or failure to return a positive blue slip, does not foreclose the possibility of the committee reporting the nomination to the Senate. It, however, at the very least, draws the committee's attention to the concerns of the home state Senator and to the question of what degree of courtesy the members of the committee owe that Senator's concerns. A nomination is much more in jeopardy when the Judiciary Committee policy in effect is not to consider any nomination for which a home state Senator has not returned a positive blue slip. When such is the committee's policy, a home state Senator's opposition to a judicial nomination, through use of the blue slip, eliminates any chance of its being reported out of committee (in effect killing the nomination), unless the Senator can be persuaded to drop his or her opposition. Accordingly, when both of a state's Senators are of the opposition party and they object to a circuit court candidate from their state, their opposition might persuade the President not to nominate the candidate. In turn, the Senators also might succeed in influencing the President to nominate another individual from their state who is more acceptable to them. However, a President, if dissuaded from nominating the candidate objected to by the Senators, may then consider nominating an individual from another state in the circuit. In the event the President chooses this option, the Administration will no longer have to engage in consultation with the same Senators regarding the vacant judgeship, because they would no longer be the nomination's home state Senators. The home state Senators, with whom the Administration would be expected to consult, would now be the Senators of the state of the new circuit court candidate. For the President, however, a consideration against nominating someone from a state other than that of the vacating judge will be the likelihood of controversy arising over the change in "state representation." It should be emphasized that in recent episodes in the Senate, involving a circuit court nominee whose state of residence was different from that of the vacating judge (or, in one instance, different from that of the vacating judge at the time that judge was nominated), the Senators representing the state of the vacating judge publicly objected on state representation grounds, and the nominations failed to be confirmed. For a home state Senator, the process of selecting a lower court judicial candidate typically begins when the Senator's office learns that a judgeship is, or soon will become, vacant. A judicial vacancy is created when a judicial officeholder vacates the office (for example, by retirement, resignation, elevation to a higher court, or death) or when legislation is enacted creating a new judgeship. Depending on the circumstances, a current or future judicial vacancy will be brought to the attention of a home state Senator by the outgoing judge, by the Administration, or on the initiative of the Senator's office. The typical practice of circuit and district judges is to give notice of their planned retirements months in advance. Sometimes Senators learn of an upcoming judicial vacancy when a circuit or district judge from their state, as a courtesy, alerts the Senators beforehand of the judge's intention to retire. White House or Department of Justice officials responsible for advising the President on judicial appointments also can be expected to notify a Senator's office of a judicial vacancy in the Senator's state—particularly if the Senator is of the President's party—and to invite the Senator to make recommendations of candidates to fill the judgeship. In this initial contact, or soon thereafter, the Administration might also inform the Senator of its preferences concerning candidates and the selection process: These preferences, for example, might include the number of recommendations the Senator is expected to submit, the qualification standards that the Senator's candidates must meet, and the time frame in which the Senator is expected to submit recommendations to the Administration. Also, in this preliminary outreach to the Senator, the Administration might discuss paperwork requirements, such as the background questionnaires that eventually will have to be filled out by any candidate that the Senator selects. A Senator, however, does not have to wait to hear from outgoing judges or the Administration to be informed of current or upcoming judicial vacancies. On its own initiative, a Senator's office can visit the federal judiciary's website to identify district and circuit court judgeships which currently are vacant or are scheduled to be vacated in the future. Within the judiciary's website are hypertext links to several vacancy lists, including one of current court vacancies, and another of future court vacancies, both arranged by judicial circuit. In both lists, a Senator or the Senator's staff will readily find, under the heading of the judicial circuit in which the Senator's state is located, any circuit judgeships, as well as any district judgeships within the Senator's state, which are currently vacant or are scheduled to be vacated at a specified future date. Of course, a Senator is free, if he or she chooses, to initiate a judicial candidate selection process, or to compile a list of prospective judicial candidates, before learning that a judgeship is vacant or scheduled to become vacant. Some Senators, particularly those representing a state having many lower federal court judgeships—where vacancies might be expected to occur periodically—might find it advantageous to be ready at any time, with names of judicial candidates to recommend. A key variable affecting the role of a Senator in selecting candidates for federal judgeships will be the state's other Senator. As discussed above, the extent to which the two Senators will share the judicial selection role depends, to a great extent, on their respective prerogatives and interests in this area. One Senator might have more prerogatives to select judicial candidates than the other, particularly if he or she is of the President's party and the other is not. Further, if one Senator has far more experience or expertise in selecting judicial candidates, the other Senator might be inclined to defer to the more experienced colleague in recommending persons to federal judgeships. In addition, one Senator might be very interested in the judicial selection process, while the other might, because of other priorities in the Senate, have less interest in this area. If the prerogatives and interests of a state's Senators in selecting judicial candidates are roughly equal (e.g., they are both of the President's party, have about the same amount of Senate seniority, and are both interested in recommending judicial candidates to the President), sharing, in some way, the candidate selection role seems almost inevitable. Within this approach, the other Senator, if he or she wished, could be afforded the opportunity to clear or review any candidate selections, prior to their being recommended to the Administration, as well as to join the selecting Senator in formally recommending candidates. This option might be suitable not only in various situations where only one home state Senator is of the President's party, but also where both Senators are of the President's party yet only one wishes to be actively involved in the judicial selection process. This option could be taken by alternating the selection role, with the Senators taking turns selecting a candidate each time a lower court vacancy arises in their state. A variation on this approach would be for one Senator to select candidates for a majority of the judgeship vacancies that occur and for the other Senator to select candidates for a minority—for example, for every third or fourth judicial vacancy. (This arrangement, as noted earlier, might be suitable in situations where a Senator of the President's party is willing to share the candidate recommending role with a home state Senator of the other party; it also, in some instances, might be a suitable arrangement for sharing the candidate recommending function with a junior Senator of the same party.) Also, Senators in states having more than one federal judicial district could apportion between themselves the selection of judicial candidates according to judicial district—for example, with candidates in one district selected by one Senator and candidates in the second district selected by the other Senator. This arrangement could consist of active involvement of both Senators' offices in each phase, or in most phases, of the candidate selection process, for example, announcing vacancies and inviting candidates to apply, reviewing candidate applications, interviewing applicants, and selecting one or more candidates to recommend to the Administration. Alternately, if the Senators were too busy to involve themselves with each phase of the candidate selection process, and did not wish to assign their personal office staff to selection process tasks, they could delegate much of the selection role to an outside screening committee, panel, or commission. In such a delegated arrangement, the Senators might be most involved in the earliest and latest phases of the selection process—in the beginning, when they would share in appointing members to the screening panel, and at the end of the process, when they both would weigh the panel's candidate recommendations. Senators might use a number of criteria to determine the fitness of persons from their state who seek to be recommended for U.S. district or U.S. circuit court judgeships. Ordinarily, two sets of criteria can be expected to be most important in governing the Senators' choices—first, the standards explicitly set by the Administration for judicial candidates, and second, the criteria that the Senators themselves are inclined to use when deciding whether prospective candidates merit recommendation to the President. In recent decades, various Presidents have issued guidelines or made public statements regarding the qualification standards that their judicial nominees must meet. Virtually every President has emphasized the importance of a nominee meeting high professional standards and having the ability to be impartial as a judge. At the same time, each President has underscored that judicial nominees must conform with the basic values or ideals that the President believes are inherent in the Constitution, as well as with the President's views of what a judge's fundamental role and priorities should be in our nation's constitutional system. Such perspectives on the Constitution have tended to vary somewhat from one President to the next—with some Presidents, for example, emphasizing the limited role of a judge in our constitutional system (i.e., whose role is to "interpret" rather than to "make" the law) and others emphasizing the role of judges in safeguarding constitutional and legal protections of citizens' rights. Further, some Presidents also have set various representational standards or goals for Senators to meet when selecting judicial candidates, endorsing, for instance, the goal of increasing the representation of women and persons of minority ethnicity in the lower federal courts. Elaboration of what qualities an Administration looks for in judicial candidates also can come from White House or Department of Justice officials who are involved in the judicial selection process. A Senator seeking to select judicial candidates acceptable to the President will necessarily want to take into account any qualification requirements expressed by the President or other key Administration officials. Senators also will have their own considerations or criteria to guide them in selecting judicial candidates. In nearly all cases, a fundamental starting requirement for a Senator engaged in the search for judicial candidates presumably will be that any person selected have the professional qualifications, integrity, and judicial temperament needed to perform capably as a federal judge. Forming a backdrop to each Senator's search will be "the custom to appoint lawyers who have distinguished themselves professionally—or at least not to appoint those obviously without merit." Accordingly, in many cases, a judicial candidate will, as part of the Senator's selection process, be evaluated or rated by a local or state bar association or some other kind of informal or formal panel of lawyers called upon specifically to evaluate the candidate's professional qualifications. A Senator should be mindful that, once he or she has recommended a judicial candidate to the President, the candidate's qualifications will be closely investigated by Administration personnel involved in advising the President on whether the candidate should be nominated. The nominee's qualifications also will be exhaustively examined by the American Bar Association's Standing Committee on the Federal Judiciary, either in the selection process prior to nomination or immediately after the nomination is made. Finally, the nomination will be scrutinized yet again, by staff of the Senate Judiciary Committee, upon Senate receipt of the nomination from the President. Also, a Senator likely will be guided by at least some political party considerations in the judicial candidate search. Traditionally, the overwhelming majority of all federal judicial nominees come from the same party as the nominating President, with more than half of all federal judges having been "'politically active' before their appointments." The tradition of selecting candidates having the same party affiliation as the President is linked to political patronage concerns of home state Senators of the President's party. In this context, a home state Senator in some instances might regard a judgeship recommendation, at least in part, as "a reward for major service" to the party, the President, or the Senator. A scholarly study of the judicial appointment process cites two reasons why most nominees for judicial office "must have some record of political activity....": First, to some degree judgeships are still considered part of the political patronage system; those who have served the party are more likely to be rewarded with a federal post than those who have not paid their dues. Second, even if a judgeship is not given as a direct political payoff, some political activity on the part of a would-be judge is often necessary, because otherwise the candidate would simply not be visible to the president or senators(s) or local party leaders who send forth the names of candidates. If the judicial power brokers have never heard of a particular lawyer because that attorney has no political profile, his or her name will not come to mind when a vacancy occurs on the bench. A Senator also may evaluate the suitability of a judicial candidate according to whether certain groups or constituencies are adequately represented on the district or circuit court in question. Among the representational considerations a Senator might take into account are a candidate's ethnicity, religion, gender, and place of residence. For instance, at the time a particular judicial vacancy occurs, a Senator might be concerned with increasing the representation of a certain ethnic group on that court, to make its membership more representative of the population of the Senator's state, or of that part of the state in which the judicial district is situated. Another concern of the Senator, for example, might be to assure that membership on the district court or courts in the Senator's state represent all of the state's geographic regions. Senators, as well, may sometimes use philosophical or ideological criteria to evaluate judicial candidates. In applying such criteria, a Senator might be concerned with what values—legal, constitutional, political, social, economic, and philosophical—would underlie a candidate's reasoning and decision making as a judge, and whether, in light of these values, the candidate would approach cases with impartiality or with prejudgment. A Senator also might be concerned with gauging how the candidate ultimately might decide certain kinds of legal or constitutional issues (especially any issues about which the Senator personally feels strongly), or in what general ideological direction, if any, the candidate might move a court if joined with judges of similar views. Applying such criteria, a Senator might find a judicial candidate acceptable if his or her orientation appeared sufficiently compatible with the Senator's. The exact philosophical or ideological criteria applied would vary among Senators, reflecting their individual views regarding the courts, the Constitution, and public policy. Senators have great discretion as to the procedures they will follow in identifying and evaluating candidates for appointment to federal judgeships. These may range over a wide spectrum of options—from procedures that are extremely informal, unstructured, and totally dependent on a Senator's individual judgment, to those formalized, structured, and reliant on judgments of others beside the Senator. A Senator, for instance, may view his or her role in selecting a judicial candidate as essentially making a personal choice, with any input from others being informal in nature and not in any way limiting the Senator's involvement in the search for candidates. By contrast, at the other end of the spectrum, a Senator may use a formally constituted advisory body of individuals, such as a nominating commission, not only to identify and evaluate judicial candidates, but also to make recommendations that would be binding on the Senator or that the Senator ordinarily would be expected to follow. A Senator, as well, may take a procedural approach that falls somewhere between the two just described or that has elements of each. For instance, a Senator may use the services of a formal committee of expert advisers to identify and evaluate judicial candidates, but with the understanding that the committee's recommendations are advisory only, and not in any way binding on the Senator. In a November 12, 2003, floor speech, a Senator illustrated, from his own experience, the discretion and flexibility Senators have to tailor their own personal approach to judicial candidate selection. In the speech, made during an extended Senate debate on judicial nominations, the Senator stated that, over the course of his Senate career, he saw himself as bearing the following responsibility—that if "you are going to make [judicial] recommendations to the President of the United States, do so with care." He described two somewhat different approaches that he had taken during his tenure to identify candidates for lower court judgeships in his state. In the first 25 years of his Senate career, he noted, I appointed a nominating committee ... made up principally of very distinguished attorneys and judicial figures for whom I had respect and from all over my state. I knew these people commanded respect, and they were very helpful in identifying, each time a judicial vacancy occurred, several nominees. Without fail, I presented all of these nominees to the president, and his staff sifted through them and in each case came up with one of the nominees, frequently the one recommended first by the panel. In 2002, however, upon learning that two U.S. district court judges in his state would be retiring, the Senator took a different approach to identifying judicial candidates. On this occasion, he said, he wrote letters to the press throughout his state. In the letters, he outlined all the of the qualifications he saw needed for a federal judge and invited "every well-qualified person to apply." Over the course of four months, "15 serious candidates emerged." After reading all of their applications, he interviewed five of the candidates—with a principal interest in their professional skills, as well as in their "characterization of how they would fulfill their responsibilities." From the five interviewed candidates, the Senator submitted three names to the White House, and two of those persons were nominated by the President (and subsequently confirmed by the Senate). As mentioned above, another option for Senators is to delegate all or some of their power to evaluate and recommend candidates for federal judgeships to judicial nominating commissions (sometimes also referred to as "merit commissions"). Such commissions are ordinarily created by Senators for the specifically stated purpose of identifying and recommending highly qualified persons for federal judicial appointment. While the structure and operations of nominating commissions vary, most have the following features in common: They have been formally, and publicly, constituted by one or both of their state's Senators (or by predecessor Senators of their state). They have a specific number of members, who have been publicly identified. Each commission has a clearly defined mission. Each publishes notices of judicial vacancies and invites applicants. The applicants fill out a standard application form or questionnaire and are evaluated according to procedures that are the same for each applicant. Applications must be submitted, and the commission's evaluation of applications completed, by specified deadlines. The commission recommends not one but several candidates for a judicial position (forwarding the names either to the home state Senators or directly to the President). Typically, commission memberships include prominent attorneys in the state or local bar, and sometimes state or county judges, as well as leaders of community groups, and they often, if not always, represent both political parties. The advent of widespread use of nominating commissions to identify candidates for federal judgeships came with the presidency of Jimmy Carter, who, at the start of his Administration in 1977, urged every Democratic senator to establish a commission for the selection of candidates for U.S. district judge positions. By 1980, the last full year of the Carter presidency, senatorial commissions were operating in 31 states. Although President Reagan in 1981 disbanded the commission created by President Carter to identify circuit court candidates, his Attorney General urged Republican Senators to use commissions (as Democratic Senators had done during the previous four years) to screen candidates for district court judgeships. In the years that followed, however, senatorial use of nominating commissions decreased substantially. In November 2007, a Brookings Institution study reported that at that time 16 Senators in 8 states were using commissions. The study found that most of these commissions had bipartisan memberships, a circumstance attributed to political necessity: Bipartisan commission membership is essential in this period of polarized politics, with both majority and minority senators ready and able to contest nominations. Realizing this, the Democratic senators who use commissions today appoint some Republican members, named either by themselves or by state Republican leaders, similar to what Republican senators did during the Carter administration. Since the Brookings study, an increased number of Senators reportedly have been using commissions or similar entities to aid them in screening and evaluating candidates for federal judgeships. In October 2012, the American Judicature Society, on its website, identified 19 states in which 34 Senators were listed as using commissions or formal panels or committees to review judicial candidates. In addition, in three states where neither U.S. Senator was of the President's party, panels used to identify, screen, and recommend judicial candidates to the President had reportedly been established by House Members of the President's party. (The entities were established either by the senior House Member of the state's congressional delegation or by the entire House party delegation.) The increased use by Senators of judicial nominating commissions was underscored in a 2010 report entitled Options for Federal Judicial Screening Committees . The report, issued by two nonpartisan organizations, stated that its purpose was to describe how judicial "screening committees" (a phrase it said it preferred over "judicial nominating commissions") have been constructed and how they typically have worked. The report, at the outset, identified reasons why Senators might choose to use such committees. These, it said, included a hope that an individual who enjoys the endorsement of a committee may move to nomination and confirmation more quickly. … Other advantages of a committee process may include the ability to screen applicants and catch problems before any ABA or White House involvement; providing a voice to varied constituencies, including non-lawyers and members of both political parties; and inviting applications from individuals who might not otherwise come to the senators' attention. A frequently stated senatorial objective in using nominating commissions is to make the judicial selection process less partisan. A Senator in 2011, for example, declared that in "recent years, judicial selections at the national level have too often become overly politicized." For that reason, he said, he was pleased that he and the state's other Senator (the former a Republican, the latter a Democrat) had reached a bipartisan agreement to establish three "judicial nomination advisory panels" in their state, which would "go a long way to make sure excellent candidates are nominated and confirmed." In the same vein, another Senator, also in 2011, stated that he and the state's other Senator, of opposite party affiliations, "have tried to take the politics out of the selection of judges by letting the interviewing process, the selection process, be done by a panel of prominent citizens called a judicial nominating commission." Senators who use nominating commissions to identify and evaluate judicial candidates often, if not always, require their commissions to follow clearly defined rules of procedure. This was the case, for instance, in Wisconsin, where, from 1995 to 2010, the state's two Democratic Senators used a commission to advise them in the selection of candidates to fill U.S. district court vacancies in that state (as well as candidates for vacancies for U.S. attorneys in Wisconsin and U.S. circuit court judgeships which were "appropriately considered Wisconsin seats"). The charter for the commission laid out its rules of procedure in detail. The charter provided that the commission would consist of 11 members in the case of district court and U.S. attorney vacancies, or 12 members in the case of a circuit court vacancy. The number of members that each Senator could appoint to the commission varied, depending on whether the Senator was of the same political party as the President. When a court vacancy occurred, the charter provided specific timetables for seeking candidates and accepting applications, as well as for evaluating the candidates' qualifications. Further, the charter set organizational and voting procedures for the commission's members, including a quorum requirement and the number of affirmative votes required to recommend a candidate for nomination. Finally, it stated that after the commission had designated from four to six individuals as best qualified to fill a vacancy, the commission would immediately notify the state's Senators as to the individuals' names. In the above example, use of a nominating commission can be seen as largely removing Senators from the initial search for judicial candidates as well as from the evaluation of all of the candidates who initially submit applications. The arrangement, however, retains for the Senators the opportunity to evaluate the smaller number of applicants who ultimately are recommended by the commission. Further, the Senators are not required by the language of the commission's charter to forward to the President every commission recommendation that they receive. Absent a commitment to be bound by a merit panel's recommendations, Senators retain the discretion to further inquire, on their own, into the qualifications of persons recommended by the commission and to pass along to the President only those recommendations that they find acceptable. In every presidential Administration in recent decades, there has been an office assigned principal responsibility for consulting with Senators regarding judicial appointments in their state. When a federal judgeship in a Senator's state becomes vacant, or there is the imminent prospect of a vacancy occurring, a frequent scenario will find the Senator or top aides to the Senator in contact with, or contacted by, this office. In some recent Administrations, officials in the Department of Justice consulted with Senators about judicial appointments. Thus far during the presidency of Barack Obama, however, the White House counsel's office has played the primary liaison role with Senators regarding judicial appointments (as it did during the presidency of George W. Bush). As the primary consultative link with Senators, it is this office that ordinarily receives Senators' recommendations of specific individuals for judicial appointment. In recent presidential Administrations, the task of evaluating the background and qualifications of judicial candidates has been apportioned between key staff persons in the White House counsel's office and the Department of Justice. These staff, aided by the research of subordinate White House or DOJ personnel, as well as by investigations of the Federal Bureau of Investigation (FBI) into the backgrounds of judicial candidates, decide which candidates to recommend to the President for nomination. In recent presidencies, the selection process has consisted of a number of basic preliminary steps, including, for any given Administration, all or nearly all of the following: At the outset, the names of judicial nominee candidates are identified (as recommended by Senators or others outside the Administration or as generated from within the Administration). The candidates fill out various forms and questionnaires, including a personal background information form for the FBI, a financial disclosure form, a White House questionnaire, and a questionnaire from the Senate Judiciary Committee. (Sometimes, the Administration waits until it has narrowed down the nominee search to one candidate, requiring only that candidate to fill out the aforementioned forms.) An initial evaluation (or "preliminary vetting") of the candidates is conducted, which includes interviewing some or all of the candidates (either by phone or in person) and reviewing publicly available information about them (such as their published writings and news media accounts of their past activities in public life). The candidates also might, or might not, be asked by the Administration to fill out a questionnaire of an American Bar Association committee, which evaluates and rates the professional qualifications of nominees for federal judgeships. The search is narrowed down to one candidate, who is recommended to the President for more intensive evaluation; The President clears the candidate for this more intensive evaluation, known as "detailed vetting." The detailed vetting phase of the selection process, for any given Administration in recent decades, has included all, or nearly all, of the following steps: Staff from the Department of Justice or the White House or both carefully review the candidate's written opinions or other legal writings (depending on whether the candidate is a judge or a practicing attorney), as well as the forms and questionnaires filled out by the candidate, and interview persons in the legal community who have had past contact with, or have knowledge about, the candidate. The FBI conducts a confidential background investigation of the candidate, which typically takes four to six weeks. The ABA Standing Committee on the Federal Judiciary, if informed by the Administration of the candidate under consideration (and upon receipt of an ABA questionnaire filled out by the candidate) also conducts an investigation of the candidate. Upon completing its investigation, it informs the Administration whether, according to its rating system, it has found the candidate to be "Qualified," "Well Qualified," or "Not Qualified." Judicial selection staff in the Administration might conduct a follow-up interview of the candidate (either in person or by telephone) to address any new questions or confirm new information arising out of the detailed vetting process. Administration staff evaluate the results of the detailed vetting effort and recommend to the President whether to nominate the candidate. In the Administration of President Barack Obama, the various steps in the selection process are overseen by the White House counsel's office. It has been tasked to take the lead, through its own preliminary research and investigatory efforts, in identifying prospective circuit court candidates, whose names are then provided to Department of Justice staff (and later the FBI) to investigate more thoroughly. For district court candidates, the counsel's office reviews the recommendations of home state Senators (or of other home state officials when neither Senator is of the President's party).Where Senators have recommended more than one candidate for a district court vacancy, the counsel's office typically, based on its own preliminary review, has selected one of the candidates to be investigated more intensively by Department of Justice staff. Also, as mentioned earlier, the responsibility for liaison with Senators regarding the lower court selection process continues to reside with the counsel's office, as it did during the Administration of President George W. Bush. Staff in this office receive input from Senators regarding judicial candidates and consult with Senators or their staff at different steps in the judicial candidate evaluation process. Initial contacts between an administration and a Senator's office regarding judicial appointments can be expected to clarify the nature of the Senator's recommending role. A principal question to be addressed in these contacts will be the degree to which the Administration, in its judicial candidate search, will rely on recommendations from the Senator. The Senator, for instance, will want to know whether the Administration will give sole or primary consideration to candidates that the Senator recommends for a particular judgeship—and, further, whether the Administration, if not comfortable with the Senator's candidates, will seek, and rely primarily on, additional recommendations from the Senator (rather than on recommendations coming from others). This role typically might be expected when the Senator is the only Senator in the state of the President's party, or if the state's other Senator is also of the President's party and the two are making joint recommendations, and if the vacancy to be filled is on a district court. Under different circumstances, however, the Administration, might intend the Senator to have a lesser role. The Administration, for example, might welcome recommendations from the Senator, while also encouraging recommendations from other sources and while conducting its own search for candidates. This role might often be the case if the Senator is of the President's party but the appointment in question would be to a circuit court. In a third type of arrangement, it might be understood that the Senator would not be regarded as a primary source for candidate recommendations; however, as a courtesy, the Administration would consider any recommendations the Senator might make, apprise the Senator of judicial candidates under serious consideration, and invite the Senator's opinions about those candidates before one were selected as a nominee. This often might be the case when the Senator is of the opposition party, regardless of the kind of judgeship in question, and sometimes might be the case when the Senator is of the President's party and the appointment in question is to a circuit court. Another question to be addressed in preliminary consultations between a Senator's office and the Administration will be the number of persons, if any, that the Senator is expected to recommend for a single judicial vacancy. In recent presidencies, the Administration practice usually has been to request that a Senator supply the names of at least three candidates for a judgeship, and this, CRS has been told, was the initial practice of the Obama Administration in identifying district court candidates (although subsequently the practice was relaxed, with one recommended name sometimes considered sufficient). This practice affords the President more options in making a final choice than would be possible with only one candidate under consideration. If multiple recommendations are requested by the Administration, a Senator might wish to establish whether this is a preference or a requirement. If a requirement, the Senator might wish to inquire into the Administration's possible willingness to initially evaluate only the Senator's first choice and, if finding that choice acceptable, to dispense with evaluating the other recommended candidates. Another topic of possible discussion would be the Senator's relationship with the other state's Senator and the extent to which the two Senators would be coordinating or sharing the role as recommender. If one Senator would be taking the lead, to what extent would that Senator, or Administration officials, assume the responsibility for consulting with the other Senator regarding the search for, and evaluation of, judicial candidates? If an advisory panel were to be used, would it serve that Senator alone, or would the panel's recommendations, before being forwarded to the Administration, be cleared by the other Senator as well? If neither Senator were of the President's party, would designated officials in the President's party having a judicial recommendation role in that state be making recommendations to the Administration in close consultation with the Senators or apart from them? If the vacancy to be filled is that of a district court judgeship, the long-standing practice of presidential administrations ordinarily has been to give the primary recommending function to Senators of the President's party (or to House Members or state officials of the President's party when there are no Senators from the states of the vacancies). For circuit court nominations, by contrast, the usual practice of the Clinton and George W. Bush presidencies, in keeping with long-standing custom, was to center consideration on candidates whom the Administration selected on its own, rather than on persons recommended by home state Senators. Similarly, President Obama, in the words of an Administration source, "retains the prerogative" to select circuit court nominees on his own, although, it also has been emphasized, "home-state Senators are consulted in the circuit court candidate selection process." An administration, however, sometimes might be amenable to departing from customary practices. It might, for example, be amenable to allowing home state Senators not of the President's party, in some circumstances, a greater than usual role in recommending district court candidates, or to allowing home state Senators of either party a greater than usual role in identifying circuit court candidates for the Administration to consider. Further, even if afforded only a marginal role in recommending candidates at the outset, a home state Senator, regardless of party affiliation, ordinarily can expect to be consulted by the Administration subsequently during the selection process. The typical purpose of such consultation will be to apprise the Senator of candidates that the Administration is seriously considering and to afford the Senator an opportunity to express his or her views concerning the candidates. Accordingly, a home state Senator presumably will want to use his or her initial contact with the Administration, at the very least, to clarify the Administration's general policy regarding the recommending role of Senators in the selection of lower court nominees. In some cases, the Senator, during this initial or subsequent contact, might also wish to explore whether he or she can play a larger recommending role than ordinarily contemplated by Administration policy. Further, the Senator might want to clarify, when a home state judicial vacancy arises, how often and for what purpose the Administration would intend to consult with the Senator until a nominee were actually selected. Consultation between a Senator and the Administration over the selection of a judicial nominee can take different forms, depending on the stage reached in the selection process. Early in the process, as already noted, consultation may consist primarily of the Senator providing input to the Administration. The input in many cases will be in the nature of recommending a particular candidate or list of candidates for a judgeship. If providing more than one name, the Senator might or might not rank the candidates in order of the Senator's preferences. The input in some cases might also take a negative form, with the Senator expressing opposition to particular candidates or kinds of candidates. (A Senator might provide this kind of input if he or she understood that the Administration would be relying on its own internally generated list of candidates or on recommendations from sources other than the Senator.) In some instances, a Senator may convey recommendations directly to the President—for example, in an in-person meeting, by telephone, or by letter—without White House or senatorial staff functioning as intermediaries. A Senator, or an aide on the Senator's behalf, also may submit recommendations to the President indirectly, by transmitting them, for example, in written or other form to the Administration office charged with serving as liaison to Senators on judicial appointment questions. As the selection process moves forward, the onus for engaging in further consultation shifts to the Administration, to apprise the home state Senator where things stand. The point at which this first occurs may vary somewhat, depending on the particular judicial position to be filled or on the understandings reached earlier between the Administration and the Senator. Often, however, renewed consultation can be said to come when the Administration is close to concluding, or has concluded, its preliminary evaluation of a candidate or candidates for a judgeships. Based in part on its interviews of the various candidates (if there is more than one candidate) and on a preliminary examination of the available record of the candidates, the Administration at some point will be in a position to apprise the home state Senator whether one candidate has emerged as the clear favorite. Various policy statements made in recent decades by chairs of the Senate Judiciary Committee have expressed the view that home state Senators should be informed when an administration has narrowed its list of candidates for a judgeship to one candidate. The expectation of the policy statements has been that the home state Senators will be so apprised before the President approves that candidate for a more intensive "formal clearance"—before the candidate undergoes a complete FBI background investigation and other aspects of the "detailed vetting" process discussed earlier. If the Administration is considering the selection of someone other than a candidate recommended by the Senator, the Administration at this point may apprise the Senator of this fact, affording the Senator an opportunity to express any opinions or concerns about the candidate, including whether the Senator might oppose the candidate if nominated. In some instances, a preliminary review of candidates recommended by a Senator might result in the Administration deciding that none would be acceptable. At that point the Senator might be called on to provide additional recommendations for the Administration to consider (or, perhaps less often, be informed that Administration staff have decided on a candidate of their own to recommend to the President). If a judicial candidate under consideration for "formal clearance" is a person recommended by the home state Senator, such clearance, when it occurs, of course, ordinarily will meet with the Senator's wholehearted approval. The subsequent "vetting" of the candidate, as already discussed, will involve a comprehensive FBI investigation of the candidate and might also include a review of the candidate's past rulings or legal writings, and the questionnaires he or she filled out, as well as an initial or follow-up interview of the candidate, and interviews of persons in the legal community who have had past contact with, or knowledge about, the candidate. During this investigation, Administration consultation with the home state Senator might entail little more than providing routine status reports on the progress of the clearance process, particularly if nothing problematic about the candidate is found. By contrast, if a candidate under consideration for formal clearance has not been recommended by a home state Senator, subsequent Administration consultation with the Senator might, or might not, take place at several points. If it acts in keeping with the kind of consultative process called for in past policy statements of the Judiciary Committee, the Administration might notify the Senator that it is preparing to begin a formal clearance process for a particular candidate, affording the Senator an opportunity to provide feedback, before it actually initiates the clearance process. Subsequently, if the Senator, in providing feedback, objects to the candidate, the Administration, might in turn, as a courtesy (and in accord with past Judiciary Committee policy statements), notify the Senator that the formal clearance process is being initiated despite the Senator's objections. If, at the conclusion of the clearance process, the President decides to nominate the candidate, consultation again can be expected, particularly if the home state Senators are of the President's party. Specifically, the Administration, if it acts in keeping with past Judiciary Committee statements, will notify home state Senators (whether or not they recommended the person involved) before the nomination is actually made. The Administration, however, is not obliged, by any rule or long-standing custom, to engage in all of the consultative steps just discussed. In the absence of any requirements to engage in pre-nomination consultation, a President's Administration might not always notify home state Senators of judicial candidates it is considering. Sometimes, as noted, a President might select a district or circuit court nominee against the advice of one or both home state Senators. On other occasions, the Administration might provide a home state Senator little or no opportunity to provide any feedback before a candidate is selected by the President as a judicial nominee. In either situation, the Senator will then face the question of whether to oppose the nomination, either first in the Senate Judiciary Committee or later on the Senate floor. From the standpoint of a Senator, opposition to a lower court nomination in his or her state may serve a number of purposes, including one or more of the following: Preventing confirmation. The Senator's opposition, if successful, will prevent the nomination from receiving Senate confirmation. Opposition by the Senator will succeed if it causes the nomination to fail to be reported out of committee or to receive Senate consideration or a Senate vote to confirm. Averting a similar kind of nomination. Successful opposition to the President's nominee (preventing Senate confirmation) might dissuade the President from making a new nomination to the judgeship of someone else as objectionable to the Senator as the original nominee. Causing the Administration to take consultation more seriously. A Senator's opposition to a judicial nominee, based all or in part on an alleged lack of Administration consultation with the Senator, might persuade the Administration to consult more closely with the Senator when selecting future home state judicial nominees. Preserving the appointment for a later President or Congress. Successful opposition to the judicial nomination might, in some situations, delay the filling of the judgeship in question until a new President is in office or until a new Congress is convened (where, in either case, the Senator might have more influence over the selection of home state judicial appointments). Drawing attention to policy differences with the Administration. The inability of the Administration and the Senator to agree on a judicial nominee might suggest that they have different policy objectives for judicial appointments, or use different criteria in evaluating judicial candidates. In such situations, a Senator might wish to publicize, rather than conceal, these differences, to promote his or her own policy preferences and call those of the Administration into question. If the Senator decides to oppose the nomination, the first available recourse will be to exercise the prerogatives afforded to a home state Senator by the blue slip policy of the Senate Judiciary Committee. As already discussed, the blue slip policy determines what effect the disapproval of a home state Senator (indicated by the return to the committee of a negative blue slip or by the non-return of the blue slip) will have on the prospects for a nomination to be considered by the committee. The blue slip policy is set by the chair of the Judiciary Committee, usually at the outset of a Congress. Over the years, particularly when the majority party in the Senate has changed (resulting in a new chair of the Judiciary Committee), or when an outgoing President has been succeeded by a President of the opposite party, the committee's blue slip policy also has changed—sometimes barely noticeably, but other times in more controversial ways. The most important difference between various blue slip policies applied over the years concerns whether, under a particular policy, a home state Senator may block committee consideration of a nomination simply by returning a negative blue slip (one expressing opposition to the nomination) or declining to return the blue slip. The blue slip policy of some committee chairs, including the ones in effect during the 109 th , 110 th , 111 th , and 112 th Congresses, has been to afford that basic veto power to the home state Senator. When the committee's policy is to consider a nomination only if both home state Senators have returned positive blue slips, a refusal of one of the Senators to do so will block the nomination. The Senator, in such a situation, might initially have been unsuccessful in trying to prevent the President from nominating a particular person. Nevertheless, under the committee policy in effect in the four most recent Congresses, the Senator ultimately can succeed in preventing Senate confirmation of the nominee, by using the Judiciary Committee's blue slip procedure to stop the nomination in committee. The policy of some other chairs of the committee, by contrast, has been not to allow a negative blue slip, or non-return of a blue slip, by itself automatically to block consideration of the nomination in committee. For instance, the policy sometimes has been applied to allow consideration of a judicial nomination when one or even (in very rare instances) both home state Senators have declined to return positive blue slips, or to allow a negative or unreturned blue slip to block committee consideration only if the Administration, in the view of the committee chair, did not consult in good faith with a home state Senator prior to selecting the nominee. When the Judiciary Committee's blue slip policy is not to allow a single home state Senator to block committee consideration of a lower court nominee, the next recourse available to the Senator is to convey to the committee his or her objections about the nominee, if and when it considers the nomination. The Senator might have objections based on concerns about the fitness of the nominee to be a federal judge, or about the nature or lack of consultation that the Administration engaged in with the Senator prior to the selection of the nominee. The Senator might wish to convey these concerns as an argument to the committee against voting on the nominee or, in the event of a vote, that the vote be to reject. Even if the Senator anticipates that the committee will vote to report the nomination, the Senator might wish to put his or her concerns about the nominee on record with the committee, to set the stage for making the same case again, before the full Senate. Another tactical option for the Senator will be to try to persuade one or more members of the Judiciary Committee to engage in dilatory tactics in committee—in an effort to dissuade the committee from voting on the nomination. Rule IV of the Judiciary Committee's rules of procedure provides that debate on a matter before the committee shall be terminated if a non-debatable motion is made to bring the matter "to a vote without further debate," and it "passes with ten votes in the affirmative, one of which must be cast by the minority." Depending on how the chair of the Judiciary Committee interprets Rule IV, a Senator opposing a nomination might, or might not, succeed in preventing a committee vote on it (and thus block it in committee). The Senator will succeed in a filibuster against the nominee, for instance, if none of the minority members of the Judiciary Committee votes in favor of a motion to terminate debate and if the chair of the committee interprets Rule IV as "providing the minority with a right not to have debate terminated and not to be forced to a vote without at least one member of the minority agreeing." The Senator, however, will not succeed if the chair wishes to bring the nomination to a vote and views the committee chair as having "the inherent power to bring a matter to a vote." If the Judiciary Committee votes to report the objected-to nomination, the home state Senator's opposition strategy then shifts to the Senate floor. At this point, the Senator, if so inclined, may inform his or her party leader that the Senator wants to place a "hold" on the nomination. This action would have the effect of preventing or delaying Senate action on the nomination, if the majority leader honors the request for a hold. Alternately, the Senator may request the leader to place a hold on another nomination or on an important Administration-backed bill, in order to pressure the President to withdraw the objected-to nomination. The effectiveness of the hold is grounded in the difficulty for the Senate, under its rules, of disposing of a nomination if a single Senator objects. Such an objection, voiced on behalf of the home state Senator, would indicate that a hold had been placed on the nomination and that the Senator placing the hold might be prepared to filibuster the nomination. To end delay on the nomination and allow for an eventual vote on it may require three-fifths of the entire Senate membership, or 60 of 100, to vote in the affirmative under the cloture procedure of Senate Rule XXII. As long as the Senate majority leader honors the hold placed by the home state Senator, the nomination will not receive floor consideration. (The Senator's hold will prevent confirmation if it succeeds in pressuring the President to withdraw the nomination or if it is honored by the majority leader until an adjournment of the Senate for more than 30 days, at which point, under Senate rules, the nomination may be returned to the President.) However, if the majority leader decides to schedule action on the nomination, the Senator must decide whether to filibuster it (as well as whether to enlist the support of other Senators in this effort). For their part, Senators supporting the nomination, in response to a filibuster (or in anticipation of one), may file a cloture petition (signed by 16 Members) to end debate. If three-fifths of the Senate's membership votes in favor of cloture, the longstanding Senate rule has been to allow a maximum of 30 hours of additional post-cloture debate on the nomination. After 30 hours, unless less time were used, the Senate would vote on whether to confirm. At the start of the 113 th Congress, however, the Senate approved a temporary standing order, in effect until the end of the Congress, that subjects district, but not circuit, court nominations to a maximum of two hours of post-cloture Senate consideration. The success of a Senator's strategy to defeat the nomination by filibuster will be determined by the Senate's vote on any cloture motion that might be filed. If fewer than three-fifths of the Senate's Members vote to invoke cloture, the Senator (and other Senators voting against cloture) will have succeeded in preventing a Senate vote on the nomination, at least at that time. Sometimes, a home state Senator might choose not to oppose a judicial nominee selected by the President with little apparent regard for the views expressed by the Senator during the nominee selection process. Various considerations might influence the Senator to take this position. One consideration for not opposing the nominee might be the desirability of filling the vacant judgeship in question as promptly as possible. To successfully oppose the nomination in the Judiciary Committee or the full Senate would compel the President to make a new nomination for the judgeship at a later point in time. The Senator's opposition, in other words, would prolong the time in which the judgeship was vacant. Hence, a Senator, in some situations, might consider filling the vacancy with a nominee in whom he or she found fault (or about whom the Senator had been inadequately consulted) to be preferable to prolonging the vacancy indefinitely by successfully opposing the nominee in the Senate. In some situations, another consideration for not opposing a nomination might be the nominee's qualifications for the judgeship—particularly if the nominee appeared highly qualified. This consideration, it could be argued, might be a reason for a Senator not to oppose the nominee unless the Senator thought his or her own candidate search would likely produce an even more qualified nominee. A Senator also might not wish to oppose a particular nomination if it might project to the public a picture of the Senator as "obstructionist" or unduly antagonistic in relation to the Administration. Particularly, under certain circumstances, opposing a President's judicial nomination might be seen as unduly negative. For instance, if the Senator's objections to the nominee are purely procedural in nature (in essence, that the Administration afforded the Senator little or no opportunity to provide input prior to the candidate's being nominated), the Senator might see the merits of opposing the nominee on these grounds as outweighed if the Senator finds no fault with the nominee and if the public is also likely to look favorably or sympathetically upon the nominee. Sometimes a consideration not to oppose a home state judicial nomination might be the likelihood of more judicial vacancies arising in the Senator's state in the near future. A Senator might see these future vacancies as providing a better opportunity for exerting senatorial influence over judicial appointments than is possible by opposing someone whom the President has already nominated. Further, by not opposing a particular home state nomination, the Senator might be in a position to gain goodwill with the Administration, from which the latter might well be moved to afford the Senator a more enhanced role in the selection process for future home state judicial nominees. Another consideration for not actively opposing a judicial nominee is that this option would not necessarily preclude the Senator from expressing criticisms of the current nominee or of the process used in his or her selection. While refraining from opposing the nominee, the Senator would be free to call on the Administration to "do better" with its next judicial nomination from the Senator's state. The Senator also could suggest ways of improving the consultative process between the Senator and the Administration in the search for future lower court nominees, as well as the kind of qualities that the Senator deemed important for the future nominees to possess. This approach, it could be argued, would put the Administration on notice that public criticism of, and possible opposition to, the next judicial nominee from that state could be expected, if more attention were not paid in the future to the Senator's views during the nominee selection process. Home state Senators have long played an important role in providing advice to Presidents on judicial appointments. Historically Presidents have generally been more receptive to such advice when it has come from Senators of their own party rather than of the opposition party. Nevertheless, presidential administrations have long recognized that pre-nomination consultation with opposition party home state Senators also is important, serving, at the very least, as a means to learn Senators' views about potential nominees (and whether they would be likely to return positive blue slips to the Judiciary Committee if certain candidates were nominated). In recent decades, despite periodic controversies over judicial nominations, the idea that there should be consultation on judicial appointments between an administration and home state Senators, regardless of their party, appears to have gained widespread acceptance. As discussed earlier, various chairs and other members of the Judiciary Committee, in correspondence with the White House between 1989 and 2001, declared the importance of such consultation. Specifically, these letters expressed the expectation that the Administration engage in consultation with home state Senators of both parties that is "in good faith" and "serious." Senators, the letters said, should not only provide feedback on judicial candidates under Administration consideration but also have the opportunity to make their own candidate recommendations. The letters also called for consultation to include a number of specified sequential steps, to keep Senators informed and involved throughout the Administration's judicial selection process. Recent administrations have not publicly challenged these expectations; indeed, the White House counsel to President George W. Bush, in a 2001 letter, indicated his general acceptance of them. Subsequently, on numerous occasions during the 110 th Congress, Senator Leahy, chairman of the Judiciary Committee, called on the Bush Administration to "work with" home state Senators—including Senators of the opposition party—in the judicial selection process. Such consultation, Senator Leahy maintained, would help identify judicial candidates acceptable to both the Administration and the Senators and, conversely, avoid the selection of more controversial nominees to whom the Senators would object. During the 111 th Congress, Chairman Leahy in various Senate floor statements praised President Barack Obama for consulting with home state Senators prior to selecting lower court nominees. In December 2009 floor remarks, he cited pending judicial nominations that had the support of Republican home state Senators in seven different states. "These nominations," Senator Leahy said, were "just the most recent examples of this President reaching out to home state Senators from both parties to consult before making nominations." More recently, in a March 2012 teleconference with journalists, President Obama's White House counsel stressed the importance the President attached to consulting with home state Senators. President Obama, she asserted, "has followed the historical practice of consulting with Senators of both parties and nominating highly qualified non-controversial district court nominees…. " It was, she added, "always the White House's goal to nominate a candidate for each and every district that will be supported by the home state Senators." During the presidencies of William J. Clinton, George W. Bush, and Barack Obama, Senators, usually of the opposition party, sometimes questioned the adequacy of Administration consultation with home state Senators in the lower court selection process. In various instances, Senators, maintaining they were not adequately consulted, or not consulted in good faith, concerning lower court nominations in their states, declined to return positive blue slips to the Senate Judiciary Committee, in effect blocking committee consideration of the nominations. In 1997, during the Clinton presidency, Senator Orrin G. Hatch (R-UT), then-chairman of the Judiciary Committee, drew attention to questions that he said had been raised about the Clinton Administration's "level of consultation" with home state Senators on lower court appointments: While we are on the subject of judicial nominations, I would like to respond to some of my colleagues who have come to me to express their frustration that they have not received the level of consultation that they have expected, and typically received, regarding nominees from their states. It has long been the policy of the Senate, and of the Committee, that a fair, efficient and cooperative confirmation process is best achieved when the Executive Branch engages in genuine, good faith consultation with home state senators in the process of determining whom to nominate for judicial positions. Several years later, Senator Hatch, who had been chairman of the Judiciary Committee during the last six years of the Clinton Administration, explained what had happened to some of the judges nominated by President Clinton who were not confirmed. "Seventeen of those," Senator Hatch said, "lacked home state support, which often resulted from the White House's failure to consult with home state senators. There was no way to confirm those nominations without completely ignoring the senatorial courtesy we afford to home state Senators in the nomination process." During the presidency of George W. Bush, Senators, mostly along party lines, periodically debated whether the Administration adequately consulted with home state Senators before President Bush selected his nominees. Democratic leaders in the Senate asserted that the Bush Administration frequently had not consulted with, or heeded the advice of, their party's home state Senators before the President made judicial nominations. As a result of not receiving senatorial input, or receiving but not heeding it, the President, they maintained, made unwise, controversial nominations, provoking Democratic opposition in the Senate. Senate Republicans, by contrast, defended the Bush Administration, portraying it as having regularly consulted with Senators regarding judicial nominations in their states, while faulting opposition party Senators for seeking, through the consultative process, the power to select whom the President nominates, rather than solely making recommendations or expressing opinions about candidates under presidential consideration. During two Congresses coinciding with the Bush presidency (the 108 th and the 109 th Congresses), the President's party, the Republicans, had majority control of the Senate. During the 108 th Congress, the blue slip policy of the Senate Judiciary Committee then in effect did not prevent committee consideration of, or action on, five circuit court nominations that were ultimately reported to the Senate in spite of opposition by Democratic home state Senators. In the Senate, however, in the face of significant opposition from Democratic Members, none of the five nominees received final confirmation votes (although three were subsequently confirmed, during the 109 th Congress). Also during the 108 th Congress, long-running consultations between the White House and one state's Democratic Senators failed to reach an agreement over whom from that state to nominate for circuit judgeships. The President was criticized by Senate Democrats, but defended by Senate Republicans, for not agreeing to a proposal offered by the two home state Senators as a compromise. Under their proposal, a bipartisan judicial nomination commission would be established, with the President selecting circuit court nominees from names recommended by the commission. During the 109 th Congress, with Republicans again in the Senate majority (but with the Judiciary Committee under a different chair), no instances were reported of district or circuit nominations receiving committee action in the absence of favorable blue slips returned to the committee by home state Senators. Senate Republicans and Democrats, however, clashed over other judicial nominations and over the propriety of using filibusters on the Senate floor to prevent Senate votes on those nominations. In May 2005, leaders of the Senate's Republican majority announced their intention, if Senate Democrats continued to seek to prevent confirmation votes on several circuit court nominees, to change the chamber's rules or precedents to require the vote of only a simple Senate majority to end Senate debate on judicial nominations. A Senate confrontation over judicial filibusters was averted on May 23, 2005, when an agreement was reached by a coalition of seven Democratic and seven Republican Senators. As part of the agreement, the Senators in the coalition pledged not to lend their support to filibusters against judicial nominations except under "extraordinary circumstances," and not to support any change in the Senate rules to bar filibusters against judicial nominations, as long as the "spirit and continuing commitments made in this agreement" were kept by all of the Senators in the coalition. As a result of this agreement, some, but not all, of the President's most controversial circuit court nominations, which previously had been blocked on the Senate floor, were confirmed. The agreement, in the form of a "memorandum of understanding," also called on the President to consult with Senators, regardless of their party, on prospective judicial candidates. Specifically, on this point, the memorandum stated, We believe that, under Article II, Section 2, of the United States Constitution, the word "Advice" speaks to consultation between the Senate and the President with regard to the use of the President's power to make nominations. We encourage the Executive branch of government to consult with members of the Senate, both Democratic and Republican, prior to submitting a judicial nomination for consideration. Such a return to the early practices of our government may well serve to reduce the rancor that unfortunately accompanies the advice and consent process of the Senate. Throughout most of the first Congress coinciding with his presidency (the 107 th ), President Bush's party was not the majority party in the Senate, and it was not the majority party in the 110 th Congress. In the Judiciary Committee during the 107 th Congress, five lower court nominees opposed by home state Senators were among a larger number whose nominations did not advance to the committee hearing stage. Likewise, under the blue slip policy in effect in the 110 th Congress, the Judiciary Committee did not consider or act on a judicial nomination in cases where a home state Senator declined to return a positive blue slip. Further, the chairman of the Judiciary Committee, on various occasions, criticized President Bush for failing to "work with" Senators of several specified states in making judicial nominee selections for those states and for selecting nominees who had not received support from their home state Senators in the form of positive blue slips. In another instance during the 110 th Congress, the President nominated someone to a circuit judgeship who was not on the list of five candidates recommended jointly to the judgeship by the two home state Senators, one a Republican and the other a Democrat. (The nominee, however, had been on the list of candidates recommended by the Republican Senator earlier, in the 109 th Congress.) Immediately, upon announcement of the nomination, the two Senators criticized the White House for ignoring their recommendations, with the Democratic Senator reportedly stating there was "no way" he would return a positive blue slip to the committee needed for Judiciary Committee consideration of the nomination. Eventually, the nominee, citing "press reports" that he was unlikely to receive a hearing before the Judiciary Committee, requested that President Bush withdraw his nomination. Ultimately, over the course of the 110 th Congress, lack of home state Senator support blocked at least six circuit court nominations and three district nominations from being considered by the Judiciary Committee. In each instance, the nominations lacked positive blue slips from both home state Senators, which were regarded by the committee's chairman as necessary for the nominations to move forward in committee. Most recently, early in the Obama presidency, the Senate's Republican minority in the 111 th Congress underscored the importance of being consulted by the Administration, prior to nomination, about persons under consideration for lower court appointments in their states. In a March 2, 2009, letter to President Barack Obama, signed by all 41 of its Members, the Senate's Republican Conference cited "the principle of senatorial consultation," which they said "allows individual senators to provide valuable insights into their constituents' qualifications for federal service." They then added, We hope your Administration will consult with us as it considers possible nominations to the federal courts from our states. Regretfully, if we are not consulted on, and approve of, a nominee from our states, the Republican Conference will be unable to support moving forward on that nominee. Also in their letter, the Republican Senators suggested to President Obama that, as a show of bipartisanship, he re-nominate some of President Bush's circuit court nominees who failed to be confirmed in the 110 th Congress. At that point, President Obama had yet to make any circuit or district court nominations. Two weeks later, in possible reaction to the Republican Conference letter, the Obama Administration stated an intention to seek out the views of Republican home state Senators before selecting judicial nominees. The statement, by an unnamed Administration official, came on March 17, 2009, coinciding with President Obama's first lower court nomination. The President that day selected Chief Judge David Hamilton of the U.S. District Court for the Southern District of Indiana to serve on the U.S. Court of Appeals for the Seventh Circuit. Press reports of the nomination drew attention to the fact that it was supported by Indiana's two Senators, one a Democrat and the other a Republican, and that both, in consultation with the Obama Administration beforehand, had recommended Judge Hamilton for the circuit judgeship. The official also reportedly stated that the Obama Administration was "eager to put the confirmation wars behind us—to turn the page and work with senators from both sides of the aisle to achieve at least a bipartisan process." Subsequently, during the remainder of the 111 th Congress, little, if any, public controversy arose over the adequacy of the Obama Administration's consultation with Senators concerning judicial nominations in their states. Early in the 112 th Congress, however, the adequacy of such consultation did become an issue for home state Senators in two states. In January 2011, a newly elected Senator not of the President's party faulted President Obama for failing to consult him before re-nominating two persons to federal judgeships in his state. (Subsequently, the Senator wrote, in a newspaper op-ed piece, that the Obama White House "chose not to contact me until May 10—months after sending the nominations to the Senate.") In early February 2011, another Senator, also not of the President's party, stated he was "deeply disappointed in the White House's lack of consultation" with him on a nomination to a home state district court judgeship. In both states, opposition by these Senators to the above nominations blocked their consideration in the Judiciary Committee, preventing their confirmation. All three nominations ultimately were returned to President Obama on January 3, 2012, at the end of the first session of the 112 th Congress. Eventually, in one of the states, the consultation issue was resolved, when President Obama, on February 29, 2012, after White House consultation with the state's two opposition party Senators, selected a district court nominee acceptable to both. The Judiciary Committee favorably reported this nomination on June 7, 2012, and the Senate confirmed it by a unanimous 95-0 roll call vote on December 11, 2012. In the other state, however, consultation-related issues persisted. Over the course of the 112 th Congress, a working consultative arrangement was not reached by the White House and the state's new Senator (whom the President had bypassed when making his two judicial re-nominations in January 2011). Impeding such an arrangement was a disagreement between the Senator and the state's senior Senator over the number of members each should select for a state judicial candidate screening commission. Amid these difficulties, the President in 2012 did not submit new nominations to take the place of the earlier unsuccessful ones. In recent years, the role to be played by home state Senators in the selection process for lower court judges has periodically been the subject of debate. Specific issues concerning the Senators' recommending role have included the following: Various Judiciary Committee policy statements, discussed earlier, have prescribed specific consultative steps between an administration and home state Senators as requisite elements in consultation conducted seriously and in good faith. The statements, however, did not address how seriously the Administration should consider the Senators' judicial candidate recommendations or their objections to other candidates under Administration consideration. In various controversies over particular judicial nominations during the Bush presidency, Democratic home state Senators asserted that the Bush Administration did not engage in good faith, serious consultation with them during the judicial nominee selection process, an assertion denied by the Administration. The Administration view, in these controversies, appeared to be that it engaged in good faith, serious consultation with a home state Senator on judicial nominations if it considered the input of a Senator, even if it ultimately made a decision (in the selection of a judicial nominee) contrary to the Senator's express wishes. During the 111 th Congress, little or no public controversy arose between the Obama Administration and opposition party Senators over what constitutes good faith consultation. Upon the announcement of President Obama's first circuit court nomination, an official said it was "trying to set a tone" and "to send a message that we're going to spend time consulting in the Senate. We are eager to put the confirmation wars behind us." The implication, it can be argued, was that, in order to put "the confirmation wars behind," the Administration would, for its part, enter into consultations with home state Senators with what it considered to be good faith. Arguably in a similar tone, the Senate Republican Conference, in a letter to the President two weeks earlier, had noted that the judicial appointment process had "become needlessly acrimonious," and added, "We would very much like to improve this process, and we know you would as well." Early in the 112 th Congress, however, judicial nomination controversies arose in two states over an alleged lack of White House consultation with home state Senators. The issues raised in the two states, involving whether, or to what extent, an Administration should consult with home state Senators before a judicial nomination is selected, are discussed below, in the immediately following section. Over the years, the stated practice of the Administration of George W. Bush was one of welcoming home state Senators' views about who should or should not be nominated to fill federal court judgeships in their states. The Administration, however, appeared not always to have informed home state Senators, prior to announcing the selection of a nominee, of all candidates under consideration or of the candidate finally chosen to be the nominee. For example, in at least one such instance, a circuit court nominee allegedly was selected without prior consultation with the home state Senators. A spokesperson for one of the Senators criticized the President for acting in an "uncooperative unilateral manner," which, he said, broke "sharply from the cooperative process in which previous nominees were chosen. As discussed earlier, the stated practice of the current Obama Administration is to consult with home state Senators concerning circuit and district court candidates under consideration, well before a nominee is selected. Particularly for district court candidates, this consultation entails seeking recommendations from home state Senators of the President's party (or, if neither Senator is of the President's party, from other state officials of the President's party); hence, these Senators, by virtue of their recommending role, provide the Administration with opinions—in effect, endorsements—of candidates well before the selection of a nominee. Opposition party Senators, according to an Administration source, also are "afforded the opportunity to comment on circuit and district court candidates in their state prior to nomination." In spite of the Obama Administration's stated practice, judicial nomination controversies arose in two states early in the 112 th Congress over lack of prior White House consultation with home state Senators. In one state, as discussed above, the Obama White House had previously, during the 111 th Congress, consulted with the state's two Democratic Senators over a district court nominee and a circuit court nominee, both of which, however, failed to be confirmed in that Congress. At the start of the 112 th Congress, when the President re-nominated the two judicial nominees, the White House's previous consultations with Senators appeared to be treated by the Administration as all that were required, rendering unnecessary prior consultation with a newly elected Republican Senator in that state about the presidential decision to re-nominate. From the Senator's standpoint, however, the re-nominations submitted to the Senate in the 112 th Congress were new nominations, about which the state's newly elected Senator should have been consulted beforehand. The Senator noted that while the President announced the two re-nominations at the start of the Congress, on January 5, 2011, the Senator was not contacted about them by the White House until May 10, 2011. Early in the 112 th Congress, another judicial nomination controversy, also discussed above, arose over a reported lack of White House consultation with home state Senators prior to the nomination being made. In this instance, the state's two Republican Senators, according to one newspaper story, "complained that they weren't consulted by the White House" about a nomination to a district court judgeship in their state "before it was forwarded to the Senate." This particular controversy was acknowledged several months later, in September 2011, by a senior White House counsel to President Obama. In a National Law Journal interview, the counsel stated that he thought the two Senators "had been consulted, but perhaps we hadn't closed that loop before nomination. That really is the exception." Both of the above controversies ultimately ended with the judicial nominations in question being returned to the President and not being confirmed. A key factor in the failure of the nominations to move forward in the judicial confirmation process was opposition to them by home state Senators. The opposition, in turn, was based in part, on senatorial concern with not being consulted by the White House prior to the President making a nomination. The episodes in both states underscored that an Administration's declining to consult beforehand with home state Senators regarding selection of judicial nominees is very much the exception to the rule. The episodes as well underscored the typical importance of such consultation to securing home state Senator support for the nominees. Historically, as a general rule, Presidents, as already discussed, have been much more accepting of judicial recommendations from Senators of their own party than from Senators of the opposition party. When neither of a state's Senators is of the President's party, the recommending role has traditionally been filled by another state official of the same party as the President, such as the governor or the most senior U.S. Representative of the President's party from the state. If only one of the state's Senators is of the President's party, the role of providing recommendations traditionally has belonged to that Senator alone, to the exclusion of any significant consultative role for the opposition party Senator. Many Presidents, however, have selected some lower court nominees from among candidates recommended by opposition party Senators. An administration might make special accommodations with opposition party Senators for reasons unique to the state in question—for example, to be in keeping with an established practice in the state for its two Senators, regardless of their party, to make recommendations to the President; to minimize potential conflict with particular Senators whose support for, or opposition to, the President's judicial nominations, might be regarded as of strategic importance for confirmation purposes; or to minimize the chances of opposition party Senators using the Senate Judiciary Committee's blue slip procedure to block home state nominations in committee. Early in the Obama presidency, as discussed earlier, a White House official reportedly said the Administration would seek out the views of opposition party Senators before selecting judicial nominees from their states. One news story quoted the Administration official as saying it was "eager to put the confirmation wars behind us—to turn the page and work with senators from both sides of the aisle to achieve at least a bipartisan process." For its part, the Senate Republican Conference, it will be recalled, has said its Members "will be unable to support moving forward" on judicial nominees from their states "if we are not consulted on, and approve of," the nominees. Each presidential administration, as it considers judicial candidates from states with one or two opposition party Senators, likely will address a variety of questions about the kind of consultative relationship it wants with the Senators. Should, for example, consultation generally be limited to seeking the Senators' views of candidates recommended from other sources? Or should the consultative role for these Senators be greater—to include, for instance, an opportunity for them, early in the nominee selection process, to recommend specific candidates or to inform the Administration of the types of criteria that they believe should be used in selecting nominees? When both home state Senators are of the opposition party, should the Administration, under some circumstances, select a judicial nominee from among candidates recommended by the Senators, rather than from other sources? When federal court vacancies arise in their states, opposition party Senators might often be inclined to seek as large a consultative role in the judicial nominee selection process as possible—in some cases perhaps approaching or equal to the role traditionally played by Senators of the President's party. An administration, however, might generally be expected to resist the notion that the consultative role for opposition party Senators in judicial selection is on a par with the role played by Senators of the President's party. When neither of a state's Senators is of the President's party, an administration might prefer to generate its own list of candidates for judicial candidates. Or it might be concerned with respecting the traditional claims of state officials of the President's party, who predictably will assert that their prerogatives to recommend candidates for judicial appointments supersede those of opposition party Senators. How an administration, in judicial selection, resolves the competing claims of opposition party Senators with those of state officials of the President's party might vary, depending, among other things, on the state and the extent to which the Administration believes it must make special accommodations with the Senators in question. As already discussed, home state Senators of the President's party by custom exert less influence over the selection of circuit court nominees than of district court nominees. Such Senators may, and frequently do, recommend circuit court candidates, but with the usual understanding that the Administration will be considering other candidates as well—with the distinct possibility of the President selecting a nominee from the latter group. Home state Senators of the opposition party are also free to recommend candidates for circuit court nominations (as they may for district court nominations). By custom, however, such recommendations (in large part because they come from the Senators of the opposition party) are ordinarily not at the top of the list among candidates under Administration consideration. (The rare exceptions to this, where recommendations by an opposition party Senator are a major consideration in the selection of circuit court nominees, have usually occurred when the recommendations were made jointly with a Senator of the President's party or in accord with the recommendations of a bipartisan judicial nominee selection panel established in the Senators' state.) Throughout the presidency of George W. Bush, Administration sources indicated an openness to receiving circuit nominee recommendations from home state Senators, without, however, being under any obligation to follow the advice given. President Bush's disinclination to cede selection power to home state Senators of his party in the area of circuit court appointments seemed to be borne out by various news media accounts in 2007, which reported on public disagreements between the Bush Administration and a number of Republican Senators over whom to nominate to fill certain circuit judgeships. A Washington Post story, reporting on these disagreements, quoted "one conservative who is close to the nominating process" (and who would speak only on the condition of anonymity) as saying, "There has been a long-standing practice in Republican administrations that courts of appeals nominees are the president's prerogative, period." Controversy also arose periodically, throughout the Bush presidency, over how much influence home state Senators of the opposition party should have on the President's selection of circuit court nominees. The controversies usually occurred when President Bush selected nominees who were objectionable to the Senators, doing so apparently uninfluenced by the Senators' pre-selection input aimed at dissuading him from making these choices. Rather than "working with" the home state Senators to select nominees who would be acceptable to both sides, the President, his Senate critics alleged, selected nominees without regard to the Senators' nominee preferences or concerns. During the first two years of the Obama presidency, the prerogatives of home state Senators in recommending candidates for circuit court judgeships had not yet become an issue. An Administration source in April 2010 noted that of 18 persons nominated up to then by President Obama for circuit judgeships, at least 6 were initially recommended for the President's consideration by home state Senators. At the same time, as discussed earlier, the position of President Obama, in the words of an Administration source, was that he "retains the prerogative" to select circuit court nominees on his own, distinct from persons whom home state Senators might recommend. During the next two years of the Obama presidency, however, circuit court nominees selected without the prior approval of Republican home state Senators sometimes proved, upon their nomination, to be unacceptable to the Senators. Lacking home state Senator support, the circuit court nominations in question were blocked, under the Senate Judiciary Committee's current blue slip policy, from receiving either a Judiciary Committee hearing or a committee vote—and thus from moving forward in the confirmation process. Throughout the presidency of George W. Bush, the Judiciary Committee's blue slip policy often was at the center of Senate debate over judicial nominations. In this debate, Senators differed on how much control over lower court nominations the policy should confer on a home state Senator—and, specifically, on whether a Senator's failure to return a favorable blue slip for a district or circuit court nomination should block the Judiciary Committee from considering the nomination. This issue was particularly relevant in the 110 th Congress, when six of President Bush's circuit court nominations and three of his district court nominations lacking positive blue slips from both home state Senators failed to receive hearings or votes by the Senate Judiciary committee. Thus far during the presidency of Barack Obama, the Judiciary Committee's blue slip policy per se has not been the subject of debate. However, the committee's chair has sometimes raised concerns, in connection with his blue slip policy, about judicial nominations not moving forward in committee—specifically when home state Senators not of the President's party have not returned blue slips. In early 2009, at the start of the 111 th Congress, the Judiciary Committee's blue slip policy was explicitly acknowledged on both sides of the aisle in the Senate as central to determining whether a judicial nomination lacking the support of both home state Senators should receive committee consideration. With the White House newly occupied by a Democrat, the Senate Republican Conference urged that the blue slip policy continue to be applied as it had been in the previous Congress, when the President was a Republican. Under that policy, as discussed above, the absence of a favorable blue slip from a home state Senator prevented a lower court nomination from receiving a committee hearing or other committee action. During the 111 th , Congress, the power to decide how the blue slip policy was applied rested, as it had during the previous Congress, with Senator Leahy, the committee's chair. In September 2010 floor remarks, Senator Leahy indicated that support of both home state Senators, regardless of their party, was a prerequisite for a lower court nomination to be considered by the Judiciary Committee. In those remarks, Senator Leahy praised President Obama, in selecting judicial nominees, for having "worked with home State Senators in both parties." Likewise, he said, "I have respected the minority. I have not brought up people who did not have the support of their Republican home State Senators." Subsequently, during the 112 th Congress, at a March 2011 hearing on judicial nominations, Senator Leahy spoke more expansively about his blue slip policy: I will continue to do as I have always done and respect the customary deference given to home state Senators by waiting to proceed on nominations from their states until both Senators have returned blue slips. This is meant to ensure that the home state Senators who know the needs of the courts in their state best are consulted and have the opportunity to make sure that the nominees are qualified. As Chairman, unlike certain of my Republican predecessors, I have not proceeded to hold a hearing on a single nominee without both blue slips having been returned. At the same hearing, however, Senator Leahy expressed concerns about his blue slip policy possibly being "abused"—specifically, if home state Senators were taking advantage of that policy to block committee consideration of qualified judicial nominees. Senator Leahy noted that, "without blue slips having been returned" from several Senators of the opposite party, the Judiciary Committee was unable, at that hearing, to include "several nominees who [were] otherwise ready for hearings." Noting that it was his policy not to hold a hearing on a judicial nominee without both home state Senators first returning blue slips, Senator Leahy said he hoped, "in return, that fairness is not abused simply to delay our ability to make progress filling vacancies." In recent Congresses, Senate supporters of judicial nominations that have encountered difficulties either in committee or on the Senate floor, in making a case in favor of confirmation, often have pointed, among other things, to the fact that the nominations enjoyed home state Senator support. Sometimes, they also have suggested that the Judiciary Committee and the Senate should consider and approve the nominations, as a courtesy or in deference to their colleagues, the home state Senators. In the 110 th Congress, for instance, Senate Republicans, then in the minority, drew attention to the fact that three of President George W. Bush's circuit court nominations (all nominated to the Fourth Circuit) had not received consideration by the Judiciary Committee, despite having, in each case, the support of both home state Senators. (Ultimately, at the end of the Congress, the three nominations were returned to the President, without having received hearings.) Senator Mitch McConnell of Kentucky, the Republican leader, and Senator Arlen Specter of Pennsylvania, ranking member on the Judiciary Committee, discussed two of these nominees in an April 2008 letter to the Senate majority leader and the chair of the Judiciary Committee. Both nominees, their letter said, were "ready for hearings," had "been waiting for many months," and "enjoyed strong home-state support from their Senate delegations," all of whom were Republican Members. Senators McConnell and Specter said the committee appeared "to view the support of Republican senators as a necessary, but insufficient, condition for their constituent nominees." They urged that the committee instead regard the support of the home state Senators in question to be as "dispositive" as the support given by a Democratic home state Senator to a judicial nominee. In the 111 th Congress, the issue of deference again was raised—this time, however, not regarding how much deference the Judiciary Committee, but rather the Senate as a whole, should to give to home state Senator support of judicial nominations. The issue was particularly underscored during Senate floor debate on July 29, 2010, when Senate Democrats, in the majority (as they were in the previous Congress), made six different unanimous consent requests for the Senate to consider specific judicial nominations (involving 6 circuit and 14 district court nominees). All of the unanimous consent requests were objected to by the ranking member on the Judiciary Committee, Senator Jeff Sessions. In remarks preceding the requests, Senator Sheldon Whitehouse observed that four district court nominations included in the requests had been approved by the Judiciary Committee by party-line votes, and a fifth district court nomination, from the Senator's state of Rhode Island, had been reported out by a vote of 13-6 (with one Republican Senator joining the 12 Democrats voting to favorably report). All five district court nominees, Senator Whitehouse noted, had the support of both of their home state Senators. "Why," the Senator asked, "have we departed from the longstanding tradition of respect [for] the views of home State Senators who know the nominees best and who best understand their home districts?" Moments later, he urged "colleagues on the other side to reconsider what I think is a terrible mistake, which is to allow out-of-State special interests to prevail over the considered judgment of home State Senators when they agree on the best qualified nominee for district court in their home State." A week later on the Senate floor, Senator Whitehouse again spoke in favor of the chamber deferring to a state's Senators who support the confirmation of a district court nominee from that state. It is also my understanding there has been a tradition in this body that while circuit court nominees are considered what one might call, for better or worse, political fair game, there has been a tradition of courtesy and comity regarding district court judges who sit in the Senator's home State when both of the home State Senators have agreed to and accepted the President's recommendations and supported it, given their blue slip to the committee, and so forth. In recent years, however, Senators, have often been less than unanimous in deferring to home state Senators' endorsements of district court nominees. Instead, roll call votes on these nominees, in the Judiciary Committee as well as on the Senate floor, increasingly have included "nay" votes, In some instances, particularly in the 112 th Congress, Senators have voted against confirmation even when the nominee was supported by a home state Senator of their own party. Further, in various instances, Senators opposed to particular district court nominees have, through the use of "holds" or objections to unanimous consent requests, effectively blocked or delayed Senate consideration of the nominees, sometimes for months at a time. In any of these circumstances, Senators, by opposing a district court nominee's consideration or confirmation, presumably would take issue with the notion that they are obliged to defer to home state Senators who support the nominee. The American Bar Association, at its annual meeting in August 2008, adopted a resolution aimed at making the appointment process for lower court judges less contentious and less time-consuming. A key provision in the resolution was a proposal that bipartisan commissions be used to identify candidates for nomination to lower federal judgeships. Specifically, the ABA encouraged that each state's two U.S. Senators jointly appoint a bipartisan commission of lawyers and other leaders to evaluate candidates for U.S. district judgeships in the state and recommend which candidates the Senators should suggest for the President's consideration. The ABA resolution, as well, proposed the use of bipartisan commissions to consider and recommend prospective nominees to the U.S. circuit courts; while the resolution did not specify who would appoint these commissions, clarification on this point appeared to come from an ABA Journal news account, which stated that, according to the resolution, bipartisan commissions should be used by the President to help fill circuit court vacancies. The resolution recommended that the President "consult with Senate leaders of both parties and the home state senators in advance of submitting nominations," and it urged the President and the Senate "to promptly fill judicial vacancies and act expeditiously, especially with respect to nominees recommended by bipartisan commissions." Adoption of the resolution had been urged by the ABA's Standing Committee on Federal Judicial Improvements. In a report to the ABA convention, the committee suggested that use of bipartisan commissions, by instilling a greater degree of bipartisanship in the selection of nominees, could make the judicial confirmation process in the Senate less polarized, contentious and drawn out. The committee urged that the two U.S. Senators in every state jointly appoint truly bipartisan commissions of lawyers and non-lawyers to develop lists of potential district judge nominees for the consideration of the senators and the White House. When a state's senators are of the same political party, it may be appropriate to share the appointing authority with legislators and others in the state of the opposite party. The ABA's August 2008 resolution failed to generate subsequent debate in Congress about the merits of using bipartisan commissions to recommend candidates for U.S. district or circuit court judgeships. Some news media organizations, however, reacted quickly to the resolution. Providing a negative assessment, the Wall Street Journal, in an editorial, maintained that the ABA proposal would diminish the President's constitutional power to select judicial nominees, by limiting his choice to "preapproved lists" of candidates provided by home state Senators and bipartisan commissions. Further, it said, "merit selection merely takes the partisan politics out of the public eye and into backrooms stocked with political insiders." By contrast, a Los Angeles Times editorial asserted that adoption of the ABA proposal would improve the quality of the federal judiciary without infringing on the constitutional prerogatives of the president or the Senate. It even could lead to a truce in the tiresome partisan tit-for-tat in the Senate that has blocked the confirmation of qualified and moderate judicial nominees, a development the next president should welcome, regardless of who he is. The Obama Administration thus far has not established any commission-like entities to aid it in identifying or evaluating circuit court candidates. As of October 2012, however, nominating commissions reportedly were being used in 19 states by one or both Senators (34 in all) to screen candidates for federal court vacancies—up from 8 states in which such commissions were said to be in use in August 2008. In one of the 19 states, a commission reportedly was tasked with recommending not only candidates for district court judgeships but also for circuit court judgeships historically associated with that state. In a study issued in mid-December 2012, a scholar reviewed the use by Senators of judicial nominating commissions up to that point in the Obama presidency. In this review, the scholar sought answers to two questions—whether district court nominees selected through use of commissions (which he referred to as "vetting committees") had more diverse backgrounds than other Obama district court nominees, and whether they proceeded "through the nomination and confirmation process with less resistance." In measuring such possible effects of vetting committees on judicial nominee selection, the scholar cautioned that "the committees operate within state nomination cultures and senatorial practices that probably exert more influence on the process than do the committees." Taking into account that and other caveats, the scholar found that the non-committee states have produced proportionately more nominations, and in less time, than the committee states. That may reflect the additional time and effort for at least some committees to do their work, compared to the less formal vetting processes that senators and their staffs employ when there is no committee to consult. States with committees, though, also produced proportionately more confirmations, again in less time. And in terms of the proportion of white males and former state judges, the two sets are almost identical. In Senate controversies over lower court nominations in recent years, a central question often has been whether an administration adequately consulted home state Senators during the nominee selection process. Usually, the question has concerned the degree to which opposition party Senators should play a role in advising the President on judicial nominee selections in their state. Against this backdrop, both the Obama Administration and the Senate opposition party in the 111 th Congress, as already noted, expressed, early in the Congress, the desire that the judicial confirmation process be less acrimonious. Both also advocated, as a key to that objective, increased consultation in the nominee selection process between the Administration and home state Senators, regardless of their party. Subsequently in the 111 th Congress, while lower court nominations frequently were a subject of partisan contention in the Senate, the focal point of contention rarely, if ever, was whether the Administration adequately consulted with home state Senators. In the 112 th Congress, however, as discussed above, the adequacy of Administration consultation did become a public issue for opposition party home state Senators in two states. Asserting they had not been consulted before the President made certain nominations to judgeships in their states, the Senators effectively blocked the nominations from receiving committee consideration, resulting ultimately in their being returned to the President. Controversies of this nature possibly could have been avoided if certain past guidelines regarding Administration consultation with home state Senators had been observed. As noted earlier, various policy statements by past chairs of the Senate Judiciary Committee have listed various specific consultative steps which the chairs regarded as requisite elements in consultation between an administration and home state Senators concerning the selection of lower court nominees. Although not binding on the Administration then or now, such statements can be seen as helping to identify points during the consultative process when Senators and the current Administration might make a point of contacting each other before a nominee is actually selected. Such contact, it can be argued, would at least avert controversy arising over a Senator not being consulted at all about a judicial nomination. Experience in recent Congresses, however, suggests that, even when there is consultation, reaching agreement on the choice of a nominee might not always be an easy or simple matter. It especially might be difficult when a presidential administration and a home state Senator differ over the criteria to use in selecting judicial nominees or over the policy goals to be served by judicial appointments, or when there are sharp partisan differences between the President and the opposition party in the Senate over judicial appointments. In such circumstances, however, the consultative process might sometimes present an opportunity for the Administration and home state Senator to resolve their differences. The process, for instance, might be an opportunity for the Administration to address, and seek to ease, concerns a home state Senator might have about a judicial candidate. Alternately, during consultation with the Administration, the Senator's input might, in particular circumstances, increase the chances for the selection of a "compromise" nominee, or one less objectionable to the Senator than a candidate under earlier consideration by the Administration. For any given Senator, the actual consultative process that takes place between the Senator (or his or her staff) and the Administration will be unique to the situation at hand. For the particular judicial candidate search in question, there will be such unique elements as the extent and nature of input that the Senator conveys, whether he or she recommends specific candidates (and if so, the comparative strengths of the Senator's candidates vis-à-vis others the Administration might be considering), the predisposition of the Administration to the Senator's input, and a host other political factors that the Administration might have to take into account (including its own policy preferences for judicial nominees). A President, experience has shown, sometimes nominates a judicial candidate other than one favored by a home state Senator, often, by custom, doing so when the home state Senator is of the opposition party. Whether the President, when making such a choice, has shown due respect for the advisory part of the Senator's advice and consent role will be a personal question for the Senator to answer—but one also of likely interest to other Senators concerned about the nature of their advice and consent prerogatives as home state Senators. Of key relevance to the question will be the extent to which the Administration consulted with the Senator or the Senator's staff, and whether it did so with an apparent openness to the Senator's views.

This report examines the role that home state Senators, historically and in the contemporary era, have played in the selection of nominees to U.S. district court and circuit court of appeals judgeships. It also identifies issues that have arisen in recent years over the role of home state Senators in the selection process for federal judges. Report findings include the following: Supported by the custom of "senatorial courtesy," Senators of the President's party have long played, as a general rule, the primary role in selecting candidates for the President to nominate to district court judgeships in their states. They also have played an influential, if not primary, role in recommending candidates for circuit court judgeships associated with their states. For Senators who are not of the President's party, a consultative role, with the opportunity to convey to the President their views about candidates under consideration for judgeships in their states, also has been a long-standing practice—and one supported by the "blue slip" procedure of the Senate Judiciary Committee. In recent and many past Congresses, the Judiciary Committee's blue slip procedure has reinforced Senators' influence over judicial nominations in their state by permitting nominations to receive committee action only when both home state Senators have returned "positive" blue slips. Senators, in general, exert less influence over the selection of circuit court nominees than they do over district court nominee selection. Whereas home state Senators of the President's party often dictate whom the President nominates to district judgeships, their recommendations for circuit nominees, by contrast, typically compete with names suggested to the Administration by other sources or generated by the Administration on its own. Whether and how a state's two Senators share in the judicial selection role may depend, to a great extent, on their respective prerogatives, party affiliations, and interests. Senators have great discretion as to the procedures they will use to identify and evaluate judicial candidates, ranging from informally conducting candidate searches on their own to relying on nominating commissions to evaluate candidates. Contact between a Senator's office and the Administration can be expected to clarify the nature of the Senator's recommending role, including the degree to which the Administration, in its judicial candidate search, will rely on the Senator's recommendations. If a President selects a district or circuit court nominee against the advice of, or without consulting, a home state Senator, the latter must decide whether to oppose the nomination (either first in the Senate Judiciary Committee or later on the Senate floor). From the Senator's standpoint, opposition to the nomination might serve a number of purposes, including helping to prevent confirmation or influencing the Administration to take consultation more seriously in the future. On the other hand, various considerations might influence the Senator not to oppose the nomination, including the desirability of filling the vacant judgeship as promptly as possible, the qualifications of the nominee, and the possibility of better opportunities in the future to exert influence over judicial appointments. In recent years, the role of home state Senators in recommending judicial candidates has given rise to various issues, including the following: What constitutes "good faith" or "serious" consultation by the Administration? Should home state Senators always have the opportunity to provide their opinion of a judicial candidate before he or she is nominated? How differently should the Administration treat the input of Senators, depending on their party affiliation? What prerogatives should home state Senators have in the selection of circuit court nominees? Should the policy of the Judiciary Committee allow a home state Senator to block committee consideration of a judicial nominee? Conversely, should the Judiciary Committee and the Senate, as matter of courtesy, approve judicial nominees supported by home state Senators? Should home state Senators use commissions to aid them in selecting judicial candidates to recommend to the President?

As the role of lawyers in most countries has evolved from advocates regulated by local courts and their rules to legal advisors for transactions in economic activities, the increase in cross-border provision of legal services led to the inclusion of such services in the trade agreements and negotiations under the WTO, over the objections of some countries. The scope of agreements under the WTO has expanded over the years to cover issues and sectors not traditionally considered to fall within trade laws and regulations through periodic multilateral negotiations that are called "rounds," the latest being the Doha Round. The commitments the United States has made and may make in current and future negotiations could affect domestic regulation of the legal profession, including ethical issues. Legal services are classified as part of professional services, which in turn are under the business services sector covered by the General Agreement on Trade in Services (GATS), concluded as part of the Uruguay Round of the General Agreement in Tariffs and Trade that created the WTO. Under the GATS, WTO countries undertake obligations with regard to all service sectors, including most-favored-nation treatment (MFN) under GATS Article II; transparency under GATS Article III; the notice and publication of relevant domestic laws and measures; judicial or administrative review of domestic regulation under GATS Article VI(2); and recognition agreements under GATS Article VII. In addition to the general obligations under the GATS, the United States included legal services in its schedule of commitments under the GATS; not all WTO countries included legal services in their schedules. Such schedules set forth specific additional obligations made by a WTO country with respect to specific service sectors, including any limitations or qualifications to obligations undertaken. These obligations include market access under GATS Article XVI, national treatment under GATS Article XVII, and any other additional commitments under GATS Article XVIII, including those regarding qualifications, standards or licensing matters. A schedule also summarizes obligations as they apply via four modes of supply—(1) cross-border supply, the ability of non-resident service suppliers to supply services cross-border into a WTO country; (2) consumption abroad, the ability of a WTO country's residents to buy services located in another WTO country; (3) commercial presence, the ability of foreign service suppliers to establish a branch or representative office in a WTO country, sometimes referred to as the right of establishment; and (4) movement of natural persons, the ability of foreign individuals to enter and stay in a WTO country's territory to supply a service. The U.S. schedule sets forth its obligations in terms of limitations and qualifications under the laws and/or rules governing the practice of law by foreign lawyers and foreign law firms in each of the States, the District of Columbia, the U.S. territories, and before certain federal agencies, such as patent prosecution before the U.S. Patent and Trademark Office (USPTO). As part of the sectors subject to WTO negotiations in the Doha Round, legal services are potentially subject to changes. Indeed, several members have sought concessions from the United States regarding legal services. Such changes could affect the laws and rules governing foreign lawyers and foreign law firms in each of the 50-plus jurisdictions in the United States and the federal agencies. Such laws and rules comprise the bar admission of lawyers who are admitted to practice in a foreign jurisdiction or who are foreign nationals and the eligibility of foreign legal consultants and foreign firms to provide legal services in the United States. Rules regarding foreign legal consultants may address the applicability to such consultants of ethics rules and disciplinary procedures for attorneys. The European Union, which together with the United States has the most active trade in legal services among WTO members, is seeking several new legal services concessions from the United States. One significant change sought by the European Union is to eliminate the requirement in the U.S. states and territories that qualified U.S. lawyers providing legal services must be "natural persons," not law firms or other organizational/corporate persons. This apparently is not a requirement in some other WTO countries. The EU and the United States also propose eliminating the U.S. requirement that an attorney admitted to the patent bar for the purpose of prosecuting a patent before the USPTO must be a U.S. citizen. In addition, there has been consideration of whether disciplines (WTO parlance for certain guidelines) on domestic regulation in the legal services sector should be adopted and applied. This may be accomplished by negotiation of a discipline specific to legal services or by application of the existing Disciplines on Domestic Regulation in the Accountancy Sector to legal services. Under GATS Article VI(4), disciplines on domestic regulation are developed "[w]ith a view to ensuring that measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade in services." Disciplines aim to ensure that requirements are not more burdensome than necessary to ensure quality of service and that licensing procedures are not per se restrictions on the supply of the service. After the accountancy disciplines were developed and adopted, there was active consideration and debate about whether they should be extended to legal services, which the International Bar Association recommended against. Any substantive Doha Round concessions or any agreement to a legal services discipline by the United States would obligate it, under GATS Article I(3)(a), to take reasonable measures to ensure that each of its political subdivisions observes such agreements. This could pose federalism issues, since the rules governing practice in a state are a matter for the highest court of a state or for its legislature and not traditionally a matter for federal legislation or policy. The U.S. Trade Representative (USTR) does not make WTO commitments with which the United States is not in a position to comply. This is the reason the current schedule of commitments notes obligations in terms of which states have certain requirements, such as in-state residency for licensure. In accordance with §102 of the Uruguay Round Agreements Act (URAA), the USTR has consulted with several states concerning the negotiating position of the United States on legal services, apparently to consider what changes these states would be amenable to observing. If the United States were to commit to liberalizing the rules for foreign lawyers or firms to provide legal services in the United States, any related complaint against the United States could be brought only by another WTO country and would be resolved through the WTO dispute settlement system. An individual foreign attorney or firm could not bring a complaint because disputes can only be brought by one WTO country against another WTO country. Nor could an individual attorney or firm bring a suit domestically for noncompliance with a WTO obligation. WTO agreements are not self-executing international agreements, so obligations under those agreements must be implemented through domestic legislation or other domestic measures. Section 102 of the Uruguay Round Agreements Act (URAA) provides that only the United States may bring an action to declare a state law invalid because it is inconsistent with an Uruguay Round agreement and that no private person may challenge a state or local law or other measure on the grounds that it is not consistent with an Uruguay Round agreement. The global nature of business, including legal services, and its continued growth has necessitated the consideration and adoption of rules concerning multijurisdictional practice of law. In 2007, 71 persons were licensed as foreign legal consultants in the United States across 16 jurisdictions. Twenty-nine jurisdictions have a rule permitting the licensing of foreign legal consultants. Some adopted a version of the ABA Model Rule on Foreign Legal Consultants (first approved in 1993, most recently revised in 2006), itself modeled on the New York rule first adopted in 1974. Others adopted their own rule differing significantly from the ABA Model Rule. The ABA Model Rule provides that foreign legal consultants may be licensed to provide certain legal services in a jurisdiction without an examination, if they are members in good standing in a recognized legal profession in a foreign country. They are not actually admitted as members of the bar in the host jurisdiction in the United States and are prohibited from providing certain services, such as appearing in court to represent a client or giving advice on U.S. law or a state law in the United States. Foreign legal consultants would be able to provide advice on the laws of their foreign home countries. Additionally, five jurisdictions have rules that expressly refer to temporary practice by foreign lawyers, some similar to the ABA Model Rule for Temporary Practice by Foreign Lawyers (approved in 2002). This ABA Model Rule provides that foreign lawyers not admitted in a U.S. jurisdiction may provide legal services in that jurisdiction in certain circumstances, including, among others, where they are working with a lawyer admitted to practice in that jurisdiction or where they are advising clients with regard to legal proceedings in a foreign jurisdiction where they are admitted to practice. The WTO Secretariat has noted that WTO countries generally require foreign legal consultants to submit to the local code of ethics as a prerequisite to licensing in the host country. The WTO has observed that the legal profession does not consider this a major obstacle to trade in legal services. There are certain common principles shared by the national legal ethical codes, including rules on conflicts of interest, loyalty to the client, and confidentiality. The WTO has observed, for example, that the EU has developed a common legal ethics code applicable to some EU countries; the U.S., Japanese and European lawyers' professional associations have compared their ethical codes and found no serious differences; and a bilateral agreement exists between the ABA and its counterpart for England and Wales with regard to mutual recognition on matters such as ethical standards. However, the agreements of such associations are not binding on the U.S. jurisdictions whose courts or legislatures would implement such recognition in conjunction with the bar disciplinary authorities. Negotiations in the Doha Round of the WTO could help resolve ethical issues that have arisen in the cross-border provision of legal services. The prohibition against the unauthorized practice of law is a basic tenet of U.S. legal ethics; therefore, any new agreement under WTO auspices that may affect the regulation of legal services providers admitted to the practice of law in a foreign jurisdiction could have implications for ethical compliance. However, U.S. legal ethics rules or codes have recognized that business demands and the mobility of society necessitate refraining from unreasonable territorial limitations. Any liberalizing of licensing requirements could facilitate the operations of law firms. ABA Opinion 01-423, dated September 21, 2001, found that U.S. law firms may include partners who are foreign lawyers, as long as the arrangement complies with U.S. and foreign law, and the foreigners are members of a recognized legal profession in the foreign jurisdiction. It cautioned that U.S. lawyers must avoid assisting in the unauthorized practice of law by foreign lawyers in the United States. ABA Opinion 01-423 further noted that many countries recognize only a narrow attorney-client privilege. Some legal authorities cite the opinion in a European Union (EU) case, Australian Mining & Smelting Europe Ltd. v. Commission , as supporting the proposition that attorney-client privilege does not apply to attorneys not admitted to practice in the EU. In response, the ABA passed a resolution that attorney-client privilege should apply to non-European Union attorneys. In a more recent case, Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v Commission , the EU Court of First Instance declined to consider whether the discriminatory non-recognition of privilege with respect to non-EU lawyers violated certain EU principles. A paper summarizing a discussion on Cross-Border Travel Traps: Protecting Client Confidences at the Frontier at the ABA Section of International Law 2007 Fall Meeting discusses the problems posed for U.S. attorneys by the narrower European view of profession privilege/confidentiality with regard to attorney-client communications. With regard to disciplinary measures and proceedings, U.S. legal professional groups have submitted letters to the USTR supporting local disciplinary jurisdiction over foreign attorneys and disciplinary reciprocity with foreign jurisdictions in Doha Round negotiations.

This report provides a broad overview of the treatment of legal services under the World Trade Organization (WTO) agreements and its potential effect on laws and rules governing the provision of legal services by foreign lawyers in the United States and legal ethics rules.

In the more than 15 years since gaining independence, Estonia's political scene has been characterized by the creation and dissolution of numerous parties and shifting alliances among them. This has often resulted in politics resembling a game of "musical chairs." Estonian governments have lasted on average only slightly longer than a year each. Nevertheless, due to a wide-ranging policy consensus, Estonia has followed a remarkably consistent general course—building a democracy, a free-market economy, and integrating into NATO and the European Union (EU). Estonia's current government, formed after March 2007 parliamentary elections, is led by Prime Minister Andrus Ansip of the center-right Reform Party. His coalition partners are the conservative and nationalist Pro Patria-Res Publica Union and the center-left Social Democratic Party. The government's priorities include cutting taxes, reducing business and labor regulation, and increasing spending on child care and education. In September 2006, Toomas Hendrik Ilves was chosen as Estonia's President by an electoral college composed of members of the Estonian parliament and local government representatives. The result was a blow to the left-of-center Center Party and People's Union, which had aggressively campaigned for the re-election of incumbent Arnold Ruutel. Ilves was born in the United States. After Estonia regained its independence in 1991, he moved to Estonia, and later served as Ambassador to the United States and Foreign Minister. In these posts he became known as an outspoken defender of Estonia's interests, especially against Russian encroachment. The post of President is largely ceremonial, but it plays a role in defining Estonia's international image, as well as in expressing the country's values and national unity. Estonia has one of the most dynamic economies in central Europe, and indeed in Europe as a whole. Its real Gross Domestic Product (GDP) grew by 11.4% in 2006 and 9.9% in the first quarter of 2007. Due to its use of a currency board that strictly ties Estonia's kroon to the euro, Estonia has pursued a stringent monetary policy. However, inflation remains significant, at a 5.5% rate in April 2007, on a year-on-year basis, a result of increasing energy prices and rapid wage growth. Unemployment in April 2007 was estimated at 5.3%, one of the lowest rates in the EU. The country is on target for a budget surplus of 1.9% of GDP in 2007, due in part to prudent fiscal policies and rising revenues fostered by economic growth. Estonia has a flat income tax rate of 22%. The new government has pledged to cut the tax rate by 1% per year until it reaches 18% in 2011. President Bush praised Estonia's tax system during a visit to the country in November 2006. According to the State Department, Estonia's "excellent" business climate, along with its sound economic policies, have ensured strong inflows of foreign direct investment (FDI). Estonia was ranked 12 th in the world in the 2007 Wall Street Journal/Heritage Foundation Index of Economic Freedom. The survey praised the country for the fairness and transparency of its business regulations and foreign investment codes, and the independence of its judiciary in enforcing property rights. Corruption remains a problem in Estonia, but significantly less so than in other countries in the region. Total FDI inflows to Estonia in 2004 were $850 million, a large amount for a very small country. Companies owned in whole or part by foreigners account for one-third of the country's GDP and over half of its exports. The country has a modern banking system, largely controlled by banks from the Nordic countries. It has developed an innovative technology sector. Estonians played a key role in developing software for the popular Skype Internet phone. Prime Minister Ansip gave President Bush a Skype phone during his visit to Estonia in November 2006. Estonia achieved its two key foreign policy objectives when it joined NATO and the European Union in 2004. Estonia continues to try to bring its armed forces up to NATO standards, and has maintained defense spending at over 2% of GDP. Estonia was perhaps the best prepared of the candidate states in central and eastern Europe to join the EU, due to its successful economic reforms. However, Estonia still lags behind most EU members in many areas, and receives substantial EU funding to address such issues as border security, public infrastructure, and the environment. Estonia has had to put off plans to adopt the euro as its currency until 2011, due to an inflation rate above the EU's strict criteria for euro zone membership. Estonia enjoys a close relationship with its Baltic neighbors and the Nordic countries. It has acted as an advocate for democratic and pro-Western forces in Belarus, Ukraine, Moldova, Georgia, and other countries bordering Russia. Estonia's relations with Russia remain difficult. Russia claims that Estonia violates the human rights of its Russian-speaking minority, which makes up about 30% of the country's population. While international organizations have generally rejected these charges, many Russian-speakers remain poorly integrated into Estonian society, despite Estonian government efforts to deal with the problem. Some 130,000 Russian-speakers in Estonia are stateless, about 10% of the population. Over 100,000 more have adopted Russian citizenship. They are denied Estonian citizenship by Estonian law because they or their ancestors were not Estonian citizens before the Soviet takeover of Estonia in 1940 and they have not successfully completed naturalization procedures, which require a basic knowledge of the Estonian language. As a result, a significant portion of Estonia's population cannot vote in national elections and lack some other rights and opportunities accorded to citizens. In addition, at least part of the Russian-speaking population suffers from higher unemployment and lower living standards than ethnic Estonians do, due to a variety of factors, including inability to speak Estonian, which is required by Estonian law for many jobs. Russia has also expressed irritation at NATO's role in patrolling the airspace of Estonia and the other two Baltic states, and Estonia's failure to join the Conventional Forces in Europe (CFE) treaty. The role of Estonia in the transit of Russian oil through its ports, once key to Estonia's economy, may be reduced by the decision by the Russian government-controlled Transneft oil transit company to expand the use of its own port facilities at Primorsk in Russia. Estonia is heavily dependent on Russia for oil and natural gas supplies. Estonia and other states in Central Europe have expressed concern about the Nord Stream natural gas pipeline which, when completed, will link Germany directly with Russia via the Baltic Sea floor. In addition to environmental concerns, they fear Russia will gain additional political and economic leverage over the region once Russia has an alternative to key energy infrastructure that runs through their territories. Russo-Estonian relations deteriorated sharply in April 2007, when Estonia moved "the Bronze Soldier," a World War II-era statue of a Soviet soldier from a park in the capital, Tallinn, to another location, along with the bodies of Red Army soldiers buried nearby. The move provoked a furious reaction among some ethnic Russians in Estonia, and from Russian government leaders, who viewed the action as dishonoring Red Army soldiers who liberated Estonia from the Nazis. For their part, many Estonians see the "liberation" as the exchange of Nazi domination for a Soviet one, and not worthy of prominent commemoration. In addition to harsh verbal attacks from Moscow, harassment of Estonia's ambassador to Moscow by youth groups with close ties to the Kremlin, and violent demonstrations by hundreds of ethnic Russians in Estonia, Estonia's Internet infrastructure came under heavy attack from hackers in late April and early May. Estonian officials said some assaults came from Russian government web servers, although many others came from all over the world. These cyberattacks were particularly damaging to Estonia, which has integrated the Internet into public life perhaps more than almost any country in the world. Estonia has asked for Russia's cooperation in investigating the origin of the cyberattacks. The Russian government has denied involvement in the attacks. At the invitation of the Estonian government, NATO cyber experts visited Estonia in the wake of the attacks to assess their scope and discuss with their Estonian counterparts how to deal with possible future attacks. Estonian officials have called for greater cooperation in the EU and NATO to find practical ways of combating cyberattacks. They note that the EU and NATO have yet to define what constitutes a cyberattack and what the responsibilities of member states are in such cases. Russia also appears to have imposed unannounced economic sanctions on Estonia; Estonian railway officials reported a sharp drop in freight traffic from Russia, and Russia limited traffic over a key highway bridge between the two countries. Russia attributed these actions to repair work and safety concerns. Observers have noted that these actions fit a pattern in Russian foreign policy toward neighboring countries of interrupting energy, transportation, and other links under various pretexts to punish these countries for perceived anti-Russian behavior. U.S. officials have expressed concern about Russia's statements and actions surrounding the statue's relocation. On June 14, Assistant Secretary of State Daniel Fried said that" threats, attacks, [and] sanctions, should have no place" in Russo-Baltic relations and that warned that the Baltic states "will never be left alone again, whether threatened by old, new, or virtual threats..." The United States and Estonia enjoy excellent relations. The United States played a key role in advocating NATO membership for Estonia and the other two Baltic states, against the initial resistance of some European countries, which feared offending Russia. U.S. officials have lauded Estonia's support in the U.S.-led war on terrorism, including its deployments in Afghanistan and Iraq. Estonia has deployed 105 soldiers to Afghanistan, as part of the International Security Assistance Force, a significant force for a small country. Two Estonian soldiers were killed there in June 2007. There are 40 Estonian soldiers deployed in Iraq. Two Estonian soldiers have died in Iraq. Estonia also contributes troops to EU and NATO-led peacekeeping missions in Bosnia and Kosovo. In November 2006, President Bush visited Estonia. He praised Estonia as a "strong friend and ally of the United States" and expressed appreciation for Estonia's contributions in Afghanistan, Iraq, and in training young pro-democracy leaders in Georgia, Moldova, and Ukraine. Addressing perhaps the most difficult issue in U.S.-Estonian relations, he pledged to work with Congress to extend the U.S. Visa Waiver program to Estonia and other countries in Central and Eastern Europe. The program, in which 27 countries (mainly from western Europe) participate, allows persons to visit the United States for business or tourism for up to 90 days without a visa. In order to join the program, a country must have a visa refusal rate of no more than 3% a year, and must also have or plan to have tamper-resistant, machine-readable passport and visa documents. Estonia does not currently meet these standards, although it is attempting to do so. Some believe that Estonians should enjoy visa-free travel to the U.S., in part due to their country's status as an EU member and to their troop contributions in Iraq and Afghanistan. After a meeting in Washington, DC with President Ilves on June 25, 2007, President Bush said that Ilves had "pushed him very hard" on the visa waiver issue. President Bush added that he would continue to seek Congressional action on extending the Visa Waiver program to Estonia. President Bush said that the two leaders had also discussed the cyberattacks on Estonia and that Ilves had suggested that a NATO "center of excellence" be based in Estonia to study cybersecurity issues. Estonia "graduated" from U.S. economic assistance after FY1996, due to its success in economic reform, but the United States continues to provide other aid to Estonia. In FY2006, Estonia received $5.8 million in U.S. aid, mainly in Foreign Military Financing (FMF) and IMET military education and training funds to improve Estonia's interoperability with U.S. and other NATO forces in peacekeeping and other missions. The Administration requested $4.1 million for the same purposes for FY2008.

After restoration of its independence in 1991, following decades of Soviet rule, Estonia made rapid strides toward establishing a democratic political system and a dynamic, free market economy. It achieved two key foreign policy goals when it joined NATO and the European Union in 2004. However, relations with Russia remain difficult. Estonia suffered cyberattacks against its Internet infrastructure in April and May 2007 during a controversy about the removal of a Soviet-era statue in Estonia. Estonian leaders believe the cyberattacks may have been instigated by Moscow. Estonia and the United States have excellent relations. Estonia has deployed troops to Iraq and Afghanistan, and plays a significant role in efforts to encourage democracy and a pro-Western orientation among post-Soviet countries. This report will be updated as needed.

Dozens of temporary tax provisions expired at the end of 2013, and several other temporary tax provisions are scheduled to expire at the end of 2014. The American Taxpayer Relief Act (ATRA; P.L. 112-240 ), signed into law on January 2, 2013, reduced tax policy uncertainty by permanently extending most of the tax cuts first enacted in 2001 and 2003 and permanently indexing the alternative minimum tax (AMT) for inflation. ATRA, however, did not eliminate uncertainty in the tax code. Under ATRA, a number of provisions that had been allowed to expire at the end of 2011 or 2012 were temporarily extended through 2013. Thus, under current law, these provisions expired at the end of 2013. Collectively, temporary tax provisions that are regularly extended by Congress rather than being allowed to expire as scheduled are often referred to as "tax extenders." Many of these "tax extender" provisions have been temporarily extended multiple times. The research tax credit, for example, has been extended 15 times since being enacted in 1981. Most of the temporary tax provisions that expired at the end of 2013 were previously extended more than once. The 113 th Congress has considered legislation that would extend selected expired or expiring tax provisions. The Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act ( S. 2260 ), which would extend most expired and soon-to-expire tax provisions through 2015, was reported by the Senate Finance Committee on April 28, 2014. The act subsequently became an amendment to H.R. 3474 which did not advance in the Senate, as a motion to end debate on H.R. 3474 was voted down on May 15, 2014. In contrast to the Senate, the House has voted to permanently extend certain expired tax provisions as part of the Jobs for America Act ( H.R. 4 ), which passed the House on September 18, 2014. Several expired charitable-related provisions would be made permanent as part of the America Gives More Act of 2014 ( H.R. 4719 ), which passed the House on July 17, 2014. Chairman Camp supports addressing extenders as part of broader tax reform. His proposed Tax Reform Act of 2014 would make certain provisions permanent, such as the research and experimentation (R&D) tax credit and increased expensing under Section 179. The President's FY2015 Budget proposal would permanently extend or modify certain expired provisions, while temporarily extending others. Proposals that would be permanently extended (and in some cases modified) include (1) the enhanced deduction for conservation easements; (2) increased expensing under Section 179; (3) the exclusion for qualified small business stock; (4) the new markets tax credit (NMTC); (5) the renewable electricity production tax credit (PTC); (6) the deduction for energy-efficient commercial property; (7) the research and experimentation (R&D) tax credit; and (8) the Work Opportunity Tax Credit (WOTC). Proposals that would be temporarily extended include (1) the exclusion for cancellation of home mortgage debt (through 2016); (2) the tax credit for cellulosic biofuel (through 2024); and (3) the tax credit for energy-efficient new homes (through 2024). The President's FY2015 Budget also assumes that the American opportunity tax credit (AOTC), the earned income tax credit (EITC) expansions, and the child tax credit (CTC) expansions, that were extended through 2017 as part of ARTA, are made permanent. Allowing temporary tax provisions to expire at the end of 2013 does not necessarily mean that these tax provisions will not be available to taxpayers in 2014. In recent years, Congress has chosen to retroactively extend expired tax provisions. Under ATRA, for example, a number of tax provisions that had been allowed to expire at the end of 2011 were retroactively extended through 2013. This report provides a broad overview of the tax extenders. Additional information on specific extender provisions may be found in other CRS reports, including the following: CRS Report R43510, Selected Recently Expired Business Tax Provisions ("Tax Extenders") , by [author name scrubbed], [author name scrubbed], and [author name scrubbed] CRS Report R43688, Selected Recently Expired Individual Tax Provisions ("Extenders"): In Brief , by [author name scrubbed] CRS Report R43517, Recently Expired Charitable Tax Provisions ("Tax Extenders"): In Brief , by [author name scrubbed] and [author name scrubbed] CRS Report R43541, Recently Expired Community Assistance Related Tax Provisions ("Tax Extenders"): In Brief , by [author name scrubbed] CRS Report R43449, Recently Expired Housing Related Tax Provisions ("Tax Extenders"): In Brief , by [author name scrubbed] The tax code presently contains dozens of temporary tax provisions. In the past, legislation to extend some set of these expiring provisions has been referred to by some as the "tax extender" package. While there is no formal definition of a "tax extender," the term has regularly been used to refer to the package of expiring tax provisions temporarily extended by Congress. Oftentimes, these expiring provisions are temporarily extended for a short period of time (e.g., one or two years). Over time, as new temporary provisions have been routinely extended and hence added to this package, the number of provisions that might be considered "tax extenders" has grown. There are various reasons Congress may choose to enact temporary (as opposed to permanent) tax provisions. Enacting provisions on a temporary basis, in theory, would provide Congress with an opportunity to evaluate the effectiveness of specific provisions before providing further extension. Temporary tax provisions may also be used to provide relief during times of economic weakness or following a natural disaster. Congress may also choose to enact temporary provisions for budgetary reasons. Examining the reason why a certain provision is temporary rather than permanent may be part of evaluating whether a provision should be extended. There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis provides an opportunity to evaluate effectiveness before expiration or extension. However, this rationale for enacting temporary tax provisions is undermined if expiring provisions are regularly extended without systematic review, as is the case in practice. In 2012 testimony before the Senate Committee on Finance, Dr. Rosanne Altshuler noted that an expiration date can be seen as a mechanism to force policymakers to consider the costs and benefits of the special tax treatment and possible changes to increase the effectiveness of the policy. This reasoning is compelling in theory, but has been an absolute failure in practice as no real systematic review ever occurs. Instead of subjecting each provision to careful analysis of whether its benefits outweigh its costs, the extenders are traditionally considered and passed in their entirety as a package of unrelated temporary tax benefits. Several temporary tax provisions that had previously been extended a number of times were allowed to expire during the 112 th Congress (see the " Tax Extenders in the 112th Congress " section below). Arguably, certain incentives were not extended as it was determined that their benefit did not exceed the cost. For example, tax incentives for alcohol fuels (e.g., ethanol), which can be traced back to policies first enacted in 1978, were not extended beyond 2011. The Government Accountability Office (GAO) had previously found that with the renewable fuel standard (RFS) mandate, tax credits for ethanol were duplicative and did not increase consumption. Tax policy may also be used to address temporary circumstances in the form of economic stimulus or disaster relief, for example. Economic stimulus measures might include bonus depreciation or generous expensing allowances. Various tax policies have also been enacted to provide relief following natural disasters. Recent examples of other temporary provisions that have been enacted to address special economic circumstances include the exclusion of mortgage forgiveness from taxable income during the recent housing crisis, the payroll tax cut, and the Section 1603 grants in lieu of tax credits to compensate for weak tax-equity markets during the economic downturn. It has been argued that provisions that were enacted to address a temporary situation should be allowed to expire once the situation is resolved. Congress may also choose to enact tax policies on a temporary basis for budgetary reasons. If policy makers decide that legislation that reduces revenues must be paid for, it is easier to find resources to offset short-term extensions rather than long-term or permanent extensions. Additionally, by definition the Congressional Budget Office (CBO) assumes under the current law baseline that temporary tax cuts expire as scheduled. Thus, the current law baseline does not assume that temporary tax provisions are regularly extended. Hence, if temporary expiring tax provisions are routinely extended in practice, the CBO current law baseline would tend to overstate projected revenues, making the long-term revenue outlook stronger. Thus, by making tax provisions temporary rather than permanent, these provisions have a smaller effect on the long-term fiscal outlook. Temporary tax benefits are a form of federal subsidy that treats eligible activities favorably compared to others, and channels economic resources into qualified uses. Extenders influence how economic actors behave and how the economy's resources are employed. Like all tax benefits, economic theory suggests every extender can be evaluated by looking at the impact on economic efficiency, equity, and simplicity. Temporary tax provisions may be efficient and effective in accomplishing their intended purpose, though not equitable. Alternatively, an extender may be equitable but not efficient. Policy makers may have to choose the economic objectives that matter most. Extenders often provide subsidies to encourage more of an activity than would otherwise be undertaken. According to economic theory, in most cases an economy best satisfies the wants and needs of its participants if markets allocate resources free of distortions from taxes and other factors. Market failures, however, may occur in some instances, and economic efficiency may actually be improved by tax distortions. Thus, the ability of extenders to improve economic welfare depends in part on whether or not the extender is remedying a market failure. According to theory, a tax extender reduces economic efficiency if it is not addressing a specific market failure. An extender is also considered relatively effective if it stimulates the desired activity better than a direct subsidy. Direct spending programs, however, can often be more successful at targeting resources than indirect subsidies made through the tax system such as tax extenders. A tax is considered to be fair when it contributes to a socially desirable distribution of the tax burden. Tax benefits such as the extenders can result in individuals with similar incomes and expenses paying differing amounts of tax, depending on whether they engage in tax-subsidized activities. This differential treatment is a deviation from the standard of horizontal equity, which requires that people in equal positions should be treated equally. Another component of fairness in taxation is vertical equity, which requires that tax burdens be distributed fairly among people with different abilities to pay. Most extenders are considered inequitable because they benefit those who have a greater ability to pay taxes. Those individuals with relatively less income and thus a reduced ability to pay taxes may not have the same opportunity to benefit from extenders as those with higher income. The disproportionate benefit of tax expenditures to individuals with higher incomes reduces the progressivity of the tax system, which is often viewed as a reduction in equity. An example of the effect a tax benefit can have on vertical equity is illustrated by two teachers who have both incurred $250 in classroom-related expenses and are eligible to claim the above-the-line deduction for expenses. Yet the tax benefit to the two differs if they are in different tax brackets. A teacher with lower income, who may be in the 15% income tax bracket, receives a deduction with a value of $37.50, while another teacher, in the 33% bracket, receives a deduction value of $82.50. Thus, the higher-income taxpayer, with presumably greater ability to pay taxes, receives a greater benefit than the lower-income taxpayer. Extenders contribute to the complexity of the tax code and raise the cost of administering the tax system. Those costs, which can be difficult to isolate and measure, are rarely included in the cost-benefit analysis of temporary tax provisions. In addition to making the tax code more difficult for the government to administer, complexity also increases costs imposed on individual taxpayers. With complex incentives, individuals devote more time to tax preparation and are more likely to hire paid preparers. The Congressional Budget Office (CBO) provides estimated costs of extending all tax provisions scheduled to expire before 2024 (see Table 1 ). CBO's estimates can be viewed as the cost of a long-term extension. The cost of a short-term extension, as proposed in the EXPIRE Act, is presented in Table 2 below. The cost of permanent extension of certain provisions as passed by the House can be found in Table 3 below. According to CBO's estimates, over the 2014 to 2024 budget window, extending all expiring tax provisions would cost $963.4 billion; extending temporary provisions that expired in 2013 would cost $762.1 billion; extending bonus depreciation would cost $296.4 billion; and extending expansions to the child tax credit, the earned income tax credit, and the American Opportunity Tax Credit currently scheduled to expire at the end of 2017 would cost $165.4 billion. This cost of extending "all other expiring provisions" includes the extension of all provisions scheduled to expire in 2013 (see Table 1 and the associated discussion below) as well as those scheduled to expire in years between 2013 and 2024. However, most of the cost of extension (79%) is associated with provisions that expired at the end of 2013. Since tax extender provisions are assumed to expire as scheduled by CBO, their extension—even if expected by policy makers—is not included in CBO's current law revenue baseline. As a result, CBO's revenue projections are higher than actual revenue levels that are likely to occur. Consequently, projected budget deficits under the current law baseline are smaller than actual deficits that are likely to occur. The President's FY2015 budget uses a baseline that assumes that the American Opportunity Tax Credit (AOTC), expansions to the earned income tax credit (EITC), and child tax credit (CTC) are made permanent. The baseline in the President's FY2015 budget, which assumes certain policies are extended, collects less revenue than CBO's current law baseline. The cost of providing a short-term extension, as proposed in the EXPIRE Act (discussed below), is less than the cost of extending expiring provisions through the budget window, as is done by CBO for the purposes of constructing the alternative fiscal scenario baseline. CBO scores, some might argue, provide a more accurate measure of the budget impact of temporary tax provisions. The JCT scores reflect the budget impact of the temporary extension relative to current law. If expiring provisions are temporarily extended, the 10-year revenue cost may be less than the cost in year 2015, as many of the expired provisions are tax deferrals, or timing provisions. Bonus depreciation is one example of a timing provision, where the short-term cost of extension is greater than the long-term or budget window cost. Extending 50% bonus depreciation would reduce revenues by $73.6 billion in 2015, while the cost over the 10-year budget window is $2.9 billion. Dozens of temporary tax provisions expired at the end of 2013 (see Table 2 ). Many of these provisions have been extended as part of previous "tax extender" legislation. For the purposes of this report, expiring provisions have been classified as belonging to one of six categories: individual, business, charitable, energy, community development, or disaster relief. The following sections provide additional details on expiring provisions within each category. Table 2 also notes which provisions would be extended by the EXPIRE Act. Table 2 also includes the 10-year (or budget window) cost of the extension through 2015, as proposed in the EXPIRE Act. All but one of the individual provisions that expired at the end of 2013 have been extended at least once. The longest-standing individual provision that has previously been extended is the above-the-line deduction for classroom expenses incurred by school teachers. This provision was first enacted on a temporary basis in 2002 and has regularly been included in tax extender packages. Other individual provisions that have been extended more than once include the deduction for state and local sales taxes, the above-the-line deduction for tuition and related expenses, the deduction for mortgage insurance premiums, and the parity for the exclusion of employer-provided mass transit and parking benefits. The one provision that has not been extended in the past, the health coverage tax credit, was first enacted without an expiration date as part of the Trade Act of 2002 ( P.L. 107-240 ). A January 1, 2014, termination date was enacted as part of an act to extend the Generalized System of Preferences in 2011 ( P.L. 112-40 ). Although the health care coverage credit would not have been extended as part of the chairman's mark of the EXPIRE Act, a two-year extension was agreed to during the April 3, 2014, Senate Finance Committee markup. All but one of the business provisions that expired at the end of 2013 have been extended at least once. Most of the business provisions scheduled for expiration in 2013 have been extended more than once. Long-standing provisions that are scheduled for expiration include the research tax credit, the rum excise tax cover-over, the Work Opportunity Tax Credit, and the active financing exception under Subpart F. Bonus depreciation and enhanced expensing allowances, which are often viewed as economic stimulus measures, are also scheduled to expire at the end of 2013. The April 1, 2014, chairman's mark of the EXPIRE Act proposed extending most of the expired business provisions. The three provisions that were not included in the April 1, 2014, proposal—the look-through treatment of payments between controlled foreign corporations, the seven-year amortization for motorsports racing facilities, and the special expensing rules for film and television production—were included in the modification release on April 3, 2014. All of the business-related provisions listed in Table 2 would be extended in the EXPIRE Act as reported by the Senate Finance Committee. The House has also voted to make permanent several business-related extenders (see " Tax Extenders Legislation in the 113th Congress " below). The four charitable provisions that expired at the end of 2013 have previously been extended multiple times. Provisions providing an enhanced deduction for non-corporate businesses donating food inventory were first enacted in response to Hurricane Katrina in 2005. The remaining charitable provisions set to expire were first enacted as part of the Pension Protection Act of 2006 ( P.L. 109-280 ). The April 1, 2014, chairman's mark of the EXPIRE Act would extend three of the four charitable provisions that expired at the end of 2013. The April 3, 2014, modification proposed extending the special rule for contributions of capital gain real property for conservation purposes. All four charitable provisions would be extended through 2015 in the EXPIRE Act as reported by the Senate Finance Committee. The House has also voted on July 17, 2014, to make permanent the four charitable-related extenders (see " Tax Extenders Legislation in the 113th Congress " below). The longest-standing energy-related provision that expired at the end of 2013 is the renewable energy production tax credit (PTC). This provision was first enacted in 1992. Several of the temporary energy-related tax provisions that are scheduled to expire at the end of 2011 were first enacted as part of the Energy Policy Act of 2005 (EPACT05; P.L. 109-58 ). These include the credit for construction of energy efficient new homes, the credit for energy efficient appliances, the deduction for energy-efficient commercial buildings, and the credit for nonbusiness energy property (also known as the tax credit for energy efficiency improvements for existing homes). Certain tax incentives for alternative technology vehicles and alternative fuel vehicle refueling property were also first included in EPACT05. Six energy-related provisions were excluded from the April 1, 2014, chairman's mark of the EXPIRE Act, although three of these provisions were included in the modification released on April 3, 2014, and one other included in the version of the EXPIRE Act that was reported by the Senate Finance Committee. The three provisions that had been excluded from the chairman's mark but were added in the modification are the PTC and the provisions for residential and commercial energy efficiency. The special rule related to the reporting of income from electric transmission restructurings was included in the EXPIRE Act as reported by the Senate Finance Committee. Energy-related provisions that would not be extended include tax credits for manufacturers of energy-efficient appliances and the placed in service date for partial expensing of certain refinery property. All four of the community development provisions that expired at the end of 2013 have been extended more than once. Qualified zone academy bonds (QZABs) are tax credit bonds available to state and local governments for elementary and secondary school renovation, equipment, teacher training, and course materials. QZABs were first made available in 1998. The New Markets Tax Credit (NMTC), designed to promote investment in low-income and impoverished communities, was first enacted in 2000. Tax incentives designed to encourage economic activity in the American Samoa and empowerment zones are also scheduled to expire at the end of 2013. The chairman's mark of the EXPIRE Act included extensions of the provisions related to QZABs, the NMTC, and the American Samoa economic development credit. The EXPIRE Act, as reported by the Senate Committee on Finance, included an extension of the empowerment zone tax incentives as well as modifications to the NMTC to allow unused allocations to be used for a manufacturing communities tax credit. Disaster relief tax provisions that expired at the end of 2013 are those that provide tax-exempt bond financing authority for facilities in the New York Liberty Zone and provisions related to nonrecognition of gain for areas damaged by the 2008 Midwestern storms. Several other temporary disaster relief provisions have been allowed to expire in recent years. Neither of the disaster relief provisions that expired in 2013 are included in the EXPIRE Act. In addition to the provisions that expired at the end of 2013, six tax provisions are scheduled to expire at the end of 2014. Three of these provisions are energy-related: (1) incentives for alternative fuels and alternative fuel mixtures involving liquefied hydrogen; (2) the credit for fuel cell motor vehicles; and (3) the credit for hydrogen alternative fuel refueling property. The other tax provisions expiring in 2014 are the automatic amortization extension for multiemployer defined benefits plans; the additional funding rules for multiemployer defined pension plans in endangered or critical status; and the deemed approval of adoption, use, or cessation of shortfall funding method for multiemployer defined benefits plans. The EXPIRE Act would extend the energy-related provisions expiring at the end of 2014 as well as the expiring provisions relating to multiemployer defined benefit pension plans through the end of 2015. As discussed above, the Senate's extenders bill, the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act ( S. 2260 ), would extend most expiring provisions through 2015. The EXPIRE Act would cost an estimated $84.9 billion over the 2014 through 2024 budget window. Of this cost, $87.4 billion is for the two-year extension of tax provisions that expired in 2013. Extending tax provisions that expire in 2014 would cost $0.1 billion. Other revenue provisions would raise $3.4 billion, while the Hire More Heroes Act of 2014 ( H.R. 3474 ) would cost $0.7 billion. The House has taken a different approach to tax extenders, instead considering legislation that would make permanent certain expired provisions (see Table 3 ). The House has passed legislation that would make nine of the expired provisions listed in Table 2 permanent. Taken together, permanently extending these nine provisions would reduce revenues by an estimated $511.4 billion over the 10-year budget window. Six of these nine provisions were included in the Jobs for America Act ( H.R. 4 ). Three other charitable-related provisions were passed as part of the America Gives More Act of 2014 ( H.R. 4719 ). The Committee on Ways and Means has reported legislation that would make two additional international-related extender provisions permanent, although this legislation has yet to be considered by the full House. Some of the legislation proposed in the House would not only extend expired provisions, but would also make policy changes. For example, the House-passed modification and permanent extension of the research credit ( H.R. 4429 and H.R. 4 ) would provide a permanent credit equal to 20% of a taxpayer's qualified research expenditures (QREs) in the current tax year above 50% of average annual QREs in the previous three tax years, 20% of its basic research payments in the current tax year above 50% of average annual basic research payments in the three previous tax years, and 20% of the amounts paid or incurred by the taxpayer in the current tax year for qualified energy research conducted by an energy research consortium. The House-passed proposals to make the increased expensing allowances permanent under Section 179 would index the limits for inflation, starting in 2015. The House-passed proposals to permanently extend 50% bonus depreciation would expand the list of eligible property to include qualified leasehold and retail improvement property, in addition to other changes. The American Taxpayer Relief Act (ATRA; P.L. 112-240 ) extended dozens of temporary tax provisions that had expired or were scheduled to expire at the end of 2012 (see Table 4 ). Many of these provisions were extended retroactively, as they had been allowed to expire at the end of 2011. The 10-year budgetary cost of extending temporary expiring provisions under ATRA was an estimated $73.6 billion. The largest of these provisions, in terms of revenue cost, were the credit for research and experimentation expenses ($14.3 billion), the extension and modification of the wind production tax credit (PTC) ($12.2 billion), and the exception under Subpart F for active financing income ($11.2 billion). Information on the cost of extending specific provisions can be found in Table 4 . Several provisions that might have been considered "traditional extenders"—that is, they had been extended multiple times in the past—were not extended under ATRA. Two charitable provisions, the enhanced deduction for donations of computer equipment, and the enhanced deduction for book inventory to schools, which were first enacted in 1997 and 2005 respectively, were allowed to expire. Other energy-related provisions, including the suspension of the 100%-of-net-income limitation on percentage depletion for oil and gas from marginal wells, first enacted in 1997, and the production tax credit (PTC) for refined coal, first enacted in 2004, were also allowed to expire. Tax incentives for ethanol, which were first enacted in 1978, were also not extended in ATRA, nor were provisions first enacted in 1997 that allowed for expensing of "brownfield" environmental remediation costs. The estate tax look-through rule for regulated investment company (RIC) stock, first enacted in 2004, was also not extended. A number of other provisions were allowed to expire at the end of 2012. Some of these provisions, such as the Section 1603 grants in lieu of tax credits program and 100% bonus depreciation, might have been classified as having been temporary stimulus measures. Among the other provisions that were allowed to expire were a number of disaster relief measures, including Gulf Opportunity (GO) Zone provisions and tax provisions related to the 2008 Midwestern Storms and Hurricane Ike.

Dozens of temporary tax provisions expired at the end of 2013, and several other temporary tax provisions are scheduled to expire at the end of 2014. Most of the provisions that expired at the end of 2013 have been part of past temporary tax extension legislation. Most recently, many temporary tax provisions were extended as part of the American Taxpayer Relief Act (ATRA; P.L. 112-240). Collectively, temporary tax provisions that are regularly extended by Congress—often for one to two years—rather than being allowed to expire as scheduled are often referred to as "tax extenders." The 113th Congress has considered legislation that would extend selected expired or expiring tax provisions. The Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act (S. 2260), which would extend most expired and soon-to-expire tax provisions through 2015, was reported by the Senate Finance Committee on April 28, 2014. The act subsequently became an amendment to H.R. 3474 which did not advance in the Senate, as a motion to end debate on H.R. 3474 was voted down on May 15, 2014. In contrast to the Senate, the House has voted to permanently extend certain expired tax provisions as part of the Jobs for America Act (H.R. 4), which passed the House on September 18, 2014. Several expired charitable-related provisions would be made permanent as part of the America Gives More Act of 2014 (H.R. 4719), which passed the House on July 17, 2014. The President's FY2015 Budget identifies several expiring provisions that should be permanently extended (and in some cases substantially modified), including the research and experimentation (R&D) tax credit, enhanced expensing for small businesses, the renewable energy production tax credit (PTC), and the new markets tax credit (NMTC). Several other expired provisions would be temporarily extended. The President's FY2015 Budget also assumes that the American Opportunity Tax Credit (AOTC), the earned income tax credit (EITC) expansions, and the child tax credit (CTC) expansions, that were extended through 2017 as part of ARTA, are made permanent. There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis provides legislators with an opportunity to evaluate the effectiveness of tax policies prior to expiration or extension. Temporary tax provisions may also be used to provide temporary economic stimulus or disaster relief. Congress may also choose to enact tax provisions on a temporary rather than permanent basis due to budgetary considerations, as the foregone revenue from a temporary provision will generally be less than if it was permanent. The provisions that expired at the end of 2013 are diverse in purpose, including provisions for individuals, businesses, the charitable sector, energy, community assistance, and disaster relief. Among the individual provisions that expired are deductions for teachers' out-of-pocket expenses, state and local sales taxes, qualified tuition and related expenses, and mortgage insurance premiums. On the business side, under current law, the R&D tax credit, the WOTC, the active financing exceptions under Subpart F, and increased expensing and bonus depreciation allowances will not be available for taxpayers after 2013. Expired charitable provisions include the enhanced deduction for contributions of food inventory and provisions allowing for tax-free distributions from retirement accounts for charitable purposes. The renewable energy production tax credit (PTC) expired at the end of 2013, along with a number of other incentives for energy efficiency and renewable and alternative fuels. The new markets tax credit, a community assistance program, also expired at the end of 2013.

CRS Division abbreviation: "FDT" = Foreign Affairs, Defense, and Trade Division. For the most controversial FY2001 Foreign Operations issue - internationalfamily planning - Congress increased spending to $425 million. Lawmakers,however, restricted the obligation of funds until after February 15, 2001. OnJanuary 22, 2001, two days after taking office, President George W. Bush issued aMemorandum to the USAID Administrator directing him to "reinstate in full all ofthe requirements of the Mexico City Policy in effect on January 19, 1993." Aseparate statement from the President's press secretary stated that President Bushwas "committed to maintaining the $425 million funding level" for populationassistance "because he knows that one of the best ways to prevent abortion is byproviding quality voluntary family planning services." On February 15, 2001,USAID released specific policy and contract guidelines to implement the President'sdirective. These guidelines were re-issued by the White House on March 28 in orderto block an early congressional vote to overturn the Mexico City restrictions. Previously, on November 6, 2000, President Clinton signed into law a $14.9 billion Foreign Operations Appropriations for FY2001 ( P.L. 106-429 ; H.R. 4811 ). The spending measure includes both regular FY2001requested programs as well as selected FY2000 supplemental funding proposals thatCongress had rejected earlier in the year. The enacted legislation falls about $550million, or 3.5%, below the President's combined FY2000 supplemental/FY2001requests, but is substantially higher than the roughly $13.4 billion spendingmeasures passed by the House and Senate during the summer. Moreover, P.L.106-429 fully funds several top Administration priorities, including $435 million forinternational debt relief under the Heavily Indebted Poor Country (HIPC) initiative. Congress further boosted funding for several global health programs, including $315million for HIV/AIDS and $60 million for malaria control. The annual Foreign Operations appropriations bill is the primary legislativevehicle through which Congress reviews and votes on the U.S. foreign assistancebudget and influences executive branch foreign policy making generally. (1) It containsthe largest share -- about two-thirds -- of total international affairs spending by theUnited States (see Figure 1 ). The legislation funds all U.S. bilateral developmentassistance programs, managed mostly by the U.S. Agency for InternationalDevelopment (USAID), together with several smaller independent foreign aidagencies, such as the Peace Corps and the Inter-American and African DevelopmentFoundations. Most humanitarian aid activities are funded within Foreign Operations,including USAID's disaster program and State Department's refugee relief support. (2) Foreign Operations includes separate accounts for aid programs in the former SovietUnion (also referred to as the Independent States account) and Central/EasternEurope, activities that are jointly managed by USAID and the State Department. Security assistance (economic and military aid) for Israel and Egypt is also part of theForeign Operations spending measure, as are smaller security aid programsadministered largely by the State Department, in conjunction with USAID and thePentagon. U.S. contributions to the World Bank and other regional multilateraldevelopment banks, managed by the Treasury Department, and voluntary paymentsto international organizations, handled by the State Department, are also funded inthe Foreign Operations bill. Finally, the legislation includes appropriations for threeexport promotion agencies: the Overseas Private Investment Corporation (OPIC),the Export-Import Bank, and the Trade and Development Agency. From the perspective of congressional oversight and involvement in U.S. foreign aid policy making, the Foreign Operations bill has taken on even greatersignificance during the past 15 years. Congress has not enacted a foreign aidauthorization bill since 1985, leaving most foreign assistance programs withoutregular authorizations emanating from the legislative oversight committees. As aresult, Foreign Operations spending measures developed by the appropriationscommittees increasingly have expanded their scope beyond spending issues andplayed a major role in shaping, authorizing, and guiding both executive andcongressional foreign aid and broader foreign policy initiatives. It has been largelythrough Foreign Operations appropriations that the United States has modified aidpolicy and resource allocation priorities since the end of the Cold War. Thelegislation has also been a key tool used by Congress to apply restrictions andconditions on Administration management of foreign assistance, actions that havefrequently resulted in executive-legislative clashes over presidential prerogatives inforeign policy making. Table 1. Status of Foreign OperationsAppropriations, FY2001 President Clinton submitted his FY2001 federal budget request to Congress on February 7, 2000, including funding proposals for Foreign Operations Appropriationsprograms. Subsequently, House and Senate Foreign Operations Subcommittees heldhearings, including testimony from Secretary of State Albright, Treasury SecretarySummers, and USAID Administrator Anderson. The Senate AppropriationsCommittee bypassed subcommittee markup, and ordered reported S. 2522 on May 9. Because of disputes over scheduling and the opportunity by theminority to offer amendments to other legislation, the Senate delayed taking up S. 2522 . Those problems were settled and the Senate approved S. 2522 on June 22. The House Foreign Operations Subcommitteemarked up its companion bill, H.R. 4811 , on June 20, followed by fullCommittee approval on June 27. The House approved H.R. 4811 onJuly 13 (239-185). House and Senate conferees filed a conference report for H.R. 4811 on October 24 ( H.Rept. 106-997 ). Congress approved thereport on October 25, the House by a vote of 307-101 and Senate by a vote of 65-27. President Clinton signed into law H.R. 4811 on November 6, 2000 ( P.L.106-429 ). (3) As the United States has adjusted its foreign and defense policy to a post-ColdWar environment, one of the major foreign assistance challenges for Congress andexecutive branch policymakers has been to formulate the most effective foreign aidprogram amidst a tightening resource base. A dominant characteristic of ForeignOperations funding trends in the most recent years has been the degree to which foreign policy contingencies and international disasters have created demands foradditional resources beyond those originally requested by the President. Congress approved substantial amounts for FY1999 and FY2000 through "emergency" orsupplemental appropriation mechanisms, amounts that are over and above what isenacted in "regular" Foreign Operations bills. After peaking at $20.7 billion in FY1985, Foreign Operations appropriations began a period of decline, falling to about $12.3 billion in FY1997. Foreign aidspending cuts were especially sharp in FY1996 when Congress cut funding by $1.15billion, nearly 9% from the previous year. Many government and non-governmentexperts argued that these budget reductions seriously undermined U.S. foreign policyinterests and limited the ability of American officials to influence overseas events. After Foreign Operations funding levels fell again in FY1997 -- although by much smaller amounts -- the State Department and other executive agencieslaunched an aggressive campaign to reverse the decade-long decline in the foreignpolicy budget. This effort coincided with congressional approval of a near $1 billionincrease for FY1998, setting Foreign Operations appropriations at $13.15 billion. Foreign Operations funds rose again to $15.4 billion in FY1999 when lawmakers, atthe urging of the White House, added nearly $900 million in the final days of the105th Congress and another $2.1 billion for Central American hurricane relief andKosovo emergency assistance in supplemental funding. Amounts enacted for FY2000 - $16.5 billion - were also augmented by late-year "emergency" add-ons recommended by the President, including $1.8 billionfor the Wye River/Middle East peace accord and $1.1 billion supplementalassistance, mostly for a new counternarcotics initiative in Colombia. As shown in Table 2 , the amount for FY2000 is the highest in six years and the largest fundinglevel, in nominal terms, for Foreign Operations since FY1985. Nevertheless, whencalculated using constant dollars - taking into account the effects of inflation -FY2000 Foreign Operations amounts are 47% less than the high point of FY1985,15% less than the annual average appropriation during the late 1980s, and 3% lessthan FY1992, a year that might be considered the first post-Cold War foreign aidbudget. FY2000 Foreign Operations spending level represents 0.91% of the entirefederal budget and 2.8% of total discretionary budget authority. By comparison,these same figures in FY1985 were 2% and 4.6%, respectively. Table 2. Foreign Operations Appropriations, FY1994 to FY2000 (discretionary budget authority in billionsof current dollars) * FY1999 excludes $17.861 billion for the IMF. Usually, Appropriation Committees begin markups of their spending bills only after Congress has adopted a budget resolution and funds have been distributed to theAppropriations panels under what is referred to as the Section 302(a) allocationprocess, a reference to the pertinent authority in the Congressional Budget Act. Following this, House and Senate Appropriations Committees separately decide howto allot the total amount available among their 13 subcommittees, staying within thefunctional guidelines set in the budget resolution. This second step is referred to asthe Section 302(b) allocation. As noted above, foreign policy funds are appropriatedwithin four bills with Foreign Operations having the largest share of around 67-70%in most years. How much foreign policy money to allocate to each of the four subcommittees, and how to distribute the funds among the numerous programs remain decisionsexclusively reserved for the Appropriations Committees. Nevertheless, overallceilings set in the budget resolution can have significant implications for the budget limitations within which the Foreign Operations subcommittees will operate whenthey meet to mark up their annual appropriation bills. The FY2001 budget resolution that cleared Congress on April 13 ( H.Con.Res. 290 ) strongly indicated that the Foreign Operationssubcommittees would receive a significantly reduced Section 302(b) allocation fromthat assumed in the President's budget. H.Con.Res. 290 sets a $20billion target for total international affairs discretionary budget authority, a figureabout 12% below the request. (4) On May 4, House and Senate Appropriations Committees released Section 302(b) funding allocations for each of their 13 appropriation bills. In the House,Foreign Operations programs received $13.28 billion, sharply below the President's$15.1 billion request ($14.8 billion if Plan Colombia funds were enacted, as theywere, in FY2000; see footnote 3). The allocation was over $3 billion less than totalamounts approved for FY2000 and $213 million below the "base" FY2000appropriation, after deducting the Wye River/Middle East peace money. The Senatepanel approved a slightly higher Foreign Operations level - $13.39 billion. But thiswould still be insufficient to fund increases sought for FY2001, and at best, wouldresult in an overall total slightly below a "freeze" as compared to the FY2000 "base"amount. Practices in the past few years suggest, however, that the initial 302(b) allocation for Foreign Operations, as well as other spending bills, would changesignificantly, especially at the latter stages of the appropriations debate. In 1999, forexample, House and Senate Foreign Operations Subcommittees received allocationsof $12.6 billion and $12.7 billion, respectively, levels which established the ceilingfor House and Senate passed bills ( H.R. 2606 and S. 1234 ). Nevertheless, following a Presidential veto of H.R. 2606 because of lowfunding levels and continued White House pressure to raise foreign aid spending,during end-of-the session negotiations, Congress agreed to $15.3 billion for ForeignOperations. Much of the additional funds were designated as "emergency"appropriations, amounts that did not count against allocation limits. Although the early 302(b) allocation for Foreign Operations resulted in House and Senate bills of around $13.3 billion, the Administration pressed for additionalfunding throughout the process. Between June and October House and SenateAppropriations Committees filed numerous revisions to the original 302(b)allocations, culminating on October 25 in a new Foreign Operations level of $14.9billion. This subsequently allowed Congress to approve on the following day a $14.9billion Foreign Operations appropriations for FY2001. In February 2000 President Clinton asked Congress to appropriate $15.1 billionfor FY2001 Foreign Operations. There were two basic ways in which to compare theproposal with existing spending for FY2000. The first was to make a straightcomparison between enacted FY2000 Foreign Operations levels and the FY2001request. Using these reference points, the FY2001 budget recommendation wasabout $1.4 billion, or 8% less than total FY2000 appropriations. Another means ofcomparison, and one that was frequently used by congressional Budget andAppropriations Committees, was to compare funding for foreign aid programscontinuing from year to year, that would deduct appropriations provided underspecial circumstances, such as emergency requirements, one-time, unique initiatives,or supplemental funding. For FY2000, Congress approved under an emergencydesignation a one-time, $1.8 billion aid package for Israel, Jordan, and Palestiniansin support of the November 1998 Wye River/Middle East peace accord. Congressfurther enacted in P.L. 106-246 an additional $1.1 billion in FY2000 ForeignOperations supplemental spending, mostly for counternarcotics in Colombia. Underthis second comparison approach, which adjusts the FY2000 appropriation level from$16.5 billion to $13.5 billion, the FY2001 Foreign Operations request was 12% higher than FY2000 spending. Table 3. Summary of Foreign Operations Appropriations (Discretionary funds - in millions of dollars) Note: For comparative purposes and to conform to the account structure of the FY2000 and FY2001 enacted Foreign Operations, some funding in the FY2001request and Senate bill have been shifted: UNICEF, GAVI, Inter-AmericanFoundation, and African Development Foundation amounts requested for FY2001are included in development aid under title II. Senate funding for UNICEF, approvedin title IV, is also shifted to development aid in title II. * Pursuant to the Consolidated Appropriations Act, FY2001 ( H.R. 4577 ), signed into law on Dec. 21, 2000, most FY2001 appropriation bills, includingForeign Operations, are reduced by 0.22%. For Foreign Operations, there will be acut of about $33 million from the $14.897 billion level. ** FY2001 includes combined FY2000 supplemental and FY2001 requests for debtrelief. The President's budget plan raised funding levels for nearly every Foreign Operations account. Those receiving the largest increases or which representedspecial Administration initiatives included: Export-Import Bank - The $214 million, or 26% funding increase for Eximbank activities in FY2001 might have actually supported a smallerlevel of U.S. exports than in FY2000, according to the Administration. OMB issueda new risk assessment methodology, effective for FY2001, which determines theamount of appropriated funds necessary to back Bank lending and insuranceoperations. Because of higher risk levels for some potential countries, Eximbankestimated that the FY2001 appropriation would fall 14.5% below the equivalentcurrent appropriation. USAID development assistance - Overall bilateral development aid would have grown by nearly $350 million, or 18%. Most of theincrease would support Administration initiatives to bolster family planning programs (+45%), HIV/AIDS funding (+39%), and democracy promotion (+24%),and to launch two new environmental activities protecting tropical forests andpromoting cleaner energy sources. (See more below under specialissues.) Debt reduction for poor developing nations - The FY2001 request included $262 million for debt reduction, $238 million of which supportedU.S. participation in the Heavily Indebted Poor Country (HIPC) initiative. This wasmore than double debt relief appropriations for FY2000, although Congress rejecteda $210 million supplemental request for a U.S. contribution to the HIPC Trust Fund. For the FY2000 supplemental and FY2001 regular appropriation combined, theAdministration sought $435 million for HIPC (See more below under specialissues.) Nonproliferation, Anti-terrorism, Demining, and Related Programs account (NADR) - The Administration sought a $136 million, or 63%increase for an assortment of counterproliferation and anti-terrorism programs inFY2001. Of special note was the doubling of resources for activities aimed atfighting terrorists, including money to establish a new anti-terrorism training facilityfor foreign officials. The account also projected a $20 million increase - to $55million - for payment of heavy fuel oil to North Korea as part of the Korean EnergyDevelopment Organization (KEDO) designed to block North Korea's nuclearweapons development program. A June 5, 2000 budget amendment added $41.2million to the account for a contribution to the costs of the trial in the Netherlands ofthe Lockerbie bombing suspects. Voluntary contributions to International Organizations - The FY2001 request increased U.S. contributions to about 20 organizations by $83million, or 45%. Nearly all of the additional resources would support the U.N.Development Program (+$10 million) and a new Global Alliance for Vaccinesand Immunizations (GAVI) initiative ($50 million). The U.N. Population Fund(UNFPA) contribution would remain the same at $25 million. Multilateral Development Bank contributions - Overall, the budget proposed a $235 million, or 24% increase for U.S. commitments to the WorldBank and regional multilateral development banks (MDBs). Most of the additionalfunding ($140 million) would go to the Global Environment Facility, anorganization for which the United States had fallen into significant arrears due tocongressional reductions in recent years. Summary of Debate. The first congressional action on the Foreign Operations Appropriations for FY2001 occurredon May 9 when the Senate Appropriations Committee marked up and reported S. 2522 . The legislation also included FY2000 supplemental fundingfor various Foreign Operations programs. (5) The fullSenate approved the measure onJune 22. The House Foreign Operations Subcommittee marked up its companionbill, H.R. 4811 , on June 20, followed by full Committee endorsementon June 27. The full House approved the measure on July 13. Subsequently, theSenate took up H.R. 4811 on July 18, deleted the House-passed text, andinserted the text of S. 2522 . On October 24, House Foreign OperationsSubcommittee Chairman Callahan introduced a new bill - H.R. 5526 - reflecting agreements reached during informal Foreign Operations conferencecommittee discussions. On the same day, the full conference committee met andissued a report ( H.Rept. 106-997 ) incorporating the text of H.R. 5526 into H.R. 4811 . Congress approved the report on October 25, the Houseby a vote of 307-101 and Senate by a vote of 65-27. President Clinton signed thelegislation on November 6 - P.L. 106-429 . (6) FY2000 Supplemental. On June 29, Congress passed an $11.2 billion supplemental spending measure ( P.L. 106-246 ; H.R. 4425 ), including $1.094 billion in Foreign Operations funds. Mostof money - $1.019 billion - supported the full FY2000/2001 Administration requestfor a counternarcotics initiative in Colombia. The legislation also provided $50million in additional economic aid to Kosovo, Croatia, and Montenegro ($251million requested), and $25 million for southern Africa flood relief ($200 millionrequested). H.R. 4425 further rejected the President's supplementalrequest for a $210 million contribution to the HIPC Trust Fund, an initiative toprovide multilateral debt relief to the world's poorest nations. Congress reconsideredand approved HIPC funds and portions of other rejected supplemental requests,however, in October when lawmakers made final decisions on FY2001 ForeignOperations spending levels. Senate action. As approved by the Senate, S. 2522 provided $13.4 billion for Foreign Operations programsin FY2001. The amount was about $110 million less than FY2000 enacted, aftersubtracting from FY2000 the one-time, $1.8 billion emergency aid package for Israel,Jordan, and the Palestinians in support of the Wye River/Middle East Peace Accord,and the recently approved supplemental. (7) The Senaterecommendation fell about$1.7 billion, or 11%, below the President's (at that time) $15.1 billion FY2001request. Nearly every account was funded below the Administration's request, andseveral were reduced from FY2000 enacted amounts: USAID operating expenses ($510 million) was $10 million below enacted and requested amounts. At this level, USAID would most likely facethe choice of reducing plans for growth in either staff salaries and benefits, overseassupport costs, or information technology enhancements. Former Soviet Union aid ($775 million) declined by about $65 million compared with enacted and proposed levels. But because earmarks in S. 2522 for Ukraine ($175 million), Georgia ($94 million), and Armenia($89 million) were slightly higher than amounts requested, the overall accountshortfall likely would have fallen most heavily on aid to Russia, proposed at $162million. Inter-American Foundation received no funding in S. 2522 for FY2001. The legislation further authorized, but did notrequire, the President to abolish the Foundation. Last year, Congress also authorizedthe President to terminate the Inter-American Foundation, appropriating $5 millionfor the small, grassroots development organization, an amount believed to besufficient to cover existing grants and contract obligations, and to conclude any otheroutstanding operations of the Foundation. The President, however, did not exercisethis authority, and requested $20 million for FY2001 programs. The SenateAppropriations Committee believed that there would be enough funds carriedforward into FY2001 that would cover Foundation terminationcosts. Peace Corps . As proposed by the Committee bill, Peace Corps funds ($220 million) would have fallen below FY2000 enacted ($245 million) andFY2001 requested ($275 million), and would undermine Administration efforts toachieve a 10,000 Peace Corps volunteer target. During floor debate, an amendment(Dodd) was approved, providing an additional $24 million to be drawn from otherparts of the bill and allowing Peace Corps levels to remain at roughly the FY2000level. Debt reduction resources to support the Heavily Indebted Poor Country Initiative (HIPC) - $75 million - were significantly less than the combined$475 million FY2000 supplemental/FY2001 request. The most immediate effectwould have been to delay final debt relief for Bolivia because of funding shortfallsin the HIPC Trust Fund. (See below under Major Spending and PolicyIssues.) International narcotics control appropriations ($220 million) were roughly $90 million below enacted and requested amounts. This would notaffect Plan Colombia, which was funded elsewhere, but would cut by nearlyone-third continued funding for other anti-drug initiatives. Peacekeeping operations funds ($85 million) were well below FY2000 ($153 million) and FY2001 proposed ($134 million) amounts. The SenateAppropriations Committee assumed no funding for operations in Haiti ($4 million). Cuts recommended in S. 2522 might also have jeopardizedAdministration plans to support OSCE activities in Kosovo and train and equip anAfrican crisis peacekeeping force. World Bank, International Development Association (IDA) contribution of $750 million would have added about $85 million to arrears owed bythe U.S. S. 2522 further cut funding for the Global EnvironmentFacility, Asian Development Bank, African Development Fund, and othermultilateral organizations. In a few areas, S. 2522 increased Foreign Operations spending over enacted amounts, supporting in some cases Administration priorities. The majorSenate Committee initiative was the creation of a Global Health account withindevelopment assistance spending. This account, which incorporated much, althoughnot all, of the Child Survival and Infectious Disease fund, represented acomprehensive funding approach to protect global health, attack poverty, and shieldAmericans from infectious diseases easily transmitted across borders. The $691million appropriated in S. 2522 (including a Senate floor amendmentadding $40 million to the Committee recommendation) provided earmarks forHIV/AIDS ($255 million), malaria ($65 million), tuberculosis ($51 million), and aU.S. contribution ($50 million) to the Global Fund for Children's Vaccines. Foranother key economic aid issue - population assistance - S. 2522 earmarked $425 million within development program funding which, whencombined with resources from other accounts, would total about $482 million. Thiswas $110 million higher than FY2000 spending, but below the request of $541million. S. 2522 further replaced abortion-related restrictions thatapplied to FY2000 funds with language that would permit the White House to restoreprevious family planning policy in which no U.S. funds can be used for performingor promoting abortions, but no conditions are imposed on how foreign organizationsspend funds raised from non-U.S. Governments sources. (See below under MajorFunding and Policy issues for more discussion of development assistance populationaid.) House action. As approved by the House on July 13, H.R. 4811 provided $13.3 billion, about $200 millionless than the FY2000 Act (after subtracting from FY2000 the one-time, $1.8 billionWye River/Middle East peace aid package and the enacted supplemental), and $1.8billion, or 12%, below the President's (at the time) $15.1 billion FY2001 request. As is the case with the Senate bill, many accounts fell below the Administration request: USAID development assistance (other than Child Survival) ($1.258 billion) was roughly $250 million below the request. USAID operating expenses ($509 million) was $11 million below enacted and requested amounts. As noted above, USAID would confrontseveral options to cut operations in order meet the reducedappropriation. Former Soviet Union aid ($740 million) declined by about $95 million compared with enacted and proposed levels. The House panel allocateda percentage (12.5%) of the account total for Armenia and Georgia, resulting insimilar amounts as earmarked by the Senate. The House bill, however, did notearmark funds for Ukraine, providing somewhat more flexibility for the StateDepartment in making its country allocations for Russia and other former Sovietstates. Foreign Military Financing (FMF) was reduced during House debate by $242 million to $3.268 billion, $270 million below the request. The cutswere part of off-set packages that allowed for an increase in debt reduction andHIV/AIDS funding. Not only would the House-passed amount squeeze FMFrequests for new members of NATO, Partnership-for-Peace nations, and Jordan, butalso falls $12 million below the combined $3.28 billion request for Israel andEgypt. World Bank, International Development Association (IDA) contribution of $566.6 million was about $270 million below the requested amount. The House measure further reduced by significant levels proposed U.S. contributionsto the Global Environment Facility, Asian Development Bank, African DevelopmentFund, and other multilateral organizations. Overall, the House measure included $1billion for multilateral assistance, one-third less than requested and 25% belowFY2000 amounts. As has been the case in House Foreign Operations spending bills since 1995, the legislation placed priority on child survival and infectious disease activities. TheHouse bill approved $886 million, $74 million above the request and $117 millionhigher than FY2000 levels. Initially, H.R. 4811 , as reported, had provided $82.4 million in debt reduction resources to support the Heavily Indebted Poor Country Initiative (HIPC),a level that, like the Senate's, was well below the combined $475 million FY2000supplemental/FY2001 request. During floor debate, the House adopted anamendment (Waters, 216-211) that raised this amount to $238 million, $24 millionbelow the FY2001 request, but still far less than the combined request. Conference agreement. As enacted, Congress approved $14.9 billion for Foreign Operations spending in FY2001. (8) Thetotal, however, includes not only amounts requested for this year, but also severalitems proposed as FY2000 supplementals. Prior to reaching agreement, House andSenate conferees reconsidered some of the FY2000 supplementals that lawmakersrejected earlier in the year, and included about $470 million as part of the $14.9billion total. After adjusting the combined President's request to include bothFY2000 supplementals and regular FY2001 proposals, the $14.9 billion ForeignOperations appropriations falls about $500 million, or 3.5% below theAdministration's request. Nevertheless, P.L. 106-429 represents a substantialincrease over the roughly $13.35 billion funding bills passed previously by the Houseand Senate. Moreover, P.L. 106-429 fully funds several top Administrationpriorities, including HIPC debt relief contributions. Major items enacted in theFY2001 Foreign Operations bill include: HIPC debt relief is set at $435 million, as requested in both FY2000 supplemental and FY2001 requests. In addition, H.R. 4811 authorizes the United States to support the full IMF gold revaluation transactionwhich provides the Fund with the necessary resources to cancel debt owed by HIPCqualifying countries. Global health programs receive substantial funding increases under the enacted legislation, with spending on HIV/AIDS activities climbing to$315 million. Malaria ($50 million), tuberculosis ($45 million), and GAVI ($50million) are also funded at or well above the requestedamounts. The Child Survival and Disease Program Fund is funded at $963 million, nearly double the level of six years ago and one-third more than inFY2000. Child survival programs are earmarked at $295 million, UNICEF at $110million, and basic education at $103 million. USAID development assistance falls about $200 million, or 13% below the President's request, but $90 million, or 7% higher than inFY2000. Family planning assistance is set at $425 million, the highest level since FY1995, but below the President's $541.5 million request. None of thefunds, however, could be obligated until February 15, 2001. As many expected,President Bush elected, on January 22, 2001, to apply abortion restrictions as acondition of eligibility for foreign organizations to receive USAID grants. OnFebruary 15, USAID announced guidelines for implementing the re-imposed MexicoCity policy conditions under which all FY2001 population aid funds willfall. USAID operating expenses increased in the enacted legislation to $520 million, the same as FY2000 and requested forFY2001. Inter-American Foundation receives $12 million, less than the $20 million requested, but higher than last year's $12 million appropriation. Once again, Congress grants the President discretionary authority to abolish theFoundation. Serbia aid is funded at up to $100 million, but cannot be obligated after March 31, 2001, unless the President certifies that, among otherthings, the Yugoslav government is cooperating with the International CriminalTribunal regarding the investigation and transfer of thoseindicted. Peace Corps receives $265 million, up $20 million from FY2000. Foreign Military Financing (FMF) is restored to $3.545 billion, slightly above the requested amount and $125 million higher than FY2000. This will provide full funding for Israel, Egypt, and Jordan. Conferees further added$31 million for southeast Europe that had originally been requested as an FY2000supplemental. Multilateral Development Bank contributions increase significantly over earlier House and Senate-approved amounts, although the totalfalls about $200 million below the request. The World Bank IDA receives $775million, the same as in FY2000, but $60 million less thanproposed. In addition to funding decisions made by Congress in the Foreign Operationsappropriation bill, the annual spending measure also includes a wide range of policyprovisions that frequently raise contentious foreign policy disagreements between thePresident and Congress. As mentioned above, because Congress has not enactedforeign aid authorization bills for over a decade, the Foreign Operationsappropriations legislation often becomes the vehicle for debate on the conduct ofU.S. foreign policy more generally. Many of these policy provisions take the formof conditions or restrictions on how the President can use money included in thespending bill. Many of these provisions are opposed by the Administration asexcessively limiting its ability to manage American foreign policy. Thelegislative-executive policy differences have in the past delayed the enactment of theForeign Operations bill or have prompted a presidential veto. Among the most significant funding and policy issues raised during congressional debate in 2000 on the Foreign Operations appropriation measure wereconflicting executive-legislative branch development assistance strategy prioritiesand new Administration initiatives, restrictions on international family planningprograms, regional and country aid allocations, and efforts by the Administration tosecure funding to reduce debt burdens of the poorest developing countries. Since the end of the Cold War, a recurring debate has focused on what should replace the anti-communist foreign aid rationale of the past 50 years. A morefundamental question raised by some, especially critics of development assistance,is whether the United States needs to maintain an active, globally focused economicaid program. Many of these critics argue that aid can be transformed into a smaller,more targeted, and often privatized instrument to support only the highest priorityU.S. foreign policy interests. Although there has been no definitive consensus on priorities, the Clinton Administration has strongly supported the retention of an activist foreign aid policywhich can be used to bolster a variety of U.S. foreign policy initiatives around theworld. In early 1994, USAID released its blueprint for a post-Cold War developmentaid policy, based around the goal of "sustainable development," and its four strategiesof promoting economic growth, stabilizing global population, protecting theenvironment, and advancing democracy. More recently, USAID added a fifthstrategy aimed at developing human capacity through education. Since adopting these strategies in 1994, USAID has maintained that they operate as inter-linked, mutually reinforcing elements of an overall U.S. effort to promote theadvancement of market economies and democratic transitions in developing nations. Officials argue that U.S. aid is justified until countries reach a point of sustainabilitythat no longer requires external aid. Funding reductions, congressional restrictions,and fluctuating Administration priorities, however, have required USAID to alter themix of resources devoted to each of the strategies, raising questions over whether theintegrative, mutually reinforcing rationale can be maintained. Congress, for example, limited development aid for population programs in FY1996-FY2000 to roughlytwo-thirds of the amount provided in FY1995. (See below for more discussion onfamily planning restrictions.) Further, the State Department's Bureau of GlobalAffairs has in the past placed a high priority on environment programs and pressedUSAID to allocate the maximum amount possible to such activities. As a result, theenvironment sector of sustainable development has not declined as much as it mighthave otherwise. Table 4. USAID Goals (inmillions of dollars) Source: USAID. Amounts in this table represent total USAID economic assistance funded across several Foreign Operations accounts, including DevelopmentAssistance, Child Survival and Diseases, Economic Support Fund, Eastern Europe,and Independent States of the former Soviet Union. * Includes a one-time, $450 million Wye River/Middle East Peace economic package for Jordan and the Palestinians. Excluding this special supplemental, FY2000 totals$5,517 million. The FY2000 estimate does not include supplemental funds approvedin P.L. 106-246 for counternarcotics programs in Colombia and Balkan assistance. A central theme for the past five years has been differences between Congress and the executive branch regarding funding levels for programs supporting childsurvival, basic education, and efforts against HIV/AIDS and other infectiousdiseases. Despite cutting overall development aid in FY1996-FY1997 by about 23%from FY1995 levels, Congress earmarked children and disease programs at amountsequal to or somewhat greater than those allocated in FY1995, making the cuts on allother elements of sustainable development closer to 30%. Congress reduced thePresident's FY2000 development aid request by $80 million overall, but lawmakersset funding targets for child survival and infectious disease activities $18 millionhigher than proposed. As a result, USAID cut funding for economic growthprograms by $49 million, environment projects by $37 million, and democracypromotion activities by $18 million below what the agency had planned for FY2000. (9) Congressional proponents of the child survival priority argue that even though budget pressures require the United States to reduce or hold the line on foreign aidspending, the protection of children remains a core American value demanding thatcuts should be implemented without putting at risk the lives and well-being of smallchildren in developing nations. They further point out that the spread of infectiousdiseases poses a direct threat to U.S. citizens, and that American national interestsrequire continued support for global efforts to reduce or eliminate such illnesses. Although agreeing with the importance of child survival and infectious disease programs, USAID officials apply a broader definition to the terms, arguing, forexample, that efforts to protect small children go well beyond immunizations andaccess to other health services. The quality of a child's life, they assert, also isdetermined by an array of other factors, including the degree of relative stability insociety, protection of the surrounding environment, access to adequate shelter, andimplementation of sound economic policies that will ensure jobs and economicopportunities in the future. Consequently, they contend, that the "squeeze" that thesetargets place on other areas of sustainable development partially undermines thesuccess of other programs that benefit children. FY2001 Request. As has been the pattern the past few years, USAID's economic assistance request for the Agency'sfive main objectives in FY2001 reduced or maintained at FY2000 levels funding forseveral congressional priorities while increasing aid overall by $377 million, or 7%(after excluding from FY2000 the one-time Wye River/Middle East peace package). The $5.9 billion request would have cut funds for child survival programs by $25million and infectious diseases, other than HIV/AIDS, by $7 million from FY2000appropriations. (10) The proposed budget furtherheld spending steady formicroenterprise and reduced amounts for agriculture and food security programs by$18 million. (11) Both of these latter activities aretargets of special congressionalinterest. USAID requested significant increases for several other sustainable activities, plus funding to launch a few new initiatives: Programs combating the spread of HIV/AIDS , especially in Africa, were a major priority of the Administration, both within USAID and acrossother Federal agency budgets, including Health and Human Services, Center forDisease Control, and DOD. Vice President Gore announced in January 2000 that theUnited States would increase spending to $325 million in FY2001, up $100 millionfrom existing levels, for AIDS education, prevention, and treatment in Africa, India,and other areas. HIV/AIDS funding from USAID development aid accounts wouldgrow by nearly $50 million, or 28% in FY2001. Congress has also made AIDSfunding a priority in recent years. Numerous bills were introduced in 2000supporting and/or expanding the Administration's initiative, and one - H.R. 3519 ; P.L. 106-264 - was enacted into law authorizing $300million for HIV/AIDS programs. (12) Population assistance represented the largest single funding increase for FY2001, rising by $169 million, or 45% from FY2000 amounts. Lastyear, the White House reluctantly accepted new congressional restrictions on abortionand eligibility of foreign family planning organizations implementing USAIDpopulation programs. The Administration wanted to restore family planningassistance funding to levels enacted for FY1995, the year before Congress and thePresident began to engage in contentious debates over abortion and internationalfamily planning. (See next section for further discussion on thisissue.) Environmental funding would have grown significantly in two environmental sectors under the Administration's request - for biodiversity and fora new clean energy initiative. Last year, Congress directed USAID to restorebiodiversity funding to the same proportion of development assistance funds itreceived in FY1995. While USAID met the roughly $100 million congressionaltarget for FY2000 under the proportional requirement, the Administration sought a$26 million, or 27% increase for FY2001. USAID also planned to launch a new,$30 million clean energy initiative. Congressional action. The Senate approved bill, S. 2522 , set USAID economic assistance - combining allaccounts supporting the Agency's development goals - at $5.8 billion, about $100million below the request. For sustainable development assistance specifically, theSenate measure set the budget roughly mid-way between FY2000 enacted andFY2001 requested levels. The $2.17 billion sustainable development appropriation(an amount that for comparative purposes includes UNICEF contributions), wasnearly $230 million, or 12%, higher than FY2000 spending. The centerpiece of theSenate proposal was the creation of a new $691 million account for Global Health. The Global Health account replaced the Child Survival and Infectious Diseaseline-item in the FY2000 measure, incorporating most, although not all, child-relatedprograms. (13) In several respects, the new accountsupported many of the fundinginitiatives proposed in other legislation (see footnote 9) and in the Administration'srequest. Committee earmarks and report recommendations allocated resources forseveral priorities, including HIV/AIDS, tuberculosis, malaria, polio and maternalhealth. For other non-health development activities, S. 2522 directedthat USAID allocate at least $310 million (across all accounts) for agricultureprograms, $11 million higher than FY2000 amounts. Population assistance alsowould have increased under S. 2522 , although not to the level proposedby the Administration. (See Table 5 below for specific amounts and comparisonswith House, Administration, and enacted levels.) Although earmarks and directives in S. 2522 protected and increased resources for Senate priorities, especially in the health area, the overallfunding level for USAID sustainable development programs would have resulted incuts for other, non-earmarked activities, such as those for private markets anddemocracy promotion. USAID calculated that development programs not earmarkedin S. 2522 would fall by about 21% from FY2000 allocations and bynearly one-third from the FY2001 request. Table 5. Funding for Selected USAID Programs (tentative estimates across all accounts - in millionsof dollars) a. No earmark. b. No earmark, but recommendation for higher spending. As passed by the House , H.R. 4811 would provide $5.63 billion across all economic aid accounts for USAID goals, a level about $266 million, or4.6% below the request. For sustainable development activities specifically, theHouse measure approved $2.144 billion, nearly $200 million less than requested andabout $25 million less than the Senate. The House measure maintained the ChildSurvival/Disease account at $886 million, an increase of $159 million over amountsenacted in FY2000, and, like the Senate measure, included a number of earmarks anddirectives increasing a number of priorities, especially in health and childrenprograms. (See Table 5 for specific amounts and comparisons with Senate,Administration, and enacted levels.) Although the House continued its practice of recent years of providing higher funding for children activities and cutting requests for other development objectives,the Committee's report acknowledged the need for broader social and economicdevelopment. The Committee encouraged USAID to increase spending on economicgrowth and private sector programs aimed at increasing the number of jobs,educating the population, and providing better health care in developing nations. TheHouse panel further encouraged increased funding for agriculture activities and amicroenterprise program of $152 million. Nevertheless, with the number ofearmarks and priorities in the children and health sectors endorsed by the Housepanel, USAID would most likely need to make substantial reductions in a variety ofnon-health program areas. Enacted legislation increases USAID funding above levels approved earlier by the House and Senate, and protects, and in some cases adds to amounts for activityof special congressional interest. Overall USAID administered programs in supportof its five key goals are set at $5.835 billion, about $60 million, or 1% less thanrequested, but $200 million and $35 million higher than passed by the House andSenate, respectively. Sustainable development funds total $2.268 billion, also morethan $100 million higher than approved earlier by the House and Senate. Nevertheless, congressional directives and earmarks allocating USAID funding willalter, in some cases significantly, how the Agency distributes appropriated resourcesamong the five core goals. Child survival, health, including HIV/AIDS, and basiceducation will receive substantially higher amounts than requested. Because ofoverall reductions, protection for priority activities, and some spending limitations,funding for private sector, environment, family planning, and democracy programswill fall below proposed levels, and possibly under FY2000 amounts. USAIDdecisions on how to allocate FY2001 appropriations are underway, but will not likelyfinalize until early next year. Table 5, however, provides a tentative estimate of howsome of the key USAID programs will be funded, especially those for whichCongress has included specific earmarks in P.L. 106-429 . Another aspect of the discussion regarding policy priorities of U.S. development aid is the continuing controversy regarding international family planning restrictions. For FY2001, the President sought $541.6 million for USAID population programs,a $169 million, or 45%, increase over FY2000 levels. The White House furtherproposed a $25 million U.S. contribution to the U.N. Population Fund (UNFPA), thesame as appropriated for FY2000. U.S. international family planning programs hadbeen one of the largest growth areas of the foreign aid budget in the early 1990s. From an average of about $250 million in the late 1980s, FY1995 spending acrossall Foreign Operations accounts totaled approximately $541 million. In the followingyears, when Congress deadlocked over abortion-related restrictions and U.S.population aid policy, a situation that blocked movement of the entire ForeignOperations bill, lawmakers adopted interim provisions that, among other things,strictly limited the amount of funding for USAID family planning programs. Theappropriation cap of $385 million enacted in each of FY1997-FY2000 is roughlytwo-thirds the amount provided in FY1995. The principal dispute over population assistance, however, goes well beyond funding issues, centering more directly on abortion-related activities of foreignrecipients of USAID grants. For over 15 years, Congress has engaged in contentiousdebates over U.S. international family planning policy, often as part of the ForeignOperations Appropriations. Family Planning and Abortion Restrictions. The debate over international family planning policyand abortion began nearly three decades ago when Congress added a provision to theForeign Assistance Act of 1961 prohibiting the use of U.S. appropriated funds forabortion-related activities and coercive family planning programs. During themid-1980s, in what has become known as the "Mexico City" policy (because it wasfirst announced at the 1984 Mexico City Population Conference), the Reagan, andlater the Bush, Administrations restricted funds for foreign non-governmentalorganizations (NGOs) that were involved in performing or promoting abortions incountries where they worked, even if such activities were undertaken with non-U.S.funds . Several groups, including International Planned ParenthoodFederation-London (IPPF-London), became ineligible for U.S. financial support. Insome years, Congress narrowly approved measures to overturn this prohibition, butWhite House vetoes kept the policy in place. President Clinton in 1993 reversed theposition of his two predecessors, allowing the United States to resume funding forall family planning organizations so long as no U.S. money was used by thoseinvolved in abortion-related work. During the past five years, the House and Senate have taken opposing positions on the Mexico City issue that in each case held up enactment of the final ForeignOperations spending measure. The House position, sponsored by RepresentativeSmith (N.J.) and others, supported reinstatement of the Mexico City policy restrictingU.S. aid funds to foreign organizations involved in performing abortions or inlobbying to change abortion laws or policies in foreign countries. The Senate, on theother hand, has rejected in most cases House provisions dealing with Mexico Citypolicy, favoring a position that leaves these decisions in the hands of theAdministration. Moreover, Administration officials routinely said that PresidentClinton would veto any bills that included the House-passed Mexico City restrictions,a threat he carried out in October 1998 when he rejected legislation authorizingfamily planning programs that included Mexico City policy ( H.R. 1757 ). Unable to reach an agreement satisfactory to both sides, Congress adopted interim arrangements for FY1996-FY1999 that did not resolve the broad populationprogram controversy, but permitted the stalled Foreign Operations measure to moveforward. The annual "compromise" removed House-added Mexico City restrictions,but reduced population assistance to $385 million, and in several years, "metered"the availability of the funds at a rate of one-twelfth of the $385 million per month. The FY2000 debate, however, concluded far differently than the previous four years. As Congress and the White House searched in November 1999 for a finalFY2000 budget agreement, international family planning and population aid issuesbecame one of the last and most contentious aspects of the negotiations. Congressional leaders insisted that if the President wanted Congress to approvelegislation authorizing the payment of nearly $1 billion of U.S. arrears owed to theUnited Nations, the White House must also accept revised Mexico City languageadding abortion restrictions to U.S. population assistance policy. In order to removethe obstacles to U.N. arrears payments, a reluctant President Clinton agreed to theabortion restrictions, marking the first time that Mexico City conditions had beenincluded in legislation signed by the President. (Enacted in the Foreign OperationsAct for FY2000, H.R. 3422 , incorporated into H.R. 3194 ,the Consolidated Appropriations Act for FY2000, P.L. 106-113 ). Under the terms of Section 599D of H.R. 3422 , private foreign non-governmental and multilateral organizations must certify that they neitherperform abortions nor lobby to change abortion laws in foreign countries in order toreceive USAID population aid grants in FY2000. Section 599D allows the Presidentto waive the certification requirement for up to $15 million in grants to groups thatwould otherwise be ineligible, but with the penalty that $12.5 million of the $385million population aid appropriation would be transferred to child health programs. The restrictions apply only to FY2000 and expired on September 30, 2000. One day after signing the legislation, the President exercised his waiver authority (November 30, 1999), thereby reducing FY2000 population aid funds to$372.5 million. He further instructed USAID to implement Section 599D in a waythat will minimize the impact on U.S. funded family planning programs. Underagency guidelines, all non-U.S. NGOs (whether non-profit or for-profit) andmultilateral organizations that are prime contractors, grantees, and cooperativeagreement recipients must certify (and collect the same certification from theirsub-contractors) that they will not engage in three types of activities with eitherUSAID or non-USAID funds from the date they sign an agreement to receiveFY2000 USAID population funds through September 30, 2001: perform abortions in a foreign country, except where the life of the mother would be endangered, or in cases of forcible rape orincest; violate the laws of a foreign country concerning the circumstances under which abortion is permitted, regulated, or restricted;or attempt to alter the laws or governmental policies concerning circumstances under which abortion is permitted, regulated, orrestricted. If an organization declines to certify, or does not return the certification form, it will be ineligible to receive FY2000 USAID population funds. Except for the loss of $12.5 million in funding, it appears that on a programmatic basis, the certification requirement has not had a significant impact onUSAID family planning programs. A key issue has been whether the $15 million intotal grants allowed under the waiver authority was sufficient to cover all foreignorganizations that declined to certify regarding their involvement in abortion-relatedactivities. Although there is still some uncertainty about how many groups have notresponded because they disagree with the certification terms, IPPF-London and theWorld Health Organization have refused. At some point, USAID will review thecases of all foreign organizations that have not responded or declined to certify - ninecurrently - and decide how to allocate the $15 million available to such groups. Agency officials believe that they will not exceed the $15 million cap. Critics of the certification requirement oppose it on several grounds. From an administrative standpoint, they say it will increase USAID costs to manage familyplanning programs because of the additional paperwork and will delayimplementation of projects. (USAID has contracted with John Snow, Inc. to trackthe certification process.) They further believe that family planning organizationswill cut back on services because they are unsure of the full implications of therestrictions and do not want to risk losing eligibility for USAID funding. Opponentsalso believe the new conditions will undermine relations between the U.S.Government and foreign NGOs and multilateral groups, creating a situation wherethe United States challenges their sovereignty on how to spend their own money andimposes a so-called "gag" order on their ability to promote changes to abortion lawsand regulations in developing nations. The latter, these critics note, would beunconstitutional if applied to American groups working in the United States. Supporters of the certification requirement argue that even though permanent lawbans USAID funds from being used to perform or promote abortions, money isfungible; that organizations receiving American-taxpayer funding can simply useUSAID resources for permitted activities while diverting money raised from othersources to perform abortions or lobby to change abortion laws and regulations. Thecertification process, they contend, stops the fungibility "loophole." President Clinton said he would oppose any attempt to extend the abortion restrictions beyond September 30, 2000. Supporters of his position introducedseveral bills in 2000 that would effectively reverse the Mexico City language, byeither: making the eligibility requirements for NGOs and multilateral organizations no more restrictive than those that apply to foreign governments( H.R. 3634 and S. 2380 ); subjecting foreign groups (concerning the use of non-USAID funding for advocacy and lobbying activities) to the same restrictions imposed onU.S. NGOs, and maintaining their eligibility so long as these groups do not engagein health or medical services in violation of the laws of the country in which theyoperate or which would violate U.S. law if provided here ( H.R. 4211 ). Supporters of the certification process pressed for continuation of the restrictions in the FY2001 funding bill in order to further institutionalize them. UNFPA Issues. Congress further enacted for FY2000 restrictions on U.S. contributions to the U.N. Population Fund(UNFPA). During the Reagan and Bush Administrations the United States did notsupport UNFPA, a policy reversed by President Clinton in 1993. At issue areUNFPA programs in China, a country where there have been continuing reports for many years of coercive family planning practices. During the mid-1990s, Congressreduced UNFPA contributions by the amount the organization spent in China, butwhen UNFPA ended its China program in 1997, the controversy subsided. UNFPA,however, reinstituted activities in China soon thereafter, resulting in the withholdingin FY1998 of $5 million for UNFPA and the enactment for FY1999 of a totalprohibition on the U.S. $25 million contribution, so long as the organizationremained active in China. Congress restored the $25 million earmark for UNFPA inFY2000, but under terms that required a deduction of $3.5 million (the cost ofUNFPA's 2000 program in China). Coercive Family Planning Practices and Peru. A new element in the family planning issue added during theFY1999 debate emerged following reports that Peru, where USAID has populationaid programs, had established national targets for tubal ligations and vasectomies. There were also allegations that some Peruvian health workers may have conditionedthe receipt of food and medical care on the acceptance of sterilizations. USAIDmaintains a policy of strict voluntarism for family planning programs it supports, andopposes the use of performance-based quota systems. The Agency says that Peru'sgovernment has instituted significant reforms in its family planning programs,including criteria that ensure voluntary informed consent. To reinforce U.S. policiesopposing programs based on coercive practices or quota systems, Congress adoptedfor FY1999 an amendment by Representative Tiahrt that more precisely defines theterm voluntary family planning programs, and establishes criteria for USAID to applyregarding the voluntary nature of its population projects. These same provisionswere continued in the FY2000 appropriation. (14) Congressional Action. S. 2522 earmarked $425 million for population assistance out ofdevelopment assistance funding, a level which, when combined with resources fromother accounts, would provide about $482 million for family planning activities. This is significantly higher than for FY2000, but below the Administration's $541million request. On the issue of abortion conditions, section 590 of S. 2522 deleted restrictions applying to FY2000 funds, substituting language that would have theeffect of restoring previous Clinton Administration policy on foreign NGOs andmultilateral organization eligibility for USAID population aid grants. Specifically,the conditions stipulated that such organizations: shall not be subject to requirements regarding how they use non-U.S. Government funds for advocacy or lobbying activities that are morerestrictive that those that apply to U.S. NGOs which receive economic aid grants;and shall not be ineligible for USAID grants solely on the basis ofhealth or medical services provided with non-U.S. Government funds so long as suchservices do not violate the laws of the country in which they are provided or wouldnot violate U.S. Federal law if provided in this country. It is generally held that under the Constitution, U.S. NGOs cannot be restricted from using their own funds to advocate policy positions they support. The first newcondition would essentially extend that protection to foreign NGOs and multilateralorganizations. The second condition would not disqualify an organization fromreceiving USAID grants for performing abortions with its own money if abortion orwhatever medical service it provided was legal in the country in which it operated,and that the service would be legal in the United States if performed here. H.R. 4811 made no change in current law, allowing the restrictions established in the FY2000 appropriations to continue. Duringsubcommittee markup, the Foreign Operations panel rejected (7-8) an amendment byRepresentative Lowey to remove the abortion restrictions from the bill. A similaramendment during full Committee mark-up also failed 26-34, and, on the Housefloor, another amendment was rejected (Greenwood, 206-221) that would haveremoved the restrictions. H.R. 4811 further continued currentconditions on UNFPA contributions. The bill provided $385 million for populationassistance, far below the President's $542 million request. Based on reports ofcontinuing coercive family planning practices in Peru, the House measure requireda series of new investigations and reports by USAID and its Inspector General in aneffort to strengthen application of the Tiahrt amendment, not only in Peru, but in allcountries where USAID maintains family planning programs. Foreign Operations, as enacted, met the Administration's requirement for removal of the abortion-related restrictions, a policy, however, that has subsequentlybeen altered through executive action by President Bush. None of the $425 millionappropriation could be obligated until after February 15, 2001, a provision thatallowed the new President to decide which policy to apply. On January 22, 2001,two days after taking office, President Bush issued a Memorandum to the USAIDAdministrator rescinding the 1993 memorandum from President Clinton anddirecting the Administrator to "reinstate in full all of the requirements of the MexicoCity Policy in effect on January 19, 1993." The President further said that it was his"conviction that taxpayer funds should not be used to pay for abortions or advocateor actively promote abortion, either here or abroad." (15) A separate statement from thePresident's press secretary stated that President Bush was "committed to maintainingthe $425 million funding level" for population assistance "because he knows that oneof the best ways to prevent abortion is by providing quality voluntary family planningservices." The press secretary further emphasized that it was the intent that anyrestrictions "do not limit organizations from treating injuries or illnesses caused bylegal or illegal abortions, for example, post abortion care." (16) On February 15, the dayon which FY2001 population aid funds became available for obligation, USAIDissued specific policy language and contract clauses to implement the President'sdirective. The guidelines are nearly identical to those used in the 1980s and early1990s when the Mexico City policy applied. (17) For UNFPA, the FY2001 appropriations includes an earmark of $25 million, as requested, but with the requirement that the amount will be reduced by howevermuch UNFPA spends in China. Conferees did not address the issue of coercivepractices in Peru or strengthening the Tiahrt provisions. Although the Middle East has received by far the largest proportion of U.S. assistance over the past three decades -- 55-60% of bilateral aid appropriated inForeign Operations spending measures in most years -- allocations to other regionshave fluctuated considerably, especially since the end of the Cold War. Asia, whichreceived substantial assistance in the 1980s associated with the presence of U.S.military bases in the Philippines, had its share drop from 16% to 4% by the late1990s. Latin America, had its share fall from 16% to 6% following the end ofconflict in Central America in the early 1990s. Africa's proportion has remainedabout the same -- 7 to 9% -- a development that disappointed those who argued thatthe world's poorest region should receive higher priority, especially with thereduction in emphasis on security assistance. U.S. aid to the emerging democraciesand market-oriented economies in Eastern Europe and the former Soviet Union,where the United States had no programs prior to 1990, grew to represent over 16%of American bilateral assistance funded in the Foreign Operations bill by the end ofthe decade. A number of observers, including some Members and congressional committees, believed these shifts in regional aid allocations had swung too far. Thiswas particularly true in the cases of Asia and Latin America, given the Asianfinancial crises and significant U.S. interests in promoting economic development inLatin America in order to counter the trend of rising illegal immigration to the UnitedStates. Foreign Operations appropriation measures in recent years have emphasizedthe need to maintain or increase assistance especially to Latin America, and morerecently, to the Philippines, Thailand, and Indonesia which were most directlyaffected by the regional economic downturn. Others argued that not enough has beenreallocated to Africa to meet the region's unmet needs and to promote futureU.S.-African trade opportunities. When the share of bilateral Foreign Operations funding for the Middle East exceeded 60%, some in Congress began promoting the view that there should besome limits to the amount provided. If the Administration wanted to pursue newMiddle East peace initiatives using foreign aid as an implementing tool, they argued,resources should be found either within existing Middle East programs or providedon top of overall aid appropriations, rather than being taken from other regions. Table 6. Regional Allocations of U.S. Aid (In millions of dollars; % of bilateral total in ForeignOperations) Source: USAID. Amounts in the this table exclude food aid funded in the Agriculture Appropriations measure. * FY1999 includes Central America hurricane reconstruction ($613 million). ** FY2000 includes supplemental funding for Plan Colombia ($1.1 billion), Balkanaid ($50 million), and southern Africa flood relief ($25 million). Accordingly, for FY1998 Congress took steps to legislate a cap on Foreign Operations resources for the Middle East. At the initiative of RepresentativeCallahan, Chairman of the House Foreign Operations Subcommittee, lawmakersstipulated in the FY1998 funding measure (Section 586 of P.L. 105-118 ) that selectedMiddle East nations and regional programs could not receive more than $5.4 billionof the total appropriation. For FY2000, the Middle East aid cap was lowered to $5.3billion. Shortly after Congress initiated a Middle East aid ceiling, Israel put forth inJanuary 1998 a plan to cut aid received from the United States over the next 10 to 12years. Under the Israeli plan, the United States would reduce economic aid by $120million each year for about ten years, while increasing military assistance by $60million annually. At the end of the period, Israel would be receiving an annualappropriation of $2.4 billion in military aid but no longer receiving any economicassistance. If done over a 10-year period, U.S. aid to Israel would fall $60 millioneach year in net terms, with a total savings of $600 million by 2009. Since FY1999,Congress has supported the $60 million net reduction of aid to Israel, also adding asimilar $40 million economic aid cut for Egypt. The President's FY2001 Foreign Operations request reflected several of these regional allocation views expressed by Congress in recent years. Highlights of theAdministration's recommendations included the following. Creation of the Development Fund for Africa Account. (18) After a 5-year absence, thePresident proposed tore-establish a separate Foreign Operations account for African aid and to increasebilateral funding (including economic and military assistance) by 16% over FY2000levels. In the late 1980s, Congress and the Administration launched a joint initiativeto create special legislative authority for U.S. economic aid to Africa. TheDevelopment Fund for Africa (DFA -- authorized in Chapter 10 of the ForeignAssistance Act of 1961) was intended to extend more flexibility to USAID programmanagers and to protect aid resources for Africa from being transferred to otherregions as new foreign policy crises unfolded. At its peak, the United Stateschanneled about $800 million annually through the DFA. Although the DFA authorization law remained in force, Congress ended the practice of a direct DFA appropriation in FY1996, funding Africa's assistance out ofworldwide development aid and child survival accounts. Following PresidentClinton's visit to Africa in 1998, during which he pledged to restore U.S. aid tohigher levels provided in previous years, the Administration proposed a direct DFAappropriation account for FY2000. Congress rejected the DFA recommendation butapproved sufficient development funds so that Africa's level grew from $703 millionin FY1999 to $737 million estimated for FY2000. The FY2001 request once again sought the restoration of the DFA account, that when combined with child survival funds would allocate $836 million to Africa, anincrease of $99 million. Although some of the additional assistance would supportthe HIV/AIDS initiative, family planning and other health activities would receivesubstantial increases. The request for activities financed under the Economic SupportFund, an aid account used for political and security purposes, rose by one-third overFY2000, largely for democracy and economic growth initiatives for countries intransition. Military aid would have grown from about $20 million in FY2000 to $27million, with the largest increase for stabilizing regional security situations throughthe promotion of democratic transition within the militaries of countries such asNigeria, and to assist African forces participate in regional peacekeeping operations. Nigeria, which is one of the State Department's four worldwide aid "focus" countriesfor FY2001 (along with Ukraine, Indonesia, and Colombia) would be the largest ($81million) African recipient of economic and military assistance (excluding food aid),followed by Uganda ($54 million), Mozambique ($47 million), and Ethiopia ($41million). Increased Funding for Asia. The FY2001 foreign aid budget proposed significant increases in assistance programsthroughout the Asian region. The $568 million requested was nearly $137 million,or 32% higher than allocations for FY2000. This follows a 17% increase in FY2000year for Asia compared with FY1999. The higher amounts would be drawn inroughly equal levels between development and ESF accounts. Of particular prioritywere economic growth programs aimed at helping economic recovery in southeastAsia. Indonesia, another of the Administration's four aid "focus" countries, wouldbe by far the largest recipient of U.S. economic assistance ($130 million). Another$10 million was scheduled for East Timor. India ($72 million), Bangladesh ($69million), and the Philippines ($45 million) follow as other leading economic aidrecipients in the region. For each of these three, the FY2001 proposed allocationswere roughly 50% higher than those for FY2000. Modest Increases for Most Latin America Programs; Major Counternarcotics Initiative for Colombia. Aidallocations for Latin America surged in FY1999, largely due to the $613 millionemergency relief package approved to aid the victims of Hurricane Mitch that struckCentral America in late 1998. Assistance to the region increased again for FY2000due to a $1.1 billion add-on for counternarcotics in Colombia. For FY2001, regulareconomic, anti-drug, and military assistance for Latin America would total $754million. Counternarcotics aid continued to be a primary focus of assistance to LatinAmerica, accounting for 29% of total resources in the FY2001 request. Overshadowing continuing Latin American aid programs has been the FY2000/2001 $1.1 billion counternarcotics initiative for Colombia and other drug-producing nations in the region. (Including resources requested from Defense andJustice Department budgets, "Plan Colombia," as the initiative has been labeled,totals $1.272 billion over two years.) The major, and arguably most controversial,component ($600 million) of the initiative is "Push into Southern Colombia,"designed to help the Colombian government extend anti-drug efforts throughoutsouthern Colombia where coca cultivation is expanding and where Colombianguerrillas operate. This would include training and equipping two new armycounternarcotics battalions and purchasing Black Hawk and Huey helicopters totransport them. On June 29, Congress cleared for the White House ( P.L. 106-246 )a $1.3 billion supplemental for Colombia ($1.1 billion in Foreign Operations funds)that closely matched the President's funding request but imposed a number of policychanges and conditions on the assistance. (19) Peru and Bolivia, each scheduled to receive $98 million in FY2001, top the list of Latin American aid recipients. Haiti ($51 million) and Guatemala ($50 million)were also prominent aid recipients planned for FY2001. Colombia, however, hasemerged in recent years as one of the main benefactors of U.S. assistance worldwide,representing the fifth largest recipient in FY1999 behind Israel, Egypt, Jordan, andUkraine. With passage of the counternarcotics initiative, Colombia has become thethird top aid recipient worldwide for FY2000. Middle East Aid Reduced Slightly for FY2001. The President's FY2001 foreign aid request for theMiddle East reduced slightly - from $5.278 billion to $5.216 billion - U.S.assistance to the region when compared with regular programs for FY2000(excluding Wye River accord funding). This is largely the result of continuing forthe third year a ten-year plan to downsize aid to Israel and Egypt. The $2.82 billionfor Israel would be $60 million less than earmarked for FY2000, and the $1.996billion for Egypt was $40 million below FY2000 levels. (20) Enactment for FY2000 ofa one-time, $1.8 billion Wye River/Middle East peace accord aid package supportingIsrael, Jordan, and the Palestinians, pushed total Middle East aid levels far higher inthat year. No equivalent initiative was proposed for FY2001. (21) Palestinian assistancein FY2001 was scheduled for $100 million, up from the FY2000 $85 million regularprogram. Another element of the FY2001 Middle East recommendation concerned Egypt's request to receive part of its military assistance early in the fiscal year ratherthan over a much longer period of time as payments become due for defensepurchases. For a number of years, Congress has directed that economic and militaryaid for Israel be disbursed within the first month of a new fiscal year, allowing Israelto invest the funds and earn interest prior to using the money to service debt owed tothe United States and make payments on military procurements. Last year, theAdministration asked Congress to allow Egypt to receive $475 million in "earlydisbursements," an action that would have increased Foreign Operations outlays byan equivalent amount. With extremely tight limits on outlays for FY2000, theAppropriation Committees could not accommodate the request. Instead, however,Congress added $25 million for Egypt under the Wye River aid package, an amountroughly equal to the interest Egypt would have gained from an early disbursement. For FY2001, the Administration proposed a somewhat different mechanism toachieve the same purpose: that Egypt receive by October 31, 2000 (or within 30 daysof enactment of the appropriation, whichever is later) the amount of military aid thatOMB estimates will be disbursed to Egypt throughout FY2001. Egypt would placethe funds in an interest-bearing account at the Federal Reserve, and earn about $25to $30 million during the course of the year. The advantage of this plan from abudget standpoint was that it would not increase outlays over current projections. Flat Budget Request for Russia and Other Former Soviet States; Increase for Kosovo. After several years of disputesbetween Congress and the President over proposals to sharply increase assistance toRussia and the other nations comprising the former Soviet region, theAdministration's FY2001 request of $830 million for economic assistance was nearlyidentical to amounts allocated for FY2000. Distribution among recipients, however,changed somewhat from FY2000. Russia's bilateral aid would fall from $178million to $162 million, while Ukraine, another Administration aid "focus" country,would see its assistance rise from $160 million to $171 million. U.S. assistance toArmenia and Georgia, countries which have received higher levels in the pastbecause of congressional earmarks, would be cut in FY2001, to $75 million and $86million, respectively. These reductions, as well as those for Russia and Moldova,would be offset by increases for most other former Soviet states, with Azerbaijangrowing from $31 million to $55 million. (22) Table 7. Leading Recipients of U.S. Foreign Aid: FY1999 - FY2001 (Appropriation Allocations; $s in millions) *Includes regular amounts for Israel, Egypt, Jordan, and the Palestinians, plus the Wye River peace accord: Israel-$1.2 billion; Egypt-$25 million; Jordan-$200million; Palestinians-$400 million. ** Once allocated, FY2000 supplemental funds will increase amounts for thesecountries. Note: Data exclude food aid, a program not appropriated in the Foreign Operations bill. With food aid included, the rank order above would change somewhat. Foodaid for FY2001 includes Peru-$30 million; India-$92 million; Bangladesh-$43million; and Bolivia-$22 million. Moreover, because of a large food aid programs,Ethiopia and Haiti would also rank among the lower 5 of this top 17 list. For other former eastern bloc and European countries, the FY2001 request proposed an increase of $57 million, or 10% in economic aid, primarily to extendadditional support to Kosovo, Croatia, and Montenegro. Foreign Military Financinggrants would nearly double to $95 million, with levels for new NATO membersPoland, Hungary, the Czech Republic rising by 50%. Partnership for Peace countrieswere scheduled to receive $62 million in FMF grants for FY2001, up from $33million in FY2000. (23) Congressional Action. House, Senate, and enacted bills for FY2001 made several changes to the Administration'sregional and country aid proposals. Africa. Congress rejected the President's request to re-instate the Development Fund for Africa, as requested, butfunds development programs for sub-Saharan Africa out of the worldwidedevelopment assistance and child survival accounts. Because Congress increasedhealth and child survival funding levels, most of which target Africa, and made onlymodest cuts for other bilateral development spending, Africa development aidallocation of $794 million fell close to but below the proposed $837 million level. The House-passed bill had required USAID to allocate the same proportion ofdevelopment aid to Africa in FY2001 that it did for FY2000. Although theconference report made no mention of this requirement, if applied to the enacteddevelopment assistance funding totals, Africa would have received about $900million in FY2001. Asia. Based on initial Administration aid allocations, Asia will receive slightly more - about $600 million of the funds in P.L. 106-429 - than what had been requested. The enacted measure further includesdirectives for specific countries and activities. Burma - directs that $6.5 million, as requested, be provided to Burmese exiles and refugees for education, health care, and politicalinitiatives. Cambodia - recommends $20 million (up from $16.8 million requested) addressing HIV/AIDS, education, and environmental needs, but avoidingdirect assistance to the central government. Indonesia - earmarks $5 million for economic rehabilitation in the Aceh region, and encourages USAID to support economic restructuring anddecentralization programs throughout Indonesia, and especially in theMoluccas. East Timor - earmarks $25 million for reconstruction and income-generating projects, higher than the $10 millionrequest. North Korea - urges the State Department to support $250,000 for South Korean NGOs involved in democratization efforts in North Korea. Thiswould be in addition to the $55 million approved for the Korean EnergyDevelopment Organization (KEDO). Latin America. H.R. 4811 , as enacted, limits additional assistance to the Haitian government until theSecretary of State reports that Haiti has held free and fair elections to seat a newparliament. The House bill had placed high priority on Latin American fundinglevels, directing that the Administration allocate at least the same amounts in FY2001for the region as it did for FY2000. Conferees, however, did not discuss this issue. Initial allocations for Latin America, excluding counternarcotics aid, suggest that theregion will be slightly higher than for FY2000 but about $10 million less than the$750 million request. Middle East. The enacted FY2001 Foreign Operations spending bill continues the 10-year phased reduction in aid toIsrael and Egypt, as proposed, and authorizes that a portion of Egypt's militaryassistance be transferred to an interest bearing account. H.R. 4811 alsodirects that $25 million be provided for programs benefitting the Iraqi people, $12million of which must go for food, medicine, and other humanitarian purposes. Israel's planned $250 million sale to China of an airborne early warning aircraft became a significant issue during House Committee consideration of theappropriations measure. Because of the proposed transfer of the Phalcon airborneradar system, delivery of which was expected in October 2001, Chairman Callahanoffered a provision withholding $250 million in FY2001 aid to Israel until theSecretary of State certified that the sale was terminated or it did not pose a nationalsecurity threat. The amendment was defeated (6-9). Chairman Callahan proposedthe same amendment at full Committee markup, but the House panel approved asubstitute amendment expressing the "sense" of Congress that the China sale couldthreaten both Taiwan and the United States and urged Israel to terminate the sale. (24) On July 12, Israel announced it had cancelled the sale. Independent States of the Former Soviet Union and East Europe. As enacted, H.R. 4811 reduces slightly- to $810 million - the former Soviet aid account, representing an increase from the$775 million and $635 million passed earlier by the Senate and House, respectively. Amounts for Eastern Europe are set at $600 million, about mid-way between Houseand Senate-passed levels. These regional totals have resulted in higher allocationsfor Croatia, Montenegro, and Serbia than requested, but reductions for several formerSoviet states including Azerbaijan, Kyrgystan, and Moldova. The Administrationallocated slightly more to Russia - $168 million - than had been requested, althoughthe level is down from $187 million in FY2000. The legislation includes severalcountry earmarks that set funding at or above amounts proposed by the President: Ukraine - $170 million, down slightly from the $173.5 million request. Armenia - $90 million, up from the $75 millionproposal. Georgia - $92 million, higher than the $85.8 millionrequest. Unlike the Senate bill, the conference agreement does not earmark funds for Montenegro or Croatia, but encourages the Administration to allocate at least $89million for Montenegro and $65.7 million for Croatia. These totals would includeregular FY2001 funding, plus portions of the $75.8 million Congress also approvedfor the Balkans that had earlier been considered but rejected as an FY2000supplemental. Lawmakers also added $34 million in military aid for the region thathad also been proposed as an FY2000 supplemental. Reflecting recent changes inthe political leadership of Serbia, the bill provides that up to $100 million inassistance may be used for Serbia. Nevertheless, the funds cannot be obligated afterMarch 31, 2001, unless Congress is notified that the Yugoslav government iscooperating with the International Criminal Tribunal regarding the investigation andtransfer of indicted war criminals. For other countries, H.R. 4811 limits aid allocations or attaches conditions that must be met prior to distributing the funds: Russia - maintains conditions on aid to Russia if it does notterminate sales of nuclear reactor and related technology to Iran, and adds a newcondition withholding assistance if Russia is not cooperating with internationalinvestigations of war crimes in Chechnya or providing access to Chechnyan refugees. These conditions affect 60%, rather than last year's 50%, of aid allocated to theRussian central government. Kosovo - no assistance can be made available for Kosovo until the Secretary of State certifies that U.S. obligations and expenditures of funds do notexceed 15% of total amounts from all donors. Bosnia - limits to $80 million ($90 million requested) FY2001 assistance. Providing debt relief to poor developing nations that borrowed in the past from the United States, other creditor governments, and international financial institutionsemerged as one of the key foreign aid issues in 1999 and continued as a White Housepriority in 2000. At the Cologne Summit in June 1999, G-7 leaders endorsed asubstantial expansion of the Heavily Indebted Poor Country (HIPC) Initiative largelyalong the lines of policy changes recommended by the United States and Britain. TheWorld Bank and IMF, institutions that manage HIPC debt relief, adopted theseenhancements in September. In late 1999, Congress approved some of the legislationrequested by the Administration for full U.S. participation in HIPC, but left severalmatters incomplete, primarily those associated with the cancellation of multilateraldebts. In 2000, the White House sought congressional approval for authorizing andappropriating issues left over from 1999. For the past decade, the United States has engaged in various forms of debt relief for developing nations, resulting in the cancellation of about $14.7 billion offoreign debt. Much of it -- $10.1 billion -- resulted from special cases involvingkey U.S. national interests: for Egypt in 1990 ($7 billion), for Poland in 1991 ($2.5billion), and for Jordan in 1995 ($635 million). U.S. debt reduction policy for othernations based strictly on need has been guided by the principle that eligible countriesmust have demonstrated a strong and sustained commitment to economic policyreforms prior to receiving debt relief. Under budget rules instituted in 1992,Congress has had to appropriate funds in advance representing the costs of cancelingdebt. The cost determination methodology is based on a complicated formula thattakes into account, among other things, the loan's net present value, its interest rate,and the likelihood the loan will be repaid. For especially poor countries withparticularly large debt overhangs, the appropriation requirement may be quite smallrelative to the loan's face value -- perhaps 10% or less. When it was introduced in 1996, HIPC was hailed as the first arrangement that included relief from debts owed to the World Bank, the IMF, and other internationalinstitutions, organizations that hold over 25% of debt owed by the most heavilyindebted nations. Previously, multilateral organizations had declined to participatein debt cancellation, arguing that it would increase their costs of raising new moneyto lend, expenses that would have to be passed on to borrowers. Forty-one countries-- mostly in Africa -- are eligible for HIPC, although only those determined to have"unsustainable" debt would qualify for HIPC terms. The initial HIPC framework came under heavy criticism in early 1999, especially among non-governmental organizations and religious groups working indeveloping countries. They charged that HIPC terms were not deep enough -- that90% or 100% of bilateral debt owed should be canceled, and that six years was a fartoo long qualification period for full HIPC relief. They further believed that thenon-sustainable debt criteria, based largely on a ratio of a country's debt-to-exports,was too high and therefore excluded many countries that were also in need of debtrelief. Some critics opposed the economic reform requirements and argued forunconditional debt reduction. A number of organizations further advocatedinstituting mechanisms that would ensure that savings realized by debtorgovernments would be channeled into spending on basic services, such as health andeducation, that would improve the quality of life of the very poor. Many of thesearguments were reflected in legislative initiatives launched in 1999, including H.R. 1095 (Debt Relief Poverty Reduction Act of 1999), H.R. 772 (Hope for Africa Act), H.R. 2232 (Debt Reliefand Development in Africa Act of 1999), and S. 1690 (Debt Relief forPoor Countries Act of 1999). Complicating the expansion of HIPC and enactmentof these bills, however, was the large additional costs that would be associated withefforts to broaden, deepen, and accelerate HIPC or U.S. bilateral debt reductionpolicies. Following agreement to expand HIPC and insert a strong poverty reduction requirement, President Clinton amended in September 1999 his pending FY2000foreign aid request, increasing debt relief from $120 million to nearly $1 billion overfour years. Congress agreed to $123 million for bilateral debt cancellation at theParis Club in 2000 but rejected the $600 million proposed for HIPC Trust Fundcontributions, FY2000-FY2003 ( H.R. 3422 , as incorporated into P.L.106-113 ). (26) The President had also askedCongress to allow the United States tosupport an IMF plan to draw on resources in a contingency fund and to re-value someof its gold holdings at current prices through an off-market gold sale that would allowthe IMF to cancel HIPC debts owed to the Fund. (27) Congress authorized the use ofthe contingency fund but placed a restriction that the IMF could only use 9/14ths ofthe gold transaction "profits" for HIPC debt relief ( H.R. 3425 , asincorporated into P.L. 106-113 ). Legislative Issues in 2000. The Administration asked Congress to approve items carried over from 1999: HIPC Trust Fund $210 million contribution as an FY2000 supplemental appropriation; HIPC bilateral and multilateral debt relief request of $225million for FY2001; Tropical forestry debt relief initiative of $37million; HIPC bilateral and multilateral debt relief advanceappropriation (FY2002/2003) of $375 million; Authorization for the U.S. to participate in the HIPC TrustFund; and Authorization permitting the U.S. to support the full use of theIMF for gold transaction profits for debt relief. Administration officials were especially concerned about appropriations for the HIPC Trust Fund contribution. They argue that the absence of a U.S. payment hadconvinced other creditor governments to hold back their own pledges until the U.S.acted. They further contended that while most of the existing Trust Fund pledgeswere earmarked for African nations that would be among the earliest qualifiers,resources for Latin American debt relief - for Bolivia and Honduras - were notavailable. Without a U.S. contribution, they said, a debt workout for Bolivia hadbeen delayed because of inadequate resources. Critics of multilateral debt relief,including some in Congress, argued, however, that before the U.S. contributes to theTrust Fund, multilateral institutions should agree to suspend new lending to HIPCcountries for a period of time once they received debt relief so that they would notreturn to a severely indebted state. Congressional Action. Prior to consideration of the FY2001 Foreign Operations spending measure, lawmakers dealtwith other aspects of the HIPC requests. In the FY2000 supplemental appropriation( H.R. 4425 ), Congress rejected the President's request for the HIPCTrust Fund. Supporting other Administration requests, however, the Senate ForeignRelations Committee reported on April 7 legislation ( S. 2382 )authorizing U.S. participation in the HIPC Trust Fund and U.S. approval of the entireIMF off-market gold sale mechanism. That bill, after referral to the Senate BankingCommittee, did not receive full Senate consideration. S. 2522 provided $75 million in debt reduction for FY2001, far below the combined FY2000/2001 requests for $472 million. The legislationpermitted the Administration to use the resources for either bilateral debt relief orcontributions to the HIPC Trust Fund. Because several HIPC countries were nearingconsideration for HIPC eligibility, it was possible that reduced funding in S. 2522 , if enacted at that level, would have resulted in further delaysfor debt workout negotiations. H.R. 4811 provided $238 million for debt reduction. The House Appropriations Committee bill had provided $82.4 million for debt reduction, wellunder the Administration's request. During floor debate, however, the Houseadopted an amendment (Waters, 216-211) that increased the debt relief allocation by$155.6 million. As reported by the Committee, however, H.R. 4811 required that before any U.S. contribution to the HIPC Trust Fund, theAdministration must report to Congress that the HIPC beneficiary country would notreceive any new market-rate loans from international financial institutions for 30months or concessional loans for 9 months. The Administration opposed theselimitations. The House Committee expressed support for economic reformsundertaken by Bolivia and Mozambique, and its expectation that all of the debtreduction funds for HIPC would go to these two countries. The House measurefurther indicated that $13 million of the debt reduction appropriation was reservedfor the Tropical Forestry debt initiative. The enacted bill provides a total of $448 million for debt reduction, consisting of $435 million for HIPC (the combined FY2000 supplemental and FY2001 regularrequest) and $13 million for the Tropical Forestry initiative. Of the HIPC funds,roughly $75 million will be used for bilateral debt relief and $360 million as a TrustFund contribution. Countries which will receive benefits from U.S. contributionsmust first agree not to borrow at market rate terms for two years. The limitation onconcessional financing, as passed by the House, was dropped from the conferenceagreement. Instead, conferees endorsed consideration of a policy in which the WorldBank's International Development Association would expand grant assistance toHIPC countries. The legislation further includes new reporting requirementsregarding implementation of the HIPC initiative that will allow Congress to monitoractions taken in the coming year more closely. P.L. 106-429 does not, however, approve the full U.S. pledged commitment to the HIPC initiative. The Administration is asking Congress in the FY2002 ForeignOperations budget for an additional $224 million HIPC Trust Fund contribution. Because Congress authorized in H.R. 4811 only $435 million of thetotal $600 million Trust Fund pledge, additional authority may be sought in the 107thCongress. Foreign Operations Programs CRS Issue Brief IB88093. Drug Control: International Policy, by Raphael Perl. CRS Report RL30830 . International Family Planning: The "Mexico City" Policy , by [author name scrubbed]. CRS Issue Brief IB96008. Multilateral Development Banks: Issues for the 106th Congress , by Jonathan Sanford. CRS Issue Brief IB86116. U.N. System Funding , by [author name scrubbed]. CRS Issue Brief IB96026. U.S. International Population Assistance: Issues for Congress , by [author name scrubbed]. Foreign Operations Country/Regional Issues CRS Issue Brief IB95052. Africa: U.S. Foreign Assistance Issues , by Raymond Copson. CRS Issue Brief IB95077. The Former Soviet Union and U.S. Foreign Assistance , by [author name scrubbed]. CRS Issue Brief IB85066. Israel: U.S. Foreign Assistance , by Clyde Mark. CRS Issue Brief IB91141. North Korea's Nuclear Weapons Program , by Larry Niksch. CRS Current Legislative Issues: Foreign Affairs http://www.crs.gov/products/browse/is-foreignaffairs.shtml Export-Import Bank http://www.exim.gov/ Inter-American Development Bank http://www.iadb.org/ International Monetary Fund http://www.imf.org/ Peace Corps http://www.peacecorps.gov/ Trade and Development Agency http://www.tda.gov/ United Nations Children's Fund (UNICEF) http://www.unicef.org/ United Nations Development Program (UNDP) http://www.undp.org/ United National Population Fund (UNFPA) http://www.unfpa.org/ U.S. Agency for International Development http://www.info.usaid.gov/ U.S. Department of State http://www.state.gov/ World Bank http://www.worldbank.org/ World Bank HIPC website http://www.worldbank.org/hipc/ Table 8. Foreign Operations Appropriations: DiscretionaryBudget Authority (millions of dollars) * NOTE: Pursuant to the Consolidated Appropriations Act, FY2001 ( H.R. 4577 ), signed into law on Dec. 21, 2000, most FY2001 appropriation bills, including ForeignOperations, are reduced by 0.22%. For Foreign Operations, there will be a cut of about $33million from the $14.897 billion enacted level. a. FY2000 enacted includes $1.1 billion in supplemental FY2000 Foreign Operations funds approved in P.L. 106-246 ( H.R. 4425 ). b. The account structure for development aid differs among versions of the bill. This table showsa consistent and comparable account structure based on the FY2001 conference agreement. Forthe Administration's request, this means adding amounts to development aid for theInter-American and African Development Foundations, GAVI, and UNICEF, which arerequested in other accounts. For the Senate it means the addition of $110 million for UNICEFwhich S. 2522 funded under the International Organizations account in title IV. c. For FY2001, the Administration requested a separate account under development aid for Africa (the Development Fund for Africa, or DFA). Africa aid is also proposed within the ChildSurvival account. The total amount requested for Africa -- DFA plus Africa/Child Survival-- is $837 million. This compares to $738 million appropriated for Africa in FY2000 withinthe Child Survival and Development Assistance Fund accounts. d. Initially requested and/or approved by the House or Senate as an FY2000 emergencysupplemental appropriation. Included in Title VI of P.L. 106-429 as an emergency FY2001appropriation. e. Transition Initiative funds included in Disaster Assistance account for FY2000, FY2001 request,and Senate FY2001 bill. Approved by the House and enacted for FY2001 as a separateaccount. f. Congress approved for FY2000 a one-time supplemental ESF ($450 million) and FMF ($1.375billion) package supporting the Wye River/Middle East peace accord with aid for Israel, Jordan,and the Palestinians. g. The Administration request and Senate bill included the Ireland Fund as part of the EconomicSupport Fund. h. FY2000 supplemental enacted in P.L. 106-246 . The President's FY2001 request included $256million for Plan Colombia. Congress incorporated portions of the follow-on $256 millionFY2001 Plan Colombia proposal in the FY2000 supplemental. Because additional PlanColombia funding had already been accommodated and was not part of the final FY2001debate, the $256 million has been removed from the President's FY2001 request. i. IFAD was funded in FY2000, FY2001 request and the Senate bill out of development assistanceand international organizations and programs accounts. The House and FY2001 enacted billsestablished IFAD as a separate account. j. For comparative purposes and to conform to the account structure enacted for FY2000 andFY2001, UNICEF funds ($110 million) have been deducted here and added in the developmentaid subtotal in title II. The Administration's $50 million FY2001 request for GAVI has alsobeen shifted from here to title II, as enacted. k. Pursuant to sequestration requirements in P.L. 106-113 , the amounts for FY2000 are reduced by$19 million.

The annual Foreign Operations appropriations bill is the primary legislative vehicle through which Congress reviews the U.S. foreign aid budget and influences executive branch foreign policymaking generally. It contains the largest share -- over two-thirds -- of total U.S. internationalaffairs spending. President Clinton asked Congress initially to appropriate $15.1 billion for FY2001 Foreign Operations, plus $1.25 billion in FY2000 supplemental funds. Congress approved some of thesupplemental spending in P.L. 106-246 , but in October 2000 reconsidered and approved as FY2001emergency appropriations portions of the FY2000 supplemental rejected earlier. Consequently, thecombined FY2000 supplemental/FY2001 regular Foreign Operations request, as it stood whenCongress debated the FY2001 Foreign Operations conference report in October, totaled $15.45billion. The largest program increases for FY2001 were those for the Export-Import Bank (+26%),USAID development aid (+18%), nonproliferation, terrorism, and demining (+44%), voluntarycontributions to international organizations (+45%), and multilateral development bank contributions(+24%). S. 2522 , as approved by the Senate on June 22, provided $13.4 billion for FY2001 Foreign Operations Appropriations. The measure was about $65 million less than FY2000 enactedand about $1.7 billion, or 11%, below the President's initial FY2001 request. A major new initiativein S. 2522 was the creation of a Global Health account ($691 million). Population aidwould have increased by $110 million and a new set of conditions on family planning programswould have effectively eliminated the FY2000 abortion-related restrictions. H.R. 4811 , as approved by the House on July 13, provided $13.3 billion, about $200 million less than the FY2000 enacted, and 13% less than the President's original request. Thebill maintained the FY2000 funding level and abortion-related restrictions for family planningprograms. At $238 million, the bill provided most of the Administration's FY2001 request for debtrelief, but still fell well short of the combined FY2000/2001 debt reduction request of $472 million. On October 25, Congress approved the conference report on H.R. 4811 ( H.Rept. 106-997 ), increasing FY2001 Foreign Operations spending to $14.9 billion, well above levels passedearlier by either the House or Senate. The enacted legislation ( P.L. 106-429 ) falls about $550million, or 3.5% below the President's combined FY2000 supplemental/FY2001 requests, but fullyfunds several top Administration priorities, including international debt relief and global healthprograms. For international family planning, Congress increased spending to $425 million, butrestricted the obligation of funds until after February 15, 2001. Prior to the release of these funds,President Bush reimposed the so-called "Mexico City" abortion restrictions that apply to FY2001and future U.S. family planning appropriations

The Defense Department announced on June 24, 2009, that an agreement of "mutual benefit" had been concluded with the Kyrgyz government "to continu[e] to work, with them, to supply our troops in Afghanistan, so that we can help with the overall security situation in the region." According to Kyrgyz Foreign Minister Kadyrbek Sarbayev, the government decided to conclude the annually renewable "intergovernmental agreement with the United States on cooperation and the formation of a transit center at Manas airport," because of growing alarm about "the worrying situation in Afghanistan and Pakistan." The agreement permits the transit of personnel and non-lethal cargoes, although Kyrgyzstan is not permitted to inspect the cargoes, he stated. A yearly rent payment for use of land and facilities at the Manas airport would be increased from $17.4 million to $60 million per year and the United States had pledged more than $36 million for infrastructure improvements and $30 million for air traffic control system upgrades for the airport. Sarbayev also stated that the United States had pledged $20 million dollars for economic development, $21 million for counter-narcotics efforts, and $10 million for counter-terrorism efforts. All except the increased rent have already been appropriated or requested (see below, Congressional Concerns ). The agreement also reportedly includes stricter host-country conditions on U.S. military personnel. One Kyrgyz legislator claimed that the agreement was not a volte - face for Kyrgyzstan because Russia and other Central Asian states had signed agreements with NATO to permit the transit of supplies to Afghanistan. Prior to the signing of the new agreement on June 22, 2009, President Obama reportedly had sent a letter to Kyrgyz President Bakiyev that stated that a high level delegation was ready to travel to Kyrgyzstan to discuss the status of the airbase and enhanced cooperation between the two countries. In mid-June, Afghan President Hamed Karzai met Bakiyev at a conference in Moscow and reportedly urged him to keep the airbase open. In February 2009, Kyrgyzstan announced that it was terminating an agreement permitting U.S. forces to use portions of the Manas International Airport and adjoining areas near the capital of Bishkek to support coalition military operations in Afghanistan. According to the U.S. Air Force, the airbase provides major refueling and air mobility capabilities in support of operations in Afghanistan. U.S. forces faced leaving the airbase by late August 2009. Major U.S. concerns raised by the Kyrgyz announcement included working out alternative logistics routes and support functions for the Obama Administration's planned surge in U.S. troops deployed to Afghanistan and possibly cooler security ties with Kyrgyzstan that would set back U.S. counter-terrorism efforts and other U.S. interests in Central Asia. U.S. and NATO relations with Russia also might have suffered if the airbase closure and other Russian actions in Central Asia came to be viewed as non-supportive of International Security Assistance Force (ISAF) operations in Afghanistan. The United States intensified talks with Kyrgyzstan after the announcement with the goal of persuading the country to reverse its decision. The 111 th Congress was faced with issues associated with either raising security and foreign assistance appropriations for Kyrgyzstan if the airbase remained open, or with re-evaluating U.S.-Kyrgyz relations if the airbase was closed. After the September 11, 2001, terrorist attacks, the United States negotiated status of forces agreements (SOFA) and other security accords with several Central Asian states in order to use their airstrips for what became the U.S.-led Operation Enduring Freedom (OEF) in Afghanistan. The SOFA with Kyrgyzstan was finalized and an airbase was opened at the Manas International Airport (north of the capital of Bishkek) on December 11, 2001. Subsequently, several coalition countries also signed agreements with Kyrgyzstan and deployed troops and aircraft. U.S. military engineers upgraded runways and built an encampment next to the airport, unofficially naming it the Peter J. Ganci airbase, in honor of a U.S. fireman killed in New York on September 11, 2001. By mid-2002, the Manas airbase hosted over 2,000 troops from nine countries. In 2003, Kyrgyzstan agreed to also host a small Russian airbase at Kant, east of Bishkek, ostensibly as part of the Collective Security Treaty Organization (CSTO; members include Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan). The Kant airbase is close to the Manas airbase. On July 5, 2005, the presidents of Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Russia, and China signed a declaration at a summit of the Shanghai Cooperation Organization (SCO; a regional economic and security grouping) that called on OEF coalition members to decide when they would end their use of airbases and other facilities in Central Asia. Later that month, Uzbekistan announced that it was ending a basing agreement with the United States, after the United States had criticized the Uzbek government for repressive actions against civilians. Some of the functions of this airbase were moved to Manas. In October 2005, Kyrgyz President Kurmanbek Bakiyev demanded either that the United States greatly increase fees paid for use of the Manas airbase or close it. After protracted negotiations, agreement was reached in July 2006 on an increase from $2 million per year for leasing the base to $17.4 million for a five-year period. In a joint statement, the United States pledged to provide various forms of assistance to Kyrgyzstan totaling $150 million over the next year, pending Congressional approval. U.S. assistance totaling $150 million was provided to Kyrgyzstan in FY2007, according to the State Department. There is controversy, however, over whether a similar amount was to be provided in subsequent years. During a January 2009 visit to Kyrgyzstan, Gen. David Petraeus, Commander of U.S. Central Command, stated that "the United States provides, both direct and indirect, [aid that] adds up to about $150 million per year in various programs." He also announced "our desire to increase the benefits that accrue to your country from Manas and the other activities." According to a recent factsheet from the U.S. Air Force, the Manas airbase contributed more than $64 million to the local Kyrgyz economy in FY2008. Of this amount, $17.4 million was a lease payment, $22.5 was for airport operations and other land lease fees, nearly $500,000 for upgrading Kyrgyz air control systems, and about $24 million on local contracts and charity work. Besides the $64 million, U.S. foreign operations appropriations for Kyrgyzstan for FY2008 were an estimated $32.6 million, resulting in total assistance of about $96 million. The U.S. Air Force stated in February 2009 that "Manas airbase currently serves as the premier air mobility hub for the International Security Assistance Force and coalition military forces operating in Afghanistan.... Currently, 1,000 personnel from Spain, France and the United States are assigned to the base, along with 650 U.S. and host-nation contractor personnel." It reported that in 2008, the 376th Air Expeditionary Wing based at the Manas airbase flew 3,294 refueling missions over Afghanistan, about 20% of all such missions flown in the theater. The Air Force also reported that most NATO and coalition troops entering or leaving Afghanistan transit through Manas, more than 170,000 in 2008. The airbase is an important landing strip for C-17 Globemaster transports to off-load supplies bound for Bagram airbase in Afghanistan, although the total weight of such cargoes is much less than provided to forces in Afghanistan via other air or land routes. Under the SOFA, the airbase has a significant capability to serve as a possible alternative route for lethal supplies entering Afghanistan if needed. C-17 Globemasters assigned to the airbase are used for rapid airlift of troops and cargoes as well as emergency medical evacuation and airdrops. The 376th Air Expeditionary Wing's KC-135 Stratotankers carry out refueling missions over Afghanistan, and also serve as communications hubs while loitering. The Spanish detachment and their C-130 aircraft provide airlift for medical evacuations and other coalition support. The French detachment provides aerial refueling for coalition aircraft with the French version of the KC-135, the C135FR. While Russia joined other SCO members in the mid-2005 call for a decision on closing coalition bases, the Russian government appeared to intensify its efforts to convince Kyrgyzstan to close the Manas airbase a few months after the United States and Kyrgyzstan had agreed on expanded rent payments. Russian and pro-Russian Kyrgyz media appeared increasingly to allege that airbase operations contributed to environmental damage by polluting the air and soil and that U.S. personnel were a threat to the safety of civilians and were involved in illicit activities (see also below). At the same time, Russian media praised the benefits of Russia's Kant airbase. Among other leverage, the pro-Moscow Party of Communists of Kyrgyzstan was prominent in anti-American demonstrations. A new Russian law on migrant workers went into effect at the beginning of 2007, leading to concerns in Kyrgyzstan, a major source of migrant workers in Russia. Kyrgyz legislative speaker Marat Sultanov visited Russia in May 2007 and reportedly urged Moscow to facilitate the inflow of Kyrgyz migrant workers, including by granting them dual citizenship, in exchange for agreeing to a major boost in the Russian military presence in Kyrgyzstan and to close the Manas airbase. In August 2007, Russia's then-President Vladimir Putin offered to invest up to $2 billion in Kyrgyzstan's economy if "good projects" could be located. The two governments worked on identifying such projects, particularly investments in hydro-electricity production. Inter-governmental accords reportedly were being prepared for signing in late 2008, and talks had expanded to include a $300 million loan to support Kyrgyzstan's budget in the face of the global economic downturn. Around this time, some Kyrgyz and Russian media alleged that Kyrgyz President Bakiyev had acquiesced to a Russian condition that the assistance would be provided if the Manas airbase was closed, and that Bakiyev would announce the base closure when he visited Moscow in early 2009. Most Russian and Kyrgyz officials have denied that the aid was explicitly conditioned on the airbase closure. On February 3, 2009, President Bakiyev announced during his Moscow meeting with Russian President Dmitriy Medvedev that the Manas airbase would be closed. Reasons for closing the base, Bakiyev claimed, included inadequate U.S. compensation for its continued use and strong Kyrgyz public opinion against its continued operation. He also asserted that counter-terrorism operations in Afghanistan had been concluded, which had been the main reason for keeping the airbase open. At their meeting, Medvedev announced that $1.7 billion would be invested in Kyrgyzstan for building a dam and hydroelectric power station and another $450 million would be provided for budget stabilization. Russia also agreed to cancel a $180 million debt owed by Kyrgyzstan in exchange for some properties. The next day, Medvedev suggested that the member-countries of the Russia-led CSTO could compensate for the airbase closure by offering land transit for non-lethal supplies for NATO forces in Afghanistan. The Kyrgyz legislature, dominated by the president's Ak Zhol Party, voted overwhelmingly on February 19, 2009, to close the airbase, and the president signed the bill into law the next day. Under the SOFA, the United States is to turn over the airbase facilities within six months of notification, or by late August 2009. On April 2, 2009, Bakiyev signed similar legislation annulling airbase access agreements with Australia, Denmark, France, Italy, Netherlands, New Zealand, Norway, Poland, South Korea, Spain, and Turkey. Among the few legislators who opposed closing the airbase, Bakyt Beshimov, the leader of the opposition Social Democratic Party, argued that "both the Manas Airbase and the Russian base at Kant ... were opened with the aim of countering terrorism and religious extremism.... Guided exclusively by the national interests of Kyrgyzstan, [we] believe that the decision on the closure of the US airbase is premature." Outside the legislature, prominent human rights advocate Topchubek Turgunaliyev similarly criticized the decision to close the airbase, warning that "our relations will get worse not only with the United States, but with many Western countries." He and some other Kyrgyz citizens argued that by hosting both the U.S. airbase and the Russian Kant airbase, Kyrgyzstan maintained a balanced foreign policy, and that if one airbase was closed, the other also should be closed. Many observers warned that the closure of the Manas airbase might well set back Kyrgyzstan's security relations with the United States and increase Bishkek's dependence on such ties with Russia and China. Seeming to indicate such a tightening security grip, Russia's CSTO head, Nikolay Bordyuzho, announced on April 20, 2009, that "the Russian government plans to enlarge the number of warplanes stationed in Kant. That would correspond to the current situation in Central Asia and Afghanistan." He also stated that the upgraded airbase would support the CSTO rapid reaction forces. Railroad repair work was reported at Kant in February 2009, presumably in advance of a major influx of weaponry and personnel. Some observers maintained that Russia's push for closing the Manas airbase was aimed more to minimize U.S. influence in Central Asia rather than to harm U.S. and ISAF operations in Afghanistan. With President Obama's commitment to increase the size of the U.S. military footprint in Afghanistan, these observers argued, Russia became more concerned that the Manas airbase would become a permanent U.S. presence in the region and would remain even if Afghanistan became more stable. These observers pointed to Russia's readiness to facilitate cargo shipments to Afghanistan and other offers of assistance as indications that Russia supported ongoing U.S. and ISAF operations in Afghanistan. Other observers took a less sanguine view and argued that Russia desired control over access routes in order to gain substantial influence over U.S. and ISAF operations in Afghanistan. They also pointed out that the alternative access proffered by Russia was only for non-lethal shipments and could be restricted or rescinded at any time (see also below). The Russian head of the CSTO, Nicholas Bordyuzho, in late April 2009 reportedly downplayed the significance of the Manas airbase in supporting operations in Afghanistan and instead claimed that by granting transit rights for NATO supplies, Russia and the Central Asian countries had rendered the airbase moot. He also asserted that CSTO efforts were more significant in ensuring stability in Afghanistan and Central Asia and announced that Russia would send more warplanes to the Kant airbase. Also in April 2009, the SCO held a military exercise in Tajikistan to simulate the repulsion of a terrorist incursion from Afghanistan. Disagreeing with such views, Pierre Morel, the EU's Special Representative for Georgia and Central Asia, reportedly emphasized during a visit to Kyrgyzstan that the country would suffer the effects of a deteriorating security situation in Afghanistan if NATO operations there were hindered. He also rejected the view that the airbase closure would not affect EU ties with Kyrgyzstan, since EU citizens were among those fighting in Afghanistan. A presidential election is to be held in Kyrgyzstan in July 2009. Some observers suggested that President Bakiyev faced rising public discontent from the shocks of the global economic downturn, which have led many Kyrgyz migrant workers to return home. Energy shortages during the past two winters also have heightened discontent. To gain electoral support, these observers suggest, Bakiyev raised criticism of the airbase and ordered its closure. Some pro-Moscow opposition parties hailed Bakiyev's decision to close the base, but other parties and groups in Kyrgyzstan raised concerns that Bakiyev's "embrace of Russia" could herald rising Russian-style authoritarianism in Kyrgyzstan. In the end, however, Bakiyev reversed his decision on closing the airbase, perhaps viewing the economic boost provided by keeping the airbase open—at higher rent payments he had negotiated—as enhancing his ability to retain office. At a campaign stop in a small town in southwestern Kyrgyzstan on June 29, Bakiyev stated that "the transit center [the Manas airbase] is the Kyrgyzstan's contribution to ensuring regional security." He reportedly stressed that the situation in Afghanistan and Pakistan was worsening and had at least indirectly influenced Kyrgystan, where a terrorist attack had recently taken place. He also reportedly stated that Presidents Obama and Karzai had urged him to continue to support NATO operations in Afghanistan. After signing cooperative security agreements with the Central Asian states, the former Bush Administration averred that the United States was not seeking "permanent" bases in the region. However, the previous Administration also argued that regional access would "be needed as long as conditions in Afghanistan require it," as well as "for future contingencies and to be involved in training and joint exercises ... for the long term." The Obama Administration has reaffirmed these U.S. interests in the region. On April 24, 2009, then-Assistant Secretary Boucher stressed while visiting Tajikistan the economic and security roles the Central Asian region could play in bolstering stability in Afghanistan. He stated that "President Obama and Secretary Clinton want to continue and expand [the U.S.] involvement in relations with Central Asia. We want to work more closely with the countries in this region. Together we can help bring stability to Afghanistan, and together we can try to open up new opportunities for the nations and especially the people of this region." Some unfortunate incidents at the Manas airbase over the years appeared to increase negative views of the airbase among the population. As mentioned above, such incidents were widely criticized in Russian and Russian-influenced Kyrgyz media and among pro-Moscow parties and groups, were used as weapons in political infighting, and played a role in Kyrgyz government demands for added lease payments. A major sore point in U.S.-Kyrgyz relations occurred after the shooting of an ethnic Russian truck driver by a U.S. serviceman at the Manas airbase in December 2006. Appearing to reflect the influence of Russian-orchestrated propaganda as well as other influences, a Kyrgyz opinion survey in late 2008 reported that 84% of respondents viewed Russia as friendly to Kyrgyzstan and almost 50% viewed the U.S. airbase at Manas negatively as a symbol of U.S. aspirations for global domination. According to some observers, the U.S. military did not appear overly concerned about the status of the Manas airbase as late as October 2008, when the Army Corps of Engineers invited bids for construction of a concrete parking ramp to support strategic and refueling operations and a concrete hazardous cargo pad. However, by the time of the visit of Gen. David Petraeus in January 2009, such concerns appeared evident by his offer to consider boosting U.S. assistance. Responding to Bakiyev's announcement that the Manas airbase would be closed, U.S. Defense Secretary Robert Gates stated that "Manas is important, but it's not irreplaceable.... We have not resigned ourselves to this being the last, the last word.... I think we are prepared to look at the fees and see if there is justification for a somewhat larger payment.... We are prepared to do something that we think is reasonable.... It is an important base, but it's not so important that we're going to waste taxpayer dollars paying something that's exorbitant." Then-Assistant Secretary Boucher indicated on April 24 that talks with Kyrgyzstan are ongoing, and that in the meantime, operations have not been affected at the airbase. He also emphasized that the United States was not "in particular" seeking another airbase in Central Asia, and that the functions carried out at the Manas airbase might be parceled out to various locations rather than to one new airbase. Many observers raised concern that the Manas airbase closure could complicate President Obama's February 17, 2009, order for up to 17,000 additional troops to be deployed to Afghanistan by the end of the year. Over its lifetime, the Manas airbase has been the premier point of access to and from Afghanistan for most U.S. military and contract personnel. Although the airbase is currently not used to transport lethal cargoes into Afghanistan (lethal cargoes do exit Afghanistan through the airbase), its SOFA permits it to be used as an alternative secure way-station for the supply of lethal military supplies to Afghanistan. It may be difficult to find similarly convenient facilities for aerial refueling, data communications, and medical evacuation. Retired Gen. Richard Myers, the former chairman of the U.S. Joint Chiefs of Staff, has warned that the closure of the Manas airbase could make maintaining the supply routes to Afghanistan more difficult and expensive. He has suggested that bases in Turkey or elsewhere in the Middle East could be used for refueling missions, but operational costs would be higher. Some observers suggested that Russia was using the putative closure of the Manas airbase as a bargaining chip to force U.S. concessions on missile defense, NATO enlargement, and other issues. Analyst Stephen Blank argued that such a Russian strategy would prove fruitless because the United States would not recognize Russia's claims to a sphere of exclusive influence in Central Asia. He argued that Russia's apparent success in convincing Kyrgyzstan to close the Manas airbase demonstrated that the United States should provide more assistance to the Central Asian states so that they have "the ability to make their own unfettered decisions on security matters.... Washington must be prepared to invest heavily in Central Asian states." Analysts such as Blank and others also raised concerns that a possible reduction of U.S. influence in Central Asia could jeopardize the security of alternative land supply routes to Afghanistan. The need for such routes increased as a result of Taliban attacks on non-lethal U.S. and NATO shipments through Pakistan to Afghanistan. Recent agreements reached with Russia and Central Asian states permit overland transit of non-lethal and non-sensitive cargoes to Afghanistan. Land routes include one starting at the Latvian port of Riga and continuing by rail through Russia, Kazakhstan, and Uzbekistan. Another route starts at the Georgian port of Poti, crosses the Caspian by ferry, and commences by rail through Kazakhstan and Uzbekistan. Goods also can enter Tajikistan from Uzbekistan and be delivered by truck across a U.S.-built bridge to Afghanistan. According to some reports, U.S. planners calculate that about 20% of non-lethal supplies to Afghanistan could be sent along these routes (with much of the remainder continuing to be sent via Pakistan). The first shipment of U.S. non-lethal military supplies—reportedly including camouflage, food, and civil engineering equipment—was loaded onto rail cars at the port of Riga, Latvia, and transited the Baltic states, Russia, Kazakhstan, and Uzbekistan to arrive in Afghanistan in late March 2009. Some analysts point out that U.S.-led coalition actions in Afghanistan in 2001-2002 seriously degraded the capabilities of the Islamic Movement of Uzbekistan (IMU) and other terrorist groups harbored in Afghanistan that had periodically launched attacks in Central Asia. Russia and China, in contrast, had appeared unwilling, if not unable, to provide enough military support to Central Asia in the 1990s to halt these periodic attacks. These analysts question whether Russia and China would now prove able to provide enough military support to prevent the re-emergence of such attacks. Analysts Borut Grgic and Alexandros Petersen raise a related concern that terrorists could seek safe harbors in an insecure Central Asia and launch attacks into Afghanistan. They state that "weak borders between Central Asia and Afghanistan are a recipe for long-term failure for the United States and its NATO allies in Afghanistan. We see today how terrorists and other criminals move unbothered through the porous border with Pakistan. Why should it be any different on the Central Asian side?" Congress has supported the maintenance of the U.S. airbase at Manas by providing construction and other military assistance as well as enhanced U.S. foreign assistance. This Congressional support also has been prompted, in part, by some democratization progress in the country, although these reforms recently have appeared to lag. Similar to the case in 2006—when the United States and Kyrgyzstan agreed on a revised rental agreement—current talks on keeping the airbase open, if successful, could result in an Administration request to Congress to approve added funding or other legislative action. For some Members, the issue at this time may include whether the advantages of keeping the airbase open outweigh Kyrgyzstan's apparently declining democratization progress. Among recent legislative action, Division E of the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act for FY2009 ( H.R. 2638 ; P.L. 110-329 ) provided $6 million for constructing a hazardous cargo pad at the Manas airbase. Construction was originally planned to begin on April 9, 2009. The Consolidated Appropriations Act, 2008 ( H.R. 2764 ; P.L. 110-161 ) provided $30.3 million for construction of a parking ramp at the airbase. Perhaps of some significance to possibly re-aligning some functions carried out at the Manas airbase, a parking ramp for wide-body strategic airlift is being built at Bagram airbase in Afghanistan. Strategic airlift currently must land at Manas and offload cargo for airlifting to Bagram, where cargo is again reloaded for airlift to forward operations bases. At a hearing of the Senate Armed Services Committee in mid-March 2009, Senator John McCain raised concerns about the impact the possible closure of the Manas airbase would have on transportation and logistics risks associated with the shift of resources and personnel from Iraq to Afghanistan. At a hearing in late April 2009 on the President's request for supplemental appropriations for FY2009, Representative Chet Edwards asked about whether a new $30 million request for air traffic control system upgrades at the Manas airbase was still warranted in light of Kyrgyzstan's demand for the closure of the airbase. He also noted that the previously appropriated $36 million (the $30.3 million ramp and the $6 million pad mentioned above) had not yet been expended, and encouraged ongoing U.S.-Kyrgyz talks to keep the airbase open. Gen. David Petraeus, Commander of U.S. Central Command, responded that "if, of course, it came that we were to leave [the Manas airbase], obviously we would not invest in that particular air traffic control improvement. I don't want to get ahead of things, but we need to give this time.... it's our hope that actually all parties in the region, and this includes Russia, could [join in] a broad partnership against transnational extremism and the illegal narcotics activities." Supplemental appropriations for FY2009 (signed into law on June 24, 2009; P.L. 111-32 ) provided $30 million for air traffic control system upgrades at the Manas airbase and $21.52 million for drug interdiction and counter-drug activities in Kyrgyzstan. The Obama Administration's FY2010 foreign assistance request calls for boosting aid for Kyrgyzstan from $29.06 million in FY2009 to $48.23 million in FY2010. The added request "represents a strategic shift to focus on programs that will stabilize and reform the Kyrgyz economy during turbulent times." The boost also reflects added foreign military financing (FMF), from $800,000 for FY2009 to a requested $2.9 million for FY2010.

In February 2009, Kyrgyzstan announced that it was terminating an agreement permitting U.S. forces to upgrade and use portions of the Manas international airport near the capital of Bishkek to support coalition military operations in Afghanistan. U.S. forces faced leaving the airbase by late August 2009. Major U.S. concerns included working out alternative logistics routes and support functions for a surge in U.S. and NATO operations in Afghanistan and possibly cooler security ties with Kyrgyzstan that could set back U.S. counter-terrorism efforts and other U.S. interests in Central Asia. After reportedly intense negotiations, the United States and Kyrgyzstan reached agreement in June 2009 on modalities for maintaining U.S. and NATO transit operations at Manas. For more on Central Asia, see CRS Report RL33458, Central Asia: Regional Developments and Implications for U.S. Interests, by [author name scrubbed].

Early in December 2010, press reports indicated that legislators, especially in the Senate, were seeking to gather support for several water quality bills that could be considered during the post-election, lame duck session of the 111 th Congress, possibly packaged with others dealing with public lands and wildlife protection. These discussions resulted in a comprehensive bill, titled "America's Great Outdoors Act of 2010," that was introduced in the Senate on December 17 ( S.Amdt. 4845 to S. 303 ). The water quality measures were found in Division J, Title CII (Subtitles A-I) and Title CII (Subtitle A) of S.Amdt. 4845 . This report describes water quality bills that were included in the package. All but one of the bills discussed below would have amended the Clean Water Act (CWA, 33 U.S.C. 1251 et seq.), and all had been approved and reported by the Senate Environment and Public Works Committee. Similar House bills had been introduced for all but one of the Senate measures, and the House had passed two of them. With the exception of legislation that focused on Chesapeake Bay ( S. 1816 , discussed below), the individual bills were not considered to be controversial, although some Members criticized the expansive scope and cost of the entire omnibus bill. Most of the individual bills would either have reauthorized and in some cases modified existing CWA provisions that address water quality concerns in specified geographic areas, or they would have established similar provisions for other regions or watersheds. As included in S.Amdt. 4845 , most of the bills were little changed from the Senate Environment Committee-approved versions, while three reflected more substantive modifications (bills dealing with the Great Lakes, Long Island Sound, and San Francisco Bay). The 111 th Congress adjourned sine die on December 22 without taking up either the omnibus bill or individual measures that were included in S.Amdt. 4845 . Whether the 112 th Congress will consider some or all of these bills is unknown for now. The CWA is the principal federal law that deals with polluting activity in the nation's surface streams, lakes, estuaries, and coastal waters. Enacted basically in its current form in 1972 (P.L. 92-500), the law established broad water quality restoration objectives for the nation's waters. The objectives were accompanied by statutory goals to eliminate the discharge of pollutants into navigable waters of the United States by 1985 and to attain, wherever possible, waters deemed "fishable and swimmable" by 1983. Programs at the federal level are administered by the U.S. Environmental Protection Agency (EPA); state and local governments have major day-to-day responsibilities to implement CWA programs through standard-setting, permitting, and enforcement. Considerable progress towards the goals of the act has been made, but long-standing problems persist and new problems have emerged. The last major amendments to the law were the Water Quality Act of 1987 ( P.L. 100-4 ), the most comprehensive amendments since 1972. Subsequently, congressional committees conducted oversight on the law, and Congress enacted bills addressing a number of regional water quality concerns. The 111 th Congress bills included in American's Great Outdoors Act of 2010 ( S.Amdt. 4845 ) addressed issues for these geographic-specific areas and CWA programs: Estuaries under the CWA's National Estuary Program, Chesapeake Bay, Columbia River Basin, Great Lakes, Gulf of Mexico, Lake Tahoe, Long Island Sound, Puget Sound, San Francisco Bay, and Monitoring water quality of coastal recreation waters. Estuaries are areas where rivers meet the sea and where fresh and salt water mix. They are critical to the health of coastal environments. They serve as important habitat for fish and wildlife, provide wetland plants and soils that trap pollutants and temper storm surges, and provide tangible, direct economic benefits to regions and the nation. Many, however, are threatened or degraded by overuse of resources and human development. In response to concerns about conditions of the nation's coastal estuaries, the 1987 CWA amendments established the National Estuary Program (NEP) in Section 320 of the act. The NEP is a program to promote comprehensive planning efforts to protect nationally significant estuaries that are threatened by pollution, development, and overuse. Once approved by EPA, local stakeholders can receive financial and technical assistance to develop and implement a comprehensive conservation management plan that addresses factors that contribute to the estuary's degradation. To date, EPA has approved 28 estuaries for participation in the program. Since 1987, Congress has amended Section 320 to reauthorize funding and in several cases to identify estuaries to be given priority consideration under the program. Authorization of Section 320 appropriations expired at the end of FY2010. In April 2010, the House passed H.R. 4715 , the Clean Estuaries Act, to reauthorize assistance through FY2016 and to increase the authorization from $35 million annually to $50 million annually to encourage EPA to expand the number of estuaries included in the program. Further, H.R. 4715 would have added several requirements in the development of comprehensive management plans, such as addressing the impacts of climate change, and would have required periodic update of the plan and evaluation and approval by EPA. Under the House-passed bill, if the EPA review were to find the plan deficient, EPA could reduce grant funding until the plan was revised. The Senate Environment and Public Works Committee approved an amended version of H.R. 4715 in June ( S.Rept. 111-293 ). As reported, the bill would have increased authorization of appropriations to $75 million per year and would have required updates and evaluations every five years, rather than every four years as in the House-passed version. In S.Amdt. 4845 , National Estuary Program provisions were included in Division J, Title CII, Subtitle C. The provisions were essentially the same as in the bill as approved by the Senate Environment and Public Works Committee. Modifications were included to clarify EPA procedures for reviewing and determining completeness of a comprehensive management plan. The provisions of S.Amdt. 4845 would have authorized appropriations of assistance for NEP estuaries for six years (through FY2017) at $75 million per year. The bill with the greatest potential for controversy is S. 1816 , the Chesapeake Clean Water and Ecosystem Restoration Act of 2009. It would revise CWA Section 117, which addresses restoration of Chesapeake Bay's water quality. Because of this stand-alone CWA provision, Chesapeake Bay is not included in the NEP. Despite several decades' of activity by governments, the private sector, and the general public, efforts to improve and protect the Chesapeake Bay watershed have been insufficient to meet restoration goals. Although some specific indicators of bay health have improved slightly or remained steady (such as blue crabs and underwater bay grasses), others remain at low levels of improvement, especially water quality. Overall, the bay and its tributaries remain in poor health, with polluted water, reduced populations of fish and shellfish, and degraded habitat and resources. In May 2009, President Obama issued Executive Order 13508 that declared the bay a "national treasure" and charged the federal government with assuming a strong leadership role in restoring the bay. The executive order established a Federal Leadership Committee for the Chesapeake Bay to develop and implement a new strategy for protecting and restoring the Chesapeake Basin that would build on and accelerate existing programs like those under CWA Section 117. A central feature of the overall strategy is EPA's pledge to establish a Total Maximum Daily Load (TMDL) for Chesapeake Bay. Section 303 of the CWA requires states to identify waters that are impaired by pollution, even after application of pollution controls. For those waters, states must establish a TMDL to ensure that water quality standards can be attained. A TMDL is essentially a pollution budget, or a quantitative estimate of what it takes to achieve standards, setting the maximum amount of pollution that a water body can receive without violating standards. If a state fails to do this, EPA is required to make its own TMDL determination for the state. Throughout the United States—including the Chesapeake Bay watershed—more than 20,000 waterways are known to be violating applicable water quality standards, and thus requiring development of a TMDL. Lawsuits have been brought to pressure EPA and states to develop TMDLs; under a consent decree in one such lawsuit, EPA must establish a Chesapeake Bay TMDL by no later than May 1, 2011, with a goal of having TMDL implementation measures in place by 2025. The Chesapeake Bay TMDL will be the geographically largest single TMDL developed to date. It will address all segments of the bay and its tidal tributaries that are impaired from discharges of nitrogen, phosphorus, and sediment, and the TMDL will allocate needed reductions of these pollutants to all jurisdictions in the 64,000-square-mile watershed. Detailed plans identifying specific reductions will be developed by the bay states in Watershed Implementation Plans. Environmental activists are pleased that the federal government is now asserting a leadership role to restore the bay and are supporting legislation that would codify procedural requirements and deadlines for the bay TMDL and authorize grants and other assistance for implementing required measures. S. 1816 proposed to do so. As reported, the bill generally sought to codify 2025 as a deadline for implementing restoration actions throughout the Chesapeake Basin and would have given EPA explicit backup authority to develop measures to restore the watershed, if states fail to do so. The legislation would have authorized significant financial resources, totaling $2.26 billion over six years, to assist in implementing programs, projects, and measures for restoration of the Chesapeake Basin watershed. The legislation was controversial—as are EPA's TMDL plans and the overall federal Chesapeake Bay restoration strategy—and a number of groups such as agriculture and developers have been concerned about the likely mandatory nature of many of EPA's and states' upcoming actions that will occur with or without the authorization of appropriations in the legislation. The Senate Environment and Public Works Committee approved S. 1816 on June 30 ( S.Rept. 111-333 ). In the House, companion legislation was introduced ( H.R. 3852 ), as were several other bills concerned with Chesapeake Bay issues ( H.R. 5509 , H.R. 3265 , and H.R. 6382 ). The House Agriculture Committee approved an amended version of H.R. 5509 in July (no report was filed); there was no legislative action on the other House bills. In S.Amdt. 4845 , Chesapeake Bay provisions were included in Division J, Title CII, Subtitle H. The provisions were generally the same as the Chesapeake Bay bill approved by the Senate Environment and Public Works Committee, but did include some modifications that were based in part on separate legislation, H.R. 5509 . In particular, revisions included the following: directing EPA to establish a website providing transparency on Chesapeake Bay restoration efforts, calling for EPA to prepare annually a financial report and interagency crosscut budget accounting for federal funding on Bay restoration, and modifying provisions related to compliance of agricultural or private forest conservation plans with state management plans for Bay restoration. Finally, the provisions of S.Amdt. 4845 included language that would amend the Food Security Act of 1985 (the farm bill) authorizing the Secretary of Agriculture to identify conservation practices for agricultural and private foresters that Chesapeake Bay states could use in their restoration implementation plans. The lower Columbia River estuary is one of 28 estuaries included in the National Estuary Program. S. 4016 , the Columbia River Basin Restoration Act of 2010, would have added a new section to the CWA to establish a restoration program for the whole of the Columbia River Basin in the Pacific Northwest (the lower, middle, and upper portions, including the Snake, Clark Fork, and Pend Oreille Rivers and tributaries) and direct EPA to provide federal leadership and coordination. A particular focus of restoration efforts would be reducing toxic contamination throughout the basin. The legislation included a provision, unrelated to CWA Section 320, directing the President to preserve and protect the transboundary Flathead River watershed that spans the United States and Canada, including participation in cross-border collaborations. S. 4016 would have authorized grants to carry out plans or projects under the legislation, authorizing appropriations of $33 million annually from FY2012 through FY2017. Under the legislation, the federal share of project costs would not exceed 75%. S. 4016 was an original bill that was introduced on December 8 and reported from the Senate Environment and Public Works Committee that same day ( S.Rept. 111-358 ). There was no action in the House on similar legislation ( H.R. 4652 , which did not include a provision on the Flathead River watershed). In S.Amdt. 4845 , Columbia River Basin provisions were included in Division J, Title CII, Subtitle E. These provisions were generally the same as provisions of the Environment Committee bill, S. 4016 . The ecosystem of the Great Lakes, the largest system of surface freshwater in the world, faces threats from multiple stressors, including aquatic invasive species, pollution of the open waters and coastal areas of the lakes, habitat degradation, and sediments that are contaminated with mercury and other pollutants. Efforts by governments, private interests, and the public in both the United States and Canada to address these challenges have been underway for several decades. The 1987 CWA amendments established Section 118 of the CWA and put in place measures to achieve water quality improvement goals embodied in agreements between the United States and Canada. Congress has amended this provision several times since then, adding new authorities and requirements in order to strengthen Great Lakes restoration actions. In particular, in 2002 Congress passed the Great Lakes Legacy Act ( P.L. 107-303 ), which amended CWA Section 118 to authorize funds for projects to remediate toxic, contaminated sediments throughout the lakes. In 2004 President Bush issued Executive Order 13340, which created the Great Lakes Interagency Task Force of federal agencies to coordinate restoration of the lakes. In separate action, a Regional Collaboration of state and local governments, the public, and the private sector subsequently released a strategy and implementation framework for restoration. In the FY2010 budget proposal, President Obama requested increased funding (totaling $475 million) for an EPA-led Great Lakes Restoration Initiative to target federal funding to major threats to the ecosystem of the lakes that have been identified by the Interagency Task Force and the Regional Collaboration. The initiative is essentially a means of coordinating appropriations for Great Lakes restoration. Congress approved the requested FY2010 appropriations. In February 2010, the Interagency Task Force issued a multi-year restoration Action Plan to guide implementation of the Initiative through projects and grants in five areas: toxic substances, invasive species, nonpoint source pollution, habitat and wildlife restoration, and partnerships and communication. In the 111 th Congress, the Senate Environment and Public Works Committee approved two bills concerning Great Lakes issues. First, S. 3073 , the Great Lakes Ecosystem Protection Act of 2010, addressed governance issues. It would have amended CWA Section 118 to establish a Great Lakes Leadership Council to provide input on restoration priorities to the federal Interagency Task Force. It also would have established in law the existing Interagency Task Force, to continue coordination of restoration efforts, and the Great Lakes Restoration Initiative, to target the most significant environmental problems of the ecosystem. The bill would have authorized $475 million annually through FY2016 for the initiative. It also would have reauthorized the Great Lakes Legacy Act program for projects to remediate contaminated sediments at $150 million annually through FY2015. A second Environment Committee-approved bill, the Contaminated Sediment Remediation Reauthorization Act ( S. 933 ), addressed only the existing program for remediation of contaminated sediments in the Great Lakes in CWA Section 118. It also would have reauthorized that program at $150 million annually through FY2014. The Senate Environment and Public Works Committee approved S. 3073 on June 30 ( S.Rept. 111-283 ) and S. 933 on June 19 ( S.Rept. 111-171 ). Similar measures were introduced in the House. H.R. 4755 , like S. 3073 , would have provided statutory authority for the Great Lakes Restoration Initiative and the Great Lakes Interagency Task Force and would have reauthorized the Great Lakes contaminated sediment remediation program. There was no action on this bill. Separate legislation, in Title V of H.R. 1262 , also would have reauthorized the contaminated sediment remediation program with $150 million per year in funding through FY2014. The House passed H.R. 1262 , including Title V, in March 2009. In S.Amdt. 4845 , Great Lakes provisions were included in Division J, Title CII, Subtitle F. These provisions were based on the committee-reported version of S. 3073 but included a number of modifications to that bill. The legislation would have established a Great Lakes Leadership Council, which, together with the existing Great Lakes Interagency Task Force, would be known as the Great Lakes Collaboration Partnership. The Partnership would be responsible for developing a Great Lakes Restoration Blueprint, a strategy for protecting water quality and the ecosystem of the Great Lakes basin. The Leadership Council also would be responsible for developing annual priority lists of projects to advance the goals and objectives of the Blueprint or the Great Lakes Restoration Initiative Action Plan. The legislation would have authorized to be appropriated $475 million per year through FY2017 and authorized EPA to transfer not more than $475 million to other federal agencies to carry out activities under the Blueprint, the Action Plan, or the Great Lakes Water Quality Agreement between Canada and the United States. It would have codified the Great Lakes Interagency Task Force, and it would have established new reporting requirements, as well as preparation of a crosscut budget for Great Lakes funding. Finally, the provisions in S.Amdt. 4845 also included an increase in authorization for the contaminated sediment remediation program, under the Great Lakes Legacy Act, from $50 million to $150 million annually, for FY2012-FY2017. The health of the Gulf of Mexico's economically important and biologically rich ecosystem had been a concern long before the 2010 Deepwater Horizon oil spill in the gulf. In 1988 EPA administratively created a Gulf of Mexico Program to provide federal leadership and identify priority areas and projects for states and gulf coastal communities to undertake on a voluntary basis to protect, maintain, and restore the productivity of the gulf. S. 1311 , the Gulf of Mexico Restoration and Protection Act, would have added a new section to the CWA to establish the program in statute, codify authorities of the EPA Administrator to use interagency agreements to carry out functions of the program office, and authorize grants for monitoring of water quality and living resources, conducting research, developing and implementing restoration projects, and similar purposes. The federal share of project costs would be limited to 75%. The bill would have authorized a total of $100 million for five years, through FY2014. The Senate Environment and Public Works Committee approved S. 1311 on June 30 ( S.Rept. 111-241 ). There was no similar House bill. In S.Amdt. 4845 , Gulf of Mexico provisions were included in Division J, Title CII, Subtitle A. Provisions were generally the same as in S. 1311 , but one modification reduced the five-year authorization of appropriations to $57 million (FY2012-FY2016). Lake Tahoe is the second-deepest lake in North America, and the clarity of its waters and scenery are major tourist and recreational attractions. Since the 1960s, the governments of California and Nevada have engaged in efforts to protect the lake from environmental pressures such as nutrient pollution, fire, and invasive species. In 1969 Congress ratified an agreement between the two states that created a regional planning agency with authority to adopt and enforce environmental quality standards. In 1997 President Clinton issued Executive Order 13057, which created the Lake Tahoe Federal Interagency Partnership to lead a cleanup effort of the lake. In 2000 Congress enacted the Lake Tahoe Restoration Act ( P.L. 106-506 ). It authorized $300 million over 10 years for projects such as land acquisition, forest management, fire suppression, and water quality improvement. This law is not part of the CWA. Several federal agencies, including the Forest Service, the Fish and Wildlife Service (FWS), and EPA, have roles and responsibilities in carrying out its authorities. In the 111 th Congress, S. 2724 , the Lake Tahoe Restoration Act of 2010, would have reauthorized the 2000 legislation. The bill assigned high priority to a number of projects and programs, including watershed restoration, forest management, fire suppression, and invasive species management. It would have directed EPA to establish a Lake Tahoe Basin Program to conduct research, provide scientific and technical support on restoration, and develop performance measures for assessing restoration. It would have authorized appropriation of $415 million through FY2018 for several federal agencies to perform ecological restoration activities in the Lake Tahoe Basin. Of the amount authorized, $136 million would be for Forest Service projects to reduce the risk of fire; $102 million would be for EPA research and grants for certain projects to improve water clarity and manage stormwater runoff; and $41 million would be for FWS activities against invasive species. Remaining unallocated funds would have been available to carry out other restoration projects. The Senate Environment and Public Works Committee approved S. 2724 on June 30 ( S.Rept. 111-211 ). There was no action in the House on related legislation ( H.R. 4001 ). In S.Amdt. 4845 , Lake Tahoe provisions were included in Division J, Title CII, Subtitle B. These provisions were the same as the Environment Committee-approved bill, S. 2724 . Long Island Sound, bordering New York and Connecticut, is one of the 28 estuaries included in the National Estuary Program; it was one of the original estuaries designated for priority when the NEP was established in law in 1987. In 2000, Congress amended the CWA to add Section 119, which established a Long Island Sound Program office providing federal leadership for developing a conservation management plan for Long Island Sound and authorized grants for related projects and activities. In 2006, Congress enacted separate legislation, the Long Island Sound Stewardship Act ( P.L. 109-359 ), which did not amend the CWA but also dealt with Long Island Sound and authorized grants for restoration activities. In the 111 th Congress, S. 3119 , the Long Island Sound Restoration and Stewardship Act of 2010, would have reauthorized grant programs under CWA Section 119 and the Stewardship Act through FY2015 at their current authorized levels: $40 million per year for Section 119 program and $25 million per year for Long Island Sound Stewardship grants. It also would have mandated new reporting and budgeting requirements and established a pilot project for natural filtration technologies to remove nutrients from the Sound. The Senate Environment and Public Works Committee approved S. 3119 on June 30 ( S.Rept. 111-298 ). There was no action in the House on related legislation, H.R. 5876 , which dealt only with the Long Island Sound Program under CWA Section 119. In S.Amdt. 4845 , Long Island Sound provisions were included in Division J, Title CII, Subtitle G. These provisions made substantial changes to the Environment Committee-reported bill. In addition to provisions of the bill as reported, it defined the area covered by CWA Section 119 to be the Long Sound watershed, meaning the Sound and named rivers and tributaries that drain into the Sound, and defined Long Island Sound state to include Connecticut, New York, Massachusetts, New Hampshire, Rhode Island, and Vermont. It would have added new requirements in CWA Section 119 to authorize issuance of stormwater discharge permits on a regional basis and would have required that stormwater discharge permits held by industrial or construction sources within the watershed shall conform to municipal stormwater discharge permits issued under CWA Section 402(p). The provisions in S.Amdt. 4845 also would have directed EPA to work with governors of Long Island Sound states to establish a voluntary interstate nitrogen trading program. Under the legislation, the director of EPA's Long Island Sound Office would be required to prepare annually a list of priority restoration projects. Finally, the legislation would have increased authorization levels as in the reported bill ($40 million per year for Section 119 program and $25 million per year for Long Island Sound Stewardship grants, each for five years) and also would have authorized $1.125 billion over four years for municipal wastewater treatment projects. Puget Sound, a Washington State estuary, is one of 28 estuaries currently included in the NEP. S. 2739 , the Puget Sound Recovery Act of 2010, would have added a new section to the CWA to authorize federal funding expressly to support the protection and restoration of Puget Sound. It would have authorized $90 million annually through FY2015 to EPA to provide funding for projects that are prioritized by the Puget Sound Partnership, a Washington State agency, and approved by EPA in order to implement a comprehensive plan for restoring the estuary. For certain types of activities, the federal share could be 75%; for identified priority projects, the federal share could be 50%. The Senate Environment and Public Works Committee approved S. 2739 on June 30 ( S.Rept. 111-292 ). There was no legislative action in the House on similar legislation ( H.R. 4029 ). In S.Amdt. 4845 , Puget Sound provisions were included in Division J, Title CII, Subtitle D. These provisions were generally the same as the reported bill, but with several modifications. The changes addressed clarifying procedures for EPA's approval of an annual list of priority restoration projects, revising the allocation of funds to implement a comprehensive restoration plan (generally specifying percentages of available funds, but not dollar amounts), and allowing EPA to increase the federal share of certain projects or activities to 100% (e.g., a project carried out solely by a Puget Sound tribe). San Francisco Bay is one of 28 estuaries currently included in the NEP. S. 3539 , the San Francisco Bay Restoration Act, would have added a new section to the CWA to authorize a grant program to fund restoration of San Francisco Bay in accordance with the comprehensive conservation management plan developed through the NEP. According to S.Rept. 111-284 , EPA has received $17 million in appropriations over the last three years to provide grants for ecosystem restoration and water quality work in the San Francisco Bay. The bill would have authorized "such sums as are necessary" annually through FY2020 for grants to undertake estuary restoration projects. Under the legislation, a federal grant would not exceed 75% of the total cost of eligible activities. The Senate Environment and Public Works Committee approved S. 3539 on June 30 ( S.Rept. 111-284 ). There was no legislative action in the House on similar legislation ( H.R. 5061 ). In S.Amdt. 4845 , San Francisco Bay provisions were included in Division J, Title CII, Subtitle I. These provisions made substantial changes to the Environment Committee-reported bill. As modified, the legislation would have directed EPA to prepare annually a list of priority projects to restore the San Francisco Bay estuary and would have authorized EPA to provide funding to the San Francisco Estuary Partnership for identified activities and projects. It would have authorized $350 million over 10 years (FY2012-FY2021) for such assistance, at a 75% federal share. The legislation would have permitted the Estuary Partnership to receive assistance under these provisions, as well as through the NEP (CWA Section 320). In 2000 Congress enacted the Beaches Environmental Assessment and Coastal Health Act (BEACHES Act, P.L. 106-284 ), in order to augment federal and state efforts to prevent human exposure to polluted coastal recreation waters, including the Great Lakes. This act amended to CWA to direct coastal states to adopt updated water quality standards and EPA to develop new protection water quality criteria and standards for coastal recreation waters. It also authorized grants to coastal states to support monitoring and public notification programs. In the 110 th Congress Senate and House committees held hearings on implementation of the BEACH Act, and bills to extend authorization of appropriations for beach monitoring grants were introduced, but none was enacted. The 111 th Congress considered similar bills. In June 2009 the Senate Environment and Public Works Committee approved S. 878 , the Clean Coastal Environment and Public Health Act ( S.Rept. 111-170 ), which would have required the use of more rapid testing of beach waters for contamination and faster notification to the public to warn of contamination. It also would have increased grants to states for beach monitoring and testing, from $30 million annually to $60 million annually, and extended the authorization of appropriations for five years, through FY2013. The House passed similar legislation, H.R. 2093 , in July 2009. In S.Amdt. 4845 , provisions concerning water quality of coastal recreation waters were included in Division J, Title CIII, Subtitle A. The provisions in the amendment were generally the same as in S. 878 (including a five-year authorization of appropriations for grants to states of $60 million per year), but would have extended authorization of appropriations for grants to states through FY2016. The amendment also included three new provisions calling for studies by EPA. One was a study on the long-term impact of pollution on coastal recreation waters, and the second was a study on the impact of excess nutrients and algal blooms on coastal recreation waters. The third study was to address the formula for distributing state grants under the BEACHES program.

Early in December 2010, press reports indicated that legislators, especially in the Senate, were seeking to gather support for several water quality bills that could be considered during the post-election, lame duck session of the 111th Congress, possibly packaged with others dealing with public lands and wildlife protection. These discussions resulted in a comprehensive bill, titled "America's Great Outdoors Act of 2010," that was introduced in the Senate on December 17 (S.Amdt. 4845 to S. 303). This report describes water quality bills that were included in the legislative package. All but one of the bills discussed below would have amended the Clean Water Act (CWA), and all had been approved and reported by the Senate Environment and Public Works Committee. Similar House bills were introduced for all but one of the Senate measures, and the House had passed two of them. With the exception of a bill on Chesapeake Bay, the individual bills were not considered controversial. Most of the individual bills would either have reauthorized and in some cases modified existing CWA provisions that address water quality concerns in specified geographic areas, or would have established similar provisions for other regions or watersheds. The water quality issues and related 111th Congress bills are: Estuaries under the CWA's National Estuary Program (H.R. 4715), Chesapeake Bay (S. 1816), Columbia River Basin (S. 4016), Great Lakes (S. 3073 and S. 933), Gulf of Mexico (S. 1311), Lake Tahoe (S. 2724), Long Island Sound (S. 3119), Puget Sound (S. 2739), San Francisco Bay (S. 3539), and Monitoring water quality of coastal recreation waters (S. 878). The 111th Congress adjourned sine die on December 22 without taking up either the omnibus bill or individual measures that were included in S.Amdt. 4845. Whether the 112th Congress will consider some or all of these bills is unknown for now.

In 2008, the U.S. Supreme Court decided District of Columbia v. Heller , in which the Court held that the Second Amendment to the U.S. Constitution protects an individual right to possess a firearm, unconnected with service in a militia, and the use of that firearm for traditionally lawful purposes, such as self-defense within the home. Shortly afterward in McDonald v. City of Chicago , the Supreme Court held that the Second Amendment also applies to the states, but it did not further explore the scope of the Second Amendment. Although Heller did not constitute "an exhaustive historical analysis ... of the full scope of the Second Amendment," the Court noted that its decision "does not imperil every law regulating firearms," and "[does] not cast doubt [] on longstanding regulatory measures [such] as 'prohibitions on the possession of firearms by felons and the mentally ill,' 'laws forbidding the carrying of firearms in sensitive places such as schools and government buildings, or laws imposing conditions and qualifications on the commercial sale of arms.'" Since Heller and McDonald , both federal and state firearms laws have been regularly challenged under the Second Amendment. This report first discusses the standard of judicial review that the lower courts generally have fashioned to determine if a firearm law is in violation of the Second Amendment. Next, the report examines select categories of firearms laws that have been challenged under the Second Amendment. These include (1) prohibitions on certain persons based on age and on criminal history; (2) state concealed carry laws; and (3) state and local assault weapons bans. An examination of these categories could provide some insight as to how courts might assess future firearms legislation on Second Amendment grounds. In the 113 th Congress, several gun control proposals have been introduced. These include, among others, measures that would ban certain assault weapons and prohibit possession of large capacity magazines (e.g., S. 150 / H.R. 437 / S. 33 ); and measures that would require background checks on private transfers of firearms or ammunition (e.g., S. 22 / S. 174 / S. 374 / H.R. 141 ). A significant question left open by the Court in Heller centers on the standard of scrutiny that should be applied to laws regulating the possession and use of firearms. Generally, there are three levels of judicial scrutiny. First, strict scrutiny, the most rigorous, requires a statute to be narrowly tailored to serve a compelling state interest. Second, intermediate scrutiny, requires a statute to further a government interest in a way that is substantially related to that interest. Third, the rational basis standard merely requires the statute to be rationally related to a legitimate government function. The Court in Heller rejected the rational basis test and also explicitly rejected Justice Breyer's "interest-balancing" inquiry, distinguishing this "judge-empowering" approach from the "traditionally expressed levels" of scrutiny. However, the Court did not establish or clearly apply any judicial standard, declaring instead that the challenged firearms provisions were unconstitutional "[u]nder any of the standards of scrutiny that [the Court has] applied to enumerated constitutional rights." After Heller , some lower courts seemingly did not perform an extensive analysis or apply a particular standard of scrutiny in determining that a challenged federal firearms law was valid under the Second Amendment. Rather, they analogized the challenged firearms provisions to those listed as "presumptively lawful" in Heller and found them to be constitutional. Under this approach, courts have upheld bans on possession by felons, by substance abusers, by illegal aliens, and by people convicted of domestic violence. Interestingly, some of these categories, as well as those not listed in the Court's dicta as "presumptively lawful regulatory measures," are not necessarily "longstanding," as they were enacted in the 20 th century. As touched upon below, courts have wrestled with how to interpret and incorporate the "presumptively lawful" language from Heller with an analytical framework that involves application of means-end scrutiny. However, the U.S. Court of Appeals for the Third Circuit (Third Circuit), in United States v. Marzzarella , attempted to establish a framework for how to evaluate firearms laws that did not fall within those identified as "presumptively lawful." The statute at issue in Marzzarella was 18 U.S.C. Section 922(k), which is the federal ban on the possession of unmarked firearms. In the Third Circuit's view, there are two possibilities of how the "presumptively lawful" categories are to be treated. The first possibility is that these types of firearms regulations could be those which regulate "conduct outside the scope of the Second Amendment," meaning that they would not be subject to any heightened judiciary scrutiny. Or, the language "may suggest the restrictions are presumptively lawful because they pass muster under any standard of scrutiny." The Third Circuit favored its first interpretation, finding it more consistent based on the text and structure of the Heller decision. With this view, the Third Circuit noted that Heller suggested a two-step approach: "First, we ask whether the challenged law imposes a burden on conduct falling within the scope of the Second Amendment's guarantee (citations omitted). If it does not, our inquiry is complete. If it does, we evaluate the law under some form of means-end scrutiny. If the law passes muster under the standard, it is constitutional. If it fails, it is invalid." With respect to scope, the Court in Heller seemed to indicate that the "core" Second Amendment right protects "the right of law-abiding citizens to possess non-dangerous weapons for self-defense in the home." It is less clear, however, the types of regulation that might burden conduct protected by the Second Amendment. The defendant, Marzzarella, argued that firearms without serial numbers must come within the scope of the Second Amendment because firearms in common use in 1791 did not have serial numbers. The Third Circuit rejected this because it found that "it would make little sense to categorically protect a class of weapons [under the Second Amendment] bearing a certain characteristic wholly unrelated to their utility." The court was further skeptical of the defendant's argument that "possession in the home is conclusive proof that §922(k) regulates protected conduct [under the Second Amendment]." Due to a lack of historical evidence, however, the court could not conclude with certainty that the Second Amendment did not protect possession of unmarked firearms in the home. The Third Circuit, therefore, proceeded to assume that the federal ban burdened the defendant's Second Amendment right and examined the law under "some form of means-end scrutiny." Looking to First Amendment jurisprudence for guidance, the court noted that even an enumerated, fundamental right may be subjected to varying levels of scrutiny depending on the circumstances. The court chose to apply an intermediate scrutiny standard to evaluate Section 922(k) finding that, similar to content-neutral time, place, and manner restrictions on speech, the firearms provision also regulated the manner in which persons could lawfully exercise their Second Amendment rights. Although the intermediate scrutiny standard in the First Amendment context is articulated in different ways, "[t]hey all require the asserted governmental end to be more than just legitimate, either 'significant,' 'substantial,' or 'important," and require "the fit between the challenged regulation and the asserted objective be reasonable, not perfect." With respect to Section 922(k), the Third Circuit held that the statute passes muster under intermediate scrutiny because it does not "severely limit the possession of firearms," and reasonably fits to achieve the government's substantial and important interest in preserving serial numbers for tracing purposes. As discussed below, many courts generally have employed the Third Circuit's two-part inquiry when determining if a challenged federal or state firearms provision violates the Second Amendment, including those the Court in Heller determined to be presumptively lawful. Both federal and state laws have long prohibited certain categories of individuals from possessing firearms. Congress enacted the Gun Control Act of 1968 (GCA or Act) to "keep firearms out of the hands of those not legally entitled to possess them because of age, criminal background, or incompetency, and to assist law enforcement authorities in the states and their subdivisions in combating the increasing prevalence of crime in the United States." The GCA establishes a comprehensive statutory scheme that regulates the manufacture, sale, transfer, and possession of firearms and ammunition. For instance, the GCA prohibits federal firearms licensees (or licensed dealers) from selling handguns to any person under the age of 21 and long guns (i.e., rifles and shotguns) to any person under the age of 18. Licensed dealers are also subject to several requirements designed to ensure that a firearm is not transferred to an individual disqualified from possession under the act. Under federal law there are nine categories of persons who prohibited from possessing, receiving, or transferring a firearm. The individuals targeted by this provision include (1) persons convicted of a crime punishable by a term of imprisonment exceeding one year; (2) fugitives from justice; (3) individuals who are unlawful users or addicts of any controlled substance; (4) persons legally determined to be mentally defective, or who have been committed to a mental institution; (5) aliens illegally or unlawfully in the United States, as well as those who have been admitted pursuant to a nonimmigrant visa; (6) individuals who have been discharged dishonorably from the Armed Forces; (7) persons who have renounced United States citizenship; (8) individuals subject to a pertinent court order; and, finally, (9) persons who have been convicted of a misdemeanor domestic violence offense. The following section reviews judicial decisions that have evaluated the constitutionality of the federal age requirement to purchase firearms, as well as the federal prohibition on misdemeanants of domestic violence from possessing firearms. While these and other categorical restrictions on certain individuals can be likened to the long-standing, presumptively lawful regulatory measures identified in Heller , reviewing courts have generally employed the two-step inquiry fashioned in Marzzarella . Section 922(b)(1) of title 18 prevents licensed dealers from selling handguns to any individual under the age of 21 and long guns to any individual under the age of 18. The constitutionality of this law and its attendant regulations were challenged for violating "the right of 18-to-20-year-old adults to keep and bear arms under the Second Amendment" in Nat'l Rifle Assoc. v. Bureau of Alcohol, Tobacco, Firearms, and Explosives . The U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit) adopted the two-step approach from Marzzarella . To determine if the law burdens protected conduct as historically understood, the Fifth Circuit relied on a "wide array of interpretive materials to conduct a historical analysis" to determine if the "law harmonizes with the historical traditions associated with the Second Amendment guarantee." After reviewing both founding-era attitudes toward gun restrictions on certain groups, as well as the laws and jurisprudence of the 19 th century, the Fifth Circuit concluded "the present ban is consistent with a longstanding tradition of targeting select groups' ability to access and to use arms for the sake of public safety." The court believed that the first step of the inquiry was satisfied, such that the regulation did not burden conduct protected by the Second Amendment, given the "considerable historical evidence of age- and safety- based restrictions on the ability to access arms." However, in "an abundance of caution," the Fifth Circuit proceeded to analyze the federal law under intermediate scrutiny (the second step) primarily due to two factors. First, the age restriction is similar to the other "longstanding, presumptively lawful bans on possession by felons and the mentally ill" identified in Heller ; second, the prohibition does not "disarm an entire community" like the D.C. ban in Heller . In applying intermediate scrutiny, the court concluded that the government satisfied its burden of demonstrating that Congress "deliberately adopted a calibrated, compromise approach" to achieve an important government interest. The following two cases demonstrate the federal appellate courts' treatment of the GCA provision that prohibits misdemeanants of domestic violence from possessing or transporting firearms. Notably, this provision—codified at 18 U.S.C. Section 922(g)(9)—was enacted into law in 1996. The U.S. Court of Appeals for the Seventh Circuit (Seventh Circuit) in United States v. Skoien ( Skoien I ) vacated and remanded for further proceedings a defendant's conviction under 18 U.S.C. Section 922(g)(9). The court noted the limiting language in Heller regarding presumptively lawful measures and declared it "would be a mistake to uphold this or other gun laws simply by invoking the Court's reference to these ... measures ... without more." The court favored an analytical framework not unlike the two-step approach from Marz za rella . It stated: "[C]onstitutional text and history come first, then (if necessary) an analysis of the public-benefits justification for the regulation follows.... If the first inquiry into the founding-era scope of the right doesn't resolve the case, then the second inquiry into the law's contemporary means-end justification is required." The court moved to evaluate the prohibition under means-end scrutiny, given that the first inquiry did not resolve whether an individual who falls under Section 922(g)(9) is "categorically excluded from exercising the Second Amendment right as a matter of founding-era history and background legal assumptions." Consequently, it applied intermediate scrutiny because the challenged provision "is several steps removed from the core constitutional right identified in Heller ." This is not to say that "domestic-violence misdemeanants have no Second Amendment rights, but it does support the application of a more lenient standard of review." However, the Seventh Circuit in Skoien I vacated the charges against the defendant because the government "made little effort to discharge its burden of demonstrating the relationship between §922(g)(9)'s means and its end" and instead "rested nearly its entire case on Heller 's reference to felon-dispossession laws, asserting, without analysis, that 'Congress permissibly concluded that a narrow additional range of serious criminal offenses should likewise result in the forfeiture of the right to possess a firearm, even though the offenses are defined as misdemeanors under applicable law.'" Because the government did not carry its burden of establishing a reasonable fit between the important objective of reducing domestic gun violence and Section 922(g)(9)'s permanent disarmament of all domestic-violence misdemeanants, the court vacated the defendant's charges but gave the government time to make its case. Upon rehearing, the Seventh Circuit, sitting en banc, resisted delving "more deeply into the 'levels of scrutiny' quagmire." It rejected the Second Amendment challenge to 18 U.S.C. Section 922(g)(9) on the basis that the government apparently met its burden by demonstrating that "logic and data establish a substantial relation between §922(g)(9) and [an important governmental] objective." In United States v. Chester , the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) issued a decision to provide district courts in its circuit guidance on the framework for deciding Second Amendment challenges. The Fourth Circuit followed the two-step approach delineated in Marzzarella : first, a historical inquiry "seek[ing] to determine whether the conduct at issue was understood to be within the scope of the right at the time of ratification;" and second, if the regulation burdens conduct within the scope of the Second Amendment as historically understood, "... mov[ing] up to the second step of applying the appropriate form of means-end scrutiny." The Fourth Circuit remanded the case to the district court but noted that, under the first prong, Section 922(g)(9)—like the GCA provision prohibiting convicted felons from possession—should be evaluated based on whether a person, rather than a person's conduct, is unprotected by the Second Amendment, and that "the historical data is not conclusive on the question of whether the Founding era understanding was that the Second Amendment did not apply to felons." Thus, as in Marzzarella , the Fourth Circuit assumed, due to a lack of historical evidence, that the defendant was entitled to some Second Amendment protection to keep and possess firearms in his home for self-defense. For this defendant and other similarly situated persons, the court declared that the government, upon remand, must meet the intermediate scrutiny standard and not strict scrutiny, because the defendant's claim "was not within the 'core right' identified in Heller —the right of a law-abiding , responsible citizen to possess and carry a weapon for self-defense—by virtue of [the defendant's] criminal history as a domestic violence misdemeanant." Upon remand, the government presented empirical evidence to support its contention that the ban on misdemeanants of domestic violence is a reasonable fit in achieving the important government objective at stake, namely decreasing firearm use in domestic violence incidents. The U.S. District Court for the Southern District of West Virginia upheld the statute, concluding the government demonstrated a reasonable fit between the statute and the substantial governmental objective at stake. These decisions indicate there may be variation with respect to how courts apply the two-step inquiry to assess whether a class of persons is entitled to protection under Second Amendment. As seen above, the Fifth Circuit did not find it necessary to its holding to analyze the federal age requirement under the second prong of the two-step analysis, because it concluded that historical evidence indicated individuals under a certain age are not entitled Second Amendment protection. The Fourth Circuit in Chester , on the other hand, could not determine if domestic violence misdemeanants are entitled to protection under the Second Amendment as historically understood, and therefore, it assumed they were protected, stating that application of intermediate scrutiny under the second prong would be appropriate upon remand. When faced with a Second Amendment challenge to prohibition on a category of persons that does not have a historical basis, it seems that a reviewing court will proceed with analysis of a regulation under a heightened means-end scrutiny and place even more emphasis on the responsibility of the government to meet its burden under intermediate scrutiny. Traditionally, states have regulated concealed carrying of firearms and generally, they are categorized as either "shall-issue" or "may-issue" states. Among these states, some issue permits only to residents, while others issue permits to both residents and non-residents. In "shall-issue" jurisdictions, the issuing authority is required to grant the applicant a concealed carry permit (CCP) if he or she meets the statutory requirements. In "may-issue" jurisdictions, the issuing authority generally has the discretion to grant or deny a CCP based on a variety of statutory factors. Furthermore, each state decides which out-of-state permits to recognize. Since Heller , several states' concealed carry laws have been challenged under the Second Amendment. For the most part, challenged concealed carry laws have been those in may-issue states that require an applicant to show good or proper cause in order to be eligible for a CCP. Both Heller and McDonald emphasized that the right to keep and bear arms is not "a right to keep and carry any weapon whatsoever in any manner whatsoever and for whatever purpose." Heller also indicated that mere regulation of a right would not sufficiently infringe upon, or burden, the Second Amendment right, when it pointed out that certain colonial-era ordinances did not "remotely burden the right of self-defense as much as an absolute ban on handguns." In other words, it appears that to be burdensome, a regulation must also substantially infringe on the self-defensive right. Notably, Heller declared that the pre-ratified Second Amendment right was "understood to be an individual right protecting against both public and private violence," perhaps suggesting that the Second Amendment right extends beyond the home. Yet the Court listed measures that forbid the carrying of firearms in sensitive places as presumptively lawful, perhaps suggesting that these are the types of regulatory measures excepted from the Second Amendment. Therefore, with respect to concealed carry laws, courts have been confronted with determining whether the Second Amendment's protections extend beyond the home and, if so, whether concealed carry laws substantially burden the right of self-defense. Not surprisingly, courts have evaluated the challenged provisions differently, given the nuances of each state's concealed carry provisions. The following decisions indicate how reviewing courts have evaluated the constitutionality of concealed carry laws, and thus, how courts may assess future challenges to these laws. For example, in Peruta v. County of San Diego , the U.S. District Court for the Southern District of California turned to the text and structure of Heller to determine whether California's concealed carry laws burden the Second Amendment. The court determined that the law, which requires an applicant for a CCP to be a resident and demonstrate "good cause," does not violate the Second Amendment. Although the court raised the issue whether the Second Amendment right as delineated in Heller extends to the right to carry a loaded handgun in public, either openly or concealed, the court concluded it did not need to decide the issue. It found California's CCP scheme similar to the 19 th century cases cited in Heller that upheld state prohibitions on carrying concealed weapons because alternative forms of carrying arms were available. To the extent that California's concealed carry scheme burdened the Second Amendment, the court declared this burden mitigated by California's open carry provisions, which, although generally restrictive, permit the open carry of a loaded firearm under certain circumstances for immediate self-defense. The court also concluded that California's concealed carry measure passes muster under intermediate scrutiny. Similarly, in Williams v. Maryland , the Maryland Court of Appeals upheld the state provision which prohibits the wearing, carrying, or transporting of a handgun openly or concealed without a permit. The court reached this conclusion on the basis that the general ban on carrying a firearm includes an exception for home possession of a handgun without obtaining a permit. According to the court, the exception for the home "takes the statutory scheme outside the scope of the Second Amendment, as articulated in Heller and McDonald ." This reading is "wholly consistent with Heller's proviso that handguns are 'the most preferred firearm in the nation to keep and use for protection of one's home and family.'" On the other hand, the U.S. Court of Appeals for the Tenth Circuit (Tenth Circuit) used a two-step inquiry to analyze Colorado's concealed carry provision. The court, in Peterson v. Martinez , held that the carrying of concealed firearms is not protected by the Second Amendment. The challenger, a resident from the State of Washington, sought review of Colorado's concealed carry law, which only issues CCPs for handguns to residents of the state. After reviewing both early 19 th century decisions and regulations on concealed carry cases, the court concluded that restrictions on concealed carry qualify as long-standing, and therefore fit within the Supreme Court's "presumptively lawful regulatory measures." Moreover, because "the law harmonizes with the historical traditions associated with the Second Amendment guarantee," the challenger's claim "fail[ed] at step one" of the two-step analysis. As such, the Tenth Circuit did not engage in a means-end analysis of the provision. Other decisions have proceeded to the second prong of the two-step inquiry and have reached opposite conclusions after applying an intermediate scrutiny analysis on substantially similar concealed carry regulations that require an applicant to show proper cause. For instance, the U.S. District Court for the District of Maryland in Woollard v. Sheridan analyzed the requirement in the State of Maryland's statute that an applicant demonstrate "good and substantial reason" in order to obtain a CCP. Although the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) has since reversed the judgment of the court, this report proceeds to review the district court's decision as it could be an approach that other courts may follow. In Woollard I , the district court was mindful of an earlier Fourth Circuit decision that had refrained from concluding whether the scope of the Second Amendment as recognized in Heller applies outside the home . However, the district court in Woollard I found it necessary to conduct this analysis so as to determine if Maryland's restriction on handgun possession burdens any Second Amendment right. The district court concluded that Heller itself suggests the Second Amendment applies beyond the home, when it declared the right applicable to the home where the need "for defense of self, family, and property is most acute." This particular language "suggests that the right also applies in some form 'where that need is not 'most acute.'" The district court also reasoned that the Second Amendment must extend beyond the home because it protects lawful purposes such as hunting and militia training, neither of which are household activities. Having determined that the regulation burdens conduct protected by the Second Amendment, the district court in Woollard I applied intermediate scrutiny and held that the "good and substantial reason" requirement infringes upon the Second Amendment because it is not reasonably adapted to a substantial government interest. Although public safety and crime prevention are considered substantial and compelling governmental interests, the district court found the state's good cause requirement overly broad and that it did nothing to advance the interests of public safety. In contrast, the U.S. Court of Appeals for the Second Circuit (Second Circuit) in Kachalsky v. County of Westchester upheld the State of New York's law which provides that a license to carry a concealed handgun shall only be issued when "proper cause exists." The Second Circuit also determined that the Second Amendment " must have some application in the very different context of public possession of firearms." Because the regulation places "substantial limits on the ability of law-abiding citizens to possess firearms for self-defense in public," some form of heightened scrutiny is appropriate. The court declared that it made "eminent sense" to apply intermediate scrutiny because the regulation does not touch upon the "core" protection of self-defense in the home. Unlike the Maryland regulation in Woollard I , the Second Circuit decided that the New York proper cause requirement passes muster under intermediate scrutiny. Deferring to the state legislature's policy judgments, the court concluded that rather than forbidding anyone from carrying a handgun in public, New York took "a more moderate approach to fulfilling its important objective and reasonably concluded that only individuals having a bona fide reason to possess handguns should be allowed to introduce them into the public sphere." Courts have employed a mixed approach when evaluating whether the Second Amendment protects certain types of weapons. Unlike other laws that have been scrutinized before the courts, the Supreme Court in Heller briefly addressed whether certain types of weapons would fall outside the protection of the Second Amendment. It declared that the Second Amendment "does not protect those weapons not typically possessed by law-abiding citizens for lawful purposes, such as short-barreled shotguns." The Court found that its prior 1939 decision in United States v. Miller supported this conclusion. Relying on Miller , the Court acknowledged that this limitation is supported by the "historical tradition of prohibiting the carrying of 'dangerous and unusual weapons'" and that the "sorts of weapons protected were those 'in common use at the time'" because those capable of service in the militia at the time of ratification would have brought "the sorts of lawful weapons that they possessed at home to militia duty." Since Heller , cases that have evaluated the constitutionality of state assault weapons bans have generally found them to be valid under the Second Amendment. These courts have relied on either, or both, the "common use" language found in Heller and the two-step inquiry set forth in Marzzarella to evaluate bans on assault weapons. In 2009, the California Court of Appeals decided People v. James , which held that possession of an assault weapon in California remains unlawful and is not protected by the Second Amendment. California's Roberti-Roos Assault Weapons Control Act of 1989, like the 1994 federal assault weapons ban, defines "assault weapons" by providing a list of proscribed weapons and through characteristics "which render these weapons more dangerous than ordinary weapons typically possessed by law-abiding citizens for lawful purposes." Relying on Heller 's brief discussion that the Second Amendment does not protect a military weapon, such as an M16 rifle, the court in James declared that the prohibited weapons on the state's list "are not the types of weapons that are typically possessed by law-abiding citizens for lawful purposes such as sport hunting or self-defense; rather these are weapons of war." It concluded that the relevant portion of the act did not prohibit conduct protected by the Second Amendment as defined in Heller and therefore the state was within its ability to prohibit the types of dangerous and unusual weapons an individual can use. The District of Columbia amended its firearms regulations after the Heller decision and enacted new firearms regulations including an assault weapons ban that is similar to California's. In 2011, the D.C. Circuit issued its decision in Heller v. District of Columbia ( Heller II ) which upheld the District's ban on certain semiautomatic rifles and large capacity ammunition feeding devices (LCAFD). Under the "common use" factor delineated in Heller , the D.C. Circuit acknowledged that "it was clear enough in the record that certain semi-automatic rifles and magazines holding more than 10 rounds are indeed in 'common use.'" However, the court could not conclude definitely whether the weapons are "commonly used or are useful specifically for self-defense or hunting" such that they "meaningfully affect the right to keep and bear arms." Therefore, the court went on to analyze the bans under the two-step approach to determine their validity under the Second Amendment. Assuming that the ban impinged on the right protected under Heller (i.e., to possess certain arms for lawful purposes such as individual self-defense or hunting), the court found that such regulations should be reviewed under intermediate scrutiny because the prohibition "does not effectively disarm individuals or substantially affect their ability to defend themselves." Under intermediate scrutiny, the government has the burden of showing that there is a substantial relationship or reasonable "fit" between the regulation and the important governmental interest "in protecting police officers and controlling crime." The D.C. Circuit held that the District carried this burden and that the evidence demonstrated that a ban on both semiautomatic assault rifles and LCAFDs "is likely to promote the Government's interest in crime control in the densely populated urban area that is the District of Columbia." In 2012, the Supreme Court of Illinois decided Wilson v. Cook County , a case that evaluated the constitutionality of the Blair Holt Assault Weapons Ban of Cook County, a long-standing ordinance that was amended to similarly reflect provisions of the 1994 Assault Weapons Ban. Among other claims, the plaintiffs argued that the ordinance violates the Second Amendment. With respect to the Second Amendment claim, the court indicated that it would follow the two-step approach similar to the Heller II court. While the court acknowledged that the ordinance banned only a subset of weapons with particular characteristics similar to other jurisdictions, it found that it could not "conclusively say ... that assault weapons as defined in the [o]rdinance categorically fall outside the scope of the rights protected by the [S]econd [A]mendment." The court ultimately remanded the Second Amendment claim to the trial court for further proceedings, because unlike the James and Heller II decisions, the county did not have an opportunity to present evidence to justify the nexus between the ordinance and the governmental interest it seeks to protect. These cases demonstrate that courts evaluating various assault weapons bans, and to a limited extent LCAFD bans, have looked to the Heller decision and the general framework that has developed in the lower courts for analyzing claims under the Second Amendment. Based on the Heller decision where the Supreme Court indicated that certain weapons fall outside the protection of the Second Amendment, lower courts have examined whether the prohibited weapons are considered in "common use" or "commonly used" for lawful purposes or "dangerous and unusual." It is uncertain whether, to be protected under the Second Amendment, the weapon must be in "common use" by the people and if so, whether it must be in "common use" for self-defense or hunting; it is likewise uncertain what constitutes "dangerous and unusual." Heller could arguably be taken to indicate that if the prohibited weapons do not meet these criteria then they are not protected by the Second Amendment, in which case no heighted judicial scrutiny would be applied. As seen above, a reviewing court could evaluate such measures under the two-step inquiry. If the restriction to certain types of firearms and firearms accessories imposes a burden on conduct protected by the Second Amendment, then a heightened level of judicial scrutiny will be applied to determine the ban's constitutionality. Yet how the "common use" and "dangerous and unusual" criteria should be read, if at all, in connection with the two-step approach remains unclear. Neither the James , Heller II , nor Wilson courts appear to have fully explained the connection between the two approaches. Although many firearms laws have been upheld as constitutional, the differences in how courts interpret the text of Heller , insofar as providing some guidance on the scope of the Second Amendment, as well as how they apply the two-step inquiry may impact the burden upon the government to prove its case. For instance, courts have reached different conclusions on how to interpret the language on presumptively lawful restrictions. As noted above, it could be that these presumptively lawful measures are "so ingrained in our understanding of the Second Amendment that there is little doubt that they withstand the applicable level of scrutiny. Alternatively, the right itself can be seen as failing to extend into areas where, historically, limitations were commonplace and well accepted." While the court in Woollard believed the former reading was correct, the Third Circuit in Marzzarella believed the latter was the correct interpretation for how to treat measures identified as presumptively lawful by the Court in Heller . In each case, the court went on to apply intermediate scrutiny; however, the potential impact in selecting the latter interpretation—i.e., exceptions to the Second Amendment—may mean that as long as a challenged regulation was included among, or analogous to, the provisions noted in Heller , there would be no burden imposed on the government to submit evidence demonstrating that the firearms regulation is a narrow fit to meet a substantial government interest. As such, this interpretation arguably would favor the government, and there could be a greater chance that a firearms regulation would be upheld. In contrast, the alternative interpretation is arguably not as favorable to the government, and a reviewing court could be less likely to uphold the constitutionality of a provision, unless the government is able to provide "meaningful evidence," as some courts have required. Moreover, the interpretation of the presumptively lawful language likely affects how lower courts define the nature of the right conferred by the Second Amendment and thus the level of scrutiny, if any, that should be applied. Although the prevailing test to evaluate challenges under the Second Amendment is the two-step inquiry, at least one judge, through dissent, has proposed a different approach. In Heller II , Judge Kavanaugh opined: "In my view, Heller and McDonald leave little doubts that courts are to assess gun bans and regulations based on the text, history, and tradition, not by a balancing test such as strict or intermediate scrutiny." Under this test, he would have found that D.C.'s ban on semiautomatic rifles to be unconstitutional. However, the Second Circuit in Kachalsky seemed to implicitly reject this test. After reviewing the history of concealed carry laws and accompanying jurisprudence, the court stated: "History and tradition do not speak with one voice here. What history demonstrates is that states often disagreed as to the scope of the right to bear arms, whether the right was embodied in a state constitution or the Second Amendment." Moreover, some parties challenging firearms laws, such as the proper cause requirement for concealed carry, have also started to advocate that the court take a different approach to evaluate gun measures. They suggest applying First Amendment prior restraint doctrine instead of means-end scrutiny. In the First Amendment context, any law that makes "freedoms which the Constitution guarantees contingent upon the uncontrolled will of an official—as by requiring a permit or license which may be granted or withheld in the discretion of such official—is an unconstitutional censorship or prior restraint upon the enjoyment of those freedoms." Thus far, this argument has been rejected and no court has taken this "quantum leap" of "import[ing] substantive First Amendment principles wholesale into Second Amendment jurisprudence." Firearms laws, both existing and new, will undoubtedly continue to be challenged under the Second Amendment. The Supreme Court's decision in Heller appears to have provided limited guidance on how to analyze firearms regulations under the Second Amendment. Yet lower courts have fashioned and primarily applied a two-step inquiry, which asks whether the regulated conduct burdens the Second Amendment right, and if so, whether it passes muster under means-end scrutiny. Although several firearms provisions have been upheld, it remains difficult to discern if there is a better understanding of the scope of the Second Amendment outside the "core" right identified in Heller , as courts have evaluated firearms provisions differently under the two-part test. As the post- Heller challenges to firearms provisions continue to percolate through the lower courts, it remains to be seen if any begin to use other analytical frameworks proposed, such as the "history, text, and tradition" test from the Heller II dissent or the prior restraints analysis suggested by parties challenging regulations under the Second Amendment.

The U.S. Supreme Court in District of Columbia v. Heller held that the Second Amendment to the U.S. Constitution protects an individual right to possess a firearm, unconnected with service in a militia, and the use of that firearm for traditionally lawful purposes, such as self-defense within the home. It also held that the Second Amendment applies to the states in McDonald v. City of Chicago. Since then, federal and state firearms laws have been challenged under the Second Amendment. Lower courts have been disputed in determining how to evaluate these provisions, given that the Heller decision was not an exhaustive analysis of the scope of the Second Amendment. This report first discusses the two-step inquiry fashioned by the lower courts to analyze provisions under the Second Amendment. It proceeds to highlight how this test has been employed on a select number of firearms laws—namely, the federal age requirement and prohibition on possession by those convicted of a misdemeanor crime of domestic violence; and state requirements to obtain a concealed carry permit and a state assault weapons ban. How courts have applied the test to these categories may provide some indication as to how future firearms regulations may be considered by the Supreme Court. The report concludes with a discussion on how varied interpretations by the lower courts of the Heller decision may affect the burden upon the federal government to defend firearms provisions, as well as new analytical frameworks that have been suggested.

The size and composition of federal spending directed toward low-income people is a focus of public policy. Particularly in a budget-conscious environment, policy makers want to know what the federal government spends on programs to help needy populations, including the types of assistance provided and the characteristics of those who benefit. This report attempts to identify and provide information about federal programs that are targeted in some way toward low-income people and communities. An earlier version of the report looked at low-income programs and spending in FY2008 and FY2009; this version extends that analysis through FY2013. Programs included in this report are distinct from social insurance programs such as Social Security, Medicare, or Unemployment Insurance. Those programs are financed largely by contributions from workers and employers and benefits are earned on the basis of an individual's work history. Social insurance plays a major antipoverty role in the United States, but participation is generally meant to be universal (providing insurance to the population at large against becoming poor) and not specifically targeted toward low-income people. In contrast to social insurance, programs examined in this report are funded through general revenues and provide benefits and services to people with limited income either by tying eligibility to a specific measure of income, or by targeting assistance through funding allocation formulas or other need-related mechanisms. Some programs are highly targeted with detailed eligibility rules for individuals or households, while others encourage or prioritize services to low-income people within a broader target population group, such as the elderly. These programs attempt to ameliorate or mitigate the effects of low income by providing cash or noncash benefits to help people meet basic needs, such as food, housing, and health care. They also seek to address root causes of economic disadvantage by providing education, training, and other services to improve people's employability and earnings capacity. Some programs target assistance to communities with high concentrations of low-income people to compensate for their low tax capacities, and to help finance benefits and services for residents. While they share the common feature of an explicit low-income focus, programs discussed in this report are highly diverse in their purpose, design, and target population. They were established at different times, in response to different policy challenges, and not necessarily in coordination with one another. Readers should exercise caution in any attempt to generalize about these programs or draw conclusions from the information presented in this report. No single label accurately describes all programs in the report. Terms such as "social welfare" and "social safety net" are often understood to include social insurance programs, and are thus broader than the programs included here. "Public welfare" and "public assistance" are typically understood as a more narrow set of programs that primarily provide cash or near-cash benefits to low-income people. While such programs are included, programs that provide in-kind benefits and services also are discussed. "Income-tested" or "means-tested" might be used to describe these programs, but some target assistance toward low-income communities and do not apply a specific income or means test to individual participants or beneficiaries. The report examines programs by category, but the categories themselves are diverse. For example, the health category includes primary care for poor children and their families along with nursing home care for the elderly and disabled whose health costs may have depleted other income and assets. Cash aid includes traditional "welfare" in the form of cash assistance to needy families, but also includes pensions for needy veterans and two refundable tax credits for households with earnings, the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). Food assistance includes the Supplemental Nutrition Assistance Program (SNAP), as well as subsidized meals for low-income schoolchildren and home-delivered meals for the elderly. Similarly, no single trait characterizes the people served by these programs. They include elderly and disabled individuals, children and their families, single adults and couples without children, workers and nonworkers, veterans, homeless people, refugees, students, and others. While some popular perceptions of "welfare" assume that beneficiaries are unemployed able-bodied adults of working age, the report demonstrates that people with disabilities actually account for the single largest share of spending under the 10 largest low-income programs. Families with children where an adult is working account for the next largest share of spending, followed by the elderly. Households where no able-bodied adult is working account for a relatively small share of spending under these programs. Readers should also note that most of the programs included in this report are relatively small, and serve a fraction of their potentially eligible target population. The report refers to the collective target population of the programs as persons with "low" or "limited" income, rather than "poor" people. Although some programs limit participation to individuals with income below federal poverty guidelines, income eligibility criteria vary widely and frequently include people with income above the official federal definition of poverty. Key findings of this report are presented in the Summary , above. The body of the report is organized as follows: The report begins with an overview of trends in federal spending for low-income programs over the six-year period from FY2008 through FY2013. It continues with a brief descriptive overview of federal low-income programs by major category (health care, cash aid, food assistance, etc.). Following sections discuss spending trends by category and by budgetary classification ("mandatory" or "discretionary"). The next section looks specifically at spending and trends over the six-year period for the 10 largest programs included in the report, which together accounted for 82% of all low-income spending in FY2013. Key features of the 10 programs are summarized. Still focusing on the 10 largest programs, the next section presents an analysis of spending by the population groups served, including the elderly and disabled, families with children, and childless adults and couples. Nonelderly nondisabled households are further examined by whether they include working adults. A "related reading" section lists additional CRS reports that provide information on federal low-income policy, programs, and spending. The report concludes with several appendixes. Appendix A discusses the methodology used to create the database of low-income programs and spending, and Appendix B explains the methodology used to prepare the analysis of spending by population group. Appendix C provides overview tables of the programs included in the report, and Appendix D is a series of short fact sheets on each program. Federal spending for low-income programs totaled $561 billion in FY2008 and jumped to $708 billion the next year, as the Great Recession of 2007-2009 took hold. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) aimed to stimulate the economy with additional federal funding and was responsible for nearly 60% of the increased spending on low-income programs between FY2008 and FY2009. Caseloads also grew as unemployment rose and incomes declined, making more people eligible for such benefits as SNAP and Medicaid. Federal spending for low-income programs peaked in FY2011 at $764 billion, dropped in FY2012, and edged up again in FY2013. By that year, spending for low-income benefits and services had receded below FY2010 levels, but remained a third higher than comparable spending in FY2008. (See Figure 1 and Table 1 . ) The following sections briefly describe the programs included in each major category of benefits and services, organized by size of spending in FY2013. Tables in Appendix C list and highlight key features of the programs, and brief fact sheets on each program are provided in Appendix D . As noted earlier, these programs are highly diverse and provide a range of benefits and services to a variety of target populations (see " Important Caveats "). Just as health care dominates total federal spending on low-income programs, Medicaid dominates the health category. Medicaid accounted for 83% of health care spending in FY2013 and is the single largest program included in this report (accounting for 39% of total FY2013 low-income spending). Medicaid is intended to help specified categories of people who lack the income and resources to afford necessary medical care. Low-income parents, dependent children, the elderly, and individuals with disabilities have been the primary target populations served by Medicaid, although the Patient Protection and Affordable Care Act of 2010 (ACA, P.L. 111-148 ) expanded Medicaid eligibility to include most nonelderly, nonpregnant individuals with income below a specified level. The program finances the delivery of a wide range of primary and acute medical services as well as long-term supports and services such as nursing home care. The State Children's Health Insurance Program (CHIP) provides health coverage for low-income children who lack health insurance but whose family income exceeds Medicaid eligibility levels. Other large health programs include the low-income subsidy under Medicare Part D, which helps low-income seniors and individuals with disabilities pay for prescription drugs, and medical care for low-income veterans without service-connected disabilities. The latter program pays for an array of primary care, specialized care, and related social and support services provided by the Department of Veterans Affairs (VA). The Indian Health Service also offers a variety of health services to its target population, who are American Indians or Alaska Natives living on reservations or within a specified service delivery area. Consolidated Health Centers offer primary and other health services to low-income populations in medically underserved areas, and the Maternal and Child Health block grant supports preventive and primary health care services for low-income women, infants, and children. The Ryan White HIV/AIDS Program is intended to address the unmet care and treatment needs of individuals living with HIV or AIDS who lack insurance or resources to pay for core medical services, including prescription drugs, and related support services. Additional programs focus on specific health services, such as family planning and early breast and cervical cancer detection, or specific populations, such as refugees. Three programs account for the bulk of cash aid spending, and each ranks among the 10 largest of all programs for low-income people. Supplemental Security Income (SSI), which aims to provide a minimum income for aged, blind, or disabled individuals with very low income and resources, accounted for nearly 40% of cash aid spending in FY2013. The refundable portion of the Earned Income Tax Credit (EITC) accounted for another 38% of cash aid spending, and more than 14% came from the refundable Additional Child Tax Credit (ACTC). The EITC subsidizes the wages of low-income workers, with most benefits going to those with children. The ACTC is a refundable credit for families whose tax liability is too low for them to fully benefit from the regular nonrefundable Child Tax Credit. Cash aid also includes part of Temporary Assistance for Needy Families (TANF), the welfare reform program that replaced Aid to Families with Dependent Children (AFDC) in 1996. As AFDC's successor, TANF is still sometimes viewed as traditional welfare for poor families; however, the majority of TANF expenditures are for activities other than cash aid. TANF aims to increase the flexibility of states in meeting several statutory goals, including assisting needy families so that children can remain in their homes; ending dependence of needy parents through job preparation, work, and marriage; preventing and reducing incidence of out-of-wedlock pregnancies; and encouraging the formation and maintenance of two-parent families. In this report, TANF spending has been allocated among three categories—cash aid, social services, and employment and training—based on states' reporting of their actual expenditures. Finally, cash aid programs include pensions for needy elderly or disabled veterans and their dependents or survivors. The Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) dominates spending for food assistance, accounting for almost three-quarters of obligations in this category and ranking as the second-largest low-income program in FY2013. SNAP attempts to alleviate hunger and malnutrition and to help low-income households purchase food to support a healthy diet. The next largest area of food assistance spending is for programs that subsidize the costs of breakfast and lunch served to low-income schoolchildren; these programs aim to support learning readiness, promote healthy eating, and protect the health and well-being of low-income children. Related programs subsidize the costs of meals and snacks for children in child care and other out-of-school settings (and some low-income elderly and disabled adults in adult care settings) and for children during the summer when they lack access to school-based meal programs. Another program helps elementary schools with high concentrations of low-income students provide fresh fruit and vegetable snacks during the school day. Food assistance also includes the Special Supplemental Food Program for Women, Infants and Children (WIC), which provides supplemental food and nutrition education to low-income pregnant, postpartum, or breastfeeding women and their infants and young children who are at nutritional risk. The program seeks to protect children's health during critical developmental stages, prevent health problems, and improve health status. Food assistance programs also include congregate and home-delivered meals for the elderly to reduce hunger and promote socialization and well-being for older individuals, and emergency food assistance in the form of commodities for individuals defined by their states as needy. The Federal Pell Grant Program is the largest education program for people with limited incomes, accounting for 58% of targeted federal education spending in FY2013 and ranking as the fifth-largest program in this report. Pell Grants are one of several ways the federal government helps subsidize the costs of higher education for needy students. Other programs with similar goals include Federal Supplemental Educational Opportunity Grants and Federal Work-Study. In addition to direct assistance to students, the federal government provides institutional aid to help expand the capacity of colleges and universities that serve high proportions of low-income and minority students. Federal TRIO Programs offer grants to institutions of higher education and other organizations to motivate and support disadvantaged students as they move from high school through college. GEAR-UP serves low-income elementary and secondary school students who are at risk of dropping out, and aims to increase the number of such students who enter and succeed in higher education. College Access Challenge Grants pursue a similar goal, through partnerships between government agencies and philanthropic groups. The second-largest education program included in the report (also one of the 10 largest low-income programs) is Title I-A of the Elementary and Secondary Education Act, which accounted for more than one-fourth of targeted federal education spending in FY2013. Title I-A provides grants to local educational agencies with high concentrations of disadvantaged children and aims to ensure that all children have an opportunity to obtain a high-quality education and reach at least minimum proficiency on challenging academic achievement standards. Separate programs have similar goals for children of migrant workers, Indian children, and students in rural school districts. The Bureau of Indian Education operates programs to meet the educational needs of Indian children living on or near reservations. Other elementary and secondary education programs aim to increase student achievement through improvements in teacher and principal quality and to improve teacher knowledge and student performance in mathematics and science. Literacy is the focus of Adult Basic Education, which helps adults to become literate and obtain the skills necessary for employment and self-sufficiency and to become partners in their own children's educational development. Finally, 21 st Century Community Learning Centers are intended to provide a wide range of remedial education and academic enrichment opportunities during non-school hours for children in high-poverty and low-performing schools. The federal government supports the housing needs of low-income people primarily by subsidizing the cost of rental units in the private market. Section 8 housing vouchers and project-based rental assistance together accounted for nearly two-thirds of all housing and development spending in FY2013. (The voucher component of Section 8 is one of the 10 largest low-income programs.) The overarching goal of Section 8 is to provide low-income people with decent, safe, and sanitary housing. Public Housing, which represented 14% of spending in this category in FY2013, achieves a similar goal by making publicly owned rental units available to low-income tenants at affordable prices. The Public Housing account supports the capital needs and operating costs of publicly owned housing developments, as well as the HOPE VI program and Choice Neighborhoods, which demolish, rehabilitate, and replace distressed public housing units. Additional housing programs are intended to expand the supply of supportive housing for low-income elderly and disabled households, as well as individuals living with AIDS. Homeless Assistance Grants attempt to meet the needs of homeless individuals and families, including individuals with disabilities, for basic shelter, short-term and long-term housing, and related support services. Two block grants—HOME and the Community Development Block Grant (CDBG)—target federal assistance toward communities with high rates of poverty and aging housing stock (among other factors) to help meet the housing needs of low-income homeowners, homebuyers, and renters (HOME) and to expand the community's supply of decent housing and economic development activities (CDBG). An additional block grant provides housing assistance and helps develop private housing finance mechanisms on Indian lands. To address housing needs in rural areas, loans are available to help low-income households purchase, build, or renovate homes, and rental subsidies are available for low-income tenants. Low-interest loans and grants also are available to support new and improved water and waste disposal facilities in low-income rural communities. Finally, the housing and development category includes the Public Works and Economic Development program, which provides grants to distressed communities to help them revitalize, expand, and upgrade their physical infrastructure to attract new industries, expand businesses, diversify their economies, and generate job and investment growth. The social services category is diverse and includes a wide range of activities to support low-income or otherwise vulnerable populations. Of spending categorized as social services in this report, the vast majority—more than 90% in FY2013—is focused directly on children and youth or their families. Services funded by TANF are the largest single activity in this category, accounting for more than a quarter of the social services spending in this report. As noted in the earlier discussion of cash aid, TANF is often thought of as traditional welfare for poor families. However, states have flexibility in spending their TANF grants, and the majority of funds are used for noncash aid, including various social services for families with children. TANF spending also includes obligations under competitive grants for promotion of healthy marriage and responsible fatherhood. Head Start is the second-largest program in this category, accounting for more than 20% of social services spending for low-income populations. Head Start aims to promote school readiness for young children through a full array of educational, health, nutritional, social, and other services to children and their families. The Child Care and Development Fund (CCDF), accounting for 14% of social services spending in FY2013, subsidizes the cost of child care for low-income parents while they work or attend school. Additional programs targeted toward children and families include Child Support Enforcement, which assists custodial parents who are seeking child support from their children's noncustodial parent. Foster Care grants are used by states to provide temporary homes for children who cannot remain safely with their families; Adoption Assistance helps facilitate the adoption of children with special needs as defined by their state; and the Chafee Foster Care Independence Program helps current and former foster children transition to a self-sufficient adulthood. The Maternal, Infant, and Early Childhood Home Visiting Program is intended to promote a range of outcomes, including maternal and newborn health, child protection and prevention of child injuries, school readiness and achievement, reduction in crime or domestic violence, and family economic self-sufficiency. Of social services programs not specifically targeted toward children and families, the Social Services Block Grant (SSBG) is the largest and most flexible. The program supports a continuum of services to promote self-sufficiency, but decisions about target populations and services are left to the states. Other social services programs focus on specific target populations. For example, the Older Americans Act authorizes social services for the elderly and the Bureau of Indian Affairs provides various human services for American Indians. Programs that target services at the community level include the Community Services Block Grant (CSBG), which aims to reduce poverty and empower low-income individuals and families to become self-sufficient, and Emergency Food and Shelter Grants, which provide services for homeless and hungry individuals in high-need communities. Finally, the Legal Services Corporation attempts to ensure equal access to the justice system for people who are otherwise unable to afford legal counsel. Two programs serving disadvantaged youth comprised 43% of the FY2013 employment and training spending included in this report. Specifically, youth activities under the Workforce Investment Act (WIA) provide a variety of services to improve the educational and skill competencies of eligible youth and to develop connections with employers and mentoring opportunities with adults. Job Corps focuses on those disadvantaged youth who can benefit from an intensive residential program to become employable and productive. This category also includes work-related services for needy families with children under TANF, a small employment and training program for recipients of SNAP benefits, and a program that provides employability and related services to help refugees and other humanitarian entrants find jobs quickly. Remaining programs include WIA's adult activities program; Community Service Employment for Older Americans, which helps older individuals (age 55 or older) become self-sufficient through community service jobs and training; and Foster Grandparents, which provides stipends for low-income older individuals to provide services to children with special needs. Two programs make up the energy assistance category. The Low-Income Home Energy Assistance Program (LIHEAP) helps low-income households pay their heating and cooling expenses, and the Weatherization Assistance Program helps increase the energy efficiency of homes occupied by low-income people to reduce energy costs and improve health and safety. Health care is by far the largest category of low-income spending, accounting for nearly half of all expenditures in each of the six years from FY2008 through FY2013. Cash aid has consistently been the second-largest category (20% in FY2013), followed by food assistance (more than 14% in FY2013); however, spending for these two categories combined still falls short of spending for low-income health programs. Education, housing and development, and social services rank next in size, accounting for 7%, 6%, and 5%, respectively, of total low-income spending in FY2013. The last two categories—employment and training and energy assistance—each constituted less than 1% of low-income spending in FY2013. (See Figure 2 and Table 2 .) As noted above, health care dominates low-income spending; thus, total low-income spending tends to follow the same pattern as health care spending. (See Figure 3 .) Like total low-income spending, health expenditures during the FY2008-FY2013 period peaked in FY2011, declined in FY2012, and rose again in FY2013. However, other categories show different patterns. Spending for cash aid and food assistance generally rose over each of the six years (with a dip in the cash aid category in FY2012); peak spending for both of these categories occurred in FY2013. (The food category showed the largest growth over the period, with an 82% increase in spending between FY2008 and FY2013.) On the other hand, education spending peaked in FY2011 and declined in both of the subsequent years. Smaller categories—housing and development, social services, employment and training, and energy assistance—all saw their peak spending in FY2009. By FY2013, spending for these four categories combined was only slightly higher than in FY2008. (See Figure 4 .) Of total low-income spending in FY2013, about 82% was classified in budget terms as "mandatory" (also called "direct" spending) and the remainder as "discretionary." This was a slight shift from FY2008, when 78% of low-income spending was mandatory and 22% was discretionary. In mandatory programs, many of which are entitlements to individuals or units of government, Congress defines eligibility and payment rules in authorizing laws. These rules determine the amount of spending that will occur, so Congress generally must amend the authorizing law in order to control federal spending. The amount of federal spending for discretionary programs, on the other hand, is determined by Congress through the annual appropriations process. Mandatory spending may be structured as open-ended or capped. In an open-ended entitlement program, no predetermined ceiling is imposed on federal expenditures; instead, federal payments are made to all eligible beneficiaries for eligible expenditures as defined in law. (Medicaid is an example of an open-ended entitlement program.) In a capped program, the authorizing law limits the total amount of federal spending that can occur. (TANF is an example of a capped entitlement program.) Of mandatory spending discussed in this report, 90% was through open-ended programs in FY2013. The pattern of mandatory versus discretionary spending differs by major category of benefits and services. The three largest categories—health care, cash aid, and food assistance—are dominated by mandatory spending, while the smaller categories (with the exception of social services) are primarily or exclusively discretionary. In the top three categories, spending occurs largely through open-ended entitlement programs. Social services spending is a mixture; about two-thirds of such spending in FY2013 was classified as mandatory and the rest discretionary. Of mandatory social services spending, most (about three-fourths) was capped and the balance open-ended. This report describes a large number of programs, but it is important to note that just a few account for the vast majority of spending. (See Figure 5 .) The four largest programs accounted for nearly two-thirds (65%) of total low-income spending in FY2013, and the top 10 comprised almost 82%. The dominance of these large programs has grown somewhat since FY2008, when the same top four made up 61% of total low-income spending, and the top 10 accounted for 78%. Spending for Medicaid—the single largest program—went from 37% of the total in FY2008 to 39% in FY2013, and SNAP grew from 7% to 11%. (See Table 3 .) The 10 largest programs in FY2013 are the same as in FY2008, and Medicaid has consistently been number one; however, some of the others have shifted in rank order. Four programs ranked higher in FY2013 than in FY2008: SNAP, the Low-Income Subsidy for prescription drugs under Medicare Part D (LIS-Part D), the ACTC, and Section 8 Housing Choice Vouchers. Three programs declined in relative size: SSI, the refundable portion of the EITC, and TANF. Among the 10 largest programs, seven are entitlements, or mandatory spending programs. Of those seven, all but one are open-ended entitlements to individuals. As noted above, this means their spending levels are determined by the number of people who are eligible and apply for the program, rather than the amount Congress chooses to provide through the appropriations process. One mandatory program—TANF—is a capped entitlement to states (rather than individuals), which means that states are entitled to receive a fixed amount each year that is established in the authorizing law. Table 4 provides an overview of key features of each of these top 10 programs. Many low-income assistance programs target their benefits not only on the basis of financial need but also to certain populations, such as the aged, the disabled, or families with children. Other low-income assistance programs—while not explicitly restricting their benefits to certain groups—provide the bulk of assistance to them. Figure 6 provides estimates of federal spending in FY2011 by population group under the 10 largest low-income assistance programs identified in the previous section. The analysis uses FY2011 because it is the latest year for which data to divide spending among population groups are available for Medicaid. Estimates are provided for federal spending under the top 10 programs for the aged, the disabled, families with children, and childless adults and couples. Childless adults and couples represent nonelderly nondisabled adults in families without children. For families with children and for childless adults and couples, additional estimates are made for those with and without earnings. The figure also provides detail on the type of assistance received by each population group (e.g., health, food, housing, cash). As the figure shows, the population group benefitting from the most federal spending under the top 10 programs is the disabled, who received an estimated $208 billion in federal dollars in FY2011, or 33% of all federal spending under the 10 largest programs. Disabled individuals received $136 billion in health care assistance alone. The population group that received the second-most federal dollars was families with children with earnings, whose federal spending from the top 10 programs totaled $171 billion. This included $77 billion in cash assistance from the two refundable tax credits (EITC and ACTC), which are targeted to low-income families with children and are restricted to such families with earnings. The aged received $96 billion in low-income aid from the top 10 programs, predominantly in the health care category. Families with children but without wage earners received an estimated $61 billion from the top 10, largely from noncash programs. Childless adults received the least aid from the 10 largest programs; those with earnings received an estimated $9.7 billion in benefits and those without earnings an estimated $12.9 billion, mostly in the form of noncash benefits. Pell Grants, one of the 10 largest low-income assistance programs, provided student aid in FY2011 totaling $41.5 billion, and grants to states for services (education and TANF services) totaled $23 billion. (These are shown in Figure 6 and Table 5 as "Education and Services," rather than in a specific population category.) Table 5 shows the estimates of federal spending for each of the top 10 low-income assistance programs by population category in FY2011. For two programs, all spending was categorized for a single population group; the ACTC is only available for families with children with earners, and Pell Grants are only available for college students (shown in the "Education and Services" category). For the other eight programs, spending was allocated among population groups based on available data. (For a discussion of the methodology used to prepare these estimates by population groups, see Appendix B .) The following CRS reports provide related information on federal low-income policy, programs, and spending. Additional CRS reports are cited in footnotes, and each of the program fact sheets in Appendix D includes a reference to a relevant program-specific CRS report. CRS Report R41625, Federal Benefits and Services for People with Low Income: Programs, Policy, and Spending, FY2008-FY2009 : includes a brief history of federal low-income policy; a detailed discussion of concepts used to define individual eligibility for benefits and services (e.g., federal poverty guidelines and others); a discussion of mechanisms used to target resources on the basis of need (e.g., formula allocation factors and cost-sharing rules); and a discussion of the types of federal grants (formula, competitive, direct benefits to individuals) used to provide assistance, and related policies such as matching requirements. CRS Report R41823, Low-Income Assistance Programs: Trends in Federal Spending : analyzes spending trends for the 10 largest low-income programs (similar but not identical to the top 10 programs identified in this report) from FY1962-FY2013, with projections through FY2024. CRS Report R43731, Poverty: Major Themes in Past Debates and Current Proposals : provides a short history of key federal policies enacted over the past century to address poverty, presents several overarching themes that have recurred in antipoverty policy debates over time, and highlights selected current proposals in the context of these themes. CRS Report RL33069, Poverty in the United States: 2013 : presents detailed statistics on the incidence of poverty among various demographic groups and by geography, and compares measures of poverty under the official federal poverty guidelines and the "research supplemental poverty measure." CRS Report R41187, Poverty Measurement in the United States: History, Current Practice, and Proposed Changes : provides a history of the current official federal poverty measure, and discussion of alternatives. Appendix A. Methodology Used to Create Low-Income Program Database Selection of Low-Income Programs Programs were selected for inclusion in this report if they (1) have provisions that base an individual's eligibility or priority for service on a measure (or proxy) of low or limited income; (2) target resources in some way (e.g., through allocation formulas, variable matching rates) using a measure (or proxy) of low or limited income; or (3) prioritize services to low-income segments of a larger target population. A few programs without an explicit low-income provision were included because either their target population is disproportionately poor or their purpose clearly indicates a presumption that participants will be low income. Such programs that serve disproportionately low-income people include the Indian Health Service, Homeless Assistance Grants, Indian Education programs, Title I Migrant Education, and Indian Human Services. Programs with purposes that presume a low-income target population include Adult Basic Education and Social Services Block Grants. Federal student loan programs were considered for inclusion because they determine benefit levels through the same need-analysis system that is used for Pell Grants and several smaller postsecondary education programs. However, this system results in students from relatively well-off families receiving assistance, as there is no absolute income ceiling on eligibility. Pell Grants are structured in such a way that the majority of recipients are low-income and the lowest-income students receive the largest benefits. Student loan programs are not as strongly targeted and therefore are not included in the report. On the other hand, deliberations about whether to include the Additional Child Tax Credit (ACTC) reached a different conclusion. The regular Child Tax Credit (CTC) is a nonrefundable credit and phases out at relatively high income levels. The ACTC is a refundable credit that allows families with no or insufficient tax liability to get all or part of the benefit they would otherwise receive from the CTC. Because of the refundable nature and other design features of the ACTC, it serves predominantly lower-income families . For example, for tax year 2012, 90% of returns that claimed the ACTC were filed by families with adjusted gross income (AGI) below $40,000 and 89% of the credit went to such families. Thus, the ACTC is included in the report. Because the report includes only programs with direct spending, it does not include tax provisions, with the exception of direct spending for the refundable portion of the Earned Income Tax Credit (EITC) and the refundable ACTC. Finally, one program—Developmental Disabilities Support and Advocacy Grants—was included in the 2011 version of this report (CRS Report R41625, Federal Benefits and Services for People with Low Income: Programs, Policy, and Spending, FY2008-FY2009 ) but dropped in the current version. Only one component of that program had a low-income targeting provision, and that component was below the $100 million threshold for inclusion in this analysis (see below). Categorization of Programs Most programs are easily assigned to broad categories, such as health, cash aid, food assistance, or education. A few, however, have multiple purposes or allowable activities. For some of these programs, spending can be disaggregated into the relevant categories. For example, using state reporting of actual expenditures, it is possible to estimate the amount of TANF obligations attributable to cash aid, social services, and employment and training. Other programs cannot be disaggregated and must be assigned to a single category. For example, Transitional Cash and Medical Services for Refugees was categorized as health care, and Indian Human Services was categorized as social services although it also provides cash and housing assistance. The social services category, in general, is not well-defined and some analysts might assign some programs—and therefore dollars—differently. Head Start, for example, could be considered an education program, since its purpose is to promote school readiness; however, it supports a very broad range of activities (including activities for children ages 0-3 in its Early Head Start component) that can best be characterized collectively as social services. Foster Care and Adoption Assistance both give cash to families or other care providers, but income support is not these programs' purpose or sole use of funding. Foster Care subsidizes maintenance payments and administrative activities (including case planning) on behalf of children who cannot remain safely at home, and Adoption Assistance helps facilitate the adoption of children who would otherwise lack permanent homes. Thus, these programs were categorized as social services and not cash assistance. Likewise, Maternal, Infant, and Early Childhood Home Visiting is included in social services, rather than health care, because of the broad range of its intended purposes. Selection of Spending Measure New obligations incurred in the indicated fiscal year were chosen as the measure of spending for this report, although for many programs readers may be more accustomed to seeing appropriations (budget authority) or outlays. These spending concepts are related. Congress and the President enact budget authority through appropriations measures or other authorizing laws. Budget authority in turn allows federal agencies to incur obligations , through actions such as entering into contracts, employing personnel, and submitting purchase orders. Outlays represent the actual payment of these obligations, usually in the form of electronic transfers or checks issued by the Treasury Department. Obligations are used in this report because they are the most consistent measure available at the necessary level of detail for the majority of programs. The source of obligations data is the U.S. Budget Appendix for the second fiscal year (e.g., FY2015 budget appendix for final FY2013 obligations, FY2014 budget appendix for final FY2012 obligations, etc.). Obligations were either not available or not appropriate for a small number of programs. Because obligations were not available at the necessary program level, appropriations were used for the following: Transitional Cash and Medical Services for Refugees, Breast/Cervical Cancer Early Detection, the Title I Migrant Education Program, Social Services and Targeted Assistance for Refugees, and Foster Grandparents. For veterans' medical care, the Budget Appendix shows obligations for the entire program, not solely the income-tested component. Thus, estimated obligations for Priority Group 5 veterans (needy veterans without service-connected disabilities) were calculated from Department of Veterans Affairs data on obligations for Priority Groups 1-6 and 7-8 and the number of patients receiving care by individual priority group. The Budget Appendix also does not show obligations solely for the low-income subsidy portion of the Medicare Part D prescription drug program. Therefore, the report uses aggregate reimbursements for the low-income subsidy for the calendar year (instead of fiscal year), available from the annual report of the Medicare trustees. As noted above, TANF obligations provided in the Budget Appendix were disaggregated into the categories of cash aid, social services, and employment and training, based on states' reporting to the Department of Health and Human Services of their actual expenditures. The Budget Appendix includes obligations for the Section 502 single-family rural housing loan program in combination with other programs in an aggregate amount for the Rural Housing Insurance Fund Account. Thus, loan subsidy budget authority (also found in the Budget Appendix) was used for the Section 502 program in this version of the report. In the 2011 version, loan subsidy outlays were used, adjusted for re-estimates provided in the Federal Credit Supplement to the U.S. Budget for the relevant years; however, budget authority has now been chosen as a better measure. Finally, the report uses obligations from the Budget Appendix for the ACTC in FY2009-FY2013. However, for FY2008, ACTC obligations shown in the Budget Appendix also include an unspecified amount for a one-time $300 per child tax rebate, authorized by the Economic Stimulus Act of 2008 ( P.L. 110-185 ), which was not targeted on low-income families. That figure, which overstates the amount spent for the ACTC alone, was used in the 2011 version of this report with appropriate caveats. For the current version, however, data from the Internal Revenue Service Statistics of Income for tax year 2007 are used to provide a more accurate picture of the ACTC in FY2008. Spending Threshold Programs are included in this report if they had obligations in any year from FY2008 through FY2013 of at least $100 million. To simplify the analysis without significantly changing the overall picture, smaller programs were excluded, even if they met the low-income criteria. A few programs had spending above the threshold in some years but not in others. Spending totals cited throughout this report include these programs only for the years in which their obligations equaled or exceeded $100 million. In other words, each year's spending total is a snapshot of spending in that year for low-income programs that— in that year —had obligations totaling at least $100 million. (See Table C-1 for all spending amounts for all programs in each year.) Comparison with Predecessor CRS Report Series From 1979 to 2006, the Congressional Research Service (CRS) issued a series of reports, typically every other year, called Cash and Noncash Benefits for Persons with Limited Income . The series was conceived and produced (except for the last edition in 2006) by [author name scrubbed], Specialist in Social Policy, who retired from CRS in 2004. In 2011, CRS published CRS Report R41625, Federal Benefits and Services for People with Low Income: Programs, Policy, and Spending, FY2008-FY2009 , as a replacement for the Cash and Noncash series. The current report is an update to the 2011 version. The new report series uses different methodologies to select and categorize programs and measure spending; therefore, it cannot be considered an update of Cash and Noncash for various reasons. For example, the older series did not include certain programs that are now included, such as the low-income subsidy under Medicare Part D, Title I-A of the Elementary and Secondary Education Act, and Community Development Block Grants. The older series also had no minimum spending threshold, so it included smaller programs that are not included here. In addition, the older series included student loans, which are no longer included for reasons explained above. Several programs were also categorized differently in the previous series (e.g., Head Start was categorized as education, Foster Care and Adoption Assistance as cash aid, and Homeless Assistance Grants as social services). The older series used different measures of spending for different programs, while the new series uses obligations wherever possible. The older series also provided estimates of state-local spending, which are not included here. Finally, the older series traced spending back to 1968, which is beyond the scope of the current series. Changes in programs and appropriations accounts over time make it virtually impossible to trace obligations backward with precision. However, an analysis of long-term spending trends for 10 major needs-tested programs, using outlays, is available in CRS Report R41823, Low-Income Assistance Programs: Trends in Federal Spending , by [author name scrubbed]. Appendix B. Methodology Used for Analysis of Spending by Population The allocations of federal spending in FY2011 under the 10 largest low-income programs by population groups (see " Spending for the 10 Largest Programs by Population ") are estimates based on a specific methodology and available data. These estimates also rely upon certain simplifying assumptions and hence, represent an approximate division of spending among the population groups. Note that for most programs, data collected in conjunction with the administration of a program (administrative data) were used as the basis of making the allocations among population groups. However, programs use different definitions of "elderly" and "disabled" to determine eligibility and program requirements, so the population groupings are not consistent among all programs. For example, Medicaid uses age 65 to determine who is elderly, while a person is considered elderly for purposes of the SNAP program at age 60. Medicaid As noted earlier, the analysis uses FY2011 because it is the latest year for which data to divide spending among population groups are available for Medicaid. The allocation of Medicaid spending is based on a combination of administrative data and data from the Census Bureau's March 2011 Current Population Survey (CPS). FY2011 Medicaid administrative data report that, of total Medicaid expenditures in that year, 23% was received by the elderly and 43% by disabled recipients. These percentages were directly used to allocate federal Medicaid spending among those two population categories. However, Medicaid administrative data are not sufficient for allocating spending to the population groups representing nonelderly and nondisabled beneficiaries. (For example, they do not include information on whether a family had earnings.) An analysis of March 2011 CPS data was used to determine the allocation of federal spending among those population groups. The CPS identifies individuals covered by Medicaid, and the Census Bureau provides an estimate of the "market value" of Medicaid for those covered. The CPS also provides background demographic and economic characteristics of the population, including age, disability, whether the individual is in a family with children, and whether the individual was working or not. These background characteristics were used to identify Medicaid beneficiaries in families with children, as well as childless adult recipients (not aged or disabled) and whether any adult (aged 18 or older) in the family was employed in March 2011. Total Medicaid "market values" were computed for each population category, which determined each population category's share of total Medicaid market values for the nonelderly, nondisabled population. These shares were then applied to the 34% of Medicaid spending that remained, after spending was allocated to the elderly and disabled, to determine how much federal Medicaid spending was allocated to the population categories of families with children and childless adults and couples. Supplemental Nutrition Assistance Program The allocation of federal SNAP spending is based on an analysis of the FY2011 SNAP Quality Control Data files, administrative data that include information on the demographic and economic characteristics of SNAP participants and households. The information is for the full fiscal year, but the data are collected monthly and tabulations of them represent a monthly average. SNAP households were placed into six categories that were totally inclusive and mutually exclusive in the following order: households with an aged member, households with a disabled member, households with children and earnings, households with children without earnings, childless adults or couples with earnings, childless adults or couples without earnings. If a household could be classified in multiple categories, it was placed in the first category for which it met criteria for inclusion. For example, if the household had an aged member but also had children, it was placed in the "aged" category. Supplemental Security Income The allocation of federal SSI spending to the elderly and disabled is based on administrative data collected and published by the Social Security Administration. The share of spending for the aged and disabled in this report is from Table 2, SSI Annual Statistical Report, 2013 . Earned Income Tax Credit For the purpose of this report, EITC spending reflects obligations for the refundable portion of the tax credit. The Internal Revenue Service collects and publishes information on the refundable portion of the EITC in its Statistics of Income (SOI) data, derived from information on filed tax forms. The information in this report is based on the division of the refundable portion of the EITC for tax year 2010 (which would be paid in FY2011) between those filers who claimed the credit based on the presence of children versus those who claimed the credit based on having no children. Medicare Part D Low-Income Subsidy The allocation of the Medicare Part D prescription drug Low-Income Subsidy between the elderly and disabled is based on unpublished information obtained by CRS from the Department of Health and Human Services (HHS). They estimated that the elderly account for 55% of the total low-income subsidy, with the disabled accounting for the remaining 45% of the subsidy. Section 8 Housing Choice Vouchers The allocation of Section 8 spending among the population groups is based on an analysis of administrative data collected by the Department of Housing and Urban Development. FY2011 data were not available for Section 8; thus FY2010 data were used for these estimates. As with the SNAP information, households were categorized into population groups in the following order: households with an elderly member; households with a disabled head or child; households with children with earnings; households with children without earnings; households without children (or aged or disabled members) with earnings; and households without children (or aged or disabled members) without earnings. The Section 8 administrative data use an annual accounting period, representing the characteristics of a household over a year rather than in a month. Thus, families with earnings represent those who had any earnings over a year, rather than earnings in a month. Additionally, the disability information available for Section 8 households was more limited than that for SNAP, with the data only permitting identification of households with a disabled head or disabled child. Rent subsidies were tallied for each of these population shares, with federal Section 8 spending allocated based on each population's share of total subsidies. Temporary Assistance for Needy Families This report divides TANF spending among three categories: cash assistance, social services, and employment and training. For the analysis of spending by population group, social services and employment and training expenditures were placed in the "Education/Services" category. TANF cash assistance was allocated among the population groups based on TANF administrative data, which include information on demographic and other characteristics of families receiving TANF cash assistance. The information is for the full fiscal year, but the data are collected monthly and tabulations of them represent a monthly average. Using these data, TANF families were classified into three population groups: Disabled, representing families with a parent receiving SSI (not TANF cash), and a cash supplement paid on behalf of the children in the family from TANF; Families with children with earnings, representing those families with adult TANF recipients who had earnings; Families with children without earnings, representing families with adult TANF recipients who had no earnings and families without adult recipients (other than those with parents receiving SSI). TANF benefit amounts for these three categories were totaled, and federal TANF cash assistance spending was then allocated among the three population categories based on their shares of total cash assistance benefits from the administrative data files. Appendix C. Detailed Program Tables The following three tables provide specific information about programs included in this report. Programs are organized by category and listed within categories according to their Catalog of Federal Domestic Assistance (CFDA) number. (Program fact sheets in Appendix D are presented in the same sequence.) Table C-1 shows obligations (or another measure of spending, as noted) for each program from FY2008 through FY2013. ARRA amounts are included in the totals for each program, and are also shown in separate columns. The table also indicates the federal administering agency for each program. Table C-2 identifies, for each program, the general target population and the concept(s) used to determine individual income eligibility and (if relevant) the concept used to target federal resources broadly based on need. The table indicates the general concept used but not the specific application. For example, the table might indicate that federal poverty guidelines (FPG) are used as a concept in determining income eligibility for a particular program, but it does not indicate the specific percent of FPG that is used. Likewise, the table might show that a program uses formula allocation factors to direct federal resources toward areas with the greatest need, but it does not identify the specific factors or their weighting. Readers are referred to the fact sheets in Appendix D , relevant CRS reports, or the statutes themselves for these details. Table C-3 shows the type of federal assistance provided (typically formula grants, competitive or discretionary grants, or direct benefits) and the immediate recipients of this assistance. As noted in the table, "immediate" recipient refers to the level of government or the organization that directly receives the federal grant or award. Many programs require that funds be further distributed (by formula or other criteria) to other units of government or organizations. For example, federal grants may be awarded by formula to states, but states are then required to subaward these funds to local governments or other entities. This table only shows the "immediate" grantee. The table also indicates whether a program has provisions for participation by U.S. territories or residents or organizations located within the territories. The specific details of these provisions are not provided in the table; readers are referred to statutory language or the federal agency that administers the program for this information. Appendix D. Program Fact Sheets The following fact sheets provide brief information about each program included in this report's analysis. Efforts were made to present the information in a relatively consistent manner; however, the programs are sufficiently different that the fact sheets vary in scope and level of detail. Readers should note that the number of programs included in this report is not necessarily meaningful. While fact sheets are presented for 87 "programs," some could have been characterized as more than one program and others could have been consolidated. For each program, the following information is provided: Catalog of Federal Domestic Assistance (CFDA) number(s); statutory and regulatory citations; the name of the federal administering agency and (where relevant) the specific office within that agency; the program's purpose; the type of benefit or service provided; criteria used to determine individual eligibility; the form and recipient of federal assistance (note that "state" includes the District of Columbia); the allocation formula used if relevant; any matching or related nonfederal spending requirements; the amount of new obligations in FY2013; the budgetary classification of the program's spending; some limited detail on program participation; and citations to relevant CRS reports. Information was derived from statutes, regulations, agency websites, and budget documents. Programs are organized by category, and presented in order of their CFDA number. (Note that some programs have multiple CFDA numbers; they may not necessarily be inclusive of all CFDA numbers associated with a particular program.) Readers should note that participation data are provided to give a sense of scope for each program; however, these data use different time periods and units of measurement and therefore are not consistent from one program to another. They should not be totaled or compared. Only selected information is included in these fact sheets. Programs are generally described as they existed in FY2013, with references to major enacted changes that are effective in subsequent years. Certain programs are no longer funded and are described as they existed in their final year. For complete information about a particular program of interest, readers are referred to the legal citations provided, the federal administering agency, or the identified CRS report(s). The following table provides a list of programs and page numbers, for easier reference to individual program fact sheets. Health Care Medical Care for Veterans without Service-Connected Disability (CFDA #64.009) Authority: Statute: 38 U.S.C. Part 2, Chapter 17. Regulations: 38 C.F.R. Part 17. Federal administering agency: Department of Veterans Affairs, Veterans Health Administration. Purpose of program: To provide primary care, specialized care, and related social and support services to eligible veterans. Benefit/service: Standardized medical benefits package including preventive services, such as immunizations, screening tests, and health education and training classes; primary health care diagnosis and treatment, prescription drugs, comprehensive rehabilitative services, mental health services, including professional counseling, home health care, respite (inpatient), hospice and palliative care; and emergency care. Some veterans also may receive long-term care, including nursing home care, domiciliary care, adult day care, and limited dental care. Individual eligibility criteria: In general, eligibility for VA health care is based on veteran status, service-connected disabilities or exposures, and other factors such as veterans who were former prisoners of war or who are awarded the Purple Heart. Veterans with no service-connected conditions and who are Medicaid-eligible, or who have income below a certain VA means-test threshold and below a median income threshold for the geographic area in which they live are eligible to enroll in the VA health care system. These veterans are classified as Priority Group 5 veterans. Form and recipient of federal assistance: Services are provided directly by the VA in VA facilities or through contracts. Allocation formula: Not applicable. Matching or related requirements: None. New obligations (FY2013) : $12,546 million (estimated obligations on behalf of Priority Group 5 veterans). Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, 1,409,341 Priority Group 5 veteran patients received care from the VA. CRS report s : CRS Report R43547, Veterans' Medical Care: FY2015 Appropriations , by [author name scrubbed]; and CRS Report R42747, Health Care for Veterans: Answers to Frequently Asked Questions , by [author name scrubbed] and [author name scrubbed]. Family Planning (CFDA #93.217) Authority: Statute: Title X of the Public Health Service Act, established in the Family Planning and Services and Population Research Act of 1970 (P.L. 91-572); 42 U.S.C. 300 to 300a-6. Regulations: 42 C.F.R. Part 59. Federal administering agency: Department of Health and Human Services, Office of the Assistant Secretary for Health, Office of Population Affairs, Office of Family Planning. Purpose of program: To assist individuals to determine freely the number and spacing of their children through the provision of education, counseling, and medical services. Benefit/service: A broad range of family planning methods and services (including natural family planning methods, infertility services, and services for adolescents). Family planning services include clinical family planning and related preventive health services; information, education and counseling related to family planning; and referral services. Services are free for persons whose income does not exceed federal poverty guidelines (unless covered by Medicaid or other health insurers) and are provided on a sliding fee scale basis for those with incomes between 100% and 250% of federal poverty guidelines. Individual eligibility criteria: Priority is given to individuals from low-income families, defined in regulation as individuals whose family income does not exceed 100% of federal poverty guidelines, and individuals whose family income exceeds 100% of federal poverty guidelines but who otherwise are unable to afford family planning services. Form and recipient of federal assistance: Competitive grants to public and nonprofit agencies. Allows participation by agencies in territories (American Samoa, Guam, Northern Mariana Islands, Puerto Rico, the U.S. Outlying Islands, the Marshall Islands, the Federated States of Micronesia, Republic of Palau, and the U.S. Virgin Islands). Allocation formula: Not applicable. Matching or related requirements: None. However, regulations provide that no project may be fully supported by Title X funds. New obligations (FY2013) : $278 million. Budgetary classification: Discretionary. Participation data (most recent available) : In calendar year 2012, a total of 4.764 million users were served by Title X-funded sites. CRS report: CRS Report RL33644, Title X (Public Health Service Act) Family Planning Program , by [author name scrubbed]. Consolidated Health Centers (CFDA #93.224) Authority: Statute: Section 330 of the Public Health Service Act, established by the Health Centers Consolidation Act of 1996 ( P.L. 104-299 ) and most recently reauthorized by the Patient Protection and Affordable Care Act ( P.L. 111-148 ); 42 U.S.C. 254b. Regulations: 42 C.F.R. Subpart 51c and 42 C.F.R. Parts 56.201-56.604. Federal administering agency: Department of Health and Human Services, Health Resources and Services Administration, Bureau of Primary Health Care. Purpose of program: To provide health care services to groups that are determined to be medically underserved. Benefit/service: Primary and additional health care services defined in statute, delivered by community health centers, migrant health centers, health centers for the homeless, and health centers for residents of public housing. Individual eligibility criteria: The statute defines "medically underserved" as "the population of an urban or rural area designated by the Secretary as an area with a shortage of personal health services or a population group designated by the Secretary as having a shortage of such services." Regulations provide that, in designating these populations, the Secretary may consider economic factors, such as the percentage of the population with incomes below poverty. Grant funds may be used to pay the full cost of services to individuals and families with income at or below federal poverty guidelines; services are provided on a sliding fee scale basis for those with incomes between 100% and 200% of federal poverty guidelines and no discount is provided for those with incomes above 200% of poverty. Form and recipient of federal assistance: Competitive grants to public and private nonprofit entities. Allocation formula: Not applicable. Matching or related requirements: None. Grantees are expected to collect fees from third-party payors, such as Medicare, Medicaid, and private health insurance; centers may also collect fees from patients with family income above the federal poverty guidelines; and centers may also receive funding from state, local and other federal sources. For grants serving certain populations, federal funds must supplement and not supplant other funds used by the health center to serve the same population. New obligations (FY2013) : $2,882 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2012, 2.1 million patients were served. CRS reports: CRS Report R43304, Public Health Service Agencies: Overview and Funding , coordinated by [author name scrubbed]; and CRS Report RL32046, Federal Health Centers Program , by Barbara English. State Grants and Demonstrations (includes CFDA #93.536, #93.537, #93.767, #93.784, #93.791) Authority: Statute: grants and demonstrations with FY2013 obligations include Money Follows the Person (MFP) Rebalancing Demonstration, Section 6071 of the Deficit Reduction Act of 2005 ( P.L. 109-171 ) as amended by Section 2403 of the Affordable Care Act ( P.L. 111-148 ); Medicaid Integrity Program (MIP), Section 1936 of the Social Security Act as established by Section 6034 of the Deficit Reduction Act of 2005 ( P.L. 109-171 ); Grants to Improve Outreach and Enrollment, Section 201 of the Children's Health Insurance Program Reauthorization Act (CHIPRA, P.L. 111-3 ) and Section 10203 of the Affordable Care Act ( P.L. 111-48 ); Medicaid Incentives for Prevention of Chronic Disease Demonstration Project, Section 4108 of the Affordable Care Act ( P.L. 111-148 ); Emergency Health Services (EHS) Furnished to Undocumented Aliens, Section 1011 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ( P.L. 108-73 ); Medicaid Emergency Psychiatric Demonstration, Section 2707 of the Affordable Care Act ( P.L. 111-148 ). Regulations: no program-specific regulations. Federal administering agency: Department of Health and Human Services, Centers for Medicare & Medicaid Services. Purpose of program: MFP: to help states rebalance their long-term services and supports programs to increase use of home and community-based services rather than institutional long-term care services. MIP: to reduce fraud, waste, and abuse in Medicaid. Outreach and Enrollment Grants: to increase enrollment and participation of children who are eligible for Medicaid or the State Children's Health Insurance Program (CHIP) but not enrolled. Prevention of Chronic Disease: to provide incentives for Medicaid beneficiaries to participate in programs to promote healthy lifestyles. EHS: to reimburse states for costs of emergency care provided to unauthorized aliens. Emergency Psychiatric Demonstration: to demonstrate impact of reimbursing institutions for mental disease for services to Medicaid-eligible individuals aged 21-64. Benefit/service: MFP: home and community-based long-term care services, including home health and personal care services. MIP: not applicable. Outreach and Enrollment: not applicable. Prevention of Chronic Disease: comprehensive, evidence-based programs to promote healthy lifestyles. EHS: emergency health services provided by hospitals, physicians, and ambulance suppliers. Emergency Psychiatric Demonstration: services of residential institutions for mental disease. Individual eligibility criteria: MFP: certain Medicaid beneficiaries residing in inpatient facilities who would continue to require the level of care provided by such facilities without provision of home and community-based long-term care services. MIP: not applicable. Outreach and Enrollment: as provided under Medicaid and CHIP. Prevention of Chronic Disease: Medicaid beneficiaries. EHS: unauthorized aliens who would otherwise be eligible for Medicaid, and certain parolees and Mexican citizens. Emergency Psychiatric Demonstration: Medicaid-eligible individuals aged 21-64 who require medical assistance to stabilize a psychiatric emergency medical condition. Form and recipient of federal assistance: MFP: competitive grants to states. MIP: not applicable. Outreach and Enrollment: competitive grants to states, local governments, community-based organizations, and tribal entities. Prevention of Chronic Disease: competitive grants to states. EHS: direct reimbursements to providers. Emergency Psychiatric Demonstration: competitive grants to states. Allocation formula: EHS: payments are made directly to providers from amounts reserved for states; two-thirds of funds are allocated among states based on their relative percentage of total undocumented aliens and the remaining third is allocated to the six states with the largest number of undocumented alien apprehensions. Not applicable for other programs. Matching or related requirements: MFP: an enhanced federal medical assistance percentage (FMAP) applies. Not applicable for other programs. New obligations (FY2013) : $534 million. (MFP: $344 million. MIP: $102 million. Outreach and Enrollment: $34 million. Prevention of Chronic Disease: $23 million. EHS: $16 million. Emergency Psychiatric Demonstration: $14 million.) Budgetary classification: Mandatory. Participation data (most recent available) : MFP: As of December 2013, about 41,000 individuals had been transitioned out of institutional settings. MIP: not applicable. Outreach and Enrollment: no data available. Prevention of Chronic Disease: As of August 31, 2013, there were 7,936 participants in 10 participating states. EHS: As of November 2013, payments had been made to 2,265 hospitals, 49,505 physicians, and 538 ambulance providers. Emergency Psychiatric Demonstration: As of June 30, 2013, there were 2,791 participants. CRS reports: CRS Report R41210, Medicaid and the State Children's Health Insurance Program (CHIP) Provisions in ACA: Summary and Timeline , by [author name scrubbed] et al., and CRS Report R43328, Medicaid Coverage of Long-Term Services and Supports , by [author name scrubbed]. Transitional Cash and Medical Services to Refugees (CFDA #93.566) Authority: Statute: Title IV, Chapter 2 of the Immigration and Nationality Act, established by the Refugee Act of 1979 ( P.L. 96-212 ) and most recently reauthorized by P.L. 106-104 ; 8 U.S.C. 1521-1524. Regulations: 45 C.F.R. Parts 400-401. Federal administering agency: Department of Health and Human Services, Administration for Children and Families, Office of Refugee Resettlement. Purpose of program: To provide for the effective resettlement of refugees and to assist them to achieve economic self-sufficiency as quickly as possible. Benefit/service: Cash payments to eligible individuals that are at least equal to the payment rate to a family of the same size under the state's Temporary Assistance for Needy Families (TANF) program; and medical benefits, through payments to doctors, hospitals and pharmacists. Those eligible for Supplemental Security Income (SSI) may receive refugee cash assistance while their SSI applications are pending. Individual eligibility criteria: Adult refugees, asylees, other specified humanitarian cases, and trafficking victims who meet the income and asset tests for TANF or Medicaid but who are not categorically eligible for those programs; and unaccompanied refugee minor children. Form and recipient of federal assistance: Formula grants to states, and discretionary grants to state-alternative programs and voluntary agencies. Allows participation by territories (American Samoa, Guam, Northern Marianas, Puerto Rico, the Trust Territories of the Pacific, and the U.S. Virgin Islands). Allocation formula: Formula funds are allocated to states based on their estimates of eligible expenditures. Matching or related requirements: No matching requirements for formula grants. Voluntary agencies receiving discretionary grants must provide a $1 match for each 2 federal dollars. New obligations (FY2013) : $401 million (appropriations). Budgetary classification: Discretionary. Participation data (most recent available) : No data available. CRS report: CRS Report RL31269, Refugee Admissions and Resettlement Policy , by [author name scrubbed]. State Children's Health Insurance Program (CHIP) (CFDA #93.767) Authority: Statute: Title XXI of the Social Security Act, established by the Balanced Budget Act of 1997 ( P.L. 105-33 ), reauthorized by the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA, P.L. 111-3 ), and most recently extended through FY2015 by the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended); 42 U.S.C. 1397aa-mm. Regulations: 42 C.F.R. Part 457. Federal administering agency: Department of Health and Human Services, Centers for Medicare & Medicaid Services. Purpose of program: To provide health coverage to uninsured, low-income children in an effective and efficient manner that is coordinated with other sources of health benefits coverage for children. Benefit/service: Health care coverage is available through expansion of a state's existing Medicaid program, creation of a separate CHIP program, or a combination of both approaches where the state operates a CHIP Medicaid expansion and one or more separate CHIP programs concurrently. States that use the CHIP Medicaid expansion option must provide the full range of mandatory Medicaid benefits as well as all optional services specified in their state Medicaid plans. Alternatively, states may enroll CHIP Medicaid expansion children in Alternative Benefit Plans, which must include the same "essential health benefits" provided in plans available through the health insurance exchanges established under the ACA. All CHIP Medicaid expansion children are entitled to Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) coverage, which effectively eliminates any state-defined limits on the amount, duration, and scope of any benefit listed in Medicaid statute. CHIP Medicaid expansion programs must follow Medicaid's cost-sharing rules which generally exempt children from program participation fees and service-related cost-sharing. In general, for separate CHIP programs under which the majority of children are enrolled, states may offer one of three benefit options. As one option, states may elect to provide one of the following "benchmark" benefit packages: (1) the standard Blue Cross/Blue Shield preferred provider plan offered under the Federal Employees Health Benefits Program (FEHBP), (2) the health coverage that is offered and generally available to state employees, and (3) the health coverage that is offered by a health maintenance organization (HMO) with the largest commercial (non-Medicaid) enrollment in the state. As a second option, states may elect to offer "benchmark-equivalent" coverage with the same actuarial value as one of the benchmark packages listed above. As a third option, states may elect to offer "Secretary-approved" coverage for which benefits are appropriate for the target population. States with separate CHIP programs may vary cost-sharing requirements by family income, but the total annual aggregate cost-sharing (including premiums, copayments, and similar charges) for a family may not exceed 5% of total income in a year, and certain services such as preventive care are exempt from cost-sharing. Under certain conditions, states may also provide premium assistance for health insurance offered through private insurance arrangements for Medicaid children (including CHIP children) and their parents. States may seek CMS approval to waive many of the basic benefit rules described above to conduct demonstration projects under the Section 1115 authority that test alternative methods of meeting the overall purpose of CHIP. Individual eligibility criteria: Target populations are defined by states within federal parameters. Children must be under age 19, lack health insurance, and not be qualified for regular Medicaid. States may set the upper income limit for targeted children at up to 200% of federal poverty guidelines or 50 percentage points above the applicable pre-CHIP (1997) Medicaid income level. States may seek federal approval to serve higher-income children. States also may cover pregnant women who lack health insurance and meet specified income thresholds. The ACA requires states to maintain CHIP child eligibility standards (as of March 23, 2010) through September 30, 2019, as a condition for receiving payments under Medicaid. Beginning January 1, 2014, in determining CHIP eligibility, states must use modified adjusted gross income (MAGI) income counting rules, which include a standard 5% income disregard. Also beginning January 1, 2014, states are required to transition CHIP children ages 6 through 18 in families with MAGI income less than 133% of federal poverty guidelines to Medicaid. Form and recipient of federal assistance: Formula grants to states. Allows participation by territories (American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands). Allocation formula: The national appropriation amount is set in statute and is the overall annual ceiling on federal funds available for CHIP in a fiscal year. The law calculates allotment amounts for each state for the federal share of their CHIP expenditures, which they will receive unless the national appropriation is inadequate. The allotment formula is based primarily on states' past and/or projected federal CHIP spending (depending on the year) increased by a growth factor. Annual allotments are available for two years, with unspent funds available for redistribution to shortfall states. Matching or related requirements: State expenditures are matched at an "enhanced" federal medical assistance percentage (E-FMAP). The E-FMAP for CHIP lowers the state's share of CHIP expenditures by 30% compared to the regular Medicaid FMAP. The CHIP E-FMAP rate is subject to a ceiling of 85% and a floor of 65%. From FY2016 through FY2019, the ACA increases the E-FMAP rate by 23 percentage points (not to exceed 100%) for most CHIP expenditures. This will increase the statutory range of the E-FMAP rate to 88% through 100%. New obligations (FY2013) : $9,357 million. Budgetary classification: Mandatory (capped entitlement to states). Participation data (most recent available) : During FY2013, the total number of children ever enrolled during the year was 8,130,793; and the total number of adults ever enrolled during the year was 219,473. CRS reports: CRS Report R43627, State Children's Health Insurance Program: An Overview , by [author name scrubbed] and [author name scrubbed]; CRS Report R41210, Medicaid and the State Children's Health Insurance Program (CHIP) Provisions in ACA: Summary and Timeline , by [author name scrubbed] et al.; and CRS Report R40226, P.L. 111-3: The Children's Health Insurance Program Reauthorization Act of 2009 , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. Voluntary Medicare Prescription Drug Benefit—Low-Income Subsidy (CFDA #93.770) Authority: Statute: Part D of Title XVIII of the Social Security Act, established by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ( P.L. 108-173 ); 42 U.S.C. 1395w-101-152. Regulations: 42 C.F.R. Part 423. Federal administering agency: Department of Health and Human Services, Centers for Medicare & Medicaid Services, and Social Security Administration. Purpose of program: To provide low-income seniors and people with disabilities with comprehensive prescription drug benefits. Benefit/service: Prescription drug coverage with reduced premiums, copayments and other out-of-pocket expenses. Individual eligibility criteria: Individuals with incomes below 150% of federal poverty guidelines and limited resources are eligible for subsidized prescription drug coverage. Those with incomes no higher than 135% of federal poverty guidelines receive the highest level of subsidy. Certain individuals are automatically eligible: those also eligible for Medicaid (i.e., "dual eligibles"); Medicare Savings Program recipients; and Supplemental Security Income (SSI) recipients. Form and recipient of federal assistance: Contracts with participating prescription drug plans; payments are made to plans for the monthly premiums, deductibles and coverage gap expenses of low-income subsidy beneficiaries. Allocation formula: Not applicable. Matching or related requirements: Not applicable. New obligations (FY2013) : $22,400 million (aggregate reimbursements under Low-Income Subsidy in calendar year 2013). Budgetary classification: Mandatory (entitlement to individuals). Participation data (most recent available) : In calendar year 2013, 11.5 million beneficiaries received low-income subsidies. CRS report: CRS Report R40611, Medicare Part D Prescription Drug Benefit , by [author name scrubbed] and [author name scrubbed]. Medicaid (CFDA #93.778) Authority: Statute: Title XIX of the Social Security Act, established by the Social Security Amendments of 1965 (P.L. 89-97); 42 U.S.C. 1396 to 1396w-5. Regulations: 42 C.F.R. Parts 430-456. Federal administering agency: Department of Health and Human Services, Centers for Medicare & Medicaid Services. Purpose of program: To provide medical assistance to families with dependent children and aged, blind or disabled individuals who have insufficient income and resources to afford necessary medical care, and to provide rehabilitation and other services to help such families and individuals achieve independence and self-care. Benefit/service: Federal law provides two primary benefit packages for state Medicaid programs: traditional benefits and alternative benefit plans (ABPs). In addition, states can use waiver authority (for example, under Section 1115 of the Social Security Act) to tailor benefit packages to specified Medicaid enrollee groups. Under the traditional Medicaid benefits package, federal law requires states to cover certain services; other services may be offered at state option. Examples of mandatory services for most eligibility groups include inpatient and outpatient hospital services, services provided by qualified federal health centers and free-standing birth clinics, laboratory and x-ray services, physician services, pregnancy-related services, tobacco cessation services for pregnant women, family planning, non-emergency transportation, nursing facility services for individuals 21 and older, and home health care for those entitled to nursing home care. Examples of optional services provided for most eligibility groups in many states include prescription drugs, physician-directed clinic services, other licensed practitioners (e.g., optometrists, podiatrists, psychologists), inpatient psychiatric care for the elderly and individuals under age 21, nursing facility services for individuals under age 21, physical therapy, and prosthetic devices. As an alternative to traditional benefits, states have the option to provide alternative benefit plans (ABPs) to state-specified groups. ABPs may cover fewer benefits than traditional Medicaid, but must cover at least the 10 "essential health benefits" required of plans in the health insurance exchanges established under the Patient Protection and Affordable Care Act (ACA). Under both traditional benefits and ABPs, most Medicaid children under age 21 are entitled to Early and Periodic Screening, Diagnostic and Treatment (EPSDT) services, which include well-child visits, immunizations, screening services at regular intervals, and medical care that is necessary to correct or ameliorate identified conditions. Beginning January 1, 2014, states that implement the ACA Medicaid expansion must provide ABPs to the newly eligible enrollees (with exceptions for special-needs subgroups). Individual eligibility criteria: Individuals must meet financial (i.e., income and sometimes resource) and nonfinancial (i.e., categorical) requirements. Federal law defines more than 50 potentially eligible population groups; some groups are mandatory (all states must cover them) and others are optional (states may cover them at their discretion). In some cases, income eligibility standards are tied directly to specified percentages of the federal poverty guidelines. For example, Medicaid mandatory coverage groups include pregnant women and children under age 6 with family incomes at or below 133% of poverty; children ages 6-18 with family incomes at or below 133% of poverty; certain parents and children in working families who are entitled to Medicaid for at least 6 months and up to 12 months if their income does not exceed 185% of poverty (i.e., Transitional Medical Assistance (TMA)); individuals who qualify for Medicare Part A whose incomes do not exceed 100% of poverty (Qualified Medicare Beneficiaries (QMBs)); and individuals who are entitled to Medicare Part A with incomes between 100% and 120% of poverty (Specified Low-Income Beneficiaries (SLMs)). Mandatory groups also include families who qualify via rules applicable to the former Aid to Families with Dependent Children (AFDC) program; also, families who lose Medicaid as a result of increased spousal support or earned income may receive TMA for four months. Medicaid optional groups with income eligibility standards tied directly to specified percentages of the federal poverty guidelines include pregnant women and infants with incomes between 133% and 185% of poverty; CHIP-financed targeted low-income children; disabled and elderly (age 65+) individuals with incomes up to 100% of poverty; disabled working individuals whose family income does not exceed 250% of poverty; and individuals who would be QMBs except that their incomes are between 120% and 135% of poverty (i.e., Qualifying Individuals (QI-1s)). Beginning January 1, 2014, the ACA required states to expand Medicaid eligibility to include most nonelderly, nonpregnant individuals with income at or below 133% of the federal poverty guidelines (effectively 138% with the 5% income disregard). However, in the June 28, 2012, decision in National Federation of Independent Business v. Sebelius , the Supreme Court held that the federal government cannot terminate current Medicaid program federal matching funds if a state does not expand its Medicaid program. The U.S. Supreme Court decision effectively made the ACA Medicaid expansion optional. The ACA also required states to transition to a new income counting rule based on modified adjusted gross income (MAGI) for most non-aged eligibility groups beginning January 1, 2014. Form and recipient of federal assistance: Partial reimbursement to states of eligible expenditures, with no cap on federal spending. Allows participation by territories (American Samoa, Guam, Northern Marianas, Puerto Rico and the U.S. Virgin Islands). Allocation formula: Payments to states are based on their eligible expenditures and the applicable FMAP (see below). Matching or related requirements: The federal share of expenditures on Medicaid services is called the federal medical assistance payment (FMAP) and is inversely related to a state's per capita income. The FMAP is higher for states with lower per capita income relative to the national average and vice versa for states with higher per capita income. The FMAP ranges from a statutory low of 50% to a statutory high of 83%. Medicaid administrative expenditures are generally matched at a 50% rate, with certain exceptions. For FY2014 through FY2016, states receive a special 100% FMAP rate for the cost of individuals newly eligible for Medicaid due to the ACA expansion; after 2016, this FMAP phases down to a rate of 90% in 2020 and thereafter. New obligations (FY2013) : $286,920 million. Budgetary classification: Mandatory (open-ended entitlement to states). Participation data (most recent available) : During FY2013, an average of 57.4 million individuals were enrolled in Medicaid each month (including 27.9 million children); and a total of 72.8 million individuals were enrolled during the year (including 35 million children). CRS reports: CRS Report R43357, Medicaid: An Overview , coordinated by [author name scrubbed]; and CRS Report R41210, Medicaid and the State Children's Health Insurance Program (CHIP) Provisions in ACA: Summary and Timeline , by [author name scrubbed] et al. Ryan White HIV/AIDS Program (CFDA #93.917) Authority: Statute: Title XXVI of the Public Health Service Act, established by the Ryan White Comprehensive AIDS Resources Emergency Act of 1990 ( P.L. 101-381 ) and most recently reauthorized by the Ryan White HIV/AIDS Treatment Extension Act of 2009 ( P.L. 111-87 ); 42 U.S.C. 300ff. Regulations: no formal program-specific regulations. Federal administering agency: Department of Health and Human Services, Health Resources and Services Administration, HIV/AIDS Bureau. Purpose of program: To address the unmet care and treatment needs of persons living with HIV/AIDS who are uninsured or underinsured, and therefore are unable to pay for HIV/AIDS health care and vital health-related supportive services. Benefit/service: Primarily core medical services, such as outpatient and ambulatory health services, drug treatments (including through the AIDS Drug Assistance Program, ADAP), oral health, early intervention services, health insurance premium and cost-sharing assistance for low-income individuals, home health, medical nutrition therapy, hospice, home and community-based services, mental health, substance abuse outpatient care, and medical case management, including treatment adherence services; and some supportive services (i.e., outreach, medical transportation, language services, respite care for caregivers, and referrals for health care and support services). Services are provided without charge for individuals whose incomes are below federal poverty guidelines and are provided on a sliding fee scale basis for those whose incomes exceed federal poverty guidelines. Individual eligibility criteria: Individuals and families with HIV disease. Specific clinical and income eligibility criteria are set by states. Form and recipient of federal assistance: Formula grants to eligible metropolitan areas, "transitional grant" areas, and to states and territories; competitive supplemental grants are awarded based on need. Competitive grants are made to qualified health centers, family planning clinics, hemophilia centers, rural health clinics, Indian Health Service facilities and certain other health facilities and organizations; public and private nonprofit organizations; and dental schools. Allows participation by territories (American Samoa, Guam, Marshall Islands, Micronesia, Northern Mariana Islands, Palau, Puerto Rico, and the U.S. Virgin Islands). Allocation formula: Funds are allocated on the basis of number of living HIV and AIDS cases. Matching or related requirements: Any state with more than 1% of the nation's confirmed cases of HIV/AIDS must provide a nonfederal match equal to $1 for every federal $5 in the first year of payments under the grant, $1 for every federal $4 in the second year, $1 for every federal $3 in the third year, and $1 for every federal $2 in the fourth and fifth years of the grant. New obligations (FY2013) : $2,220 million. Budgetary classification: Discretionary. Participation data (most recent available) : 553,999 low-income people with HIV/AIDS were served in 2011 (preliminary estimate). CRS report: CRS Report RL33279, The Ryan White HIV/AIDS Program , by [author name scrubbed]. Breast/Cervical Cancer Early Detection (CFDA #93.919) Authority: Statute: Title XV of the Public Health Service Act, established by the Breast and Cervical Cancer Mortality Prevention Act of 1990 ( P.L. 101-354 ) and most recently reauthorized by the National Breast and Cervical Cancer Early Detection Program Reauthorization Act of 2007 ( P.L. 110-18 ); 42 U.S.C. 300k. Regulations: no formal program-specific regulations. Federal administering agency: Department of Health and Human Services, Centers for Disease Control and Prevention, Division of Cancer Prevention and Control. Purpose of program: To provide low-income, uninsured, and underserved women access to timely breast and cervical cancer screening and diagnostic services. Benefit/service: Clinical breast examinations, mammograms, Pap tests, pelvic examinations, diagnostic testing if results are abnormal, and referrals to treatment. No fees for services may be charged for women with incomes below 100% of federal poverty guidelines. (Under the Breast and Cervical Cancer Prevention and Treatment Act of 2000, P.L. 106-354 , women who are screened through the CDC program and found to have cancer are an optional Medicaid coverage group, which means that states may offer them medical services through their Medicaid programs.) Individual eligibility criteria: States must give priority to low-income women. CDC defines the eligible population as uninsured and underinsured women with income at or below 250% of federal poverty guidelines, aged 21-64 for cervical screening and 40-64 for breast screening. Form and recipient of federal assistance: Competitive grants to states, which enter into grants and contracts with public and private nonprofit entities. Allows participation by territories (Puerto Rico, American Samoa, Northern Mariana Islands, Marshall Islands, Micronesia, Palau) and Indian tribes and tribal organizations. Allocation formula: Not applicable. Matching or related requirements: A nonfederal match, in cash or in-kind, of $1 for every federal $3 is required. Programs must also maintain their previous level of effort before additional resources will be considered toward the matching requirement. New obligations (FY2013) : $197 million (appropriations). Budgetary classification: Discretionary. Participation data (most recent available) : In 2012, a total of 340,038 women were screened for breast cancer and 251,637 women were screened for cervical cancer. Maternal and Child Health Block Grant (CFDA #93.994) Authority: Statute: Title V of the Social Security Act, enacted in 1935 and converted into a block grant by the Omnibus Budget Reconciliation Act of 1981 ( P.L. 97-35 ); 42 U.S.C. 701 to 709. Regulations: 45 C.F.R. Part 96. Federal administering agency: Department of Health and Human Services, Health Resources and Services Administration, Maternal and Child Health Bureau. Purpose of program: To improve the health of all mothers and children consistent with applicable health status goals and national health objectives established by the Secretary of HHS. Benefit/service: Preventive and primary health care services for women, infants and children, including children with special health care needs. Within broad federal requirements, states determine the actual services provided under the block grant. Services funded by the block grant may include prenatal care, well-child care, dental care, immunization, family planning, and vision and hearing screening services. They may also include inpatient services for children with special health care needs, screening services for lead-based poisoning, and counseling services for parents of sudden infant death syndrome victims. Funds may not be used for inpatient services, other than for children with special health care needs, high-risk pregnant women, and infants (unless approved by the Secretary of HHS). States may not use the block grant funds to provide cash payments to recipients of health services. Individual eligibility criteria: Defined by the states. Federal law emphasizes services to low-income mothers and children, defined as those with income at or below the federal poverty guidelines. Form and recipient of federal assistance: Formula grants to states. Allows participation by specified territories (Puerto Rico, U.S. Virgin Islands, Guam, American Samoa, Northern Mariana Islands, Micronesia, Marshall Islands, and Palau). Allocation formula: Funds are allocated among states based on two factors: the amount awarded to each state in 1983 under previous programs that were consolidated into the block grant; and each state's relative share of low-income children. Matching or related requirements: States must provide $3 for every $4 in federal funding received. States must maintain their level of spending from state funds in 1989 on maternal and child health services. New obligations (FY2013) : $605 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2012, an estimated 43 million children, pregnant women, and reproductive-age women were served. CRS report: CRS Report R42428, The Maternal and Child Health Services Block Grant: Background and Funding , by [author name scrubbed]. Indian Health Service (no CDFA #) Authority: Statute: Snyder Act of 1921 (P.L. 83-568) and the Indian Health Care Improvement Act of 1976 ( P.L. 94-437 ), most recently reauthorized by the Patient Protection and Affordable Care Act ( P.L. 111-148 ); 25 U.S.C. 1601 et seq. Regulations: 42 C.F.R. Part 136. Federal administering agency: Department of Health and Human Services, Indian Health Service. Purpose of program: To elevate the health status of the Indian population to a level at parity with the general U.S. population. Benefit/service: Hospital, medical, and dental care, behavioral health, environmental health and sanitation services as well as outpatient services and the services of mobile clinics and public health nurses, and preventive care, including immunizations and health examinations of special groups, such as school children. Services are provided free of charge. Individual eligibility criteria: Persons of American Indian or Alaskan Native (AI/AN) descent who are members of a federally recognized Indian tribe, live within an Indian Health Service Health Service Delivery Area (HSDA), or are the natural minor children (18 years old or younger) of such an eligible member AI/AN and live within an HSDA. Form and recipient of federal assistance: Services are provided directly by the Indian Health Service in IHS or tribal health facilities or through contracts. Allocation formula: Not applicable. Matching or related requirements: None. The Indian Health Service collects reimbursements from Medicare, Medicaid, the State Children's Health Insurance Program (CHIP), and Department of Veterans Affairs for services that it provides to members of its eligible population who also are eligible for those programs. If an eligible AI/AN has private health insurance, IHS is reimbursed for services provided. New obligations (FY2013) : $5,661 million (services and facilities). Budgetary classification: Discretionary. Participation data (most recent available) : In 2013, the IHS service population was estimated at 2.2 million American Indians and Alaskan Natives. CRS report s : CRS Report R43330, The Indian Health Service (IHS): An Overview , by [author name scrubbed]; and CRS Report R41152, Indian Health Care: Impact of the Affordable Care Act (ACA) , by [author name scrubbed]. Cash Aid Pensions for Needy Veterans, their Dependents and Survivors (CFDA #64.104 and #64.105) Authority: Statute: 38 U.S.C. Chapter 15. Regulations: 38 C.F.R. Subpart A of Part 3. Federal administering agency: Department of Veterans Affairs, Veterans Benefits Administration. Purpose of program: To provide assistance to needy veterans, their dependents and survivors. Benefit/service: Cash assistance. Individual eligibility criteria: Veterans, age 65 and older or who are permanently and totally disabled (not due to military service or willful misconduct) regardless of age, who served in the active military for a minimum duration during a period of war, whose income is below a specified amount and whose net worth is not considered excessive. Also, surviving spouses and unmarried dependent children of deceased veterans who served in the active military for a minimum duration during a period of war, whose income is below a specified amount and whose net worth is not considered excessive. Form and recipient of federal assistance: Direct payment to individuals. Allocation formula: Not applicable. Matching or related requirements: Not applicable. New obligations (FY2013) : $5,195 million. Budgetary classification: Mandatory (entitlement to individuals). Participation data (most recent available) : In FY2013, benefits were paid to 308,993 veterans and 206,952 survivors. CRS report: CRS Report RS22804, Veterans' Benefits: Pension Benefit Programs , by [author name scrubbed] and [author name scrubbed]. Temporary Assistance for Needy Families (CFDA #93.558) Authority: Statute: Title IV-A of the Social Security Act, established by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 ) and most recently reauthorized by the Deficit Reduction Act of 2005 ( P.L. 109-171 ) and extended by the FY2015 appropriations law ( P.L. 113-235 ); 42 U.S.C. 601-619. Regulations: 45 C.F.R. Parts 260-270. Federal administering agency: Department of Health and Human Services, Administration for Children and Families, Office of Family Assistance. Purpose of program: To increase state flexibility in operating programs designed to (a) provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives; (b) end the dependence of needy parents on government benefits by promoting job preparation, work, and marriage; (c) prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies; and (d) encourage the formation and maintenance of two-parent families. Benefit/service: Benefits or services reasonably calculated to achieve the four statutory goals above, and certain "grandfathered" activities conducted under predecessor program (Aid to Families with Dependent Children) prior to enactment of P.L. 104-193 . (Roughly two-thirds of total TANF federal and state expenditures in FY2012 and FY2013 were for noncash services, including child care, work activities, child welfare services, and various social services directed toward the statutory goals of family formation and reduced nonmarital pregnancies.) Cash assistance benefit levels are defined by the individual states. Individual eligibility criteria: Families with dependent children as determined eligible under income and asset criteria defined by the states. Form of assistance: Formula grants to states; competitive awards to public and private entities for healthy marriage promotion and responsible fatherhood grants. Allows participation by territories (American Samoa, Guam, Puerto Rico and the U.S. Virgin Islands) and federally recognized Indian tribes and certain Alaskan Native organizations. Allocation formula: The basic TANF block grant is allocated among states according to their peak expenditures for pre-TANF programs during the FY1992-FY1995 period. TANF contingency funds are available to states that meet a test of economic "need" and increase spending from their own funds above what they spent in FY1994 on cash, emergency assistance, and job training in TANF's predecessor programs. Matching or related requirements: None. The basic TANF block grant requires states to maintain spending from their own funds on TANF or TANF-related activities for needy families with children equal to 75% of what was spent from state funds in FY1994 under TANF's predecessor programs. This maintenance-of-effort (MOE) requirement increases to 80% of FY1994 spending for states that fail to meet TANF work participation requirements. For the TANF contingency fund, a higher state spending requirement applies (100% of the historic level). New obligations (FY2013) : $17,332 million, broken down as follows, with estimates based on states' reporting of expenditures: $6,263 million (cash assistance); $9,491 million (social services); and $1,579 million (employment and training). (Includes obligations under the TANF block grant, supplemental grants, territories and tribal grants, contingency funds, healthy marriage promotion and responsible fatherhood grants. Note that in FY2009 and FY2010, states could draw down additional funds from the TANF Emergency Contingency Fund, created by the American Recovery and Reinvestment Act.) Budgetary classification: Mandatory (capped entitlement to states). Participation data (most recent available) : In FY2013, a monthly average of 1.8 million families, composed of 4.1 million recipients (including 3.1 million children), received TANF- or MOE-funded cash assistance. The larger number of individuals or families receiving any TANF- or MOE-funded benefit or service is not known. CRS report: CRS Report R40946, The Temporary Assistance for Needy Families Block Grant: An Overview , by [author name scrubbed]. Supplemental Security Income (CFDA #96.006) Authority: Statute: Title XVI of the Social Security Act, established by the Social Security Amendments of 1973 (P.L. 92-603); 42 U.S.C. 1381-1383f. Regulations: 20 C.F.R. Part 416. Federal administering agency: Social Security Administration. Purpose of program: To provide a minimum income for aged, blind or disabled individuals who have very limited income and assets. Benefit/service: Cash assistance. The basic federal SSI benefit is the same for all beneficiaries nationwide (reduced by any countable income). States may supplement the federal benefit. Individual eligibility criteria: Individuals who are aged 65 or older, blind or disabled (adults and children of any age), whose countable income and resources fall within certain specified limits. Form and recipient of federal assistance: Direct payments to individuals. Allows participation by individuals in the Northern Mariana Islands. Allocation formula: Not applicable. Matching or related requirements: Not applicable. However, states may supplement the federal benefit with their own funds. New obligations (FY2013) : $59,756 million. Budgetary classification: Mandatory (entitlement to individuals). Participation data (most recent available) : In FY2013, a total of 8,381,134 beneficiaries received benefits, of which 219,800 received state supplements only. CRS reports: CRS Report 94-486, Supplemental Security Income (SSI) , by [author name scrubbed]; and CRS Report RL32279, Primer on Disability Benefits: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) , by [author name scrubbed]. Additional Child Tax Credit (no CFDA #) Authority: Statute: 26 U.S.C. 24, established by the Taxpayer Relief Act of 1997 ( P.L. 105-34 ). Regulations: no formal program-specific regulations. Federal administering agency: Internal Revenue Service. Purpose of program: To assist eligible parents with dependent children whose tax liability is not sufficient to receive the full benefit of the regular nonrefundable Child Tax Credit. Benefit/service: Refundable tax credit. Individual eligibility criteria: Families with qualifying children (i.e., under age 17) who have earned income above a specified threshold, and whose tax liability is not sufficient for them to receive the full benefit of the regular nonrefundable Child Tax Credit. Form and recipient of federal assistance: The credit is provided in a refund check. Allocation formula: Not applicable. Matching or related requirements: None. New obligations (FY2013) : $21,608 million. Budgetary classification: Mandatory (entitlement to individuals). Participation data (most recent available) : For tax year 2012, 19.8 million returns claimed the Additional Child Tax Credit. CRS report: CRS Report R41873, The Child Tax Credit: Current Law and Legislative History , by [author name scrubbed]. Earned Income Tax Credit (refundable portion) (no CFDA #) Authority: Statute: 26 U.S.C. 32, established by the Tax Reduction Act of 1975 ( P.L. 94-12 ). Regulations: 26 C.F.R. 1.32. Federal administering agency: Internal Revenue Service, Earned Income Tax Credit Office. Purpose of program: To offset the burden of taxes, including Social Security taxes, and provide an incentive to work. Benefit/service: Tax credit to reduce the amount of income taxes owed; an eligible worker may receive the credit regardless of whether taxes are owed (i.e., the credit is refundable). Individual eligibility criteria: Families with qualifying children (i.e., under age 19 or 24 if a full-time student, or permanently or totally disabled) and childless adults (aged 25-64) who have earned income below specified levels. Form and recipient of federal assistance: The refundable portion of the credit can be provided in a refund check, or (prior to 2011) for eligible families with children, as an adjustment to income throughout the year. (This advance payment option was repealed for tax years beginning after Dec. 31, 2010, by P.L. 111-246 .) Allocation formula: Not applicable. Matching or related requirements: None. New obligations (FY2013) : $57,513 million. Budgetary classification: Mandatory (entitlement to individuals). Participation data (most recent available) : For tax year 2012, 24.3 million returns claimed the refundable portion of the EITC. CRS report: CRS Report R43805, The Earned Income Tax Credit (EITC): An Overview , by [author name scrubbed] and [author name scrubbed]. Food Assistance Supplemental Nutrition Assistance Program (formerly the Food Stamp Program) (CFDA #10.551) Authority: Statute: Food and Nutrition Act of 2008 ( P.L. 110-246 ), originally enacted by the Food Stamp Act of 1964 (P.L. 88-525), most recently reauthorized by the Agricultural Act of 2014 ( P.L. 113-79 ); 7 U.S.C. 2011-2036. Regulations: 7 C.F.R. Part 271-283. Federal administering agency: Department of Agriculture, Food and Nutrition Service. Purpose of program: To alleviate hunger and malnutrition and permit low-income households to obtain a more nutritious diet by increasing their food purchasing power. Benefit/service: Benefits redeemable for food, typically provided through electronic benefit transfer. Allotments are determined on the basis of a low-cost model diet plan (called the Thrifty Food Plan). An individual household's allotment is equal to the inflation-indexed maximum allotment for that household's size, reduced by 30% of the household's net monthly income (gross income, less allowances for non-food living expenses). Individual eligibility criteria: Eligible households must (1) have gross monthly income no higher than 130% of federal poverty guidelines and limited liquid assets (special, higher standards apply to households with elderly/disabled members) or (2) be categorically (automatically) eligible because they receive benefits/services financed by Temporary Assistance for Needy Families (TANF) programs or the Supplemental Security Income (SSI) program. Some individuals are categorically ineligible: most noncitizens, able-bodied adults without dependents (ABAWDs) after three months (unless they are working or in a work/training program), strikers, and post-secondary students without dependents who are not working or in a work/training program. Form and recipient of federal assistance: Direct benefits to individuals; grants to states for assistance with administrative costs and operating expenses for employment/training programs for recipients. Allows participation by territories (Guam and the U.S. Virgin Islands). Separate programs operate in Puerto Rico (described later in this report), American Samoa, the Northern Mariana Islands and on Indian reservations (also described later in this report). Allocation formula: Not applicable. Matching or related requirements: None for expenditures on benefits; 50% for state administrative and the majority of employment/training expenditures. New obligations (FY2013) : $79,733 million, includes $5,933 million under the American Recovery and Reinvestment Act. Obligations are broken down as follows: $79,365 million (food assistance, including benefits, state administration, and other program costs), and $368 million (employment and training). Budgetary classification: Mandatory (entitlement to individuals for benefits and to states for administrative costs). Participation data (most recent available) : In FY2013, average monthly participation was 47,636,090 persons. CRS report s : CRS Report R42505, Supplemental Nutrition Assistance Program (SNAP): A Primer on Eligibility and Benefits , by [author name scrubbed]; and CRS Report R43332, SNAP and Related Nutrition Provisions of the 2014 Farm Bill (P.L. 113-79) , by [author name scrubbed] School Breakfast Program (Free and Reduced-Price Components) (CFDA #10.553) Authority: Statute: Section 4 of the Child Nutrition Act of 1966 (P.L. 89-642), most recently reauthorized by the Healthy, Hunger-Free Kids Act of 2010 ( P.L. 111-296 ); 42 U.S.C. 1773. Regulations: 7 C.F.R. Part 220. Federal administering agency: Department of Agriculture, Food and Nutrition Service. Purpose of program: To promote learning readiness and healthy eating behaviors through provision of nutritious breakfasts. Benefit/service: Breakfasts that meet minimum federal nutrition standards and are served free or at reduced price by participating public and private elementary and secondary schools and residential child care institutions. Individual eligibility criteria: Children are eligible to receive free school breakfasts if their family income is below 130% of federal poverty guidelines, or if they receive Temporary Assistance for Needy Families (TANF) or Supplemental Nutrition Assistance Program (SNAP) benefits or services, or if they are in foster care, migrant, runaway, or homeless. Children are eligible to receive reduced-price school breakfasts if their family income is between 130% and 185% of federal poverty guidelines. Schools with 40% or more of students identified as categorically eligible for free meals may serve free meals to all students at the school. Form and recipient of federal assistance: Cash is allocated to state educational agencies, which distribute benefits to participating schools and institutions to subsidize the costs of school breakfasts. Meals that are served free receive a higher subsidy than meals served at reduced price. Participating schools and institutions also receive a small subsidy for meals served at full price to non-needy children. Allows participation by territories (American Samoa, Guam, the Northern Marianas, Puerto Rico, and the U.S. Virgin Islands); American Samoa and the Northern Marianas receive a block grant in lieu of participation in child nutrition programs. Allocation formula: Inflation-adjusted per-meal reimbursement rates are specified for each type of breakfast served (free, reduced-price, full-price). Matching or related requirements: None, although children's meal payments help finance the cost of the program. New obligations (FY2013) : $3,514 million (free and reduced-price components only). Budgetary classification: Mandatory (open-ended entitlement to participating schools and institutions). Participation data (most recent available) : In FY2013, average daily participation in the free and reduced-price components was 11.2 million children. CRS report: CRS Report R43783, School Meals Programs and Other USDA Child Nutrition Programs: A Primer , by [author name scrubbed]. National School Lunch Program (Free and Reduced-Price Components) (CFDA #10.555) Authority: Statute: Richard B. Russell National School Lunch Act (P.L. 79-396), most recently reauthorized by the Healthy, Hunger-Free Kids Act of 2010 ( P.L. 111-296 ); 42 U.S.C. 1751-1769i. Regulations: 7 C.F.R. Parts 210 and 245. Federal administering agency: Department of Agriculture, Food and Nutrition Service. Purpose of program: To safeguard the health and well-being of the nation's children and to encourage the domestic consumption of nutritious agricultural commodities and other food. Benefit/service: Lunches that meet minimum federal nutrition standards and are served free or at reduced price by participating public and private elementary and secondary schools and residential child care institutions. Individual eligibility criteria: Children are eligible to receive free school lunches if their household income is below 130% of federal poverty guidelines, or if they receive Temporary Assistance for Needy Families (TANF) or Supplemental Nutrition Assistance Program (SNAP) benefits or services, or if they are in foster care, migrant, runaway, or homeless. Children are eligible to receive reduced-price school lunches if their household income is between 130% and 185% of federal poverty guidelines. Schools with 40% or more of students identified as categorically eligible for free meals may serve free meals to all students at the school. Form and recipient of federal assistance: Cash and commodity food assistance are allocated to state educational agencies, which distribute benefits to participating schools and institutions to subsidize the costs of school lunches. Meals that are served free receive a higher subsidy than meals served at reduced price. Participating schools also receive a small subsidy for meals served at full price to non-needy children. Allows participation by territories (American Samoa, Guam, the Northern Marianas, Puerto Rico, and the U.S. Virgin Islands); American Samoa and the Northern Marianas receive a block grant in lieu of participation in child nutrition programs. Allocation formula: Inflation-adjusted per-meal reimbursement rates are specified for each type of lunch served (free, reduced-price, full-price). Matching or related requirements: None, although children's meal payments help finance the cost of the program. States must maintain the level of support they offered in 1980. New obligations (FY2013) : $10,549 million (free and reduced-price components only). Budgetary classification: Mandatory (open-ended entitlement to participating schools and institutions). Participation data (most recent available) : In FY2013, average daily participation in the free and reduced-price components was 21.5 million children. CRS report: CRS Report R43783, School Meals Programs and Other USDA Child Nutrition Programs: A Primer , by [author name scrubbed]. Special Supplemental Nutrition Program for Women, Infants and Children (WIC) (CFDA #10.557) Authority: Statute: Section 17 of the Child Nutrition Act of 1966, established by the National School Lunch Amendments (P.L. 92-433) and most recently reauthorized by the Healthy, Hunger-Free Kids Act of 2010 ( P.L. 111-296 ); 42 U.S.C. 1786. Regulations: 7 C.F.R. Part 246. Federal administering agency: Department of Agriculture, Food and Nutrition Service. Purpose of program: To provide supplemental food and nutrition education to eligible women and children to serve as an adjunct to good health care during critical times of development, to prevent the occurrence of health problems, including drug abuse, and improve the health status of beneficiaries. Benefit/service: Food assistance (in the form of vouchers for the purchase of specifically prescribed food packages), nutrition risk screening, and related services (e.g., nutrition education and breastfeeding support, medical care referral). Individual eligibility criteria: Eligible individuals are pregnant, postpartum or breastfeeding women, infants (to age 1) or children (to age 5) who are at nutritional risk (as defined by the Secretary), and who have family income no greater than 185% of federal poverty guidelines or who receive or are eligible for benefits or services under the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), or Medicaid. Form and recipient of federal assistance: Formula grants to states. Allows participation by territories (American Samoa, Guam, Northern Mariana Islands, and the U.S. Virgin Islands) and Indian tribes and tribal organizations. Allocation formula: State allocations are based on a formula established through regulations that reflects food and caseload costs, inflation, and "need" as evidenced by poverty indices. Matching or related requirements: None. States are required to operate a cost containment system for infant formula, which results in manufacturers' rebates that reduce the cost of WIC food packages. New obligations (FY2013) : $6,945 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, 8.7 million participants were served. CRS report: CRS Report R42353, Domestic Food Assistance: Summary of Programs , by [author name scrubbed] and [author name scrubbed]. Child and Adult Care Food Program (Lower-Income Components) (CFDA #10.558) Authority: Statute: Section 17 of the Richard B. Russell National School Lunch Act, established by the National School Lunch and Child Nutrition Act Amendments ( P.L. 94-105 ) and most recently reauthorized by the Healthy, Hunger-Free Kids Act of 2010 ( P.L. 111-296 ); 42 U.S.C. 1766. Regulations: 7 C.F.R. Part 226. Federal administering agency: Department of Agriculture, Food and Nutrition Service. Purpose of program: To enable nonresidential day care institutions to integrate a nutritious food service with organized care services for enrolled children or adults. Benefit/service: Breakfasts, lunches, suppers and snacks that meet minimum federal nutrition standards. Individual eligibility criteria: Eligible children are age 12 or under, migrant children age 15 or under, disabled children of any age; also eligible are chronically impaired and elderly adults. In centers, individuals are eligible to receive free meals/snacks if their household income is below 130% of federal poverty guidelines, or reduced-price meals/snacks if their household income is between 130% and 185% of federal poverty guidelines. Children whose families receive benefits or services under the Supplemental Nutrition Assistance Program (SNAP), Food Distribution Program on Indian Reservations (FDPIR), or Temporary Assistance for Needy Families (TANF) program are automatically eligible for free meals/snacks. Children who are income-eligible for Head Start or Even Start, or who are residents of emergency shelters, also are automatically eligible for free meals/snacks. Adults who receive SNAP, FDPIR, Supplemental Security Income (SSI) or Medicaid benefits are automatically eligible for free meals/snacks. Form and recipient of federal assistance: Cash and commodity support are allocated to state agencies, which distribute benefits to eligible public or private nonprofit centers and sponsoring organizations to subsidize the costs of meals and snacks. Meals that are served free receive a higher subsidy than meals served at reduced price. Participating institutions also receive a small subsidy for meals served at full price to non-needy children and adults. Allows participation by territories (American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, Trust Territories of the Pacific, and the U.S. Virgin Islands); American Samoa and the Northern Marianas receive a block grant in lieu of participation in child nutrition programs. Allocation formula: Centers are reimbursed for meals based on the eligibility of participating children and adults for free, reduced-price, or full-price meals/snacks. Reimbursements to day care homes differ depending on whether they are "Tier 1" homes (located in low-income areas or operated by low-income providers) or "Tier 2" homes (not located in low-income areas or operated by low-income providers). Matching or related requirements: None. New obligations (FY2013) : $2,799 million (lower-income components only). Budgetary classification: Mandatory (open-ended entitlement to participating centers and sponsoring organizations). Participation data (most recent available) : In FY2013, average daily attendance was 3.6 million persons; approximately 82% of meals served to these participants were served either free or at reduced price. CRS report: CRS Report R43783, School Meals Programs and Other USDA Child Nutrition Programs: A Primer , by [author name scrubbed]. Summer Food Service Program (CFDA #10.559) Authority: Statute: Section 13 of the Richard B. Russell National School Lunch Act, established by the National School Lunch and Child Nutrition Act Amendments ( P.L. 94-105 ) and most recently reauthorized by the Healthy, Hunger-Free Kids Act of 2010 ( P.L. 111-296 ); 42 U.S.C. 1761. Regulations: 7 C.F.R. Part 225. Federal administering agency: Department of Agriculture, Food and Nutrition Service. Purpose of program: To help children in low-income areas get necessary nutrition during the summer months when they are out of school. Benefit/service: Meals and snacks. Individual eligibility criteria: Children age 18 or younger and certain individuals with disabilities over the age of 18, who live in low-income areas where at least half the children are from families with incomes below 185% of federal poverty guidelines (open sites), or who are enrolled in an activity program where half the children are from families with incomes below 185% of federal poverty guidelines (enrolled sites), and children from families with incomes below 185% of federal poverty guidelines at participating camps. Automatically eligible are homeless or runaway children and children in Head Start, Early Head Start, Even Start, or state-funded pre-kindergarten programs that have received authorized waivers. Form and recipient of federal assistance: Cash and commodity support are allocated to state educational agencies, which distribute benefits to approved local public or private nonprofit sponsors to subsidize the costs of meals. Meals that are served free receive a higher subsidy than meals served at reduced price. Allows participation by territories (American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands); American Samoa and the Northern Marianas receive a block grant in lieu of participation in child nutrition programs. Allocation formula: Inflation-adjusted per-meal reimbursement rates are specified for the type of meal served (free or reduced-price). Matching or related requirements: None. New obligations (FY2013) : $437 million. Budgetary classification: Mandatory (open-ended entitlement to approved sponsors). Participation data (most recent available) : In FY2013, a daily average of 2.4 million children participated. CRS report: CRS Report R43783, School Meals Programs and Other USDA Child Nutrition Programs: A Primer , by [author name scrubbed]. Commodity Supplemental Food Program (CFDA #10.565) Authority: Statute: Sections 4(a) and 5 of the Agriculture and Consumer Protection Act of 1973 ( P.L. 93-86 ), most recently reauthorized by the Agricultural Act of 2014 ( P.L. 113-79 ); 7 U.S.C. 612c note. Regulations: 7 C.F.R. Part 247 and 250. Federal administering agency: Department of Agriculture, Food and Nutrition Service. Purpose of program: To meet the nutritional needs of low-income elderly persons and pregnant, postpartum, and breastfeeding women, infants, children. Benefit/service: Food packages and nutrition education. Individual eligibility criteria: Eligible elderly participants (60 years or older) must have incomes below 130% of federal poverty guidelines; women, infants (under one year of age) and children (under six years old) may have incomes up to 185% of federal poverty guidelines. Regardless of income, individuals may participate if they are eligible for the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), or Medicaid. Individuals who participate in the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) may not also participate in this program. ( P.L. 113-79 reauthorized the program as seniors-only; women, infants and children may continue to participate only if they had been participating prior to implementation of this change.) Form and recipient of assistance: Formula grants and commodity support to states. Allows participation by territories (American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands). Allocation formula: Funding and commodities are allocated among states according to the caseload, or number of slots, allotted to each project, which is based on previous participation levels. Subject to available appropriations, states may request additional caseload slots. Matching or related requirements: None. New obligations (FY2013) : $187 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, a monthly average of 580,000 persons participated. CRS report s : CRS Report R42353, Domestic Food Assistance: Summary of Programs , by [author name scrubbed] and [author name scrubbed]; and CRS Report R43332, SNAP and Related Nutrition Provisions of the 2014 Farm Bill (P.L. 113-79) , by [author name scrubbed]. Nutrition Assistance for Puerto Rico (CFDA #10.566) Authority: Statute: Food Stamp Act of 1977 ( P.L. 95-113 ), most recently reauthorized by the Agricultural Act of 2014 ( P.L. 113-79 ); 7 U.S.C. 2028. Regulations: 7 C.F.R. Part 285. Federal administering agency: Department of Agriculture, Food and Nutrition Service. Purpose of program: To improve diets of needy persons living in Puerto Rico. Benefit/service: Nutrition assistance benefits. Benefits are provided through electronic benefit transfers, and at least 75% must be used for food purchases. Individual eligibility criteria: "Needy" is defined by Puerto Rico. Form and recipient of federal assistance: Block grant to Puerto Rico. Allocation formula: An annually indexed amount is specified in law. Matching or related requirements: No match required for costs of benefits; 50% match required for administrative costs. New obligations (FY2013) : $2,001 million (includes $128 million under the American Recovery and Reinvestment Act). Budgetary classification: Mandatory (capped entitlement to Puerto Rico). Participation data (most recent available) : In FY2013, a monthly average of 1.36 million individuals participated. CRS report: CRS Report R43332, SNAP and Related Nutrition Provisions of the 2014 Farm Bill (P.L. 113-79) , by [author name scrubbed]. Food Distribution Program on Indian Reservations (CFDA #10.567) Authority: Statute: Section 4(b) of the Food and Nutrition Act of 2008 ( P.L. 110-246 ), originally enacted by the Food Stamp Act of 1977 ( P.L. 95-113 ), most recently reauthorized by the Agricultural Act of 2014 ( P.L. 113-79 ); 7 U.S.C. 2013(b). Regulations: 7 C.F.R. Parts 250, 253, and 254. Federal administering agency: Department of Agriculture, Food and Nutrition Service. Purpose of program: To distribute food commodities to households living on or near Indian reservations, in lieu of the Supplemental Nutrition Assistance Program (SNAP). Benefit/service: Provides an alternative to SNAP for participating Indian reservations by delivering a household food package, which includes specific goods, in lieu of SNAP's electronic benefit transfer. Individual eligibility criteria: Low-income American Indian and non-Indian households that reside on a reservation, and households living in approved areas near a reservation or in Oklahoma that contain at least one member of a federally recognized tribe, may be eligible. Income eligibility rules are similar to the Supplemental Nutrition Assistance Program (SNAP); recipients of certain forms of assistance (e.g., Temporary Assistance for Needy Families, Supplemental Security Income, general assistance) are automatically eligible. Households may not participate in both this program and SNAP simultaneously. Form and recipient of federal assistance: Commodity food assistance and funding for administrative costs to states and Indian tribal organizations. Allocation formula: Administrative funding is allocated among federal regional offices on the basis of each office's share of total national participants and state agencies participating in the program; administering agencies submit applications with a proposed budget. Matching or related requirements: No match for commodity foods; 25% match required for administrative funds (which the Secretary may reduce subject to a compelling justification). New obligations (FY2013) : $100 million. Budgetary classification: Mandatory. Participation data (most recent available) : Average monthly participation in FY2013 was 75,608 individuals. CRS report: CRS Report R43332, SNAP and Related Nutrition Provisions of the 2014 Farm Bill (P.L. 113-79) , by [author name scrubbed]. The Emergency Food Assistance Program (TEFAP) (CFDA #10.568 and #10.569) Authority: Statute: The Emergency Food Assistance Act of 1983 ( P.L. 98-8 ), most recently reauthorized by the Agricultural Act of 2014 ( P.L. 113-79 ); 7 U.S.C. 7501 et seq. Regulations: 7 C.F.R. 251. Federal administering agency: Department of Agriculture, Food and Nutrition Service. Purpose of program: To supplement the diets of low-income Americans, including elderly people, by providing them with emergency food and nutrition assistance at no cost. Benefit/service: Food commodities that are distributed to local feeding programs and the administrative costs necessary to store and transport the commodities. Individual eligibility criteria: Eligible individuals must be needy as defined by the state. State criteria must ensure that only households in need of food assistance because of inadequate income receive assistance under the program. At state discretion, income-based criteria may be met through participation in other income-tested health or welfare programs. Form and recipient of federal assistance: Formula grants and commodities to states, which distribute funds and commodities among eligible local feeding organizations. Allows participation by Indian tribal organizations. Allocation formula: Commodities and funding are allocated among states according to a poverty-unemployment formula; 60% is allocated on the basis of a state's share of all persons with income below the poverty level, and 40% is based on a state's share of all unemployed persons. Matching or related requirements: Funds retained by states for administrative costs must be matched with an equal cash or in-kind contribution. States may not reduce their level of spending of their own funds on commodities or services to organizations receiving TEFAP funds in the later of FY1988 or the year the state began administering the TEFAP program. New obligations (FY2013) : $312 million (commodities and administrative costs). Budgetary classification: Mandatory (capped entitlement to states) and discretionary (administrative costs). Participation data (most recent available) : No data available. CRS report s : CRS Report R42353, Domestic Food Assistance: Summary of Programs , by [author name scrubbed] and [author name scrubbed]; and CRS Report R43332, SNAP and Related Nutrition Provisions of the 2014 Farm Bill (P.L. 113-79) , by [author name scrubbed]. Fresh Fruit and Vegetable Program (CFDA #10.582) Authority: Statute: Section 19 of the Richard B. Russell National School Lunch Act; permanently authorized by Section 4304 of the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 ); 42 U.S.C. 1769a). Regulations: none. Federal administering agency: Department of Agriculture, Food and Nutrition Service. Purpose of program: To make free fruits and vegetable snacks available in low-income elementary schools. Benefit/service: Reimbursement to participating elementary schools for the costs of purchasing fresh fruit and vegetable snacks to be provided during the school day, separately from regular meal service. Individual eligibility criteria: None. Program operates in elementary schools selected by the states, in which 50% or more of the students are eligible for free or reduced-price meals. Priority is placed on schools where the highest proportions of children are eligible for free and reduced-price meals. Form and recipient of federal assistance: Grants to states. Allows participation by territories (Guam, Puerto Rico, and U.S. Virgin Islands). Allocation formula: Each state receives a grant equal to 1% of funds available for the program; remaining funds are allocated among states that participate in the National School Lunch Program on the basis of relative population. The Secretary must ensure that 2008 funding levels are maintained for states that participated in the pilot program at that time. Matching or related requirements: None. New obligations (FY2013) : $165 million. Budgetary classification: Mandatory. Participation data (most recent available) : No data available. CRS report: CRS Report R43783, School Meals Programs and Other USDA Child Nutrition Programs: A Primer , by [author name scrubbed]; and CRS Report R43332, SNAP and Related Nutrition Provisions of the 2014 Farm Bill (P.L. 113-79) , by [author name scrubbed]. Nutrition Program for the Elderly (CFDA #93.045) Authority: Statute: Title III of the Older Americans Act of 1965 (P.L. 89-73), most recently reauthorized by the Older Americans Act Amendments of 2006 ( P.L. 109-365 ); 42 U.S.C. 3030d-21 - g-22. Regulations: 45 C.F.R. Part 1321. Federal administering agency: Department of Health and Human Services, Administration for Community Living, Administration on Aging. Purpose of program: To reduce hunger and food insecurity, promote socialization, and promote the health and well-being of older individuals and delay adverse health conditions through access to nutrition and other disease prevention and health promotion services. Benefit/service: Meals served in congregate settings, home-delivered meals, and related nutrition services (nutrition screening, education and assessment and counseling). Individual eligibility criteria: Individuals age 60 or older and their spouses. Individuals with disabilities younger than 60 who live in housing facilities occupied primarily by the elderly and where congregate meals are served also may receive congregate meals. To be eligible for home-delivered meals, individuals must be homebound or otherwise isolated. Preference is given to individuals with the greatest economic and social needs, with particular attention to low-income older individuals (i.e., having income no higher than federal poverty guidelines), including low-income minority individuals, those with limited English proficiency, and those living in rural areas. Form and recipient of federal assistance: Formula grants to state agencies on aging, which make subgrants to local area agencies on aging. Allows participation by territories (Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands). A separate nutrition program for Native Americans is authorized under Title VI of the Older Americans Act. Allocation formula: Funds are allocated to states according to their relative share of the nation's population of older individuals (age 60 and over). States develop their own formulas for allocation of funds among local agencies, which must consider the geographic distribution of older individuals and older individuals with the greatest economic and social needs, paying particular attention to low-income minority individuals. Matching or related requirements: A nonfederal share of 25% is required for administrative activities, and a nonfederal share of 15% is required for nutrition services. New obligations (FY2013) : $765 million (congregate meals, home-delivered meals, and nutrition services incentive program). Budgetary classification: Discretionary. Participation data (most recent available) : In FY2012, 1,626,532 clients received congregate meals; 851,204 received home-delivered meals; and 29,845 received nutrition counseling. C RS report: CRS Report RS21202, Older Americans Act: Title III Nutrition Services Program , by [author name scrubbed]. Education Indian Education (CFDA #15.026, #15.027, #15.028, #15.042, #15.043, #15.044, #15.046, #15.047, #15.058, #15.059, #15.060, #15.114, #15.130, #15.149, #15.151) Authority: Statute: Snyder Act of 1921 (P.L. 67-85), Johnson-O'Malley Act of 1934 (P.L. 73-167), Indian Adult Vocational Training Act of 1956 (P.L. 84-959), Navajo Community College Act (P.L. 92-189), Indian Self-Determination and Education Assistance Act of 1978 ( P.L. 93-638 ), Tribally Controlled College Assistance Act ( P.L. 95-471 ), Education Amendments of 1978 ( P.L. 95-561 ), Tribally Controlled Schools Act of 1988 ( P.L. 100-297 ), and Tribal Self-Governance Act of 1994 ( P.L. 103-413 ); 25 U.S.C. 13, 309 et seq., 450 et seq., 640a, Chapters 7, 20, 22, 27, 28, and 35. Regulations: 25 C.F.R. Part 30-47, 273, 900-1001. Federal administering agency: Department of the Interior, Bureau of Indian Education and Bureau of Indian Affairs. Purpose of program: To provide comprehensive education programs and services for American Indians and Alaska Natives; to provide quality education opportunities from early childhood through life in accordance with the tribes' needs for educational, cultural and economic well-being in keeping with the wide diversity of Indian tribes and Alaska Native villages as distinct cultural and governmental entities. Benefit/service: Preschool, elementary, secondary, postsecondary and adult education at BIE-funded institutions, public schools, and postsecondary institutions; financial assistance for postsecondary education at accredited institutions. Individual eligibility criteria: Eligible children and postsecondary students are members of federally recognized Indian tribes or at least one-fourth degree Indian blood descendants of such members, and (for elementary and secondary students) live on or near a federal Indian reservation; members of federally recognized tribes who are accepted or enrolled at an accredited institution of higher education and are determined to have financial need by the institution's financial aid office. Form and recipient of federal assistance: Services are provided at BIE schools and institutions, public schools, and tribally controlled colleges and universities; postsecondary assistance is provided directly to students. Allocation formula: Depending on the individual program, funds are allocated to BIE-funded elementary and secondary schools based on number of students and their academic needs, commercial transportation costs, and the number of weighted bus miles driven; to tribes and tribal organizations based on the number of eligible preschool-age children and an administrative cost percentage rate; to tribes, states and public school districts based on historic funding in FY1995 and the number of Indian students served; to tribally controlled colleges based on Indian student counts and previous year allocations; and to BIE postsecondary schools based on prior allocations and unmet need. Matching or related requirements: None. New obligations (FY2013) : $766 million. Budgetary classification: Discretionary. Participation data (most recent available) : In school year 2012-2013, an "average daily membership" of 41,516 students was reported at BIE-funded schools. Early childhood programs served 2,177 children and 2,271 parents in 2012-2013. BIE-funded postsecondary schools enrolled 1,355 students in fall 2012. Tribal colleges enrolled 25,422 students in academic year 2012-2013. CRS report: CRS Report RL34205, Federal Indian Elementary-Secondary Education Programs: Background and Issues , by [author name scrubbed]. Adult Basic Education Grants to States (CFDA #84.002) Authority: Statute: Adult Education and Family Literacy Act, most recently authorized by Title II of the Workforce Innovation and Opportunity Act of 2014 ( P.L. 113-128 , goes into effect on July 1, 2015); 20 U.S.C. 9201 et seq. (29 U.S.C. 3271 et seq. under P.L. 113-128 ). Regulations: 34 C.F.R. 461 et seq. Federal administering agency: Department of Education, Office of Vocational and Adult Education, Division of Adult Education and Literacy. Purpose of program: To assist adults to become literate and obtain the knowledge and skills necessary for employment and self-sufficiency, to assist adults who are parents obtain the educational skills necessary to become full partners in the educational development of their children, to assist adults in completing a secondary school education and (under P.L. 113-128 ) transitioning to postsecondary education. (Under P.L. 113-128 , purpose will also include to assist immigrants and other English language learners in improving their English skills and acquiring an understanding of American government.) Benefit/service: Adult education and literacy services, including workplace literacy services; family literacy services; and English literacy programs. (Under P.L. 113-128 , will also include integrated English literacy and civics education and integrated education and training.) Individual eligibility criteria: Qualified adults are individuals age 16 or older, who are not enrolled or required to be enrolled in secondary school under their state law, and who lack sufficient mastery of basic educational skills to function effectively in society, or who lack a secondary school diploma or equivalent and have not achieved an equivalent level of education, or who cannot speak, read or write the English language. Form and recipient of federal assistance: Formula grants to state agencies (typically state educational agencies), which fund local projects on a competitive basis. Eligible providers include local educational agencies, community-based organizations, volunteer literacy organizations, institutions of higher education, public or private nonprofit agencies, libraries, public housing authorities, other nonprofits with the ability to provide literacy services to adults and families, and consortia of eligible entities. Allows participation by territories (Puerto Rico, American Samoa, Guam, Northern Mariana Islands, Palau, and the U.S. Virgin Islands). Allocation formula: Funds are allocated among states based on their relative number of qualified adults. Hold-harmless provisions apply. Matching or related requirements: A 25% nonfederal match is required for states. New obligations (FY2013) : $565 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, there were an estimated 1.7 million participants. CRS report: CRS Report R43789, Adult Education and Family Literacy Act: Major Statutory Provisions , by [author name scrubbed]. Federal Supplemental Educational Opportunity Grants (CFDA #84.007) Authority: Statute: Title IV, Part A, Subpart 3 of the Higher Education Act of 1965, most recently reauthorized by the Higher Education Opportunity Act ( P.L. 110-315 ); 20 U.S.C. 1070b. Regulations: 34 C.F.R. Parts 673 and 676. Federal administering agency: Department of Education, Office of Federal Student Aid. Purpose of program: To promote access to postsecondary education for low-income undergraduate students. Benefit/service: Grants to help students with the costs of postsecondary education. Individual eligibility criteria: Eligible students are undergraduate students who demonstrate financial need. Students demonstrate financial need if the cost of attendance of their school exceeds the sum of their expected family contribution (EFC) and estimated financial assistance from other sources. A student's EFC is determined according to an analysis of income and asset information reported on the Free Application for Federal Student Aid (FAFSA). Financial aid administrators must give priority in awarding FSEOG aid to students who are Pell Grant recipients and to those with exceptional financial need. Form and recipient of federal assistance: Formula grants to institutions of higher education. Recipient institutions use federal funds and institutional matching funds to award aid to eligible students. Allows participation by citizens of Palau. Allocation formula: Federal capital contributions are allocated among participating institutions first according to a statutory formula that provides a "base guarantee" that is based on past funding amounts and, if funds remain, then according to a need-based formula that considers institutional need (as measured by the aggregate need of the institution's undergraduate students). Matching or related requirements: Participating institutions must provide a match equal to one-third of the federal funds received. New obligations (FY2013) : $698 million. Budgetary classification: Discretionary. Participation data (most recent available) : In academic year 2013, a total of 1,545,031 students received grants. CRS report s : CRS Report RL31618, Campus-Based Student Financial Aid Programs Under the Higher Education Act , by [author name scrubbed] and [author name scrubbed]; and CRS Report R43351, The Higher Education Act (HEA): A Primer , by [author name scrubbed]. Education for the Disadvantaged—Grants to Local Educational Agencies (CFDA #84.010) Authority: Statute: Title I-A of the Elementary and Secondary Education Act (P.L. 89-10), most recently reauthorized by the No Child Left Behind Act ( P.L. 107-110 ); 20 U.S.C. 6301-6339, 6571-6578. Regulations: 34 C.F.R. Part 200. Federal administering agency: Department of Education, Office of Elementary and Secondary Education, Office of Student Achievement and School Accountability Programs. Purpose of program: To ensure that all children have a fair, equal and significant opportunity to obtain a high-quality education and reach, at a minimum, proficiency on challenging state academic achievement standards and state academic assessments. Benefit/service: Additional academic support and learning opportunities for students in pre-kindergarten through grade 12 to help low-achieving children master challenging curricula and meet state standards in core academic subjects. Individual eligibility criteria: Within local educational agencies (LEAs), funds are allocated to school attendance areas and schools in rank order based on their number of children from low-income families. Schools in which at least 40% of children are poor may operate schoolwide programs that serve all children. Otherwise, schools must focus services on children who are failing or most at risk of failing state academic standards. Form and recipient of federal assistance: Formula grants to LEAs. Allows participation by territories (Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, and Northern Mariana Islands). Allocation formula: Portions of available annual funds are allocated under four different formulas—Basic, Concentration, Targeted, and Education Finance Incentive Grants (EFIG)—although funds are then combined and used for the same purposes by recipient LEAs. Although the allocation formulas have several distinctive elements, the primary factors used in all four formulas are an eligible child count and an expenditure factor. The eligible child count includes children aged 5-17: (a) in poor families; (b) in institutions for neglected or delinquent children or in foster homes; and (c) in families receiving Temporary Assistance for Needy Families payments above the poverty level. Each element of the population factor is updated annually. The expenditure factor is the state average per pupil expenditure for public K-12 education (subject to a minimum of 80% and maximum of 120% of the national average, further multiplied by 0.40), and is the same for all LEAs in the same state. Both the Targeted and EFIG formulas include weighting schemes to increase aid to LEAs with the highest numbers or concentrations of eligible children. The EFIG formula also includes an effort factor, based on average per pupil expenditure for public K-12 education compared to personal income per capita for each state compared to the nation as a whole, and an equity factor, based on variations in average per pupil expenditures among the LEAs in each state. Each formula has a hold-harmless provision (no LEA may receive less than 85%-95% of its previous year grant, depending on the LEA's poverty level and whether the LEA continues to meet the formula's eligibility threshold). All four formulas have state minimum grant provisions. Matching or related requirements: Three requirements apply to total LEA grants under all four formulas: (1) maintenance of effort : recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year; (2) funds must supplement and not supplant state and local funds that would otherwise be available for the education of disadvantaged pupils in participating schools; and (3) comparability: services provided with state and local funds in schools participating in Title I-A must be comparable to those in non-Title I-A schools of the same LEA. New obligations (FY2013) : $13,757 million. Budgetary classification: Discretionary. Participation data (most recent available) : For school year 2011-2012, about 23 million public and private school students were served (of which about 172,000 or 0.7% were served in private schools). The majority of students (21.6 million or 94.2%) were served through schoolwide programs in public schools. CRS report: CRS Report RL33960, The Elementary and Secondary Education Act, as Amended by the No Child Left Behind Act: A Primer , by [author name scrubbed]. Title I Migrant Education Program (CFDA #84.011) Authority: Statute: Title I, Part C of the Elementary and Secondary Education Act of 1965 (P.L. 89-10), most recently reauthorized by the No Child Left Behind Act ( P.L. 107-110 ); 20 U.S.C. 6391-6399. Regulations: 34 C.F.R. 200 Subpart C. Federal administering agency: Department of Education, Office of Elementary and Secondary Education, Office of Migrant Education. Purpose of program: To help reduce educational and other disruptions that result from repeated moves by migratory children; to ensure that migratory children are not penalized by education disparities among states; to ensure that migratory children receive appropriate educational and supportive services; to ensure that migratory students have opportunities to meet the same challenging standards as other students; and to prepare migratory children for a successful transition to postsecondary education or employment. Benefit/service: Education and support services, including academic instruction, remedial and compensatory instruction, bilingual and multicultural instruction, vocational instruction, career education services, special guidance, counseling and testing services, health services, preschool services, professional development, and family literacy instruction. Individual eligibility criteria: Eligible children (or their parent or spouse) are migratory agricultural workers, dairy workers, or fishermen and who, in the preceding 36 months, have moved from one school district to another for employment, or have moved for employment from one administrative area to another in a state that constitutes a single school district, or who live in a school district greater than a specified size and migrate at least 20 miles to a temporary residence to engage in a fishing activity. Form and recipient of federal assistance: Formula grants to state educational agencies, consortia of states and other appropriate entities, or public or private nonprofit agencies, which may make subgrants to local operating agencies that may include local educational agencies and other public and nonprofit entities. Allows participation by Puerto Rico. Allocation formula: Federal funds are allocated by formula, based on each state's per pupil expenditure for education and counts of eligible migratory children, ages 3 through 21, residing within the state. Matching or related requirements: None. New obligations (FY2013) : $373 million (appropriations). Budgetary classification: Discretionary. Participation data (most recent available) : During school year 2012-2013, the program served 617,437 students. (Note: This is a duplicated count; students may be counted more than once as they migrate to different schools during a single school year.) CRS report: CRS Report RL33960, The Elementary and Secondary Education Act, as Amended by the No Child Left Behind Act: A Primer , by [author name scrubbed]. Higher Education—Institutional Aid and Developing Institutions (CFDA #84.031, #84.120, #84.382) Authority: Statute: Titles III, V and VII of the Higher Education Act of 1965, most recently reauthorized by the Higher Education Opportunity Act ( P.L. 110-315 ) and the Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ); 20 U.S.C. 1051-1068h and 1101-1103g. Regulations: 34 C.F.R. 606, 607, 608, 637. (Programs include Strengthening Institutions, Strengthening Tribally Controlled Colleges and Universities, Strengthening Alaska Native and Native Hawaiian-serving Institutions, Strengthening Historically Black Colleges and Universities, Strengthening Historically Black Graduate Institutions, Masters Degree Programs for Historically Black Colleges and Universities and Predominantly Black Institutions, Strengthening Predominantly Black Institutions, Strengthening Asian American and Native American Pacific Islander-serving Institutions, Strengthening Native American-serving Nontribal Institutions, Minority Science and Engineering Improvement, Developing Hispanic-serving Institutions, Developing Hispanic-serving STEM and Articulation Programs, and Promoting Postbaccalaureate Opportunities for Hispanic Americans.) Federal administering agency: Department of Education, Office of Postsecondary Education, Institutional Development and Undergraduate Education Programs. Purpose of program: To assist institutions of higher education that serve high percentages of low-income and minority students in improving their management, fiscal operations, and educational quality, to ensure access and equal educational opportunity for low-income and minority students. Benefit/service: Possible activities are broad and depend on the specific program. They may include but are not limited to assistance in planning, faculty development, and establishing endowment funds; administrative management; development and improvement of academic programs; equipment and facilities improvement, acquisition, and construction; debt reduction; staff development and tutoring. Individual eligibility criteria: There are no individual eligibility criteria. Institutional eligibility criteria differ for each program; for example, eligible institutions must be institutions of higher education that have a high enrollment of needy students, have low educational and general expenditures per student, be accredited; be a historically black college or university; be listed in statute; be institutions of higher education with high minority enrollment; or be science-oriented societies or organizations. Form and recipient of federal assistance: Competitive and formula grants to institutions of higher education (and nonprofit organizations in the case of the Minority Science and Engineering Program). Certain grants allow participation by institutions in territories (the College of the Marshall Islands, the College of Micronesia, Palau Community College, institutions of higher education in Guam, Puerto Rico, the U.S. Virgin Islands, American Samoa, and Northern Mariana Islands) and by tribal colleges and universities. Allocation formula: Depending on the program, factors may include Indian student enrollment, enrollment of Pell Grant recipients, number of graduates, number of graduates seeking a higher degree, student enrollment, cost of education per student, and percentage of total degrees awarded to African-American students by the applicant institution. Matching or related requirements: Funds must supplement and not supplant any funds that would otherwise be used for the same purposes. Funds used for endowment must be matched, if permitted. New obligations (FY2013) : $780 million. Budgetary classification: Discretionary and mandatory. Participation data (most recent available) : No data available. CRS report: CRS Report R43237, Programs for Minority-Serving Institutions (MSIs) Under the Higher Education Act (HEA) , by [author name scrubbed]; and CRS Report R43351, The Higher Education Act (HEA): A Primer , by [author name scrubbed]. Federal Work-Study (CFDA #84.033) Authority: Statute: Title IV, Part C of the Higher Education Act of 1965, most recently reauthorized by the Higher Education Opportunity Act ( P.L. 110-315 ); 42 U.S.C. 2751-2756b. Regulations: 34 C.F.R. Parts 673 and 675. Federal administering agency: Department of Education, Office of Federal Student Aid. Purpose of program: To assist students in financing the costs of postsecondary education. Benefit/service: Federally subsidized part-time employment for students. Individual eligibility criteria: Eligible students are undergraduate, graduate and professional students who demonstrate financial need. Students demonstrate financial need if the cost of attendance of their school exceeds the sum of their expected family contribution (EFC) and estimated financial assistance from other sources. A student's EFC is determined according to an analysis of income and asset information reported on the Free Application for Federal Student Aid (FAFSA). Students must be willing to work to receive Federal Work Study (FWS) assistance. Form and recipient of federal assistance: Formula grants to institutions of higher education. Recipient institutions combine federal funds and matching funds from FWS employers to compensate eligible students employed in part-time work-study jobs. Allows participation by citizens of Palau. Allocation formula: Federal capital contributions are allocated among participating institutions first according to a statutory formula that provides a "base guarantee" that is based on past funding amounts and, if funds remain, then according to a need-based formula that considers institutional need (as measured by the aggregate need of the institution's students). Matching or related requirements: Student compensation is comprised of a federal share and an employer share. In general, the federal share is 75%, but may range between 50% and 100%. The remaining share is provided by the FWS employer. New obligations (FY2013) : $934 million. Budgetary classification: Discretionary. Participation data (most recent available) : In academic year 2013, a total of 655,626 students participated. CRS report: CRS Report RL31618, Campus-Based Student Financial Aid Programs Under the Higher Education Act , by [author name scrubbed] and [author name scrubbed]. Federal TRIO Programs (CFDA #84.042, #84.044, #84.047, #84.066, #84.103, #84.217) Authority: Statute: Title IV, Part A, Subpart 2, Chapter 1 of the Higher Education Act of 1965, most recently reauthorized by the Higher Education Opportunity Act ( P.L. 110-315 ); 20 U.S.C. 1070a-11 – 1070a-18. Regulations: 34 C.F.R. Parts 642-647. (Federal TRIO programs consist of: Student Support Services, Talent Search, Upward Bound, Educational Opportunity Centers, Staff Training, and Ronald E. McNair Postbaccalaureate Achievement.) Federal administering agency: Department of Education, Office of Postsecondary Education, Student Service. Purpose of program: To motivate and support students from disadvantaged backgrounds through outreach and support programs designed to help them move through the academic pipeline from middle school to postbaccalaureate programs. Benefit/service: Depending on the program, academic instruction; personal, academic and career counseling; tutoring; exposure to cultural events and academic programs; information on the availability of financial and academic assistance available for postsecondary education; assistance in filling out college applications and financial aid request forms; summer internships; research opportunities; stipends; grant aid; and staff development. Individual eligibility criteria: Specific eligibility requirements differ among the TRIO programs but generally require that two-thirds of participants be low-income students who are first-generation college students. Low-income is defined as income no greater than 150% of federal poverty guidelines. The programs also target to varying extents students from educationally underrepresented groups, students with disabilities, low-income students, first generation college students, students at high risk of academic failure, and military veterans. Form and recipient of federal assistance: Competitive grants to institutions of higher education, public and private organizations, secondary schools, and consortia of such entities. Allows participation by agencies or institutions in territories (American Samoa, Puerto Rico, the U.S. Virgin Islands, Micronesia, the Marshall Islands, or Palau). Allocation formula: Not applicable. Matching or related requirements: None. New obligations (FY2013) : $796 million. Budgetary classification: Discretionary and mandatory. Participation data (most recent available) : In FY2013, the programs served a total of 758,212 students. CRS report: CRS Report R42724, The TRIO Programs: A Primer , by [author name scrubbed]. Indian Education Grants to Local Educational Agencies (CFDA #84.060) Authority: Statute: Title VII, Part A, Subpart 1 of the Elementary and Secondary Education Act of 1965 (P.L. 89-10), most recently reauthorized by the No Child Left Behind Act ( P.L. 107-110 ); 20 U.S.C. 7421-7429, 7491-7492. Regulations: no formal program-specific regulations. Federal administering agency: Department of Education, Office of Indian Education. Purpose of program: To address the unique education and culturally related academic needs of American Indian and Alaska Native students, including preschool children, so that these students can meet the same challenging state performance standards expected of all students. Benefit/service: Supplementary projects to help Indian children sharpen their academic skills, assist students in becoming proficient in the core content areas, and provide students an opportunity to participate in enrichment programs that would otherwise be unavailable. Funds support such activities as after-school programs, early childhood education, tutoring, and dropout prevention. Individual eligibility criteria: There are no individual eligibility criteria. However, local educational agencies that wish to participate must document that they enroll at least 10 Indian children or that Indian children constitute at least 25% of enrollment. (These thresholds do not apply in Alaska, California, Oklahoma, or to local educational agencies located on or in proximity to an Indian reservation.) Indian children include tribal members, 1 st and 2 nd degree descendants of tribal members, Eskimos, Aleuts, Alaska Natives, and members of Indian groups recognized by the Secretary. Form and recipient of federal assistance: Formula grants to local educational agencies, Bureau of Indian Education schools, and (in certain circumstances) Indian tribes that represent at least 50% of the eligible Indian children in the local educational agency. Allocation formula: Grant amounts are based on the number of Indian children served by the agency or tribe, who are documented as eligible, and the greater of the average per pupil expenditure in the state in which the agency or tribe is located or 80% of the average per pupil expenditure in all states. Matching or related requirements: Funds must supplement and not supplant any funds that would otherwise be used for the same purposes. New obligations (FY2013) : $100 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2014, approximately 476,000 children were eligible to be counted as Indian children for purposes of this program. CRS report s : CRS Report RL34205, Federal Indian Elementary-Secondary Education Programs: Background and Issues , by [author name scrubbed]; and CRS Report R41598, Indian Education Formula Grant Program of the Elementary and Secondary Education Act , by [author name scrubbed]. Federal Pell Grants (CFDA #84.063) Authority: Statute: Title IV, Part A, Subpart 1 of the Higher Education Act of 1965, most recently reauthorized by the Higher Education Opportunity Act of 2008 ( P.L. 110-315 ); 20 U.S.C. 1070a. Regulations: 34 C.F.R. 690. Federal administering agency: Department of Education, Office of Federal Student Aid. Purpose of program: To promote access to postsecondary education for low-income students. Benefit/service: Need-based grants (size of grant is capped by law) to eligible students at participating institutions of higher education. Individual eligibility criteria: Eligible students may be undergraduates or certain other post baccalaureate students in good academic standing, who demonstrate financial need as determined through analysis of income and asset information provided in their Free Application for Federal Student Aid (FAFSA). This need analysis determines the student's expected family contribution (EFC) toward their education and the amount of federal student aid they may be eligible to receive. Form and recipient of federal assistance: Funds are provided to participating institutions of higher education to pay eligible students; participating institutions also receive an administrative allowance per student. Individual students receive assistance either by payment to school account, direct payment (usually by check), or a combination of these methods. Allows participation by citizens of territories (American Samoa, Guam, Micronesia, the Marshall Islands, Palau Northern Mariana Islands, and U.S. Virgin Islands). Allocation formula: Not applicable. Matching or related requirements: Not applicable. New obligations (FY2013) : $31,887 million. Budgetary classification: Discretionary and mandatory (entitlement to individuals). Participation data (most recent available) : During award year (July-June) 2013-2014, an estimated 8,861,000 students were served. CRS report: CRS Report R42446, Federal Pell Grant Program of the Higher Education Act: How the Program Works and Recent Legislative Changes , by [author name scrubbed]. Education for Homeless Children and Youth (CFDA #84.196) Authority: Statute: Title VII, Subtitle B of the McKinney-Vento Homeless Assistance Act, established by the Stewart B. McKinney Homeless Assistance Act ( P.L. 100-77 ) and renamed by the McKinney-Vento Homeless Assistance Act ( P.L. 106-400 ), most recently reauthorized by the No Child Left Behind Act ( P.L. 107-110 ); 42 U.S.C. 11431 et seq. Regulations: no formal program-specific regulations. Federal administering agency: Department of Education, Office of Elementary and Secondary Education, Office of Student Achievement and School Accountability Programs. Purpose of program: To ensure that each child of a homeless individual and each homeless youth has equal access to the same free, appropriate public education, including a public preschool education, as other children and youth. Benefit/service: Comprehensive services to facilitate the enrollment, attendance, and success in school for homeless children and youth, including, among other things, tutoring, supplemental instruction and referral services, as well as services to address barriers such as transportation, immunization, and lack of birth records. Individual eligibility criteria: Eligible children and youth are those who lack a regular, fixed and adequate nighttime residence and include those who are sharing the housing of others due to economic hardship or a similar reason; are living in motels, hotels, trailer parks, or camping grounds due to the lack of alternative adequate accommodations; are living in emergency or transitional shelters; are abandoned in hospitals; or are awaiting foster care placement; have a primary nighttime residence that is a public or private place not designed as a regular sleeping arrangement; are living in cars, parks, public spaces, abandoned buildings, substandard housing, bus or train stations, or similar settings; or are migratory children who also qualify as homeless. Form and recipient of federal assistance: Formula grants to state educational agencies, which make subgrants to local educational agencies. Allows participation by territories (Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands). Allocation formula: Funds are allocated among states on the basis of their relative shares of funding under Title I, Part A of the Elementary and Secondary Education Act. Matching or related requirements: None. New obligations (FY2013) : $62 million. Budgetary classification: Discretionary. Participation data (most recent available) : In school year 2011-2012, a total of 1,168,354 homeless children were enrolled in school. CRS report: CRS Report R42494, Education for Homeless Children and Youth: Program Overview and Legislation , by [author name scrubbed]. 21 st Century Community Learning Centers (CFDA #84.287) Authority: Statute: Title IV, Part B of the Elementary and Secondary Education Act, established by the Improving America's Schools Act of 1994 ( P.L. 103-382 ) and most recently reauthorized by the No Child Left Behind Act ( P.L. 107-110 ); 20 U.S.C. 7171-7176. Regulations: no formal program-specific regulations. Federal administering agency: Department of Education, Office of Elementary and Secondary Education, Office of Academic Improvement and Teacher Quality Programs. Purpose of program: To create community learning centers that provide academic enrichment opportunities during non-school hours to help students meet state and local academic achievement standards, particularly for children who attend high-poverty and low-performing schools. Also offers a variety of additional programs intended to reinforce and complement the students' regular academic program and offers families of participating students opportunities for literacy and related educational development. Benefit/service: Remedial education and academic enrichment learning programs, mathematics and science education activities, arts and music education activities, entrepreneurial education programs, tutoring services, after-school activities for limited-English-proficient students that emphasize language skills and academic achievement, recreational activities, telecommunications and technology education programs, expanded library hours, programs to promote parental involvement and family literacy, academic assistance to students who are truant or suspended or expelled, drug and violence prevention programs, counseling and character education programs. Individual eligibility criteria: Funds must be used to serve students who attend schools that are eligible for schoolwide programs under Title I-A of the Elementary and Secondary Education Act (i.e., schools in which at least 40% of the children are poor) or schools that serve a high percentage of students from low-income families, and the families of such students. Form and recipient of federal assistance: Formula grants to state educational agencies, which make competitive subgrants to local educational agencies, community-based organizations, other public and private nonprofit organizations, or a consortium of the above. Allows participation by territories (Puerto Rico, American Samoa, Guam, Northern Mariana Islands and the U.S. Virgin Islands). Allocation formula: Funds are allocated among states on the basis of their relative shares of funding under Title I, Part A of the Elementary and Secondary Education Act for the preceding fiscal year. Matching or related requirements: States may require local grantees to match federal funds; however, the match may not exceed the amount of federal funds and may not come from other federal or state funds. The size of the match is adjusted based on the relative poverty of the grantee's target population and the grantee's ability to obtain the match. The match may be in cash or in-kind. New obligations (FY2013) : $1,091 million. Budgetary classification: Discretionary. Participation data (most recent available) : In 2013, a total of 1,875,000 students were served, of whom 930,000 attended for 30 days or more; and 300,000 adult family members were served. CRS report: CRS Report RL33960, The Elementary and Secondary Education Act, as Amended by the No Child Left Behind Act: A Primer , by [author name scrubbed]. Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR-UP) (CFDA #84.334) Authority: Statute: Title IV, Part A, Subpart 2, Chapter 2 of the Higher Education Act of 1965, established by the Higher Education Amendments of 1998 ( P.L. 105-244 ) and most recently reauthorized by the Higher Education Opportunity Act ( P.L. 110-315 ); 20 U.S.C. 1070a21-28. Regulations: 34 C.F.R. Part 694. Federal administering agency: Department of Education, Office of Postsecondary Education, Student Service. Purpose of program: To assist low-income students attain a secondary school diploma or equivalent and prepare for and succeed in postsecondary education. Benefit/service: Teacher training, scholarships and early intervention services; for example, financial assistance necessary for attending an institution of higher education, and additional counseling, mentoring, academic support, outreach, and supportive services. Individual eligibility criteria: A cohort of students in at least one grade level of a school in which at least 50% of students are eligible for free or reduced-price lunch; a cohort of students in at least one grade level that reside in public housing; or secondary school students eligible to be counted under the basic formula for Title I-A of the Elementary and Secondary Education Act, eligible under Title IV-B or IV-E of the Social Security Act, eligible for the homeless education program under the McKinney-Vento Act, or considered disconnected. Form and recipient of federal assistance: Competitive grants to states and to partnerships consisting of at least one degree-granting institution of higher education and one or more local educational agencies, and if desired, at least two other partners (such as community organizations, businesses, and public or private agencies or organizations). Allows participation by agencies or institutions in territories (American Samoa, Guam, Marshall Islands, Micronesia, Northern Mariana Islands, Palau, Puerto Rico, and the U.S. Virgin Islands). Allocation formula: Not applicable. Matching or related requirements: A 50% nonfederal match is required, unless granted a waiver. New obligations (FY2013) : $286 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, the program served a total of 617,437 students. CRS report: CRS Report R43351, The Higher Education Act (HEA): A Primer , by [author name scrubbed]. Rural Education Achievement Program (CFDA #84.358) Authority: Statute: Title VI, Part B of the Elementary and Secondary Education Act, established by the No Child Left Behind Act ( P.L. 107-110 ); 20 U.S.C. 7341-7372. Regulations: no formal program-specific regulations. Federal administering agency: Department of Education, Office of Elementary and Secondary Education, Office of School Support and Technology Programs. Purpose of program: To help rural and rural low-income school districts meet their state's definition of adequate yearly progress under the No Child Left Behind Act. Benefit/service: Small Rural School Achievement Program (SRSA): Activities authorized under Title I-A (improving the academic achievement of disadvantaged children), Title II-A (teacher and principal training and recruiting), Title II-D (enhancing education through technology), Title III (language instruction for limited English proficient and immigrant children), Title IV-A (safe and drug-free schools), Title IV-B (21 st century community learning centers) and Title V-A (innovative programs) of the Elementary and Secondary Education Act. Rural and Low-Income School Program (RLIS): Teacher recruitment and retention, teacher professional development, educational technology, parental involvement activities, activities under Title IV-A (safe and drug-free schools) and Title I-A (improving the academic achievement of disadvantaged children) and Title III (language instruction for limited English proficient and immigrant children) of the Elementary and Secondary Education Act. Individual eligibility criteria: There are no individual eligibility criteria. Form and recipient of federal assistance: SRSA: Formula grants to small local educational agencies (LEAs). RLIS: Formula grants to state educational agencies (SEAs) for suballocation to local educational agencies that do not meet the small-size thresholds for SRSA and in which 20% of the children aged 5-17 are from families below federal poverty guidelines. RLIS allows participation by territories (American Samoa, Guam, Northern Mariana Islands and the U.S. Virgin Islands). Allocation formula: Funds are allocated among LEAs (SRSA) and SEAs (RLIS) according to a formula that considers average daily attendance. Matching or related requirements: None. Funds must supplement and not supplant any funds that would otherwise be used for these activities. New obligations (FY2013) : $170 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, an estimated 4,304 SRSA grants were made to LEAs; 45 RLIS grants were made to states for 2,088 subgrants to LEAs. CRS report: CRS Report R40853, The Rural Education Achievement Program: Title VI-B of the Elementary and Secondary Education Act , by [author name scrubbed]. Mathematics and Science Partnerships (CFDA #84.366) Authority: Statute: Title II, Part B of the Elementary and Secondary Education Act, established by the Hawkins-Stafford Elementary and Secondary School Improvements Act of 1988 ( P.L. 100-297 ) and most recently reauthorized by the No Child Left Behind Act ( P.L. 107-110 ); 20 U.S.C. 6661-6663. Regulations: no formal program-specific regulations. Federal administering agency: Department of Education, Office of Elementary and Secondary Education, Academic Improvement and Teacher Quality Programs. Purpose of program: To improve the content knowledge of teachers and the performance of students in the areas of mathematics and science. Benefit/service: Enhanced and ongoing professional development of mathematics and science teachers, promotion of strong teaching skills through integrating reliable research methods and technology-based teaching methods into the curriculum, and summer workshops or institutes including follow-up training for elementary and secondary mathematics and science teachers. Individual eligibility criteria: There are no individual eligibility criteria. Form and recipient of federal assistance: Formula grants to state educational agencies (SEAs), which award funds to partnerships of local educational agencies (LEAs) and institutions of higher education. At a minimum, partnerships must include a high-need LEA and an engineering, mathematics or science department of an institution of higher education. Allocation formula: Funds are allocated among states according to the state's share of children aged 5-17 from families with income below federal poverty guidelines. Matching or related requirements: None. Funds must supplement and not supplant any funds that would otherwise be used for these activities. New obligations (FY2013) : $141 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2011, more than 56,000 teachers received professional development. CRS report s : CRS Report R42642, Science, Technology, Engineering, and Mathematics (STEM) Education: A Primer , by [author name scrubbed] and [author name scrubbed]; and CRS Report RL33960, The Elementary and Secondary Education Act, as Amended by the No Child Left Behind Act: A Primer , by [author name scrubbed]. Improving Teacher Quality State Grants (CFDA #84.367) Authority: Statute: Title II, Part A of the Elementary and Secondary Education Act, established by the No Child Left Behind Act ( P.L. 107-110 ); 20 U.S.C. 6601-6641. Regulations: no formal program-specific regulations. Federal administering agency: Department of Education, Office of Elementary and Secondary Education, Academic Improvement and Teacher Quality Programs. Purpose of program: To increase student achievement through improving teacher and principal quality and increasing the number of highly qualified teachers, principals and assistant principals in classrooms and schools. Benefit/service: State activities include teacher and principal certification reform, professional development activities, assistance to local educational agencies in teacher and principal recruitment and retention, tenure reform, subject matter testing for teachers, across-state certification reciprocity projects, technology training for teachers, assistance to help teachers become highly qualified, and teacher recruitment and placement clearinghouses. Local activities include assistance to schools in recruitment and retention of highly qualified teachers and principals, use of such teachers to reduce class size, professional development activities, and quality improvement activities such as tenure reform, merit pay and subject-area testing for teachers. Individual eligibility criteria: There are no individual eligibility criteria. Form and recipient of federal assistance: Formula grants to state educational agencies, which make formula-based subgrants to local educational agencies, and to state agencies of higher education, which award competitive grants to partnerships of institutions of higher education and high-need local educational agencies (those with a high number or proportion of poor children). Allows participation by territories (Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands). Allocation formula: Funds are allocated among states and local educational agencies based first on the amounts they received under predecessor programs in 2001; excess funds are allocated according to formulas based on number of children ages 5-17 and number of children ages 5-17 from families with incomes below federal poverty guidelines. Matching or related requirements: None. Funds must supplement and not supplant any funds that would otherwise be used for these activities. New obligations (FY2013) : $2,334 million. Budgetary classification: Discretionary. Participation data (most recent available) : In school year 2012-2013, funds were used to hire an estimated 14,986 teachers. CRS report: CRS Report R41267, Elementary and Secondary School Teachers: Policy Context, Federal Programs, and ESEA Reauthorization Issues , by [author name scrubbed]. College Access Challenge Grants (CFDA #84.378) Authority: Statute: Title VII, Part E, Section 781 of the Higher Education Act of 1965, discretionary funding most recently authorized by the Higher Education Opportunity Act of 2008 ( P.L. 110-315 ) and mandatory funding provided by the Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ); 20 U.S.C. 1141. Regulations: no formal program-specific regulations. Federal administering agency: Department of Education, Office of Postsecondary Education, Student Service. Purpose of program: To foster partnerships among federal, state and local governments and philanthropic organizations through matching challenge grants that are aimed at increasing the number of low-income students who are prepared to enter and succeed in postsecondary education. Benefit/service: Information for students and families regarding the benefits of postsecondary education, postsecondary education opportunities and planning, and career preparation; information on financing postsecondary education and activities to promote financial literacy and debt management; outreach for students at-risk of not enrolling in or completing postsecondary education; assistance in completing financial aid applications; need-based grant aid; professional development for guidance counselors at middle and secondary schools and for financial aid administrators and college admissions counselors at postsecondary institutions, to improve their ability to help students and parents with admissions and financial assistance procedures; and student loan cancellation or repayment, or interest rate reductions, for borrowers employed in a high-need geographic area or high-need profession in the state. Individual eligibility criteria: There are no individual eligibility criteria. However, grantees must give priority for services to students and families with income below the poverty line. Form and recipient of federal assistance: Formula grants to states (or to philanthropic organizations if the state fails to meet nonfederal matching requirements). Allows participation by territories (American Samoa, Guam, the Northern Mariana Islands, Palau, Puerto Rico, the U.S. Virgin Islands, Micronesia, and the Marshall Islands). Allocation formula: Funds are allocated equally on the basis of each state's relative population of individuals aged 5-17 living below the poverty line, and each state's relative population of individuals aged 15-44 living below the poverty line. Matching or related requirements: A one-third nonfederal match is required. New obligations (FY2013) : $72 million. Budgetary classification: Mandatory and discretionary. Participation data (most recent available) : No data available. CRS report s : CRS Report R43351, The Higher Education Act (HEA): A Primer , by [author name scrubbed]. Reading First and Early Reading First (program no longer funded; formerly CFDA #84.357 and #84.359) Authority: Statute: Title I, Part B, Subparts 1 and 2 of the Elementary and Secondary Education Act, established by the No Child Left Behind Act ( P.L. 107-110 ); 20 U.S.C. 6361-6376. Regulations: no formal program-specific regulations. Federal administering agency: Department of Education, Office of Elementary and Secondary Education, Academic Improvement and Teacher Quality Programs. Purpose of program: Reading First: To ensure that every child can read at grade level or above by no later than grade 3. Early Reading First: To enhance the early language, literacy and prereading development of preschool-aged children, particularly from low-income families. Benefit/service: Reading First: Assistance in selecting and administering reading assessments, selecting and implementing programs of reading instruction based on scientifically based reading research (SBR) that included the essential elements of reading instruction, procuring and implementing SBR-based teaching materials, providing professional development for teachers of grades K-3 and special education teachers of grades K-12, collecting and analyzing data to document program effectiveness and identify successful schools, reporting student progress, promoting reading and library programs, supporting family literacy programs, and training parents as reading tutors. Early Reading First: High-quality oral language and literature rich environments, professional training based on SBR to early childhood staff in early reading development, SBR-based language and literacy activities and instructional materials, and SBR-based reading assessments. Individual eligibility criteria: Reading First: Children in grades K- 3 who may have had reading difficulties, were at risk of referral to special education because of their reading difficulties, had been evaluated but not identified as a child with disabilities, were receiving special education services because they had been identified as having a specific learning disability related to reading, were deficient in essential reading skills, or had limited English proficiency. Early Reading First: No specific eligibility criteria; however, services were targeted toward preschool children from low-income families with limited English proficiency, disabilities, or other special needs, who were also experiencing difficulty with spoken language, prereading and early reading skills. Form and recipient of federal assistance: Reading First: Formula grants to state educational agencies, which awarded funds competitively to local educational agencies. Early Reading First: Competitive grants to local educational agencies eligible for Title I-A ESEA grants, or to one or more public or private organizations acting on behalf of programs that served preschool-age children located in an area served by a Title I-A-eligible LEA, or to a consortium of the above. Reading First allowed participation by territories (Puerto Rico, American Samoa, Guam, Northern Marianas, and the Virgin Islands). Allocation formula: Reading First: Funds were allocated among states according to their proportion of children aged 5-17 whose families had income below federal poverty guidelines. Early Reading First: Not applicable. Matching or related requirements: None. New obligations (FY2013) : None. No obligations have been made since FY2009. Budgetary classification: Discretionary. Participation data (most recent available) : In school year 2008-2009, an estimated 1,245,353 students participated in Reading First. In FY2009, grantees proposed to serve a total of 33,278 children and 3,402 educators in Early Reading First. CRS report s : CRS Report R40212, Early Childhood Care and Education Programs: Background and Funding , by [author name scrubbed] and [author name scrubbed]; and CRS Report RL33960, The Elementary and Secondary Education Act, as Amended by the No Child Left Behind Act: A Primer , by [author name scrubbed]. Academic Competitiveness and Smart Grant Program (program no longer funded; formerly CFDA #84.375 and #84.376) Authority: Statute: Title IV, Part A, Subpart 1, Section 401A of the Higher Education Act of 1965, established by the Higher Education Reconciliation Act of 2005 ( P.L. 109-171 ); 20 U.S.C. 1070a-1. Regulations: 34 C.F.R. Part 691. Federal administering agency: Department of Education, Office of Federal Student Aid. Purpose of program: To help eligible financially needy students finance their postsecondary education by encouraging students to complete a rigorous high school curriculum, maintain a high grade point average (GPA), and major in math and science fields during their undergraduate studies. Benefit/service: Grant aid that, together with any other student aid received, could not exceed the student's cost of postsecondary school attendance. Individual eligibility criteria: Eligible students were undergraduates who attended participating schools, were eligible to receive a Pell Grant, and met other eligibility requirements related to—depending on their year in school—completing a rigorous high school curriculum; majoring in mathematics, science, or selected foreign languages; and maintaining a required minimum GPA. Form and recipient of federal assistance: Funds were provided to participating institutions of higher education to pay eligible students; participating institutions also received an administrative allowance per student. Individual students received assistance either by payment to school account, direct payment (usually by check), or a combination of these methods. Allowed participation by citizens of territories (American Samoa, Guam, Micronesia, the Marshall Islands, Palau Northern Mariana Islands, and U.S. Virgin Islands). Allocation formula: Not applicable. Matching or related requirements: Not applicable. New obligations (FY2013) : None. No obligations have been made since FY2011. Budgetary classification: Mandatory (entitlement to individuals). Participation data (most recent available) : During award year (July-June) 2009-2010, 731,653 students were served. CRS report: CRS Report RL34452, The Ensuring Continued Access to Student Loans Act of 2008 , by [author name scrubbed]. Housing and Development Single-Family Rural Housing Loans (Section 502) (CFDA #10.410) Authority: Statute: Section 502 of the Housing Act of 1949 (P.L. 81-171); 42 U.S.C. 1471 et seq. Regulations: 7 C.F.R. Part 3550 Subpart B, 7 C.F.R. Part 1980, and 7 C.F.R. Part 1940 Subpart L. Federal administering agency: Department of Agriculture, Rural Housing Service. Purpose of program: To assist low-income households in obtaining adequate but modest, decent, safe, and sanitary dwellings and related facilities in rural areas. Benefit/service: Guaranteed or direct loans to assist in purchasing homes; loans also can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including to provide water and sewage facilities. Individual eligibility criteria: For guaranteed loans, individuals may have incomes up to 115% of area median income. For direct loans, individuals must be either low-income (with incomes no higher than 80% of area median) or very low-income (with incomes no higher than 50% of area median). Form and recipient of federal assistance: Guaranteed or direct loans to individuals. Allows participation by residents of territories (American Samoa, Guam, Marshall Islands, Micronesia, Northern Marianas, Palau, Puerto Rico and the U.S. Virgin Islands). Allocation formula: Guaranteed loan funds are allocated among states according to factors including the state's share of occupied rural substandard housing units, rural population in very small communities, rural households with incomes between 80% and 100% of area median income, and rural renter households paying more than 35% of income for rent. Direct loan funds are allocated among the states according to factors including the state's share of occupied rental rural substandard units, total rural population, rural population in very small communities, rural households with incomes between 50% and 80% of area median income and those with incomes below 50% of area median income. Matching or related requirements: Not applicable. New obligations (FY2013) : $50 million (budget authority for direct and guaranteed loans). Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, 162,943 units received assistance. CRS report s : CRS Report RL31837, An Overview of USDA Rural Development Programs , by [author name scrubbed]; and CRS Report RL34591, Overview of Federal Housing Assistance Programs and Policy , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. Rural Rental Assistance Payments (Section 521) (CFDA #10.427) Authority: Statute: Section 521 of the Housing Act of 1949, established by the Housing and Urban Development Act of 1968 (P.L. 90-448); 42 U.S.C. 1490. Regulations: 7 C.F.R. Part 3560 and 7 C.F.R. Part 1940 Subpart L. Federal administering agency: Department of Agriculture, Rural Housing Service. Purpose of program: To reduce the rent paid by low-income households in eligible units financed under certain Rural Housing Service programs. Benefit/service: Rental subsidies for low-income tenants provided through payments to eligible property owners; payments make up the difference between the tenant's rental payment to the owner and the approved rent for the unit. Individual eligibility criteria: Eligible tenants must have incomes no greater than 80% of area median income, although most assistance is targeted toward tenants with incomes no greater than 50% of area median. Form and recipient of federal assistance: Direct payments to property owners. Allocation formula: Funding for new rural rental assistance payments is allocated among the states according to each state's share of the rural population, rural housing units that are overcrowded and/or lack plumbing, and poor persons living in rural areas. Matching or related requirements: None. New obligations (FY2013) : $837 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, 190,697 units were under contract to be subsidized. CRS report s : CRS Report RL31837, An Overview of USDA Rural Development Programs , by [author name scrubbed]; and CRS Report RL34591, Overview of Federal Housing Assistance Programs and Policy , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. Water and Waste Disposal for Rural Communities (CFDA #10.760) Authority: Statute: Section 306 of the Consolidated Farm and Rural Development Act of 1972 (P.L. 92-419), most recently amended and reauthorized by the Agricultural Act of 2014 ( P.L. 113-79 ); 7 U.S.C. 1926. Regulations: 7 C.F.R. Parts 1778-1780. Federal administering agency: Department of Agriculture, Rural Utility Service. Purpose of program: To provide basic human amenities, alleviate health hazards, and promote the orderly growth of the nation's rural areas by meeting the need for new and improved rural water and waste disposal facilities. Benefit/service: Long-term low-interest loans and grants to support the installation, repair, improvement or expansion of rural water facilities. Loan interest rates are based on the economic health of the community and are lowest in communities where the median household income is 80% of the state nonurban median or the poverty level, or less. Individual eligibility criteria: There are no individual eligibility criteria. Eligible communities have populations of 10,000 or less and are unable to finance their projects through other means. Grants are targeted toward projects serving poorer communities. Form and recipient of federal assistance: Loans and formula grants to local governments and public and private organizations. Allows participation by territories (American Samoa, Guam, Northern Mariana Islands, Puerto Rico, the U.S. Virgin Islands) and Indian tribes. Allocation formula: USDA allocates grant funds among its state rural development offices based on each state's rural population, number of households in poverty, and unemployment. Matching or related requirements: Grants and loans are intended to cover no more than 75% of project development costs in communities where median household income is 80% of the state nonurban median or the poverty level, or less; or 45% of project development costs in communities where median household income is higher than 80% but less than 100% of the state nonurban median. New obligations (FY2013) : $524 million. Budgetary classification: Discretionary. Participation data (most recent available) : No data available. CRS reports: CRS Report RL30478, Federally Supported Water Supply and Wastewater Treatment Programs , coordinated by [author name scrubbed]; and CRS Report RL31837, An Overview of USDA Rural Development Programs , by [author name scrubbed]. Public Works and Economic Development (CFDA #11.300) Authority: Statute: Section 201 of the Public Works and Economic Development Act of 1965 (P.L. 89-136), most recently reauthorized by the Economic Development Administration Reauthorization Act of 2004 ( P.L. 108-373 ); 42 U.S.C. 3141. Regulations: 13 C.F.R. Part 305. Federal administering agency: Department of Commerce, Economic Development Administration. Purpose of program: To help the nation's most distressed communities revitalize, expand and upgrade their physical infrastructure to attract new industry, encourage business expansion, diversify local economies and generate or retain long-term private sector jobs and investments. Benefit/service: Assistance in the acquisition or development of land and improvements for use for a public works, public service, or development facility; and assistance in the acquisition, design and engineering, construction, rehabilitation, alteration, expansion, or improvement of such a facility, including related machinery and equipment. Individual eligibility criteria: There are no individual eligibility criteria. Eligible projects must be located in areas that have either: low per capita income (80% of the national average or lower); unemployment for the most recent 24-month period that is at least one percentage point higher than the national average; or a special need arising from actual or threatened severe unemployment or economic adjustment problems resulting from severe changes in economic conditions. Projects may be outside such an area if they would create significant employment opportunities for unemployed, underemployed, or low-income residents of such an area. Form and recipient of federal assistance: Competitive grants to economic development districts (i.e., areas designated by EDA which have sufficient size and resources to foster economic development and which have at least one area fitting the income, unemployment or special need criteria described above), states, local governments, institutions of higher education, or public or private nonprofit organizations and associations acting in cooperation with local governments. Allows participation by territories (American Samoa, Guam, Marshall Islands, Micronesia, Northern Marianas, Palau, Puerto Rico, and the U.S. Virgin Islands) and Indian tribes. Allocation formula: Not applicable. However, no more than 15% of available funds may be spent in a single state. Matching or related requirements: In general, the federal share is 50%, plus an additional federal share of no more than 30% based on the relative needs of the area where the project is located. Nonfederal contributions may be in cash or in-kind. At the discretion of the Secretary of Commerce, the federal share may be increased up to 100% for grants to Indian tribes, states or localities that have exhausted their effective taxing and borrowing capacity, or nonprofit organizations that have exhausted their borrowing capacity. New obligations (FY2013) : $97 million. Budgetary classification: Discretionary. Participation data (most recent available) : No data available. CRS report: CRS Report R41241, Economic Development Administration: A Review of Elements of Its Statutory History , by [author name scrubbed]. Supportive Housing for the Elderly (CFDA #14.157) Authority: Statute: Section 202 of the U.S. Housing Act of 1959 (P.L. 86-372), most recently reauthorized by the American Homeownership and Economic Opportunity Act of 2000 ( P.L. 106-569 ); 12 U.S.C. 1701q. Regulations: 24 C.F.R. Part 891. Federal administering agency: Department of Housing and Urban Development, Office of Housing. Purpose of program: To help expand the supply of affordable housing with supportive services for the elderly. Benefit/service: Financial assistance for development of supportive housing for the elderly, and rent subsidies for eligible tenants. Individual eligibility criteria: Very low-income households in which at least one member is at least 62 years old at the time of initial occupancy. Very low-income is defined as having income no greater than 50% of area median, adjusted for family size. Form and recipient of federal assistance: Interest-free capital advances to finance development costs, which do not have to be repaid as long as the project serves very low-income elderly residents for at least 40 years, and project-based rental assistance contracts to cover the difference between the HUD-approved operating costs for the project and the tenant's contribution toward rent. Assistance is provided to private nonprofit organizations and for-profit general partnerships where the sole general partner is a nonprofit organization. Allows participation by territories (Puerto Rico and the possessions of the U.S). Allocation formula: HUD uses a needs-based formula to allocate funds among HUD multifamily hubs, allocating 85% of funds to metropolitan areas and 15% to non-metropolitan areas, and considering relevant characteristics of the elderly population, such as the number of single elderly renters with incomes below 50% of area median income, and various housing factors. HUD awards funds to eligible applicants on a competitive basis. Matching or related requirements: None. New obligations (FY2013) : $389 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2012, HUD reported combined households residing in units funded through the Section 202 and Section 811 Supportive Housing for Persons with Disabilities programs. In that year, 142,977 households occupied housing units funded through the two programs. CRS report: CRS Report RL33508, Section 202 and Other HUD Rental Housing Programs for Low-Income Elderly Residents , by [author name scrubbed]. Supportive Housing for Persons with Disabilities (CFDA #14.181) Authority: Statute: Section 811 of the Cranston-Gonzalez National Affordable Housing Act of 1990 ( P.L. 101-625 ), most recently reauthorized by the Frank Melville Supportive Housing Investment Act of 2010 ( P.L. 111-374 ); 42 U.S.C. 8013. Regulations: 24 C.F.R. Parts 891 Subparts A, C and D. Federal administering agency: Department of Housing and Urban Development, Office of Housing. Purpose of program: To allow persons with disabilities to live as independently as possible in the community by increasing the supply of rental housing with the availability of supportive services. Benefit/service: Financial assistance for development of supportive housing for persons with disabilities, and rent subsidies for eligible tenants. Individual eligibility criteria: Very low-income households (which may include a single individual) in which at least one member is age 18 or older and has a disability, such as a physical or developmental disability or chronic mental illness. Very low-income is defined as having income no greater than 50% of area median, adjusted for family size. Form and recipient of federal assistance: Interest-free capital advances to finance development costs, which do not have to be repaid as long as the project serves very low-income disabled residents for at least 40 years, and project-based rental assistance contracts to cover the difference between the HUD-approved operating costs for the project and the tenant's contribution toward rent. Assistance is provided to private nonprofit organizations. Allocation formula: HUD uses a needs-based formula to allocate funds among HUD field offices based on the number of noninstitutionalized persons within the local office jurisdiction who are between the ages of 16 and 64 and have a disability. Field offices award funds to eligible applicants on a competitive basis. Matching or related requirements: None. New obligations (FY2013) : $102 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2012, HUD reported combined households residing in units funded through the Section 202 and Section 811 Supportive Housing for Persons with Disabilities programs. In that year, 142,977 households occupied housing units funded through the two programs. CRS report: CRS Report RL34728, Section 811 and Other HUD Housing Programs for Persons with Disabilities , by [author name scrubbed]. Section 8 Project-Based Rental Assistance (CFDA #14.195) Authority: Statute: Section 8 of the U.S. Housing Act of 1937, established by the Housing and Community Development Act of 1974 ( P.L. 93-383 ); 42 U.S.C. 1437f. Regulations: 24 C.F.R. Parts 5, 880, 881, 883, 884, 886 and 891 Subpart E. Federal administering agency: Department of Housing and Urban Development, Office of Housing. Purpose of program: To help very low-income families afford decent, safe and sanitary housing in the private market. Benefit/service: Rent subsidies tied to units in privately-owned multifamily housing properties. Tenants are expected to pay the highest of 30% of counted income, 10% of gross income, or, in states where applicable, the "welfare" rent. The program pays owners the difference between the tenant contribution and a previously negotiated rent. Individual eligibility criteria: Eligible families must be very low-income (with incomes no higher than 50% of area median income), but 40% of units that become available each year must be given to families that are extremely low-income (incomes no higher than 30% of area median income). In some limited circumstances, families may be low-income, with incomes as high as 80% of area median income. Form and recipient of federal assistance: Project-based rental assistance contracts between HUD and private property owners. HUD has not had the authority to enter into new contracts since 1983, but does have the authority to renew existing contracts when they expire. There are properties with project-based rental assistance contracts in the territories (U.S. Virgin Islands, Puerto Rico, and Guam). Allocation formula: None. Matching or related requirements: None. New obligations (FY2013) : $8,818 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2012, 1.174 million housing units were eligible for assistance payments. (Note: Not all units may have been occupied in the year and some units may have served more than one household during the year.) CRS report: CRS Report RL32284, An Overview of the Section 8 Housing Programs: Housing Choice Vouchers and Project-Based Rental Assistance , by [author name scrubbed]. Community Development Block Grants (CFDA #14.218, #14.225, #14.228) Authority: Statute: Title I of the Housing and Community Development Act of 1974 ( P.L. 93-383 ), most recently reauthorized by the Housing and Community Development Act of 1992 ( P.L. 102-550 ); 42 U.S.C. 5301 et seq. Regulations: 24 C.F.R. Part 570. Federal administering agency: Department of Housing and Urban Development, Office of Community Planning and Development. Purpose of program: To develop viable urban communities by providing decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low to moderate income. Benefit/service: Assistance with the acquisition of real property, relocation and demolition, rehabilitation of residential and non-residential structures, construction of public facilities and improvements, public services within certain limits, activities related to energy conservation and renewable energy resources, and assistance to nonprofit entities and to profit-motivated businesses to carry out economic development and job creation/retention activities. Individual eligibility criteria: There are no individual eligibility criteria. At least 70% of funds must be used for activities that benefit low- and moderate-income individuals. Low-income is defined as income no greater than 50% of the state or entitlement community's median; moderate-income is defined as income above 50% but no greater than 80% of the state or entitlement community's median. Form and recipient of federal assistance: Formula grants to "entitlement communities" (i.e., principal cities in metropolitan statistical areas, other metropolitan cities with populations of at least 50,000, and qualified urban counties with populations of at least 200,000); and states, which administer funds on behalf of non-entitlement communities (i.e., cities with populations of less than 50,000 and counties with populations of less than 200,000). HUD directly administers the state component of the program for Hawaii, which has elected not to participate in the program. Allows participation by territories (Puerto Rico, American Samoa, Guam, Northern Marianas, and the U.S. Virgin Islands) and Indian tribes. Allocation formula: Of available funds, 70% are allocated to entitlement communities according to a formula that considers various measures of community need, including the extent of poverty, population size, housing overcrowding, age of housing, and lag in population growth as compared to other metropolitan areas. The remaining 30% are allocated to states according to a formula that considers population, poverty, incidence of overcrowded housing, and age of the housing. Matching or related requirements: None. New obligations (FY2013) : $2,971 million (Community Development Formula Grants and Indian Community Development Grants). Budgetary classification: Discretionary. Participation data: No data available. CRS reports: CRS Report R43520, Community Development Block Grants and Related Programs: A Primer , by [author name scrubbed]; and CRS Report R43394, Community Development Block Grants: Recent Funding History , by [author name scrubbed]. Homeless Assistance Grants (CFDA #14.231 and #14.267) Authority: Statute: Title IV of the McKinney-Vento Homeless Assistance Act, established by the Stewart B. McKinney Homeless Assistance Act ( P.L. 100-77 ) and most recently reauthorized as part of the Helping Families Save Their Homes Act ( P.L. 111-22 ); 42 U.S.C. Chapter 119, Subchapter IV. Regulations: 24 C.F.R. Parts 576, 578. (Homeless Assistance Grants consist of three programs administered through a consolidated budget account: Emergency Solutions Grants Program (ESG), the Continuum of Care Program (CoC), and the Rural Housing Stability Assistance Program (RHS). Federal administering agency: Department of Housing and Urban Development, Office of Community Planning and Development. Purpose of program: ESG: To provide homeless persons with basic shelter and essential support services and prevent at-risk persons and families from becoming homeless. CoC: To promote a community-wide commitment to ending homelessness, provide funding to rapidly house individuals and families experiencing homelessness, and to optimize self-sufficiency among those experiencing homelessness. RHS: To rehouse or improve the housing situations of those experiencing homelessness or in the worst housing situations in the geographic area, stabilize the living situations of those in imminent danger of losing housing, and improve the ability of the lowest income residents in the community to afford stable housing. Benefit/service: ESG: Renovation, rehabilitation or conversion of buildings into homeless shelters, services such as employment counseling, health care and education, assistance with rent or utility payments to prevent homelessness. CoC: Transitional housing for homeless individuals and families for up to 24 months, rent subsidies for permanent supportive housing for eligible individuals and families, rapid rehousing support, supportive services, and funds for community data collection. RHS: Transitional housing, permanent housing, rapid rehousing, data collection, supportive services, homelessness prevention, relocation services for employment, education, or family reunification, short-term emergency housing, and home repairs to make properties habitable. Individual eligibility criteria: ESG: Homeless individuals and families and families, and those at risk of becoming homeless. CoC: Homeless individuals and families, those who will imminently lose housing, families with children and youth defined as homeless under other federal statutes, and, in some cases, homeless individuals and families at risk of homelessness. RHS: All those eligible for the CoC program and, additionally, those in the worst housing situations in the area and the lowest income residents in the community. Form and recipient of federal assistance: ESG: Formula grants to states, metropolitan cities and urban counties. CoC and RHS: Competitive grants to states and local governments, public housing authorities, and private nonprofit organizations. Allows participation by territories (American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands). Allocation formula: ESG: Funds are allocated on the basis of population, poverty population, housing overcrowding, age of housing, and extent of growth lag. CoC and RHS: Not applicable. Matching or related requirements: ESG: Dollar-for-dollar match (although first $100,000 provided to a state need not be matched, and the match does not apply to the territories), which might be in the form of cash or value of buildings, staff salaries or volunteer time. CoC and RHS: Match of 25% of grant funds received at the community level, except funds for leasing; match may be either cash or in-kind. New obligations (FY2013) : $2,086 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, the Homeless Assistance Grants funded 339,487 beds. CRS report s : CRS Report RL33764, The HUD Homeless Assistance Grants: Programs Authorized by the HEARTH Act , by [author name scrubbed]; and CRS Report RL30442, Homelessness: Targeted Federal Programs and Recent Legislation , coordinated by [author name scrubbed]. Home Investment Partnerships Program (HOME) (CFDA #14.239) Authority: Statute: Title II of the Cranston-Gonzalez National Affordable Housing Act of 1990 ( P.L. 101-625 ); 42 U.S.C. 12722 et seq. Regulations: 24 C.F.R. Part 92. Federal administering agency: Department of Housing and Urban Development, Office of Community Planning and Development. Purpose of program: To increase the number of families served with decent, safe, sanitary and affordable housing and expand the long-term supply of affordable housing; and to strengthen the ability of states and local governments to provide for housing needs. Benefit/service: Assistance for existing homeowners in repairing, rehabilitating or rebuilding their homes; assistance for homebuyers in the purchase or rehabilitation of a new home; assistance for developers or other organizations in the purchase or rehabilitation of affordable rental housing; and tenant-based rental assistance. Individual eligibility criteria: Recipient households may not have incomes above 80% of area median income. At least 90% of families receiving rental housing and tenant-based rental assistance must have incomes that are no more than 60% of area median income. Form and recipient of federal assistance: Formula grants to states and local participating jurisdictions, which are metropolitan cities or urban counties that meet certain minimum funding thresholds. Allows participation by territories (Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands). Allocation formula: Funds are allocated according to a formula that considers various housing quality and affordability factors, as well as certain income-related factors, including the number of older units in the jurisdiction occupied by poor households and the number of poor families in the jurisdiction. Matching or related requirements: Nonfederal matching of 25% is required. New obligations (FY2013) : $919 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, HOME funds contributed to 21,153 completed housing units, and tenant-based rental assistance for 12,762 households. CRS report: CRS Report R40118, An Overview of the HOME Investment Partnerships Program , by [author name scrubbed]. Housing Opportunities for Persons with AIDS (HOPWA) (CFDA #14.241) Authority: Statute: AIDS Housing Opportunity Act, established by the Cranston-Gonzalez National Affordable Housing Act of 1990 ( P.L. 101-625 ) and most recently reauthorized by the Housing and Community Development Act of 1992 ( P.L. 102-550 ); 42 U.S.C. 12901-12912. Regulations: 24 C.F.R. Parts 574.3-574.655. Federal administering agency: Department of Housing and Urban Development, Office of Community Planning and Development, Office of HIV/AIDS Housing. Purpose of program: To devise long-term comprehensive strategies for meeting the housing needs of persons with AIDS. Benefit/service: Housing assistance and related supportive services, including housing information services; acquisition, rehabilitation, conversion, lease, and repair of facilities to provide housing and services; new construction (for single room occupancy dwellings and community residences only); project- or tenant-based rental assistance; short-term rent, mortgage, and utility payments to prevent homelessness; supportive services such as health and mental health services, drug and alcohol abuse treatment and counseling, day care, nutritional services, intensive care when required, and aid in gaining access to other public benefits. Individual eligibility criteria: Eligible individuals are HIV-positive or have AIDS, and have incomes no higher than 80% of area median income. Form and recipient of federal assistance: 90% of funds are awarded as formula grants to states and eligible metropolitan statistical areas (MSAs) that meet minimum AIDS case requirements; 10% are competitively awarded to states, local governments, and nonprofit agencies. Allows participation by territories (Puerto Rico, American Samoa, Guam, the Marshall Islands, Micronesia, Northern Mariana Islands, Palau, and the U.S. Virgin Islands). Allocation formula: Of formula funds, 75% (base funding) is awarded to eligible cities (MSAs with population of more than 500,000 and more than 1,500 cumulative reported AIDS cases) and to eligible states (those with more than 1,500 AIDS cases in areas outside of eligible MSAs); and the remaining 25% (bonus funding) is awarded on the basis of AIDS incidence during the past three years to MSAs that have populations of more than 500,000, more than 1,500 cumulative reported AIDS cases, and a higher than average per capita incidence of AIDS. Matching or related requirements: None. New obligations (FY2013) : $302 million. Budgetary classification: Discretionary. Participation data (most recent available) : In program year 2012-2013, 56,440 households received permanent, transitional or emergency housing assistance. CRS report: CRS Report RL34318, Housing for Persons Living with HIV/AIDS , by [author name scrubbed]. Public Housing (CFDA #14.850, #14.866, #14.872, and #14.889) Authority: Statute: Sections 9(d), 9(e), 24 and 30 of the U.S. Housing Act of 1937, as amended (P.L. 75-412); 42 U.S.C. 1437. Regulations: 24 C.F.R. Parts 5 and 901-972. (Public Housing programs include Operating Fund, Capital Fund, and HOPE VI/Choice Neighborhoods.) Federal administering agency: Department of Housing and Urban Development, Office of Public and Indian Housing. Purpose of program: To provide cost-effective, decent, safe and affordable rental housing for eligible low-income families, the elderly, and persons with disabilities; and for HOPE VI/Choice Neighborhoods, to improve the living environment for public housing residents through demolition, rehabilitation and replacement of severely distressed housing units. Benefit/service: Subsidized publicly-owned rental housing units; eligible households pay rent equal to the highest of 30% of counted income, 10% of gross income, or, in states where applicable, the "welfare" rent. Individual eligibility criteria: Eligible households are low-income (defined as having income at or below 80% of area median income). At least 40% of households admitted each year must be extremely low-income households (defined as having income at or below 30% of area median income). Certain residents are required to participate in an economic self-sufficiency program or contribute 8 hours per month of community service. Form and recipient of federal assistance: Operating and Capital Funds: Formula grants to public housing authorities. HOPE VI/Choice Neighborhoods: Competitive grants to public housing authorities. Includes public housing projects located in territories (Puerto Rico, the U.S. Virgin Islands, and Guam). Allocation formula: Operating Fund: Funds to support ongoing costs of operating public housing are allocated according to a formula intended to make up the difference between the costs of maintaining public housing and the amount of tenant-paid rent received by the public housing authority; amounts are prorated to fit within the amount appropriated annually by Congress. Capital Fund: Funds to support development, financing and modernization of public housing are allocated on the basis of relative need. Matching or related requirements: None. However, an indirect local contribution results from the difference between full local property taxes and payments in lieu of taxes that are made by local housing authorities. New obligations (FY2013) : $5,954 million (operating fund, capital fund, and HOPE VI/Choice Neighborhoods). Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, 1,091,758 public housing units were eligible for payment. (Note: Not all units may have been occupied in the year and some units may have served more than one household during the year.) CRS reports: CRS Report R41654, Introduction to Public Housing , by [author name scrubbed]; and CRS Report RL32236, HOPE VI Public Housing Revitalization Program: Background, Funding, and Issues , by [author name scrubbed]. Indian Housing Block Grants (CFDA #14.867) Authority: Statute: Native American Housing and Self-Determination Act of 1996 ( P.L. 104-330 ), most recently reauthorized by the Native American Housing and Self-Determination Reauthorization Act of 2008 ( P.L. 110-411 ); 25 U.S.C. 4101 et seq. Regulations: 24 C.F.R. Part 1000. Federal administering agency: Department of Housing and Urban Development, Office of Public and Indian Housing, Office of Native American Programs. Purpose of program: To provide housing assistance and, to the extent practicable, to assist in the development of private housing finance mechanisms on Indian lands to achieve the goals of economic self-sufficiency and self-determination for tribes and their members. Benefit/service: Housing development, assistance to housing developed under the former Indian Housing Program, housing services to eligible individuals and families, crime prevention and safety, and model activities that provide creative approaches to affordable housing problems. Individual eligibility criteria: Low-income Indian families living on Indian reservations and other Indian lands; low-income is defined as having income no greater than 80% of the area median. Non-low-income families may be served if such families have a need for housing that cannot otherwise be met. Assistance also may be provided to non-Indian families living on Indian reservations or Indian lands if the presence of such families on the reservation or Indian land is essential to the well-being of Indian families and their housing needs cannot reasonably be met otherwise. Housing assistance also may be provided to law enforcement officers if their presence on the reservation or Indian land may deter crime. Form of assistance: Formula grants to federally recognized Indian tribes or their tribally designated housing entity, and a limited number of state recognized Indian tribes funded under prior law. ("State" is defined to include American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, the U.S. Virgin Islands, and any other territory or possession of the United States.) Allocation formula: Funds are allocated among tribes according to a two-part formula based on "formula current assisted stock" (housing developed under the former Indian Housing Program and owned or operated by the grantee), and "need" (e.g., Indian households with significant housing cost burdens, households that are overcrowded or lack kitchen or plumbing facilities, and number of Indian households at different levels of low income). Matching or related requirements: None. However, grant recipients must make annual user fee payments to compensate local governments for the costs of providing governmental services or must make payments in lieu of taxes to taxing authorities. New obligations (FY2013) : $627 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, approximately 5,141 units were built, acquired, or rehabilitated. CRS report: CRS Report R43307, The Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA): Background and Funding , by [author name scrubbed]. Section 8 Housing Choice Vouchers (CFDA #14.871) Authority: Statute: Section 8 of the U.S. Housing Act of 1937, established by the Housing and Community Development Act of 1974 ( P.L. 93-383 ); 42 U.S.C. 1437f. Regulations: 24 C.F.R. Parts 5 and 982. Federal administering agency: Department of Housing and Urban Development, Office of Public and Indian Housing. Purpose of program: To help very low-income families afford decent, safe and sanitary housing in the private market. Benefit/service: Tenant-based vouchers that can be used to subsidize the cost of privately-owned rental housing, chosen by tenants in the private market. Tenants are expected to pay an amount toward rent that is at least the greater of 30% of counted income, 10% of gross income, or, in states where applicable, the "welfare" rent. The program pays the balance, up to the payment standard set by the local public housing authority at between 90% and 110% of the HUD-established fair market rent for the unit. Public housing authorities may choose to "project-base" up to 20% of their vouchers, which means the subsidy is attached to a preselected unit of housing. However, tenants living in project-based voucher units are entitled to move with a tenant-based voucher, if they so choose, after one year. Individual eligibility criteria: Eligible families must be very low-income (with incomes no higher than 50% of area median income), but 75% of vouchers that become available each year must go to families that are extremely low-income (incomes no higher than 30% of area median income). In some limited circumstances, families may be low-income, with incomes as high as 80% of area median income. Form and recipient of federal assistance: Formula grants to public housing authorities. Includes public housing authorities in the territories (Puerto Rico, the U.S. Virgin Islands, Guam and Northern Mariana Islands). Allocation formula: Congress typically specifies the allocation formula in annual appropriations laws. For FY2013, funds to renew existing vouchers were provided to public housing authorities according to their utilization rates and costs from the prior year, adjusted for inflation. Matching or related requirements: None. New obligations (FY2013) : $17,897 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, 2.208 million vouchers were in use. CRS report: CRS Report RL32284, An Overview of the Section 8 Housing Programs: Housing Choice Vouchers and Project-Based Rental Assistance , by [author name scrubbed]. Neighborhood Stabilization Program (1, 2, and 3) (no CFDA #) Authority: Statute: Division B, Title III of the Housing and Economic Recovery Act of 2008 ( P.L. 110-289 ), Division A, Title XII of the American Recovery and Reinvestment Act ( P.L. 111-5 ), and Section 1497 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ; 42 U.S.C. 5301 note). Regulations: 24 FR 3501. Federal administering agency: Department of Housing and Urban Development, Office of Community Planning and Development. Purpose of program: To stabilize communities with high rates of abandoned and foreclosed homes. Benefit/service: Assistance with the purchase, rehabilitation, and resale of abandoned and foreclosed homes and residential properties, demolition of blighted structures, and redevelopment of blighted and vacant properties. Individual eligibility criteria: Individuals and families who benefitted from the program had to have incomes no higher than 120% of area median income. At least 25% of appropriations had to be used to purchase or rehabilitate residential structures that would be used to house individuals or families with incomes no higher than 50% of area median income. Form and recipient of federal assistance: Formula grants to states and local governments (NSP-1 and 3). Competitive grants to states and local governments, nonprofit entities, and consortia of for-profit and non-profit entities (NSP-2). Allowed participation by territories (Puerto Rico, Guam, the Northern Marianas, American Samoa and the U.S. Virgin Islands). Allocation formula: Funds were allocated on the basis of the number and percentage of home foreclosures in the state or locality, the number and percentage of subprime mortgages in the state or locality, and the number of homes in default or delinquency in the state or locality (NSP-1 and NSP-3). Matching or related requirements: None. New obligations (FY2013) : None. No obligations since FY2011. Budgetary classification: Mandatory. Participation data (most recent available) : No data available. CRS report s : CRS Report RS22919, Community Development Block Grants: Neighborhood Stabilization Program; Assistance to Communities Affected by Foreclosures , by [author name scrubbed]; and CRS Report R43520, Community Development Block Grants and Related Programs: A Primer , by [author name scrubbed]. Grants to States for Low-Income Housing Projects In Lieu of Low-Income Housing Credit Allocations (no CFDA #) Authority: Statute: Section 1602 of Division B of the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). Regulations: 31 C.F.R. Part 32. Federal administering agency: Department of Treasury. Purpose of program: To support the construction and rehabilitation of affordable housing typically financed with funds from the Low-Income Housing Tax Credit (LIHTC) program. Benefit/service: Grants were provided in lieu of tax credits to help finance the construction or acquisition and rehabilitation of qualified buildings that would provide rent-restricted rental units to low-income households. Individual eligibility criteria: Qualified projects had to meet one of the following tests: at least 20% of units must be rent-restricted and occupied by households with incomes at or below 50% of area median income; or at least 40% of units must be rent-restricted and occupied by households with incomes at or below 60% of area median income. Form and recipient of federal assistance: Grants to state housing credit agencies. Allowed participation by territories (American Samoa, Guam, Puerto Rico and the U.S. Virgin Islands). Allocation formula: States could elect to exchange for grants all of their unused and returned 2008 tax credit allocation, 40% of their 2009 tax credit allocation, and 40% of any allocation in 2009 made from the national LIHTC pool. Tax credits could be exchanged for grants at a rate of $0.85 on the dollar. Annual tax credit allocations are determined on the basis of each state's population. Matching or related requirements: No matching requirements for the grant program; however, the LIHTC (and this related grant program) is intended to finance only part of a project and is typically combined with other resources. New obligations (FY2013) : None. No obligations since FY2011. Budgetary classification: Mandatory. Participation data (most recent available) : No data available. CRS report: CRS Report RS22389, An Introduction to the Low-Income Housing Tax Credit , by [author name scrubbed] and [author name scrubbed]. Tax Credit Assistance Program (no CFDA #) Authority: Statute: Division A, Title XII of the American Recovery and Reinvestment Act ( P.L. 111-5 ). Regulations: no formal program-specific regulations. Federal administering agency: Department of Housing and Urban Development, Office of Community Planning and Development. Purpose of program: To make funds available for capital investments in Low-Income Housing Tax Credit (LIHTC) projects where the additional funds could be spent within specified deadlines. Benefit/service: Assistance was provided to owners of projects who received an award of LIHTCs. Individual eligibility criteria: To qualify for LIHTCs, projects must meet one of the following tests: at least 20% of units must be rent-restricted and occupied by households with incomes at or below 50% of area median income; or at least 40% of units must be rent-restricted and occupied by households with incomes at or below 60% of area median income. Form and recipient of federal assistance: Formula grants to state housing credit agencies, which competitively awarded funds to project owners. Allowed participation by Puerto Rico. Allocation formula: Funds were allocated among states according to each state's percentage of FY2008 HOME awards. Matching or related requirements: None. However, the LIHTC is intended to finance only part of a project and is typically combined with other resources. New obligations (FY2013) : None. No obligations since FY2009. Budgetary classification: Discretionary. Participation data (most recent available) : No data available. CRS report: CRS Report RS22389, An Introduction to the Low-Income Housing Tax Credit , by [author name scrubbed] and [author name scrubbed]. Social Services Indian Human Services (CFDA #15.025, #15.113, #15.141, #15.144) Authority: Statute: Snyder Act of 1921 (P.L. 67-85), Indian Self-Determination and Education Assistance Act ( P.L. 93-638 ), Indian Child Welfare Act ( P.L. 95-608 ), and Indian Child Protection and Family Violence Prevention Act ( P.L. 101-630 ); 25 U.S.C. 13, 450 et seq., 1901 et seq., and 3210. Regulations: 25 C.F.R. Parts 20, 23, and 256. (Programs include Social Services, Welfare Assistance, Indian Child Welfare, and Housing Improvement Program.) Federal administering agency: Department of Interior, Bureau of Indian Affairs, Division of Human Services. Purpose of program: To provide financial assistance for basic needs of needy eligible American Indians who live on or near reservations when such assistance is not available from state or local agencies; to fund federally recognized tribal governments to administer welfare assistance programs for American Indian adults and children, to support caseworkers and counselors, and to support tribal programs to reduce incidence of substance abuse and alcoholism in Indian country; to promote stability and security of American Indian tribes and families by protecting American Indian children, preventing separation of American Indian families, and assisting Indian tribes in the operation of child and family service programs; and to eliminate substantially substandard Indian owned and inhabited housing for very low-income Indians living in tribal service areas. Benefit/service: Assistance in processing welfare applications, determining suitable placement of American Indian children in need of foster care, operation of emergency shelters and similar services; cash payments to meet basic needs (i.e., food, clothing, shelter), assistance for nonmedical institutional or custodial care of adults not eligible for other programs, foster home care and nonmedical institutional care for American Indian children in need of protection; counseling, family assistance, protective day care, after-school care, recreational activities, respite care, education and training, foster care subsidies, legal advice and representation, home improvement programs; and renovations, repairs, or additions to existing homes. Individual eligibility criteria: Depending on the program, American Indian adults in need of financial assistance or social services, children in need of foster care, and youth requiring temporary emergency shelter; members of federally recognized Indian tribes who live on or near federally recognized reservations who are in need of financial assistance; American Indian children and families; and Indians who are members of federally recognized tribes. Form and recipient of federal assistance: Discretionary grants to federally recognized Indian tribes and tribal organizations. Allocation formula: Not applicable. Matching or related requirements: None. New obligations (FY2013) : $100 million. Budgetary classification: Discretionary. Participation data (most recent available) : No data available. Older Americans Act Grants for Supportive Services and Senior Centers (CFDA #93.044) Authority: Statute: Title III, Part B of the Older Americans Act of 1965 (P.L. 89-73), most recently reauthorized by the Older Americans Act Amendments of 2006 ( P.L. 109-365 ); 42 U.S.C. 3030d. Regulations: 45 C.F.R. Part 1321. Federal administering agency: Department of Health and Human Services, Administration for Community Living, Administration on Aging. Purpose of program: To secure and maintain maximum independence and dignity in a home environment for older individuals capable of self-care with appropriate supportive services, to remove individual and social barriers to economic and personal independence for older individuals, and to provide a continuum of care for older individuals. Benefit/service: Supportive services, including health (and mental health), education and training, welfare, informational, recreational, homemaker, counseling, or referral services; transportation services; services to help older individuals use the services and facilities available to them (including language translation services); housing-related services; services to help older individuals avoid institutionalization, legal assistance and other counseling services; activities to attain and maintain physical and mental well-being; health and mental health screenings; preretirement counseling and assistance; ombudsman services for residents of long-term care facilities; services and assistive devices for disabled older persons; employment-related services and counseling; crime prevention and victim assistance; services to identify and meet the needs of low-income older individuals; abuse prevention; health and nutrition education services; coordinated services for mentally impaired older individuals; services for family caregivers; information and training for guardians or representative payees of older individuals; services to facilitate interaction between students and older individuals; in-home services for frail elderly; information about life-long learning programs; and any other services necessary for the general welfare of older individuals. Individual eligibility criteria: Individuals age 60 or older. Preference is given to individuals with the greatest economic and social needs, with particular attention to low-income older individuals (i.e., having income no higher than federal poverty guidelines), including low-income minority older individuals, those with limited English proficiency, and those living in rural areas. Form and recipient of federal assistance: Formula grants to state agencies on aging, which make subgrants to local area agencies on aging. Allows participation by territories (Puerto Rico, American Samoa, Guam, the Northern Mariana Islands and the U.S. Virgin Islands). Separate grants are provided for Native Americans under Title VI of the Older Americans Act. Allocation formula: Funds are allocated among states according to their relative share of the nation's population of older individuals (age 60 or older). States develop their own formulas for allocation of funds among local agencies, which must consider the geographic distribution of older individuals and older individuals with the greatest economic and social needs, paying particular attention to low-income minority individuals. Matching or related requirements: A nonfederal share of 25% is required for administrative activities, and a nonfederal share of 15% is required for supportive services and senior centers. New obligations (FY2013) : $348 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2012, the number of clients participating by type of service were: 452,613 for case management; 148,733 for homemaker services; 108,212 for personal care; 34,384 for chore services; 31,950 for assisted transportation; and 19,269 for adult day care. CRS report s : CRS Report R43414, Older Americans Act: In Brief , by [author name scrubbed] and [author name scrubbed]; and CRS Report RS22549, Older Americans Act: Funding Formulas , by [author name scrubbed]. Older Americans Act National Family Caregiver Support Program (CFDA #93.052) Authority: Statute: Title III, Part E of the Older Americans Act of 1965 (P.L. 89-73), most recently reauthorized by the Older Americans Act Amendments of 2006 ( P.L. 109-365 ); 42 U.S.C. 3030s to 3030s-2. Regulations: 45 C.F.R. Part 1321. Federal administering agency: Department of Health and Human Services, Administration for Community Living, Administration on Aging. Purpose of program: To provide multifaceted systems of support services for family caregivers and grandparents or older individuals who are relative caregivers. Benefit/service: Information to caregivers about available services, assistance to caregivers in gaining access to services; individual counseling, organization of support groups, and caregiver training in the areas of health, nutrition, and financial literacy, and in making decisions and solving problems related to their caregiving roles; respite care to enable caregivers to be temporarily relieved of their caregiving responsibilities; and supplemental services, on a limited basis, to complement the care provided by caregivers. Individual eligibility criteria: Family members or others providing informal care to an older individual, and those providing informal care to individuals of any age with Alzheimer's disease or related disorders. Also, grandparents or older individuals who are relative (non-parent) caregivers to children, including those caring for children of any age with a disability. Priority is given to older caregivers with the greatest social and economic need and to older individuals providing care to individuals with severe disabilities, including children with severe disabilities. Form and recipient of federal assistance: Formula grants to state agencies on aging, which make subgrants to local area agencies on aging. Allows participation by territories (Puerto Rico, American Samoa, Guam, the Northern Mariana Islands and the U.S. Virgin Islands). Separate grants are provided for Native Americans under Title VI of the Older Americans Act. Allocation formula: Funds are allocated to states according to their relative share of the nation's population of older individuals (age 70 or older). Matching or related requirements: A nonfederal share of 25% is required for services and administrative activities. Federal funds from this program must be used to supplement and not supplant any other federal, state or local funds used for the same purpose. New obligations (FY2013) : $146 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2012, the number of clients participating by type of service were: 16,175,896 for information services, 593,438 for access assistance; 127,933 for counseling services; 65,885 for respite care; and 33,664 for supportive services. CRS report s : CRS Report R43414, Older Americans Act: In Brief , by [author name scrubbed] and [author name scrubbed]; and CRS Report RS22549, Older Americans Act: Funding Formulas , by [author name scrubbed]. Maternal, Infant, and Early Childhood Home Visiting Program (CDFA #93.505) Authority: Statute: Title V, Section 511 of the Social Security Act, established by Section 2951 of the Patient Protection and Affordable Care Act of 2010 ( P.L. 111-148 ); 42 U.S.C. 711. Regulations: none. Federal administering agency: Department of Health and Human Services, Maternal and Child Health Bureau in the Health Resources and Services Administration, and Administration for Children and Families. Purpose of program: To strengthen and improve programs and activities carried out under Title V of the Social Security Act, to improve coordination of services for at-risk communities, and to identify and provide comprehensive services to improve outcomes for families living in at-risk communities. Benefit/service: Voluntary, evidence-based home visiting programs to promote: maternal and newborn health; prevention of child injuries, child abuse, neglect, or maltreatment, and reduction of emergency room visits; school readiness and achievement; reduction in crime or domestic violence; family economic-self-sufficiency; and coordination and referrals for other community resources and supports. Individual eligibility criteria: An eligible family includes (1) a woman who is pregnant, and the father of her child if he is available; (2) a parent or primary caregiver of a child, including grandparents or other relatives of the child, and foster parents, who are serving as the child's primary caregiver from birth to entry into kindergarten; and (3) a noncustodial parent who has an ongoing relationship with, and at times provides physical care for, the child. Priority for services goes to high-risk eligible families, including those living in at-risk communities (as identified through a statewide assessment) and those who are low-income. Form and recipient of federal assistance: Formula grants and competitive awards to states (or nonprofit organizations in states where the state declines to submit an application). Allows participation by territories (Puerto Rico, Guam, the Virgin Islands, the Northern Mariana Islands, and American Samoa), and Indian tribal organizations. Allocation formula: Not established in law. In practice, HHS awards funds in part according to the jurisdiction's relative share of children under age 5 in families at or below 100% of the federal poverty line. Matching or related requirements: Funds must supplement and not supplant any funds that would otherwise be used for the same purposes. New obligations (FY2013) : $378 million. Budgetary classification: Mandatory. Participation data (most recent available) : During FY2013, approximately 487,000 home visits were made to families receiving services under this program. CRS report: CRS Report R40212, Early Childhood Care and Education Programs: Background and Funding , by [author name scrubbed] and [author name scrubbed]. Child Support Enforcement (CDFA #93.563) Authority: Statute: Title IV-D of the Social Security Act, established by the Social Services Amendments of 1974 ( P.L. 93-647 ); 42 U.S.C. 651-669. Regulations: 45 C.F.R. Chapter 3. Federal administering agency: Department of Health and Human Services, Administration for Children and Families, Office of Child Support Enforcement. Purpose of program: To enforce the support obligations owed by noncustodial parents to their children and the spouse (and former spouse) with whom such children are living through locating noncustodial parents, establishing paternity, obtaining child and spousal support, and assuring that assistance in obtaining support will be available to all children who request such assistance. Benefit/service: Noncustodial parent location, paternity establishment, establishment of child support orders, review and modification of child support orders, collection of child support payments, distribution of child support payments, and establishment and enforcement of medical support. Services are free for families that are automatically eligible; states may charge a fee of up to $25 for all other families. Individual eligibility criteria: Services are available to parents with custody of a child whose other parent is living outside the home. Services are automatically available for families receiving Temporary Assistance for Needy Families (TANF), federal foster care payments, or Medicaid. Form and recipient of federal assistance: Partial reimbursement to states of eligible expenditures, with no limit on federal spending. Allows participation by territories (Guam, Puerto Rico, the U.S. Virgin Islands) and Indian tribes and tribal organizations. Allocation formula: None. Payments to states are based on their eligible expenditures. Matching or related requirements: The federal government reimburses states for 66% of their eligible expenditures. New obligations (FY2013) : $4,278 million. Budgetary classification: Mandatory (open-ended entitlement to states). Participation data (most recent available) : In FY2013 (preliminary data), the total CSE caseload was 15.6 million cases, involving 16.9 million children. CRS report: CRS Report RS22380, Child Support Enforcement: Program Basics , by [author name scrubbed]. Community Services Block Grants (CFDA #93.569) Authority: Statute: Community Services Block Grant Act, established by the Omnibus Budget Reconciliation Act of 1981 ( P.L. 97-35 ) and most recently reauthorized by the Community Opportunities, Accountability, and Training and Educational Services Act of 1998 ( P.L. 105-285 ); 42 U.S.C. 9901 et seq. Regulations: 45 C.F.R. Part 96, Subpart I. Federal administering agency: Department of Health and Human Services, Administration for Children and Families, Office of Community Services. Purpose of program: To reduce poverty, revitalize low-income communities, and empower low-income individuals and families in rural and urban areas to become fully self-sufficient. Benefit/service: A wide range of activities may be supported to help low-income individuals and families become self-sufficient, find meaningful employment, attain an adequate education, make better use of available income, find and maintain adequate housing, obtain emergency assistance, and achieve greater participation in community affairs; address the needs of youth in low-income communities; and effectively use and coordinate with related programs. Individual eligibility criteria: In general, beneficiaries must have incomes no higher than the federal poverty guidelines, although states may set eligibility criteria at 125% of the poverty guidelines when "it serves the objectives of the block grant." Form and recipient of federal assistance: Formula grants to states. Of funds received by each state, at least 90% must be passed through to "eligible entities," which are primarily community action agencies that had been designated prior to 1981 under the former Economic Opportunity Act or their successor agencies. Allows participation by territories (Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands) and Indian tribes. Allocation formula: Funds are allocated among states based on the relative amount received in each state in FY1981, under a section of the former Economic Opportunity Act. Matching or related requirements: None. New obligations (FY2013) : $635 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2012, states reported that local agencies served more than 16 million individuals in 6.9 million families. CRS report: CRS Report RL32872, Community Services Block Grants (CSBG): Background and Funding , by [author name scrubbed]. Child Care and Development Fund (CFDA #93.575 and #93.596) Authority: Statute: Child Care and Development Block Grant Act, established by the Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ) and most recently reauthorized by the Child Care and Development Block Grant Act of 2014 ( P.L. 113-186 ); 42 U.S.C. 9858. Section 418 of the Social Security Act, established by the Personal Responsibility and Work Opportunity Reconciliation Act ( P.L. 104-193 ) and most recently reauthorized by the Deficit Reduction Act of 2005 ( P.L. 109-171 ) and extended by FY2015 appropriations law ( P.L. 113-235 ); 42 U.S.C. 618. Regulations: 45 C.F.R. Parts 98 and 99. Federal administering agency: Department of Health and Human Services, Administration for Children and Families, Office of Child Care. Purpose of program: To develop child care programs that best suit the needs of children and parents in each state; to empower working parents to make their own decisions on the child care that best suits their family's needs; to provide consumer education to help parents make informed decisions; to provide child care to parents trying to achieve independence from public assistance; and to help states implement their child care regulatory standards. (Purposes expanded by P.L. 113-186 to also include provision of consumer education to promote parental involvement; assistance to states in delivering high-quality coordinated services that maximize parents' options; assistance to states in improving the overall quality of child care services and programs by implementing health, safety, licensing, training, and oversight standards; improving child care and development of participating children; and increasing the number and percentage of low-income children in high-quality child care settings.) Benefit/service: Subsidized child care services for families provided on a sliding fee scale basis, which may be free for those with incomes below federal poverty guidelines (or, on a case-by-case basis, for those in foster care or receiving or in need of protective services). Child care providers may be paid directly by the state through a grant or contract, or through certificates (also known as vouchers) that parents may use to purchase child care from an eligible provider of their choice. Child care services may include center-based care, group home care, family care, and care provided in the child's own home. Individual eligibility criteria: Eligible children must be under age 13 (or under 19 if disabled or under court supervision), have a parent who is working or attending job training (unless the child is receiving protective services), have family income no greater than 85% of state median income (or lower depending on state policy), and (as amended by P.L. 113-186 ) have no more than $1 million in family assets. States must give priority to very low-income children and children with disabilities, and must target a certain amount of funds to welfare families working toward self-sufficiency or families at risk of welfare dependency. Form and recipient of federal assistance: Formula grants to states. Allows participation by Indian tribes, and for certain funds, by territories (Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands). Allocation formula: Discretionary funds are allocated among states according to each state's proportion of children under age 5, its proportion of all children who receive free or reduced price school lunches, and its relative per capita income. Of mandatory funds, states receive a fixed amount each year based on their spending under predecessor programs in the mid-1990s ("guaranteed" funds). Remaining mandatory funds are allocated according to each state's share of children under age 13. Matching or related requirements: No matching requirement for discretionary funds or "guaranteed" mandatory funds. States must match remaining mandatory funds at their FMAP (federal medical assistance percentage) matching rate. States also must achieve certain maintenance-of-effort targets to qualify for these funds. New obligations (FY2013) : $5,140 million. Budgetary classification: Discretionary (Child Care and Development Block Grant Act) and mandatory (Section 418 of the Social Security Act) (capped entitlement to states). Participation data (most recent available) : In FY2012, the average monthly number of children served by the CCDF was 1.5 million. Preliminary data for FY2013 estimate the average monthly number of children served was 1.46 million.   CRS report: CRS Report RL30785, The Child Care and Development Block Grant: Background and Funding , by [author name scrubbed]. Head Start (CFDA #93.600) Authority: Statute: Head Start Act, established by the Omnibus Budget Reconciliation Act of 1981 ( P.L. 97-35 ) and most recently reauthorized by the Improving Head Start for School Readiness Act of 2007 ( P.L. 110-134 ); 42 U.S.C. 9801 et seq. Regulations: 45 C.F.R. Parts 1301-1311. Federal administering agency: Department of Health and Human Services, Administration for Children and Families, Office of Head Start. Purpose of program: To promote school readiness by enhancing the social and cognitive development of children through the provision of educational, health, nutritional, social and other services to children and their families; and (for Early Head Start) to promote healthy prenatal outcomes, enhance the development of infants and toddlers, and promote healthy family functioning. Benefit/service: Comprehensive child development services, including educational, dental, medical, nutritional, and social services to children and their families. Services may be center-based, home-based, or a combination, and may be full- or part-day or full- or part-year. Individual eligibility criteria: Eligible children are those from low-income families (defined as having income below 100% of federal poverty guidelines, receiving public assistance or being a foster child or homeless) or who would be eligible for public assistance in the absence of child care, and homeless children. Up to 10% of participants may not meet these eligibility criteria if they would benefit from the program. An additional 35% of participants may have family incomes between 100% and 130% of federal poverty guidelines, as long as such children are not given higher priority than poor or homeless children. Form and recipient of federal assistance: Formula grants to local public and private nonprofit and for-profit entities. Allows participation by territories (Puerto Rico, American Samoa, Guam, Northern Mariana Islands, Palau and the U.S. Virgin Islands) and American Indian and Alaska Native Head Start programs. Allocation formula: Funds are allocated among states but awarded directly to local grantees. The allocation formula is intended to hold grantees harmless at their prior year's level and, when additional funds are available, to award a cost-of-living adjustment, and allocate remaining funds for quality improvement and program expansion. Allocation factors include children under age 5 whose family incomes are below poverty. Matching or related requirements: A 20% nonfederal match is required unless a waiver is granted. New obligations (FY2013) : $7,573 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, the Head Start funded enrollment level was about 903,679 children, of whom approximately 106,726 (or 12%) were in Early Head Start programs. The term "funded enrollment" refers to the number of Head Start slots that are funded, not the total number of children served throughout the year (which would be higher, accounting for turnover). CRS report: CRS Report RL30952, Head Start: Background and Funding , by [author name scrubbed]. Foster Care (CFDA #93.658) Authority: Statute: Title IV-E of the Social Security Act, established by the Adoption Assistance and Child Welfare Act of 1980 ( P.L. 96-272 ); 42 U.S.C. 672. Regulations: 45 C.F.R. 1355 and 1356. Federal administering agency: Department of Health and Human Services, Administration for Children and Families, Administration on Children, Youth and Families, Children's Bureau. Purpose of program: To provide temporary out-of-home care for children who cannot safely remain in their own homes, until the children may be safely returned home; placed permanently with adoptive families, in a legal guardianship, or with a fit and willing relative; or placed in another planned permanent living arrangement. Benefit/service: Payments to foster care providers to cover the costs of children's maintenance (e.g., room and board, clothing and supplies, liability insurance, certain travel expenses); and support for administrative and child placement services intended to promote safety and permanency for children and well-being for children and their families. Individual eligibility criteria: For states to receive federal reimbursement for the maintenance and related costs of providing foster care, children must have been removed from their homes pursuant to a voluntary placement agreement or certain judicial determinations and be placed in foster care settings that meet specified requirements. Children also must have been removed from homes in which they would have been considered "needy" under the former Aid to Families with Dependent Children (AFDC) program, as that program was administered in their state on July 16, 1996. Form and recipient of federal assistance: Partial reimbursement to states of eligible expenditures, with no limit on federal spending. Allows participation by territories (Puerto Rico, Guam, American Samoa and the U.S. Virgin Islands). Allocation formula: Payments to states are based on their eligible expenditures and the applicable matching (reimbursement) rate. Matching or related requirements: Maintenance payment expenditures are reimbursed at each state's federal medical assistance percentage (FMAP), which varies according to state per capita income. Certain training expenditures are reimbursed at a 75% federal rate; remaining administrative and child placement expenditures are reimbursed at 50%. New obligations (FY2013) : $4,133 million. Budgetary classification: Mandatory (open-ended entitlement to states). Participation data (most recent available) : In FY2013, the average monthly number of children served was 158,994. CRS report s CRS Report R42792, Child Welfare: A Detailed Overview of Program Eligibility and Funding for Foster Care, Adoption Assistance and Kinship Guardianship Assistance under Title IV-E of the Social Security Act , by [author name scrubbed]; and CRS Report R42794, Child Welfare: State Plan Requirements under the Title IV-E Foster Care, Adoption Assistance, and Kinship Guardianship Assistance Program , by [author name scrubbed]. Adoption Assistance (CFDA #93.659) Authority: Statute: Title IV-E of the Social Security Act, established by the Adoption Assistance and Child Welfare Act of 1980 ( P.L. 96-272 ); 42 U.S.C. 673. Regulations: 45 C.F.R. 1355 and 1356. Federal administering agency: Department of Health and Human Services, Administration for Children and Families, Administration on Children, Youth and Families, Children's Bureau. Purpose of program: To facilitate the timely placement of children whose special needs (which may include age, membership in a large sibling group or a racial/ethnic minority group, physical or mental disabilities or other circumstances as determined by the state) would otherwise make it difficult to place them with adoptive families. Benefit/service: One-time nonrecurring payments to assist with the costs of adopting a special needs child (e.g., adoption fees, court costs, attorney fees) and ongoing monthly payments to adoptive families; administrative and child placement services intended to promote child safety, permanency and well-being. Individual eligibility criteria: For states to receive federal reimbursement for either nonrecurring or ongoing costs of adoption assistance, the children must have special needs, as defined by the state, which generally would make their placement for adoption difficult. For states to receive federal reimbursement for the ongoing costs of adoption assistance, children also must be eligible for Supplementary Security Income (SSI) or must have been removed from their homes pursuant to a voluntary placement agreement or certain judicial determinations. In addition, children (who are not eligible for SSI) must have been removed from homes in which they would have been considered "needy" under the former Aid to Families with Dependent Children (AFDC) program, as that program was administered in their state on July 16, 1996. (Under P.L. 110-351 , income-related eligibility criteria are phased out for children entering the adoption assistance program beginning in FY2010 and no income eligibility criteria will remain by FY2018.) Form and recipient of federal assistance: Partial reimbursement to states of eligible expenditures, with no limit on federal spending. Allows participation by territories (Puerto Rico, Guam, American Samoa and the U.S. Virgin Islands). Allocation formula: Payments to states are based on their eligible expenditures and the applicable matching (reimbursement) rate. Matching or related requirements: Adoption assistance payment expenditures are reimbursed at each state's federal medical assistance percentage (FMAP), which varies according to state per capita income. Certain training expenditures are reimbursed at a 75% federal rate; remaining administrative and child placement expenditures are reimbursed at 50%. New obligations (FY2013) : $2,278 million. Budgetary classification: Mandatory (open-ended entitlement to states). Participation data (most recent available) : In FY2013, the average monthly number of children served was 431,533. CRS report s : CRS Report R42792, Child Welfare: A Detailed Overview of Program Eligibility and Funding for Foster Care, Adoption Assistance and Kinship Guardianship Assistance under Title IV-E of the Social Security Act , by [author name scrubbed]; and CRS Report R42794, Child Welfare: State Plan Requirements under the Title IV-E Foster Care, Adoption Assistance, and Kinship Guardianship Assistance Program , by [author name scrubbed]. Social Services Block Grants (CFDA #93.667) Authority: Statute: Title XX-A of the Social Security Act, established by the Omnibus Budget Reconciliation Act of 1981 ( P.L. 97-35 ), as amended by the Patient Protection and Affordable Care Act ( P.L. 111-148 ; 42 U.S.C. 1397. Regulations: 45 C.F.R. Part 96, Subpart G. Federal administering agency: Department of Health and Human Services, Administration for Children and Families, Office of Community Services. Purpose of program: To provide services directed at the following goals: achieve or maintain economic self-support to prevent, reduce, or eliminate dependency; achieve or maintain self-sufficiency to reduce or prevent dependency; prevent or remedy abuse, neglect or exploitation of children or adults unable to protect their own interests, or to preserve, rehabilitate or reunite families; prevent or reduce inappropriate institutional care; or refer or admit individuals into institutional care when other forms of care are not appropriate or provide services to individuals in institutions. Benefit/service: Services directed at the goals listed above, such as child care services, protective services for children and adults, services for children and adults in foster care, services related to the management and maintenance of the home, day care services for adults, transportation services, family planning services, training and related services, employment services, information, referral, and counseling services, the preparation and delivery of meals, health support services and appropriate combinations of services designed to meet the special needs of children, the aged, the mentally retarded, the blind, the emotionally disturbed, the physically disabled, and alcoholics and drug addicts. Individual eligibility criteria: Eligibility criteria are determined by the states, except that any funds transferred into the Social Services Block Grant from the Temporary Assistance for Needy Families (TANF) program must be used to serve children and their families whose incomes are no greater than 200% of the federal poverty guidelines. Form and recipient of federal assistance: Formula grants to states. Allows participation by territories (American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands). Allocation formula: Funds are allocated among states according to their relative population size. Matching or related requirements: None. New obligations (FY2013) : $1,613 million. Budgetary classification: Mandatory (capped entitlement to states). Participation data (most recent available) : In FY2010, nearly 23.7 million individuals (12.2 million children, and 11.5 million adults) received services supported in whole or in part by the SSBG. CRS report: CRS Report 94-953, Social Services Block Grant: Background and Funding , by [author name scrubbed]. Chafee Foster Care Independence Program (CFDA #93.674) Authority: Statute: Section 477 of the Social Security Act, established by the Foster Care Independence Act of 1999 ( P.L. 106-169 ); 42 U.S.C. 677. Regulations: 45 C.F.R. 1356. Federal administering agency: Department of Health and Human Services, Administration for Children and Families, Administration on Children, Youth and Families, Children's Bureau. Purpose of program: To help current and former foster youth achieve self-sufficiency. Benefit/service: Educational assistance, vocational training, employment services, life skills training, mentoring, preventive health activities, counseling, and (subject to certain limitations) room and board. Individual eligibility criteria: Children who are likely to remain in foster care until age 18, youth age 18-21 who have aged out of the foster care system, and youth who left foster care at age 16 and older for kinship guardianship or adoption. Form and recipient of federal assistance: Formula grants to states. Allows participation by Puerto Rico. Allocation formula: Funds are allocated among states according to their share of the nation's children in foster care, except that no state may receive less than $500,000 or the amount payable to the state under the predecessor program for FY1998, whichever is greater. Matching or related requirements: A 20% nonfederal match is required. Funds must supplement and not supplant any funds that would otherwise be used for the same general purposes. New obligations (FY2013) : $140 million. Budgetary classification: Mandatory (capped entitlement to states). Participation data (most recent available) : No data available. CRS report: CRS Report RL34499, Youth Transitioning from Foster Care: Background and Federal Programs , by [author name scrubbed]. Emergency Food and Shelter Program (CFDA #97.024) Authority: Statute: Title III of the Stewart B. McKinney Homeless Assistance Act of 1987 ( P.L. 100-77 ), most recently reauthorized by the Housing and Community Development Act of 1992 ( P.L. 102-550 ); 42 U.S.C. 11331-11346. Regulations: no formal program-specific regulations. Federal administering agency: The program is administered by a National Board, which operates under the auspices of the Department of Homeland Security, Federal Emergency Management Agency. Purpose of program: To provide shelter, food, and supportive services for homeless and hungry individuals nationwide. Benefit/service: Mass shelter, mass feeding, food distribution through food pantries and food banks, one-month utility payments to prevent service cutoff, one-month rent/mortgage payments to prevent evictions or help people leaving shelters to establish stable living conditions. Individual eligibility criteria: Determined by boards that administer the program at the local level. Form and recipient of federal assistance: Formula grants to local boards in eligible local jurisdictions. Local boards further distribute funds among local service providers (called local recipient organizations), which provide direct services to homeless and hungry individuals and families. Eligible jurisdictions are chosen based on measures of population, unemployment and poverty. Some funds are set-aside for states to award to local jurisdictions that don't qualify as eligible jurisdictions but have high levels of need. Allocation formula: Funds are allocated among eligible local jurisdictions based on their number of unemployed persons relative to other eligible local jurisdictions. Allows participation by territories (American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands). Matching or related requirements: None. New obligations (FY2013) : $114 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, 59,751,368 meals were provided; 4,292,341 nights of lodging were provided; 60,123 rent/mortgage payments were made; and 150,376 utility payments were made. CRS report s : CRS Report R42766, The Emergency Food and Shelter National Board Program and Homeless Assistance , by [author name scrubbed]; and CRS Report RL30442, Homelessness: Targeted Federal Programs and Recent Legislation , coordinated by [author name scrubbed]. Legal Services Corporation (no CFDA #) Authority: Statute: Legal Services Corporation of 1974 ( P.L. 93-355 ), most recently reauthorized by the Equal Access to Courts Act ( P.L. 95-222 ); 42 U.S.C. 2996 et seq. Regulations: 45 C.F.R. Part 1600. Federal administering agency: Legal Services Corporation. Purpose of program: To provide equal access to the justice system for individuals who seek redress of grievances and to provide high quality legal assistance to those would be otherwise unable to afford legal counsel. Benefit/service: Legal services in civil cases. Individual eligibility criteria: Eligible individuals must have incomes no greater than 125% of the federal poverty guidelines, with exceptions (up to 200% of poverty) allowed in specified circumstances. Form and recipient of federal assistance: Formula grants to public and private nonprofit entities. Allows participation by territories (American Samoa, Guam, Puerto Rico, the Trust Territory of the Pacific Islands, the U.S. Virgin Islands and any other territories or possessions of the United States). Allocation formula: Funds are allocated among states but awarded directly to local grantees. The allocation formula is based on each state's share of the nation's poverty population. Matching or related requirements: None. New obligations (FY2013) : $343 million. Budgetary classification: Discretionary. Participation data (most recent available) : In FY2012, 809,830 cases were closed. CRS report: CRS Report RL34016, Legal Services Corporation: Background and Funding , by [author name scrubbed]. Employment and Training Community Service Employment for Older Americans (CFDA #17.235) Authority: Statute: Title V of the Older Americans Act of 1965 (P.L. 89-73), most recently reauthorized by the Older Americans Act Amendments of 2006 ( P.L. 109-365 ); 42 U.S.C. 3056 et seq. Regulations: 20 C.F.R. Part 641. Federal administering agency: Department of Labor, Employment and Training Administration. Purpose of program: To enable individuals to become self-sufficient through placement in community service positions and job training. Benefit/service: Part-time temporary community service jobs that pay at least minimum wage, job-related training, and supportive services that are necessary to enable an individual to participate in the program. Individual eligibility criteria: Unemployed individuals age 55 or older with low incomes (defined as no higher than 125% of the federal poverty guidelines). Regulations require priority for certain groups, including veterans and individuals age 60 or older. Regulations also require special consideration to be given to certain groups, including individuals with the "greatest economic and social need." Form and recipient of federal assistance: Formula grants to states and national nonprofit organizations. Allows participation by territories (Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands) and by tribal organizations. Allocation formula: Funds are allocated to states and national organizations according to a three-part formula: a hold-harmless factor (FY2000 level of funding); each state's relative share of individuals age 55 or older; and each state's relative per capita income. Matching or related requirements: A nonfederal share of 10% is required. New obligations (FY2013) : $429 million. Budgetary classification: Discretionary. Participation data (most recent available) : In program year 2012 (July 2012-June 2013), approximately 70,718 low-income workers participated in community service assignments. CRS report: CRS Report RL33880, Funding for the Older Americans Act and Other Aging Services Programs , by [author name scrubbed] and [author name scrubbed]. WIA Adult Activities (CFDA #17.258) Authority: Statute: Chapter 5 of Title I, Subtitle B of the Workforce Investment Act of 1998 ( P.L. 105-220 ), to be replaced by Chapter 3 of Title I, Subpart B of the Workforce Innovation and Opportunity Act ( P.L. 113-128 , goes into effect on July 1, 2015); 29 U.S.C. 2861-2864. Regulations: 20 C.F.R. Part 663. Federal administering agency: Department of Labor, Employment and Training Administration, Office of Workforce Investment. Purpose of program: To assist eligible individuals in finding and qualifying for meaningful employment, and to help employers find the skilled workers they need to compete and succeed in business. Benefit/service: Core services, including outreach, job search and placement assistance, and labor market information. Intensive services, including comprehensive assessments, development of individual employment plans and counseling and career planning. ( P.L. 113-128 combines core and intensive services into a single category called career services.) Training services, including occupational skills training and basic skills training. Supportive services, including transportation, child care, housing and needs-related payments in certain circumstances. Individual eligibility criteria: Eligible individuals are at least 18 years old. No additional eligibility criteria apply for core services (or career services under P.L. 113-128 ). For training services (and intensive services prior to implementation of P.L. 113-128 ), individuals must need the services in order to become employed or to obtain or retain a job that allows for self-sufficiency. If funds are limited, priority must go to recipients of cash assistance and other low-income individuals. Low-income is defined as having income below the federal poverty guidelines or 70% of the lower living standard income level, whichever is higher; receiving means-tested public assistance; being a member of a household that receives food stamps; qualifying as homeless; or being a disabled individual whose own income meets the low-income definition but whose family income exceeds it. Form and recipient of federal assistance: Formula grants to states. Allows participation by territories (Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, the U.S. Virgin Islands, Marshall Islands, Micronesia, and Palau). Allocation formula: Funds are allocated to states on the basis of a three-part formula: state shares of the national distribution of areas of "substantial" unemployment (unemployment rate of at least 6.5%); "excess" unemployment (rate above 4.5%); and the "disadvantaged" adult population (family income below the federal poverty guidelines or 70% of the lower living standard income level). Matching or related requirements: None. New obligations (FY2013) : $731 million. Budgetary classification: Discretionary. Participation data (most recent available) : During April 2012-March 2013, there were 1,111,555 "exiters" from adult activities, of which 818,539 received core services only, 177,422 received core and intensive services, and 115,594 received training services. An exiter is a participant (who was determined eligible and received a service funded by WIA, including individuals who accessed self-services) who has not received a service funded by WIA or a partner program for 90 consecutive calendar days. CRS report: CRS Report R41135, The Workforce Investment Act and the One-Stop Delivery System , by [author name scrubbed]. WIA Youth Activities (CFDA #17.259) Authority: Statute: Chapter 4 of Title I, Subtitle B of the Workforce Investment Act of 1998 ( P.L. 105-220 ), to be replaced by Chapter 2 of Title I, Subpart B of the Workforce Innovation and Opportunity Act of 2014 ( P.L. 113-128 , goes into effect on July 1, 2015); 29 U.S.C. 2851-2954. Regulations: 20 C.F.R. Part 664. Federal administering agency: Department of Labor, Employment and Training Administration, Office of Workforce Investment. Purpose of program: To improve educational and skill competencies of youth and develop connections to employers, mentoring opportunities with adults, training opportunities, supportive services, incentives for recognition and achievement, and leadership opportunities. Benefit/service: Strategies to complete secondary school, alternative secondary school services, summer employment, work experience, occupational skill training, leadership development opportunities, supportive services, adult mentoring, follow-up services, and comprehensive guidance and counseling. Individual eligibility criteria: Eligible youth are low-income, ages 14 through 21, and either deficient in basic skills, a school dropout, homeless, a runaway or foster child, pregnant or a parent, or a youth offender. ( P.L. 113-128 revises eligibility categories to include "in-school" youth aged 14-21, and "out-of-school" youth aged 16-24.) Low-income is defined as receiving (or being eligible to receive) cash assistance or food stamps (now the Supplemental Nutrition Assistance Program); having family income no greater than the federal poverty guidelines or 70% of the lower living standard income level; or being homeless, a foster child for whom state or local payments are made, or a disabled person whose income meets the low-income definition but whose family income exceeds it. ( P.L. 113-128 also includes youth living in a high poverty area as meeting the low-income criteria.) Form and recipient of federal assistance: Formula grants to states. Allows participation by territories (Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the Marshall Islands, Micronesia, and Palau). Allocation formula: Funds are allocated to states according to a three-part formula: state shares of the national distribution of areas of "substantial" unemployment (unemployment rate of at least 6.5%); "excess" unemployment (rate above 4.5%); and population of "disadvantaged" youth (family income below the federal poverty guidelines or 70% of the lower living standard income level). Matching or related requirements: None. New obligations (FY2013) : $856 million. Budgetary classification: Discretionary. Participation data (most recent available) : During April 2012-March 2013, there were 112,386 "exiters" from youth activities. An exiter is a participant (who was determined eligible and received a service funded by WIA, including individuals who accessed self-services) who has not received a service funded by WIA or a partner program for 90 consecutive calendar days. CRS reports: CRS Report R41135, The Workforce Investment Act and the One-Stop Delivery System , by [author name scrubbed]; and CRS Report R40929, Vulnerable Youth: Employment and Job Training Programs , by [author name scrubbed]. Social Services and Targeted Assistance for Refugees (CFDA #93.566 and #93.584) Authority: Statute: Title IV, Chapter 2 of the Immigration and Nationality Act, established by the Refugee Act of 1980 ( P.L. 96-212 ) and most recently reauthorized by P.L. 106-104 ; 8 U.S.C. 1521-1524. Regulations: 45 C.F.R. Part 400. Federal administering agency: Department of Health and Human Services, Administration for Children and Families, Office of Refugee Resettlement. Purpose of program: To provide for the effective resettlement of refugees and to assist them to achieve economic self-sufficiency as quickly as possible. Benefit/service: Employability and other services that address participants' barriers to employment such as social adjustment services, interpretation and translation services, day care for children, citizenship and naturalization services. Services are designed to enable refugees to obtain jobs within one year of becoming enrolled. Individual eligibility criteria: Refugees, asylees, other specified humanitarian cases, and trafficking victims. Priority goes to newly arriving refugees during their first year in the U.S. who apply for services; refugees who are receiving cash assistance; unemployed refugees who are not receiving cash assistance; and employed refugees in need of services to retain employment or to attain economic independence. Form and recipient of federal assistance: Formula grants to states and competitive grants to public and private nonprofit entities. Allocation formula: State formula grants are based on the number of refugees, asylees, and other eligible cases who arrived in the U.S. not more than 36 months before the start of the fiscal year and who are residing in the state. Matching or related requirements: None. New obligations (FY2013) : $198 million (appropriations). Budgetary classification: Discretionary. Participation data (most recent available) : No data available. CRS report: CRS Report RL31269, Refugee Admissions and Resettlement Policy , by [author name scrubbed]. Foster Grandparents (CFDA #94.011) Authority: Statute: Domestic Volunteer Service Act of 1973, most recently reauthorized by the Serve America Act ( P.L. 111-13 ); 42 U.S.C. 5011. Regulations: 45 C.F.R. Part 2552. Federal administering agency: Corporation for National and Community Service. Purpose of program: To provide opportunities for older low-income people to have a positive impact on the lives of children in need. Benefit/service: Employment (between 15 and 40 hours weekly), with hourly stipend, providing services to children with special or exceptional needs or with conditions or circumstances that limit their academic, social or economic development. Individual eligibility criteria: Eligible individuals must be age 55 or older and, to be eligible to receive a stipend, individuals must have incomes no greater than 200% of federal poverty guidelines. Form and recipient of federal assistance: Discretionary grants to public and private nonprofit entities. Allows participation by entities in territories (American Samoa, Guam, Puerto Rico, the Trust Territories of the Pacific Islands, the U.S. Virgin Islands) and by Indian tribes. Allocation formula: Not applicable. Matching or related requirements: Nonfederal match of 10% required, which may be in cash or in-kind. New obligations (FY2013) : $105 million (appropriations). Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, 22,700 "volunteer service years" were reported for the Foster Grandparent program. CRS report: CRS Report RL33931, The Corporation for National and Community Service: Overview of Programs and Funding , by Abigail B. Rudman and [author name scrubbed]. Job Corps (no CFDA #) Authority: Statute: Title I-C of the Workforce Investment Act of 1998 ( P.L. 105-220 ), to be replaced by Title I-C of the Workforce Innovation and Opportunity Act ( P.L. 113-128 , goes into effect on July 1, 2015); 29 U.S.C. 2881-2901. Regulations: 20 C.F.R. Part 670. Federal administering agency: Department of Labor, Employment and Training Administration, Office of Job Corps. Purpose of program: To assist eligible youth who need and can benefit from an intensive program, operated in a group setting in residential and nonresidential centers, to become more responsible, employable, and productive citizens. (Revised by P.L. 113-128 to include assisting eligible youth to connect to the labor force by providing them with intensive social, academic, career and technical education, and service-learning opportunities, in primarily residential centers, so they may obtain secondary school diplomas or postsecondary credentials.) Benefit/service: Education and vocational training, including advanced career training; work experience; recreational activities; physical rehabilitation and development; job placement and counseling; and child care. (Revised by P.L. 113-128 to include work-based learning and driver's education, among other things.) Individual eligibility criteria: Low-income youth aged 16-24 who are one or more of the following: deficient in basic reading, writing or computing skills; a school drop-out; homeless, a runaway, or a foster child; a parent; in need of additional education, vocational training, or counseling to accomplish schoolwork or to secure and hold a job (revised by P.L. 113-128 to a job that leads to economic self-sufficiency). Low-income is defined as a person who receives or whose family receives cash assistance or food stamps (revised to TANF, SNAP or SSI by P.L. 113-128 ), or has income no higher than federal poverty guidelines, is homeless or a foster child, or is a disabled person whose income does not exceed federal poverty guidelines but whose family income does. ( P.L. 113-128 adds eligibility for free/reduced-price lunch to the definition of low-income, and provides that for otherwise eligible veterans, income requirements will not apply if income earned from the military in the preceding six months would exceed the income limit.) Form and recipient of federal assistance: Competitive contracts and interagency agreements with federal, state or local agencies, area vocational education schools or residential vocational schools, or private organizations. Allows participation by Indian tribes and tribal organizations. Allocation formula: Not applicable. Matching or related requirements: None. New obligations (FY2013) : $1,718 million. Budgetary classification: Discretionary. Participation data (most recent available) : In program year 2012 (July 2012-June 2013), total Job Corps enrollment was 40,800. CRS report: CRS Report R40929, Vulnerable Youth: Employment and Job Training Programs , by [author name scrubbed]. Energy Assistance Weatherization Assistance (CFDA #81.042) Authority: Statute: Title IV of the Energy Conservation and Production Act of 1976 ( P.L. 94-385 ), most recently reauthorized by the Energy Independence and Security Act of 2007 ( P.L. 110-140 ); 42 U.S.C. 6871 et seq. Regulations: 10 C.F.R. Part 440. Federal administering agency: Department of Energy, Office of Energy Efficiency and Renewable Energy. Purpose of program: To increase the energy efficiency of homes owned or occupied by low-income persons to reduce their total residential energy costs, and improve their health and safety. Benefit/service: Computerized energy audits and diagnostic equipment to determine the most energy-efficient measures for each individual home; labor and materials necessary to install such energy-efficient measures. Individual eligibility criteria: Homes eligible for weatherization assistance must be occupied by persons with income below 200% of the federal poverty guidelines or who have received cash assistance under Temporary Assistance for Needy Families (TANF) or Supplemental Security Income (SSI) in the previous 12 months, or (at state option) who are eligible for assistance under the Low-Income Home Energy Assistance Program (LIHEAP). Form and recipient of federal assistance: Formula grants to states. Allows participation by Indian tribes and territories (American Samoa, Guam, Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands). Allocation formula: A specified dollar "base" amount is allocated among states; the balance is allocated according to a formula that reflects each state's relative low-income population, climatic conditions, and residential energy expenditures by low-income households in each state. Matching or related requirements: None. New obligations (FY2013) : $182 million (weatherization and intergovernmental activities). Budgetary classification: Discretionary. Participation data (most recent available) : In FY2013, the program made energy improvements in the homes of 46,871 families. CRS report s : CRS Report R42147, DOE Weatherization Program: A Review of Funding, Performance, and Cost-Effectiveness Studies , by [author name scrubbed]; and CRS Report R40913, Renewable Energy and Energy Efficiency Incentives: A Summary of Federal Programs , by [author name scrubbed] and [author name scrubbed]. Low-Income Home Energy Assistance Program (LIHEAP) (CFDA #93.568) Authority: Statute: Low-Income Home Energy Assistance Act, established by Title XXVI of the Omnibus Budget Reconciliation Act of 1981 ( P.L. 97-35 ) and most recently reauthorized by the Energy Policy Act of 2005 ( P.L. 109-58 ); 42 U.S.C. 8621-8630. Regulations: 45 C.F.R. Parts 96.80-96.89. Federal administering agency: Department of Health and Human Services, Administration for Children and Families, Office of Community Services. Purpose of program: To assist low-income households, particularly those with the lowest incomes, that pay a high proportion of their income for home energy, primarily in meeting their immediate home energy needs. Benefit/service: Assistance to households in paying their heating and cooling costs, crisis intervention, home weatherization, and services (such as counseling) to help reduce energy costs. Individual eligibility criteria: States establish their own eligibility criteria within federal parameters. Maximum federal income eligibility is 150% of federal poverty guidelines or, if greater, 60% of state median income. States may not set eligibility at lower than 110% of federal poverty guidelines. States may grant categorical eligibility to households in which at least one member receives benefits under Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), or certain veterans' programs. Form and recipient of federal assistance: Formula block grants and contingency funds to states. Allows participation by territories (American Samoa, Guam, the Northern Marianas, Puerto Rico, and the U.S. Virgin Islands) and by Indian tribes. Allocation formula: Regular block grant funds are distributed to states based on a three-tier formula depending on the total amount of funds appropriated. Formula factors include total residential energy consumption, temperature variation, low-income heating and cooling consumption, among others; however, the formula also includes two hold-harmless provisions. Contingency funds are awarded by the President based on need. Matching or related requirements: None. New obligations (FY2013) : $3,255 million. Budgetary classification: Discretionary. Participation data: In FY2011, 7.6 million households received heating and/or winter crisis assistance and 1.1 million households received cooling and/or summer crisis assistance. There may be duplication among those receiving heating and cooling assistance. CRS report: CRS Report RL31865, LIHEAP: Program and Funding , by [author name scrubbed].

The Congressional Research Service (CRS) regularly receives requests about the number, size, and programmatic details of federal benefits and services targeted toward low-income populations, and the characteristics of people who participate. This report attempts to identify and provide information about such programs, including their federal spending during FY2008-FY2013. The report does not discuss social insurance programs such as Social Security, Medicare, or Unemployment Insurance, but includes only programs with an explicit focus on low-income people or communities. Tax provisions, other than the refundable portion of two tax credits, are excluded. Key findings include the following: No single label best describes all programs with a low-income focus, and no single trait characterizes those who benefit. Programs are highly diverse in their purpose, design, and target population. Readers should use caution in making generalizations about the programs described in this report. Total federal spending on low-income programs rose sharply between FY2008 and FY2009 as the Great Recession took hold. Spending ultimately peaked in FY2011, dropped in FY2012, and edged up again in FY2013. Total low-income spending in FY2013 totaled $744 billion, significantly higher than the FY2008 level of $561 billion but below the FY2010 level of $750 billion. Peak spending over the six years was $764 billion in FY2011. Health care is the single largest category of low-income spending, accounting for nearly half of the total, and drives overall trends. The single largest program within the health category is Medicaid. Cash aid and food assistance are the next largest categories, with food assistance seeing the largest growth over the six-year period. Other categories (in descending size) are education, housing and development, social services, employment and training, and energy assistance. Most low-income spending (82% in FY2013) is classified in budgetary terms as "mandatory" (or "direct"), which means the amount spent is a function of eligibility and payment rules established by Congress in authorizing laws. Congress determines the amount spent for the remaining "discretionary" programs through the annual appropriations process. Four programs accounted for 65% of low-income spending in FY2013, and 10 programs made up 82%. Medicaid alone contributed 39% of the total. In addition to Medicaid, the top four include the Supplemental Nutrition Assistance Program (SNAP), Supplemental Security Income (SSI), and the refundable portion of the Earned Income Tax Credit (EITC). The disabled receive the single largest share of federal low-income spending, based on an analysis of spending for the top 10 programs in FY2011. The disabled received almost a third of such spending, primarily for health care and secondarily for cash aid. Working families with children received the next largest share of spending (including from the EITC and Additional Child Tax Credit), followed by the elderly. The bulk of spending for low-income elderly was in the health category. Less than 12% of total low-income spending in FY2011 went to families with nonelderly nondisabled adults who were not working.

U.S. employers in various industries argue that they need to hire foreign workers to perform low-skilled jobs. A threshold question about importing temporary lower-skilled workers, sometimes referred to as guest workers, is whether U.S. employers need foreign workers for lower-skilled positions, or whether there is a sufficient number of available U.S. workers who could fill these jobs. This question gains salience in times of high U.S. unemployment. The issue of whether U.S. employers need foreign workers is often stated in terms of whether there are domestic labor shortages in particular industries and occupations. Questions about the existence of labor shortages are difficult to answer definitively because of various factors. The issue of labor shortages in seasonal agriculture, in particular, has been a longstanding concern and is receiving renewed attention. The farm labor shortage issue, however, is surrounded by many unanswered questions, including the following: Would more U.S. workers be willing to become farm workers if wages were raised and the terms of work were changed? If so, would such wage and other changes make the U.S. agricultural industry uncompetitive in the world marketplace? Alternatively, would there be an adequate supply of authorized U.S. farm workers if new technologies were developed and implemented? In the past, guest workers have been imported to address U.S. worker shortages during times of war. During World War I, for example, tens of thousands of Mexican workers performed mainly agricultural labor as part of a temporary worker program. The controversial Bracero program, which began during World War II and lasted until 1964, brought several million Mexican agricultural workers into the United States. At its peak in the late 1950s, the Bracero program employed more than 400,000 Mexican workers annually. Today, the United States imports guest workers in much smaller numbers to perform temporary agricultural and nonagricultural labor. In current guest worker programs, issues of need for foreign workers are addressed on an individual basis through a process of labor certification. Guest worker programs remain controversial. Some view them as a necessary source of legal workers and call for their reform and expansion. Others view them, in their current form, as "inherently abusive" and argue that if they are to be allowed to continue operating, they must be thoroughly overhauled. This report discusses existing visa programs for temporary lower-skilled workers, including regulatory changes since 2008. It covers legislative efforts to reform current programs and to create new guest worker visas. It further identifies and explores key policy considerations to help inform congressional action on guest worker programs. The Immigration and Nationality Act (INA) of 1952, as amended, enumerates categories of aliens, known as nonimmigrants, who are admitted to the United States for a temporary period of time and a specific purpose. Nonimmigrant visa categories are identified by letters and numbers, based on the sections of the INA that established them. Among the major nonimmigrant visa categories is the "H" category for temporary workers. The H category includes H-2A and H-2B visas for guest workers, as well as visas for higher-skilled temporary workers. Foreign nationals can also perform lower-skilled temporary work on certain other nonimmigrant visas. The INA, as originally enacted, authorized an H-2 nonimmigrant visa category for foreign agricultural and nonagricultural workers who were coming temporarily to the United States to perform temporary services (other than services of an exceptional nature requiring distinguished merit and ability) or labor. The 1986 Immigration Reform and Control Act (IRCA) amended the INA to subdivide the H-2 program into the current H-2A agricultural worker program and H-2B nonagricultural worker program and to detail the admissions process for H-2A workers. The H-2A and H-2B programs are administered by the Employment and Training Administration (ETA) of the Department of Labor (DOL) and U.S. Citizenship and Immigration Services (USCIS) of the Department of Homeland Security (DHS). While there are many differences between the H-2A agricultural worker program and the H-2B nonagricultural worker program, the process of importing workers under either program entails the same steps. Employers who want to hire workers through either program must first apply to DOL for labor certification, as discussed in the next section. After receiving labor certification, a prospective H-2A or H-2B employer can submit an application, known as a petition, to DHS to bring in foreign workers. If the application is approved, foreign workers who are abroad can then go to a U.S. embassy or consulate to apply for an H-2A or H-2B nonimmigrant visa from the Department of State (DOS). If the visa application is approved, the worker is issued a visa that he or she can use to apply for admission to the United States at a port of entry. In both the H-2A and H-2B programs, there is a tension between providing protections to U.S. and foreign workers on the one hand and making the programs responsive to legitimate employer needs on the other. While these competing interests are longstanding, the current environment—with relatively high levels of U.S. unemployment; discussions about expanding the E-Verify electronic employment eligibility verification system (as discussed below); and concerns about shortages of legal workers, especially in agriculture—has heightened the tensions. DOL's ETA is responsible for administering the labor certification process under the H-2A and H-2B programs. Under both programs, employers submit applications in which they request the certification of a particular number of positions. INA provisions on the admission of H-2A workers state that an H-2A petition cannot be approved unless the petitioner has applied to DOL for certification that (1) there are not sufficient workers who are able, willing, qualified … and available at the time of application for a visa and admission to the United States and at the place where the alien is to perform such skilled or unskilled labor, and (2) the employment of such alien will not adversely affect the wages and working conditions of workers in the United States similarly employed. There is no equivalent statutory labor certification requirement for the H-2B program. The INA, however, does contain some related language. For example, it defines an H-2B alien, in relevant part, as an alien "who is coming temporarily to the United States to perform other temporary service or labor if unemployed persons capable of performing such service or labor cannot be found in this country." The H-2B labor certification requirement instead appears in DHS regulations. These regulations state: The petitioner may not file an H-2B petition unless the United States petitioner has applied for a labor certification with the Secretary of Labor ... and has obtained a favorable labor certification determination ... The H-2A and H-2B labor certification requirements are intended to provide job, wage, and working conditions protections to U.S. workers. They are implemented in both programs through a multifaceted labor certification process that requires prospective H-2A and H-2B employers to conduct recruitment for U.S. workers and offer a minimum level of wages and benefits that varies by program. Table 1 provides summary information on H-2A and H-2B labor certification applications. The position certified number represents the number of positions for which employers can apply to DHS to fill with foreign workers. Typically, however, employers petition for a smaller number of workers. The H-2A program allows for the temporary admission of foreign workers to the United States to perform agricultural labor or services of a seasonal or temporary nature, provided that U.S. workers are not available. In general, for purposes of the H-2A program, work is of a temporary nature where the employer's need for the worker will last no longer than one year. Thus, an approved H-2A visa petition is generally valid for an initial period of up to one year. An employer can apply to extend an H-2A worker's stay in increments of up to one year, but an alien's total period of stay as an H-2A worker may not exceed three consecutive years. An alien who has spent three years in the United States in H-2A status may not seek an extension of stay or be readmitted to the United States as an H-2A worker until he or she has been outside the country for three months. As discussed above, an employer who wants to import H-2A workers must first apply to DOL for a certification that (1) there are not sufficient U.S. workers who are qualified and available to perform the work; and (2) the employment of foreign workers will not adversely affect the wages and working conditions of U.S. workers who are similarly employed. Prospective H-2A employers must attempt to recruit U.S. workers and must cooperate with DOL-funded state employment service agencies (also known as state workforce agencies) in local, intrastate, and interstate recruitment efforts. Under the H-2A program's fifty percent rule , employers are required to hire any qualified U.S. worker who applies for a position during the first half of the work contract under which the H-2A workers who are in the job are employed. Among the other H-2A labor certification requirements, employers must provide a "three-fourths guarantee"; that is, they must guarantee to offer workers employment for at least three-fourths of the contract period. As discussed below, H-2A employers must pay their H-2A workers and similarly employed U.S. workers the highest of several wage rates and must also provide workers with housing, transportation, and other benefits, including workers' compensation insurance. No health insurance coverage is required. As indicated in Table 1 above, 86,014 H-2A positions were certified for FY2009 and 79,011 were certified for FY2010. Employers in North Carolina received more H-2A certifications than employers in any other state in both years. Other top states, in terms of number of H-2A positions certified, were Florida, Georgia, Kentucky, and Louisiana. The H-2A program is not subject to a statutory numerical limit and has grown significantly over the last 20 years. One way to measure the H-2A program's growth is to consider changes in the number of H-2A visas issued annually by DOS. As explained above, the visa application and issuance process occurs after DOL has granted labor certification and DHS has approved the visa petition. As illustrated in Figure 1 , the number of H-2A visas issued increased more than fourfold between FY1992 and FY2000, when about 30,000 visas were issued. H-2A visa issuances remained at about 30,000 annually until FY2005 and then started to increase, peaking at more than 64,000 FY2008. The number of H-2A visas issued subsequently declined, totaling some 55,000 in FY2011, according to preliminary DOS data. Despite its growth since the early 1990s, the H-2A program remains quite small relative to total hired farm employment. This relatively small size has become an issue in the debate about the program. Critics of the H-2A program cite the low levels of participation as evidence of the program's inadequacy to meet the needs of U.S. agricultural employers. Others, however, attribute the program's low utilization to the availability of unauthorized workers, who are willing to work for lower wages than legal workers. In August 2007, in the aftermath of unsuccessful congressional efforts to enact comprehensive immigration legislation with guest worker provisions, the George W. Bush Administration announced that it would streamline existing guest worker programs within current law. In December 2008, DHS and DOL published final rules to significantly amend their respective H-2A regulations, which went into effect on January 17, 2009. The Obama Administration retained the 2008 DHS rule on the H-2A visa. It sought to review the 2008 DOL rule, and unsuccessfully attempted to suspend it in 2009. DOL subsequently issued a new final H-2A rule, which became effective on March 15, 2010, to replace the 2008 final rule. The 2008 DHS final rule on the H-2A visa described its purpose as being "to provide agricultural employers with an orderly and timely flow of legal workers, thereby decreasing their reliance on unauthorized workers, while protecting the rights of laborers." The rule made various changes to prior regulations to facilitate continued H-2A employment. Among these changes, it modified previous limitations on an H-2A worker's period of stay in the United States. It also extended the period of time that an H-2A worker could remain in the United States after the H-2A petition expired in order to prepare to depart or to seek an extension of stay. In addition, the DHS rule limited participation in the H-2A program to designated countries. The 2010 DOL final rule on H-A employment issued under the Obama Administration included as its centerpiece, regulations by the Employment and Training Administration concerning H-2A labor certification. It also included regulations by the Wage and Hour Division (WHD) concerning enforcement of contractual obligations under the H-2A program. The 2010 rule reversed changes made by the 2008 DOL rule to the H-2A labor certification process. Prior to the 2008 rule, the labor certification process was a fully supervised certification-based process, in which federal or state officials reviewed an employer's actual efforts or documentation to ensure compliance with program requirements. The 2008 rule replaced this supervised process with an attestation-based process, in which prospective H-2A employers had to attest in their applications, under threat of penalties, that they complied with H-2A program requirements. In the supplementary information accompanying the proposed rule to replace the 2008 rule, DOL explained the need for new rulemaking, in part, as follows: The Department, upon due consideration, believes that the policy underpinnings of the 2008 Final Rule, e.g. streamlining the H–2A regulatory process to defer many determinations of program compliance until after an Application has been fully adjudicated, do not provide an adequate level of protection for either U.S. or foreign workers. The ETA regulations in the 2010 DOL final rule reestablished the type of H-2A labor certification process that had been in effect prior to the 2008 rule. At the same time, these regulations retained some of the changes to the labor certification process included in the 2008 rule. For example, the 2010 regulations retained the earlier rule's expansion of the definition of agricultural labor or services for the H-2A program to include logging employment. Under the 2010 DOL H-2A rule, prospective H-2A employers are required to submit a job order to the state workforce agency (SWA) serving the area of intended employment before filing a labor certification application. Once reviewed and cleared by the SWA, the job order becomes the basis for recruiting U.S. workers to fill the employer's job openings. The employer can then file the labor certification application with DOL. As part of the labor certification process, H-2A employers have to offer and pay wages that meet specified requirements. The 2010 DOL rule amended existing regulations to require H-2A employers to pay their workers the highest of four wage rates: the federal or applicable state minimum wage, the prevailing wage rate, the adverse effect wage rate (AEWR), or the agreed-upon collective bargaining wage. In addition, the ETA regulations in the 2010 DOL rule included a system of post-certification audits of H-2A employer applications, which were a revised version of the system in the 2008 rule, and expanded DOL's authority to bar employers from participating in the program (known as debarment authority). Wage and Hour Division regulations in the 2010 DOL H-2A final rule addressed enforcement of contractual obligations under the H-2A program. These regulations revised provisions in the 2008 final rule. Among the changes, the 2010 rule provided WHD with independent authority to debar employers for "substantial violations" and increased the civil money penalties for specified violations. The H-2B program provides for the temporary admission of foreign workers to the United States to perform temporary nonagricultural service or labor, if unemployed U.S. workers cannot be found. Foreign medical graduates coming to perform medical services are explicitly excluded from the program. In order for work to qualify as temporary under the H-2B visa, the employer's need for the duties to be performed by the worker must be a one-time occurrence, a seasonal need, a peak load need, or an intermittent need. The employer's need for workers under the H-2B program must generally be for a period of one year or less, but, as explained in the discussion of recent regulatory changes below, it could be longer in the case of a one-time occurrence. An alien's total period of stay as an H-2B worker may not exceed three consecutive years. An H-2B alien who has spent three years in the United States may not seek an extension of stay or be readmitted to the United States as an H-2B worker until he or she has been outside the country for three months. Like prospective H-2A employers, prospective H-2B employers must first apply to DOL for certification that U.S. workers capable of performing the work are not available and that the employment of alien workers will not adversely affect the wages and working conditions of similarly employed U.S. workers. H-2B employers must pay their workers the highest of the prevailing wage rate or the federal, state, or local minimum wage. Unlike H-2A employers, they are not subject to the AEWR. Traditionally, H-2B employers have been subject to many fewer worker benefit requirements than H-2A employers, but DOL regulations published in February 2012 added new requirements to the H-2B labor certification process. (As explained in the Recent Regulatory Changes section, however, these 2012 regulations are not in effect as of this writing.) H-2B workers are largely low skilled, but the H-2B program is not limited to workers of a particular skill level and over the years the H-2B visa has been used to import a variety of workers. According to DOL labor certification data, the top H-2B occupation in recent years, in terms of the number of workers certified, has been landscape laborer. Other top occupations include forest worker, housekeeping cleaner, and amusement park worker. As shown in Table 1 above, 154,489 H-2B positions were certified for FY2009. Employers in Texas received more than 21,000 of these certifications. Other top states in FY2009, in terms of number of H-2B positions certified, were Florida, Colorado, and Virginia. Unlike the H-2A visa, the H-2B visa is subject to a statutory numerical limit. Under the INA, the total number of aliens who may be issued H-2B visas or otherwise provided H-2B status during a fiscal year may not exceed 66,000. This cap does not apply to petitions for current H-2B workers to extend their stay, change their terms of employment, or change or add employers. As shown in Figure 2 , the number of H-2B visas issued by DOS dipped between FY1992 and FY1993 and then began to increase fairly steadily until FY2007. As discussed below, a temporary provision exempted certain H-2B workers from the statutory 66,000 cap for three years beginning in FY2005. In both FY2003 and FY2004, however, H-2B visa issuances exceeded the cap. Mirroring regulatory actions taken on the H-2A program, DHS and DOL under the George W. Bush Administration published final rules to significantly amend their respective H-2B regulations in December 2008. The final rules went into effect on January 18, 2009. The Obama Administration initially retained both the 2008 DHS and DOL final rules on the H-2B visa. In March 2011, however, DOL proposed new regulations to replace the DOL 2008 H-2B rule. A new final rule was published in February 2012, with an effective date in April 2012. The rule did not become operative in April 2012, however. A federal district court in Florida issued a preliminary injunction against the rule, which is being challenged on the grounds that DOL lacks authority over H-2B labor certification rules. The H-2B program is currently operating under the 2008 DOL rule. In January 2011, DOL published a separate final rule to revise the methodology for calculating prevailing wage rates under the H-2B program, with an effective date of January 1, 2012. Due to court challenges and congressional action, the effective date of the wage rule has been changed several times. The effective date is currently set at March 27, 2013, in response to language enacted as part of the FY2013 Continuing Appropriations Resolution. DHS's 2008 rule on the H-2B visa made various changes to prior regulations. Among these changes, it redefined "temporary employment" for H-2B purposes to require the prospective H-2B employer to establish that his or her need for the worker would end in the "near, definable future." In the case of a one-time occurrence (one type of allowable need under the H-2B program, as discussed above), the employer's need could last up to three years. Other changes to DHS's H-2B regulations mirrored changes to its H-2A regulations. These included modification of previous limitations on an H-2B worker's period of stay in the United States and limitation of participation in the H-2B program to nationals of designated countries. The 2012 DOL final H-2B rule, which, as noted above, is not currently operative, includes regulations by DOL's ETA concerning H-2B labor certification—the main focus of discussion here —and regulations by DOL's WHD concerning H-2B program enforcement. Under DOL's 2008 rule, the H-2B labor certification process became an attestation-based process, in which employers had to attest in their applications, under threat of penalties, that they had complied with program requirements. The 2012 rule reinstated a certification-based model, in which employers had to show compliance with recruitment and other requirements in advance of a determination on the labor certification application. As in its explanation of the need for new H-2A rulemaking, DOL stated in the supplementary information accompanying its proposed rule (the precursor to the 2012 final rule) that the existing system of making determinations about program compliance after an application had been adjudicated did not provide sufficient protections for U.S. or foreign workers. It further described problems of noncompliance: [I]n the first year of the operation of the attestation-based system our experience indicates that employers are attesting to compliance with program obligations with which they have not complied, and that employers do not appear to be recruiting, hiring and paying U.S. workers, and in some cases the H-2B workers themselves, in accordance with established program requirements. In addition to returning to a certification-based model, the 2012 rule bifurcated the labor certification application process into distinct registration and application phases and revised application timetables. The 2012 final rule made a variety of other changes to the H-2B labor certification process. In an expansion of current employer obligations, the final rule required employers to provide workers engaged in corresponding employment with at least the same protections, wages, and benefits as those provided to H-2B workers. The final rule also placed new benefit requirements on employers, such as requiring them to pay or reimburse workers for transportation and visa costs. Additionally, the 2012 DOL rule revised ETA regulations on audits and debarment, mechanisms intended to ensure employer compliance with labor certification requirements. It also added provisions to allow ETA to revoke an H-2B labor certification after it has been approved in specified circumstances. While the ETA regulations discussed above comprise the main body of the 2012 DOL final H-2B rule, the rule also included regulations by WHD to carry out certain H-2B-related enforcement functions. These functions were delegated by DHS, effective January 18, 2009, to the Secretary of Labor, who, in turn, delegated them to WHD. The final 2012 WHD regulations described the agency's enforcement responsibilities as follows: In general, matters concerning the rights of H–2B workers and workers in corresponding employment under this part and the employer's obligations are enforced by the WHD.... The WHD has the responsibility to carry out investigations, inspections, and law enforcement functions and in appropriate instances to impose penalties, to debar from future certifications, to recommend revocation of existing certifications, and to seek remedies for violations Under the final rule, WHD, like ETA, has independent authority to debar employers for violations. As mentioned above, H-2B employers are required to pay workers the highest of the prevailing wage rate or the federal, state, or local minimum wage. In January 2011, DOL issued a final rule to change the methodology for determining prevailing wage rates for the H-2B program. Under the rule, the prevailing wage rate is the highest of four rates: (1) the wage rate that applies to the job under a collective bargaining agreement, (2) the wage rate that applies to the job under the Davis-Bacon Act, (3) the wage rate that applies to the job under the Service Contract Act, or (4) the average wage paid to workers employed in similar jobs in the area of intended employment, as determined by DOL's Occupational Employment Statistics (OES) Survey. Many interested parties believe that this rule change would generally increase hourly wages for H-2B workers. As noted above, this rule is not currently in effect. Beyond the "H" nonimmigrant category, there are other nonimmigrant visas that cover temporary lower-skilled work. Notable among them is the J-1 visa under the "J" nonimmigrant category for exchange visitors. The J-1 visa is for individuals participating in work- and study-based exchange visitor programs and encompasses a variety of work-related programs. Among them are programs for au pairs, camp counselors, and, as discussed below, students engaged in summer work and travel. The J-1 visa is not numerically limited by law. DOS oversees the various J-1 programs and designates sponsor organizations to conduct program activities. Although many J-1 programs include work, they are not categorized as temporary work programs under the INA and are not subject to standard temporary work program requirements or standard nonimmigrant visa petitioning procedures. For example, the application process for the J-1 programs is different than for the H-2A, H-2B, and other temporary worker programs. Among the differences, the J-1 programs do not require the submission of either a labor certification application to DOL or a nonimmigrant visa petition to DHS. Instead, program administration is handled by the designated sponsors, who are responsible for screening and selecting prospective J-1 participants. An individual who is selected for participation in a J-1 program is issued a form by a sponsor that he or she then uses to apply for a visa at a U.S. embassy or consulate. The largest J-1 program and the one most relevant to a discussion of guest workers is the Summer Work Travel (SWT) program. DOS describes the SWT program as follows: The Summer Work Travel program provides foreign students with an opportunity to live and work in the United States during their summer vacation from college or university to experience and to be exposed to the people and way of life in the United States. SWT participants perform a variety of jobs, but, according to DOS, "work in largely unskilled positions." Among the positions they hold are H-2B-like seasonal jobs at resorts and amusement parks. By regulation, as discussed below, SWT participants are excluded from performing certain types of work, including domestic help in private homes. In April 2011, DOS issued an interim final rule to amend its regulations on the SWT program. The rule became effective in July 2011. In the supplementary information accompanying the rule, DOS explained the need for modifications as follows: The Department has examined the potential risks and harms related to the Summer Work Travel program and believe[s] that the current regulations do not sufficiently protect national security interests; the Department's reputation; and the health, safety, and welfare of Summer Work Travel program participants. DOS cited an increase in the number of complaints about the SWT program during the summer of 2010 involving "fraudulent job offers, inappropriate jobs, job cancellations on arrival, insufficient number of work hours, and housing and transportation problems," as well as more general concerns about the increased incidence of criminal activity, such as money laundering and identity theft, in some unspecified nonimmigrant visa categories. The 2011 rule added new requirements under the SWT program and increased the responsibility of designated sponsors to perform oversight. The program-wide rule built on a pilot program implemented in 2011 that placed additional requirements on SWT participants from six countries due to concerns about criminal activity. The rule established separate sets of job placement procedures for participants from Visa Waiver countries and non-Visa Waiver countries based on the idea that the former faced less risk of harm related to SWT program participation. A main difference was that sponsors had to ensure that participants from non-Visa Waiver countries had job placements when they entered the United States. Under the 2011 rule, sponsors had to vet prospective U.S. host employers and job offers, and they had to ensure that the employers fulfilled their obligations under the SWT program. These obligations included paying participants at least the prevailing wage rate and providing them with the number of weekly hours listed on the job offer. Sponsors also had to screen and vet foreign entities that assist them in conducting core functions of the program, such as participant screening and selection. In addition, the rule expanded the monitoring responsibilities of sponsors, requiring them to contact program participants on a monthly basis. The 2011 DOS rule expanded provisions in prior regulations regarding prohibited work activities under the SWT program. Under the prior regulations, participants could not hold positions as domestic employees in U.S. households or positions that required them to invest money in inventory for door-to-door sales. The 2011 rule clarified the domestic help restriction by providing examples of the types of positions that SWT participants cannot hold: they cannot provide child care or elder care and cannot work as gardeners or chauffeurs. The rule retained the restriction on sales positions that require the purchase of inventory and enumerated other types of prohibited work, such as positions in the adult entertainment industry and positions in clinical care that entail patient contact. In November 2011, in the face of continuing complaints about the SWT program, DOS announced additional limitations on the program in a public notice. It announced that it was restricting the program to the number of participants in 2011 (approximately 103,000) and that it would not designate any new SWT sponsor organizations. The notice indicated that these restrictions would remain in effect until DOS completed an ongoing review of the SWT program and its regulations and "implements the next steps." In May 2012, DOS published a second interim final rule on the SWT program, most of which became effective that month. This rule made changes to the 2011 interim rule and also implemented new regulations intended to enable the U.S. government "to better regulate sponsors in order to protect participants, the program itself, and U.S. communities that support Summer Work Travel participants." As characterized in the supplementary information accompanying the 2012 interim rule, the new regulations "expand sponsors' obligations with respect to the cultural component mandated by the Act [Mutual Educational and Cultural Exchange Act of 1961], clarify characteristics of jobs that are consistent with the purpose of the Act, [and] identify jobs that are inconsistent with the purpose of the Act." Among the new requirements under the 2012 rule, SWT participants must be placed in jobs that are seasonal or temporary, and there must be opportunities for participants to interact with U.S. citizens and experience American culture during the work component of the program. The new rule also placed new responsibilities on sponsors that were intended to protect U.S. workers. For example, under the new regulations, sponsors must confirm each season that prospective host employers will not displace U.S. workers at worksites where SWT participants will be placed. In the supplementary information accompanying the 2012 interim rule, DOS also addressed the issue of a numerical cap. It stated that the SWT program would "proceed for the near future at a level not to exceed 109,000 participants annually." According to USCIS's Student and Exchange Visitor Information System (SEVIS), which maintains information about nonimmigrant students and exchange visitors in the United States, more than 100,000 foreign nationals have participated in the J-1 SWT program each year since 2005 (see Figure 3 ). It is not known, however, precisely how many of these participants held H-2B-like jobs. Policy discussions about guest worker programs necessarily involve consideration of unauthorized workers, who have traditionally performed lower-skilled work in a variety of industries. It is widely believed that most unauthorized aliens enter and remain in the United States in order to work. The Pew Hispanic Center (Center), which regularly analyzes data and issues reports on the unauthorized alien population in the United States, has estimated that there were 8.0 million unauthorized workers in the U.S. civilian labor force in March 2010. These unauthorized workers accounted for 5.2% of the civilian labor force. To prevent unauthorized immigrants from obtaining employment, policymakers have established systems for verifying the employment eligibility of workers. Currently, all employers must examine documents presented by new hires to verify identity and work authorization and must complete and retain employment eligibility verification (I-9) forms. This document review process has been largely undermined by the ready availability of fraudulent documents. Employers may also participate in the E-Verify electronic verification system administered by USCIS. E-Verify is primarily a voluntary program, although there are some mandatory participants. There are ongoing legislative efforts to make E-Verify or a similar system mandatory for all employers. Some are concerned that such a mandatory electronic employment eligibility verification system would result in labor shortages in industries with large numbers of unauthorized workers, such as agriculture. Since the 1990s, a variety of legislative proposals have been put forth concerning guest workers. Some proposals would reform existing programs, while others would establish new guest worker programs for agricultural and nonagricultural workers. Over the years, some proposals have been introduced in Congress as stand-alone bills, while others have been part of larger comprehensive immigration reform measures. Recently, congressional interest in the area of guest worker programs has been focused mainly on temporary agricultural workers. This focus stems, in part, from concerns of Members of Congress that legislative efforts to make E-Verify or another electronic employment eligibility verification system mandatory, as discussed above, would lead to agricultural worker shortages. Over the years, both growers and labor advocates have criticized the H-2A program. Growers complain that the program is administratively cumbersome, expensive, and ineffective in meeting their labor needs. Labor advocates argue that the program provides too few protections for workers. In the late 1990s, representatives of growers and workers reached agreement on legislation to address the foreign agricultural worker issue. The legislation became known as the Agricultural Job Opportunities, Benefits, and Security Act, or AgJOBS. It combined provisions to reform the H-2A program with a program to legalize the status of farm workers though a two-stage process. During the 106 th Congress, AgJOBs legislation became the basis of a bipartisan compromise on foreign agricultural workers, but that compromise fell apart at the end of the 2000s. More recently, AgJOBS titles were included in comprehensive immigration reform bills considered in the 109 th and 110 th Congresses. None of these bills were enacted. Foreign agricultural workers have been a recent focus of attention in Congress, with the immigration subcommittees of both the House and the Senate Judiciary Committees holding related hearings in 2011 and 2012. A number of legislative proposals on agricultural guest workers have likewise been put forward in the 112 th Congress. Some bills would amend INA provisions on the H-2A visa, while others would establish new temporary agricultural worker programs as alternatives to the H-2A program. Still other proposals would couple a legalization program for agricultural workers either with H-2A reform, as in the traditional AgJOBS formulation, or with other changes to current law on agricultural labor. Historically, the H-2B program has not been subject to the same level of employer criticism about administrative burden and expense as the H-2A program. Instead, in years of high demand for H-2B workers, employer criticism and related reform efforts have centered on the statutory annual numerical cap of 66,000. In past Congresses, as discussed above, legislation was enacted to establish a temporary exemption from the cap for certain returning H-2B workers. Following the expiration of that temporary provision in 2007, there were unsuccessful legislative efforts to reinstate some type of returning worker exemption. In addition to these legislative efforts targeted at the H-2B cap, comprehensive immigration reform bills introduced in past Congresses have included provisions related to the H-2B visa and temporary nonagricultural workers generally. Various bills over the years have proposed to make changes to the H-2B visa and to establish new guest worker programs for temporary nonagricultural workers. One feature common to many of the latter proposals for new programs is that they would have enabled employers to hire workers to meet ongoing labor needs on a temporary basis. They would not have been subject to the limitation under the H-2B program that the employer demonstrate a seasonal or temporary need (see discussion of H-2B temporary need requirements, above, and discussion of seasonal or temporary need issues, below). Other H-2B bills in recent Congresses have proposed to reform the H-2B visa by increasing labor protections under the program. These proposals have sought to strengthen protections in various areas, including federal labor law enforcement, recruitment of U.S. workers, and wages. They have likewise included provisions on labor recruiter accountability. Generally speaking, as discussed above, guest worker programs try to achieve two goals simultaneously: to be responsive to legitimate employer needs for labor and to provide adequate protections for U.S. and foreign temporary workers. DOL explicitly addressed the idea of balancing the needs of employers and workers in its 2011 proposed rule on the H-2B visa (the precursor to the 2012 final rule). Supplementary information accompanying the 2011 proposal stated: Although the Department still seeks to maintain an efficient system, it has in this new rule struck a balance between reducing processing times and protecting U.S. worker access to these job opportunities. The balancing of broad guest worker program goals is reflected, in practice, in the particular provisions that proposals include on a range of component policy considerations, such as program administration, the labor market test, and wages, among others. The following discussion focuses on the H-2A and H-2B programs and related legislative proposals. It also references the J-1 SWT program, which provides participating employers with seasonal labor but, as noted above, is not characterized as a temporary worker program under immigration law. As previously mentioned, the H-2A and H-2B programs are administered by DOL and DHS, with DOL making a determination on the labor certification application and DHS adjudicating the nonimmigrant visa petition. Under the INA, as explained above, prospective H-2A employers must apply to DOL for labor certification. In the case of the H-2B visa, the INA does not require DOL labor certification. Rather, it makes general reference to "consultation with appropriate agencies of the Government" as part of the process of adjudicating petitions for "H" and other specified nonimmigrants. The requirement for H-2B labor certification is established by regulation. Under the J-1SWT program, as set forth in DOS regulations, designated sponsors are responsible for program administration. Regulatory and legislative proposals have sought to establish new agency roles in administering guest worker programs. For example, H-2B rules proposed in 2005 by DHS and DOL would have eliminated DOL's labor certification role. Under this proposal, which was ultimately withdrawn in the face of opposition, employers would have applied directly to DHS for H-2B workers and would have included certain labor attestations with their application. In the supplementary information accompanying its 2005 proposal, DHS explained the rationale for the change, as follows: DHS has determined that the H-2B process should be modified to reduce unnecessary burdens that hinder petitioning employers' ability to effectively use this visa category…. The delays in processing applications for labor certification combined with the relatively short period of time for which the worker will be available under current rules have discouraged use of the program. This rule will remove existing regulatory barriers and thus likely lead to more efficiency in the H-2B program. Other proposals would assign administrative responsibility elsewhere. For example, a comprehensive immigration bill introduced in 2005 would have given the Secretary of State primary administrative responsibility for a new nonagricultural guest worker program. A more recent legislative proposal, discussed in the next section, would establish a new temporary agricultural worker visa administered by the Department of Agriculture, in consultation with DHS. A key question about any guest worker program is if, and how, it tests the labor market to determine whether U.S. workers are available for the job opportunities in question. Under both the H-2A and H-2B programs, employers interested in hiring foreign workers must first go through the process of labor certification. Intended to protect job opportunities for U.S. workers, labor certification entails a determination by DOL of whether qualified U.S. workers are available to perform the needed work and whether the hiring of foreign workers will adversely affect the wages and working conditions of similarly employed U.S. workers. Recruitment is the primary method used to determine U.S. worker availability. While there is widespread agreement on the goals of labor certification, the process itself has been criticized for being cumbersome, slow, and ineffective in protecting U.S. workers. A main difference between the DOL H-2A and H-2B rules issued by the George W. Bush Administration in 2008 and the rules issued by the Obama Administration in 2010 and 2012 concerns implementation of the labor market test. As discussed above, the 2008 DOL rules for both programs changed the traditionally supervised labor certification process into an attestation-based certification process. In the supplementary information accompanying its 2008 proposed H-2A rule, DOL cited criticism of the labor certification process as "complicated, time-consuming, and requiring the considerable expenditure of resources by employers." It further stated that its proposals "to re-engineer the H–2A program processing" will "simplify the process by which employers obtain a labor certification while maintaining, and even enhancing, the Department's substantial role in ensuring that U.S. workers have access to agricultural job opportunities." Legislative guest worker proposals in recent Congresses have also incorporated various forms of labor attestation. The 2010 DOL final H-2A rule and the 2012 DOL final H-2B rule return to a supervised, certification-based model of labor certification. In the supplementary information accompanying the 2010 final H-2A rule, DOL identified its "primary concern with respect to its statutory mandate" as "restoring necessary protections to U.S. and foreign workers while maintaining a fair and reliable process for addressing legitimate employer needs." The 2011 DOL proposed H-2B rule echoed these concerns about worker protections: [T]here are insufficient worker protections in the current attestation-based model in which employers merely assert, and do not demonstrate, that they have performed an adequate test of the U.S. labor market and one which is in accordance with the regulations. As detailed above, the 2012 final H-2B rule included other changes to the labor certification process, including an extension of the U.S. worker recruitment period . Despite the differences between the George W. Bush and Obama Administrations' DOL rules, the underlying requirements for employers to recruit U.S. workers are similar. Under both sets of rules, employers are required to cooperate with, and accept referrals of workers from, state workforce agencies and to engage in independent recruitment efforts, such as placing print job advertisements. While U.S. worker recruitment is a standard feature of guest worker programs, such a requirement can take different forms and does not necessarily have to be contained within a larger DOL labor certification process. For example, one 2011 legislative proposal to establish a new temporary agricultural worker visa would require employers to recruit U.S. workers by posting the job opportunity on a DOL electronic job registry; the posting would include the work period, wages, and other terms of employment. DOL would not perform any type of labor certification function. The job posting would be a prerequisite for applying for enrollment in the new program, which would be administered by the Department of Agriculture (USDA) in consultation with DHS. Under the proposal, agricultural employers would submit information that USDA would use to determine the number of agricultural workers required. To prevent adverse effects on similarly employed U.S. workers, the H-2A and H-2B programs require employers to offer wages at or above a specified level. As described above, under the H-2A program, employers must pay their workers the highest of the federal or applicable state minimum wage, the prevailing wage rate, the adverse effect wage rate (AEWR), or the agreed-upon collective bargaining wage. Under the H-2B program, employers must pay their workers the highest of the prevailing wage rate or the federal, state, or local minimum wage. Under the J-1 SWT program, SWT participants must be paid the highest of the prevailing local wage or the federal or state minimum wage. Wage requirements have been a key area of controversy about the H-2A program, which is the only nonimmigrant program subject to the AEWR. Farm labor advocates argue that the AEWR is necessary to protect U.S. agricultural workers from a possible depression of wages resulting from the hiring of foreign workers. Employers have long maintained that the AEWR as traditionally calculated using USDA's Farm Labor Survey data results in inflated wage rates. Legislative proposals to reform the H-2A program or establish new agricultural guest worker programs have typically included provisions to eliminate the use of the AEWR, or, more recently, to redefine the AEWR. The 2011 DOL rule on H-2B wage rates has been highly controversial, with some critics arguing that the new wage requirements will make the H-2B program prohibitively expensive. As mentioned, in response to legislation enacted by the 112 th Congress to prohibit use of funds to implement the new wage methodology for the first six months of FY2013, DOL has postponed the effective date of the rule until March 27, 2013. The H-2A and H-2B programs are, by definition, limited to seasonal or temporary work. They are intended to meet employers' temporary—and not permanent—needs for labor when U.S. workers cannot be found. This "seasonal or temporary" requirement places restrictions on both programs. With respect to the H-2A program, it means that the program cannot be used for year-round agricultural activities absent a statutory provision. There are special provisions that apply to certain year-round activities. For example, the INA definition of the H-2A nonimmigrant visa explicitly permits the use of the H-2A program for the "pressing of apples for cider on a farm." Special procedures also are in place for sheepherders and goatherders to work through the H-2A program. Legislation in recent Congresses has sought to include dairy industry activities—most of which are excluded from the H-2A program as being year-round—in the H-2A program by amending current law. Under the H-2B program, as described above, the employer's need for the duties to be performed by the worker must be a one-time occurrence, seasonal need, peak load need, or intermittent need. Some proposals in past Congresses would have broadened the H-2B visa from a category restricted to temporary need to one covering "short-term" labor. This change, which was not enacted, would have permitted H-2B workers to fill a wider range of job openings. Some past comprehensive immigration reform proposals also would have established new nonagricultural guest worker programs that would not have required a showing of temporary need and, in some cases, would have allowed for the initial admission of workers for two years or more. A numerical cap provides a means, separate from program requirements, of limiting the number of foreign workers who can be admitted annually in a visa category. Currently, the H-2A visa and the J-1 visa are not numerically limited by law. As explained, however, DOS has announced that it is restricting the J-1 SWT program to 109,000 annually. The H-2B program, by contrast, is statutorily capped at 66,000 annually. Like the H-2B program, other capped temporary worker programs in current law have fixed statutory numerical limits. More flexible numerical caps, however, have been incorporated into guest worker proposals in both past Congresses and in the current Congress. For example, a guest worker program that was outlined by former Senator Phil Gramm during the 107 th Congress, but never introduced as legislation, included a numerical cap—one that would have varied annually based on regional unemployment rates. According to the program prospectus released by Senator Gramm: Except for seasonal work, the number of guest workers permitted to enroll would be adjusted annually in response to changes in U.S. economic conditions, specifically unemployment rates, on a region-by-region basis. A comprehensive immigration bill proposed in the 110 th Congress would have established a new nonimmigrant visa with a numerical cap that would have varied based on demand for the visa. A bill introduced in 2011 would establish a new agricultural worker visa with monthly and annual numerical limitations. These caps would be based on data and information provided by agricultural employers and would "tak(e) into consideration the historical employment needs of agricultural employers and the reports of United States workers applying for agricultural employment." Currently, the INA allows for the admission of the spouses and minor children of alien workers on H-2A, H-2B, and other "H" visas who are accompanying or following to join the worker in the United States. While making provision for the admission of guest workers' spouses and minor children enables families to stay together, this practice has been faulted for decreasing incentives for guest workers to return home after their authorized period of stay. Some legislative proposals to establish new guest worker programs would explicitly prohibit family members from accompanying or following to join principal aliens. The issue of adjustment of status, or the change of immigration status to legal permanent resident (LPR) status in the United States, arises in connection with guest worker programs. Legal lower-skilled guest workers have very limited opportunities under current law to obtain legal permanent residence. For those who enter legally but remain beyond their authorized period of stay and lapse into illegal status, the opportunities are even more limited. Various proposals have been put forth in recent years to enable guest workers to adjust status. AgJOBS legislation, as discussed above, combines reform of the H-2A guest worker program with a separate program to legalize the status of agricultural workers. Under AgJOBS, farm workers who satisfy a set of requirements would first apply for a legal temporary resident status and then, after meeting additional work and other requirements, could apply to adjust to LPR status. Some comprehensive immigration reform bills in past Congresses have similarly proposed to change the status of eligible unauthorized workers to a new nonimmigrant worker status, and then, subject to additional requirements, to adjust the status of these nonimmigrants to LPR status. Some immigration proposals would establish special mechanisms for guest workers who enter the United States legally to adjust to LPR status. Proposals that would enable guest workers to seek LPR status take different forms. For example, some past comprehensive immigration reform bills would have established new guest worker visas, together with special mechanisms for participants to adjust status. A policy proposal to replace existing nonimmigrant visas for nonagricultural, nonseasonal work (including some H-2B work) with provisional visas offers another model for facilitating adjustment of status. As described in a 2009 Migration Policy Institute report, provisional visas would provide for the transition from temporary to permanent status for interested and eligible workers. According to the report, the adoption of provisional visas would be most effective as part of a larger reform of temporary worker categories but such a system could also be "overlaid on existing visa categories" with visa holders receiving "the new 'terms and conditions' of visa portability and a predictable path to earning permanent residence." The Obama Administration's 2011 blueprint for immigration reform proposed the creation of a new temporary worker program for lower-skilled workers that seemed to embody these principles. The program would be limited to nonagricultural, nonseasonal workers, who would be given "important labor protections, portability, and the ability to seek permanent residence." Another set of considerations relates to enforcement of the terms of a guest worker program. With respect to the H-2A program, the INA broadly authorizes the Secretary of Labor to take such actions, including imposing appropriate penalties and seeking appropriate injunctive relief and specific performance of contractual obligations, as may be necessary to assure employer compliance with terms and conditions of employment. With respect to the H-2B program, more limited language added to the INA in 2005 authorizes the Secretary of Homeland Security to impose administrative remedies and to deny certain petitions filed by an employer if the Secretary finds "a substantial failure to meet any of the conditions of the [H-2B] petition" or "a willful misrepresentation of a material fact in such petition." The Secretary of Homeland Security is further authorized to delegate any of this enforcement authority to the Secretary of Labor in accordance with an agreement between the two agencies. The Secretary of Homeland Security subsequently made this delegation of authority and now DOL's Wage and Hour Division is responsible for the enforcement of the terms and conditions of H–2B labor certifications. The 2008 DOL final rules on H-2A employment and H-2B employment put in place a compliance model that combined a streamlined labor certification process with post-certification enforcement mechanisms, including audits, civil money penalties, and debarment. In proposing to rewrite these rules and reinstate a model in which employers demonstrate compliance prior to certification, the Obama Administration cited concerns about employer noncompliance with program requirements under the 2008 rules. The 2010 DOL final H-2A rule and the 2012 DOL final H-2B rule incorporate a compliance-demonstration system. In supplementary information accompanying the 2011 proposed H-2B rule (precursor to the 2012 final rule), DOL questioned the appropriateness of a post-certification enforcement system for a temporary worker program, in which "non-compliance would likely be identified through enforcement efforts well after the impacted H-2B workers have returned to their home country or the U.S. workers were already denied employment." Another enforcement-related question is what type of mechanism, if any, ensures that guest workers do not remain in the United States beyond their authorized period of stay. Historically, the removal of aliens who have overstayed their visas and thereby lapsed into unauthorized status, but have not committed crimes, has not been an immigration enforcement priority. Among the related regulatory provisions are provisions establishing notification requirements for H-2A and H-2B employers. DHS regulations on the H-2A visa and the H-2B visa, as modified by the 2008 final rules, require petitioners to notify DHS within two work days when an H-2A or H-2B worker fails to report at the start of the employment period, absconds from the worksite, or is terminated prior to completion of the work, or when the work for which H-2A or H-2B workers were hired is completed early. In supplementary information accompanying the H-2B final rule, DHS explained the purpose of these notification requirements as being to enable DHS to keep track of H–2B workers while they are in the United States and take appropriate enforcement action where DHS determines that the H–2B workers have violated the terms and conditions of their nonimmigrant stay. To help ensure that H-2A and H-2B workers departed the United States at the end of their authorized period of stay, the 2008 DHS final rules on the H-2A visa and the H-2B visa also established a pilot program, known as the Temporary Worker Visa Exit Program Pilot. Under the pilot program, which began in December 2009, H-2A and H-2B aliens who were admitted to the United States at certain designated ports of entry were required to depart the country from one of these designated ports and provide certain biographic and biometric information. According to DHS, the program was "designed to positively record the departure [of workers] by utilizing the biographic and biometric information submitted at the time of entry and departure." The pilot program was discontinued effective September 29, 2011. In the notice announcing the discontinuation of the program, DHS's U.S. Customs and Border Protection (CBP) indicated that during the pilot period, "DHS gathered enough data to assess the pilot's technology, design and implementation and to identify lessons learned that can be applied to programs that may have similar requirements." Other ideas have been proposed to help ensure the departure of temporary workers at the end of their authorized period of stay. One suggestion is to involve the workers' home countries in guest worker programs. Another option is to create an incentive for foreign workers to leave the United States by, for example, withholding from earnings or otherwise setting aside a sum of money for each worker that would become available only once the worker returned home. For many years, there has been broad dissatisfaction with existing guest worker programs and periodic activity to enact reform. The last time Congress considered significant reform to lower-skilled temporary worker programs, it did so in the context of comprehensive immigration reform legislation, in which guest worker programs were an ancillary focus. Today's discussions about possible guest worker reform are focused more squarely on the programs themselves and on the needs of employers and workers. The tension between these often competing needs lies at the core of the debate about how to proceed with reform. The H-2A and H-2B regulations issued by the George W. Bush Administration and the Obama Administration reflect very different views about how to balance employer and worker needs, as do recent legislative proposals. It would seem, however, that in the current environment some type of compromise on employer and worker needs—in the policy areas highlighted here and/or in other areas—may be essential to achieving significant guest worker reform legislatively. Appendix A. DOL H-2A and H-2B Labor Certifications by State Appendix B. DOL H-2B Labor Certifications by Occupation In FY2010, DOL approved 3,726 H-2B labor certification applications. For these applications, DOL approved requests for a total of 86,596 H-2B positions. A majority of H-2B requests certified by DOL are for workers in a few occupations. Table B -1 shows that in FY2010, 64.0% of certified requests were for 10 occupations. One occupation, landscape laborer, accounted for 26.8% of the total number of workers certified. Appendix C. H-2A and H-2B Visa Issuances Appendix D. DHS and DOL Regulations on H-2A and H-2B Nonimmigrants and their Employment in the United States H-2A Regulations: DHS The 2008 DHS final rule on the H-2A visa made various changes to prior regulations. It modified previous limitations on an H-2A worker's period of stay in the United States. Under prior regulations, an H-2A worker who had spent three years in the United States had to remain outside the country for six months before he or she could again be granted H-2A status. The DHS rule reduced this waiting period to three months. The DHS H-2A rule extended the period of time from 10 days to 30 days that an H-2A worker could remain in the United States after the H-2A petition expired in order to prepare to depart or to seek an extension of stay based on a subsequent job offer. In another change, the DHS rule allowed an H-2A worker who was awaiting an extension of stay based on a petition filed by a new employer (and accompanied by an approved labor certification) to begin the new job before the extension of stay was granted, provided that the new employer was a registered user in good standing of E-Verify, the electronic employment verification system administered by USCIS. The DHS rule also established new requirements under the H-2A program. It instituted a prohibition on payments by prospective H-2A workers to employers, recruiters, or other employment service providers where the payments are a condition of obtaining H-2A employment. In addition, the DHS rule limited participation in the H-2A program to nationals of countries designated annually by DHS, with the concurrence of DOS. H-2A Regulations: DOL The 2010 DOL rule on the H-2A visa reversed key changes to the H-2A labor certification process made by the 2008 rule, while retaining other changes made by that earlier rule. The 2010 rule reinstated the type of supervised labor certification process that had been in place prior to the 2008 rule's establishment of an attestation-based certification process. Under the 2010 rule, a prospective H-2A employer must submit a job order to the state workforce agency (SWA) serving the area of intended employment before filing a labor certification application. The job order has to be submitted between 60 and 75 days before the employer's date of need for workers, and it has to include the job qualifications and requirements as well as the required minimum benefit and wage provisions. Either the SWA or DOL can require the employer to submit documentation in support of any job qualification specified in the job offer. Once reviewed and cleared by the SWA, the job order becomes the basis for recruiting U.S. workers to fill the employer's job openings. The employer then must file a labor certification application with DOL at least 45 days before the date of need. The 2010 rule further required DOL to establish an electronic registry of H-2A jobs and to post the job order on the registry once the labor certification application was accepted. As part of the labor certification process, H-2A employers have to offer and provide required wages and benefits to H-2A workers and workers in corresponding employment . The 2010 rule redefined corresponding employment for H-2A purposes as the employment of non-H-2A workers by an employer who has an approved H-2A labor certification in any work included in the job order or in any agricultural work performed by the H-2A workers. With respect to wages, the 2010 DOL rule amended existing regulations to require H-2A employers to pay their workers the highest of four wage rates: the federal or applicable state minimum wage, the prevailing wage rate, the adverse effect wage rate (AEWR), or the agreed-upon collective bargaining wage. The 2010 rule reversed changes made by the 2008 rule to the methodology for calculating the AEWR. It reinstated the wage requirements in effect prior to the 2008 rule, with the addition of the collective bargaining wage. Explaining the addition of the collective bargaining wage, the 2010 rule stated: This amendment requires employers to use a collective bargaining wage if it is the highest wage, thus avoiding the potential payment of a collective bargaining wage that is less than the other wages. At the same time, it acknowledges the role of the collectively bargained wage as a potential legitimate wage. The 2010 rule also reinstated the fifty-percent rule in its pre-2008 rule form. The fifty-percent rule requires an H-2A employer to hire any qualified U.S. worker who applies for a position until 50% of the period of the work contract under which the H-2A workers are employed has elapsed. The 2008 rule took initial steps to phase out this requirement. H-2B Regulations: DHS DHS's 2008 rule on the H-2B visa revised prior regulations in various ways. It changed the definition of temporary employment for H-2B purposes to require the prospective H-2B employer to establish that his or her need for the worker would end in the "near, definable future." While the 2008 rule stated, as did the prior regulation, that the employer's need will generally be for a period of one year or less, it also provided that in the case of a one-time occurrence, the employer's need could last up to three years. The DOL final rule discussed above further clarified that except in the case of a one-time occurrence, an H-2B labor certification application based on an employer's need lasting more than 10 months would be denied, absent unusual circumstances. DHS's 2008 H-2B rule further amended prior regulations to require that an employer have an approved labor certification before the employer could submit a petition for H-2B workers. Previously, an employer whose H-2B labor certification application was denied by DOL could submit an H-2B petition to DHS containing countervailing evidence. In response to this new requirement for an approved certification, DOL established an appeals process in cases of H-2B labor certification denials. Other changes to DHS's H-2B regulations mirrored changes to its H-2A regulations. The H-2B rule, like the H-2A rule, reduced from six months to three months the amount of time that a worker who had spent three years in the United States had to remain outside the country before he or she could again be granted H-2B status. The DHS H-2B rule instituted a prohibition on payments by prospective H-2B workers to employers, recruiters, or other employment service providers where the payments are a condition of obtaining H-2B employment. DHS's H-2B rule also limited participation in the H-2B program to nationals of countries to be designated annually by DHS, with the concurrence of DOS. H-2B Regulations: DOL The 2012 rule discussed here is not in effect, as described above. The H-2B program is currently operating under the 2008 DOL final rule issued by the Bush Administration. The 2012 DOL rule reversed changes made to the H-2B labor certification process under the 2008 rule and reinstituted a certification-based model. It also bifurcated the labor certification application process into distinct registration and application phases and revised application timetables. Under the 2012 final rule, DOL must assess an employer's temporary need for H-2B workers in the registration phase. A prospective H-2B employer is required to submit an H-2B registration 120 days to 150 days before the initial date of need for workers and must receive registration approval before filing a labor certification application. A registration approval could be valid for up to three years. The labor market test is administered by DOL in the subsequent application phase to determine whether U.S. workers are available to fill the job opportunities. Under the 2008 rule, DOL made simultaneous determinations on temporary need and the labor market test. Under the 2012 rule, the employer must file the labor certification application and the job order 75 to 90 days before the date of need. The SWA is required to keep the job order open and continue referring U.S. workers for the job opportunity until 21 days before the date of the employer's need. Under the 2008 rule, the SWA had to keep the job order open for at least 10 days. Under the 2012 DOL H-2B rule, the electronic job registry that was created for posting H-2A job orders was expanded to include H-2B job orders. Under the rule, once DOL accepts the labor certification application, the job order is posted on the online registry. The 2012 final rule made a variety of other changes to the H-2B labor certification process. The 2008 regulations provided that, except in cases of a one-time occurrence, labor certification applications with a period of employer need of more than 10 months would generally be denied. In the 2012 final rule, DOL shortened this maximum period to nine months, maintaining that this new maximum "definitively establishes the temporariness of the position, as there is an entire season in which there is simply no need for the worker(s)." Along similar lines, the 2012 rule limited the participation of job contractors in the H-2B program to cases in which they can demonstrate their own temporary need for workers, not that of their employer-clients. In addition, the 2012 rule required employers to provide workers engaged in corresponding employment with at least the same protections, wages, and benefits as those provided to H-2B workers. Corresponding employment, as defined under the rule, included, with some exceptions, employment of non-H-2B workers performing substantially the same work included in the job order or substantially the same work performed by H-2B workers. Under the 2008 regulations, this "equal treatment" requirement was limited to workers hired in connection with an H-2B labor certification application during the prescribed recruitment period. Furthermore, the 2012 final rule required employers to pay or reimburse workers for transportation and visa costs, and to offer a three-fourths guarantee similar to that under the H-2A program, in which H-2B employers must guarantee payment of wages for at least three-fourths of the contract period. Appendix E. H-2B Wage Requirements DOL H-2B Wage Rule Chronology On October 5, 2010, DOL issued proposed regulations to change the methodology for determining the prevailing wage for H-2B workers. DOL issued a final rule on January 19, 2011. The effective date of the final rule was January 1, 2012. A court ruling invalidated the January 1, 2012, effective date. Therefore, on June 28, 2011, DOL issued a proposed rule to change the effective date of the new wage methodology. On August 1, 2011, DOL issued a final rule setting September 30, 2011, as the effective date for the new wage methodology. In response to two lawsuits that sought to prevent the implementation of the new wage methodology, DOL announced on September 28, 2011, that it was postponing the effective date of the new wage rule for 60 days, until November 30, 2011. On November 18, 2011, the President signed H.R. 2112 , the Consolidated and Further Continuing Appropriations Act, 2012 ( P.L. 112-55 ). The bill stated that DOL could not use funds appropriated by the act to "implement, administer, or enforce" the new wage methodology before January 1, 2012. The bill did not prevent the new wage methodology from going into effect as planned on November 30. DOL determined, however, that if the new wage methodology went into effect, it would not be able to issue wage determinations. Accordingly, the department delayed the effective date of the new methodology until January 1, 2012. On December 23, 2011, the President signed H.R. 2055 , the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ). The act prevented DOL from using funds provided by the act "to implement" the new wage methodology for the remainder of FY2012. In response, DOL announced that it was postponing the effective date of the new wage methodology until October 1, 2012. On September 28, 2012, the President signed H.J.Res. 117 , the Continuing Appropriations Resolution, 2013 ( P.L. 112-175 ). The act prohibits DOL from using funds to implement the new wage methodology until March 27, 2013. In response, DOL announced that it was postponing the effective date of the new wage methodology until March 27, 2013. Comparison of Wage Methodology Under Current and New DOL Regulations Table E -1 compares the wage methodology under the current and new regulations for determining the prevailing wage for H-2B workers. The last column of the table identifies some of the changes that may affect the wages of H-2B workers. Wage Rates Under Current Methodology Under current regulations, DOL uses data from its Occupational Employment Statistics (OES) survey to provide four wage rates based on the level of education, experience, and supervision that the employer requires for the job. These four skill levels are labeled Level I, II, III, and IV. The Level I and IV wage levels (hourly and annual) are estimated by DOL's Bureau of Labor Statistics (BLS) directly from OES wage data. The Level I wage is the average wage for the bottom third of the earnings distribution. The Level IV wage is the average of the top two-thirds of the earnings distribution. The Level II and Level III wages are calculated from the Level I and IV wages. To illustrate the four wage levels, assume that the Level I and Level IV hourly wages estimated from OES wage data are $10.00 and $22.00, respectively. The difference between the Level IV and Level I wage is $12.00. Dividing this difference by three and adding the result to the Level I wage yields a Level II wage of $14.00 (i.e., $12.00 ÷ 3 = $4.00. $10.00 + $4.00 = $14.00). Subtracting the result from the Level IV wage yields a Level III wage of $18.00 (i.e., $22.00 - $4.00 = $18.00).

U.S. employers in various industries argue that they need to hire foreign workers to perform lower-skilled jobs, while others maintain that many of these positions could be filled by U.S. workers. Under current law, certain lower-skilled foreign workers, sometimes referred to as guest workers, may be admitted to the United States to perform temporary service or labor under two temporary worker visas: the H-2A visa for agricultural workers and the H-2B visa for nonagricultural workers. Both programs are administered by the Department of Homeland Security's U.S. Citizenship and Immigration Services (DHS/USCIS) and the Department of Labor's Employment and Training Administration (DOL/ETA). The H-2A and H-2B programs—and guest worker programs broadly—strive both to be responsive to legitimate employer needs for labor and to provide adequate protections for U.S. and foreign temporary workers. There is much debate, however, about how to strike the appropriate balance between these twin goals. Under the George W. Bush Administration, both DHS and DOL issued regulations to streamline the H-2A and H-2B programs. The Obama Administration retained the DHS rules, but rewrote the DOL rules. Arguing that the latter provided inadequate protections for workers, it issued a new DOL final rule on H-2A employment, which became effective in March 2010. The Obama Administration also issued a new DOL final rule on H-2B employment in 2012 and a DOL final rule on H-2B wage rates in 2011, but neither of these rules is currently in effect. Bringing workers into the United States under either the H-2A program or H-2B program is a multi-agency process involving DOL, DHS, and the Department of State. As an initial step in the process, employers must apply for DOL labor certification to ensure that U.S. workers are not available for the jobs in question and that the hiring of foreign workers will not adversely affect U.S. workers. The labor certification process has long been criticized as ineffective, with employers complaining that it is burdensome and unresponsive to their labor needs and labor advocates arguing that it provides too few protections for workers. The H-2A program and foreign agricultural workers in general have been a focus of congressional attention in recent Congresses. Proposals have been introduced as recently as in the 112th Congress that would have amended current law on the H-2A visa, while others would have established new temporary agricultural worker programs as alternatives to the H-2A program. Still other proposals would have coupled a legalization program for agricultural workers with either H-2A or other agricultural labor-related reform. DOL's recent rules on H-2B employment and wages also have been subjects of congressional interest. Guest worker proposals may contain provisions on a range of component policy issues. Key policy considerations include the labor market test to determine whether U.S. workers are available for the positions, wages, and enforcement. The issue of adjustment of status, which means the change to legal permanent resident (LPR) status in the United States, may also arise in connection with guest worker programs. While the discussion of current guest worker programs in this report focuses on the H-2A and H-2B visas, it also covers the Summer Work Travel (SWT) program, the largest of several programs under the J-1 visa for participants in work- and study-based exchange visitor programs. The SWT program is particularly relevant because participants work largely in unskilled jobs, including H-2B-like seasonal jobs at resorts and amusement parks.

Successive U.S. Congresses have endorsed close U.S.-Georgia ties and have supported Georgia's continued sovereignty and independence. Congressional engagement has included humanitarian and other assistance to address economic problems in the 1990s, as well as remediation support in the aftermath of the August 2008 Russia-Georgia conflict. Through appropriations, hearings, and other legislation and oversight, Congress has strongly supported the goals of the 2009 U.S.-Georgia Charter on Strategic Partnership, which pledges boosted U.S. defense and security, trade, energy, and democratization cooperation with Georgia. Among these U.S. interests, NATO and the United States have received significant troop support from Georgia for military operations in Iraq and Afghanistan, and Georgia serves as a land, sea, and air route for the transit of personnel and cargoes to and from Afghanistan along the "Northern Distribution Network." Georgia's strategic location astride east-west and north-south trade and transit routes also is exemplified by its role as part of the "Southern Corridor" for gas and oil pipelines from the Caspian region to European and other international markets. Georgia's October 27, 2013, presidential election—won by Georgia Dream (GD) party coalition candidate Giorgi Margvelashvili—occurred one year after a highly contentious legislative election resulted in a shift of power from the ruling United National Movement (UNM) party, led by President Mikheil Saakashvili, to the (then-opposition) GD, led by businessman Bidzina Ivanishvili. After the change in the majority in the legislature, Saakashvili had voluntarily cooperated with Ivanishvili on many issues formally under presidential purview, including accepting Ivanishvili's elevation as prime minister, his formation of a cabinet government, and other GD policies. However, Saakashvili opposed several GD actions, in particular investigations and arrests of many former government and other UNM officials and the release of many prisoners formerly sentenced for major crimes, including spying for Russia. Many in Georgia and internationally urged the president and prime minister to "co-habit," or seek to tone down rhetoric and cooperate on major issues, during the period between the legislative and presidential elections. The October 2013 presidential election marked Saakashvili's retirement after completing a constitutionally limited two terms in office and heralded a major shift in constitutional power in Georgia. Amendments to the constitution approved in 2010 came into force after the 2013 election to transfer significant executive powers from the president to the prime minister and legislature. While previously the president had nominated the prime minister, the majority party in the legislature now has the right of choice and the legislature is tasked with approving the nominee, his cabinet selectees, and his policy program. Powers that are shifted to the prime minister include appointing local governors and nominating ambassadors (after consultation with the president), and countersigning presidential decrees. The president is directed to consult with the prime minister on such issues as concluding international treaties and to seek legislative approval soon after declaring a state of emergency. The president no longer can dismiss the prime minister or submit bills to the legislature. Perhaps a source of future friction, the president and the prime minister share some security and foreign policy powers. Some observers have suggested that the constitutional changes had been designed to permit Saakashvili to become a powerful prime minister after stepping down as president, but any such plan was mooted by the GD's legislative win in 2012. The Organization for Security and Cooperation in Europe (OSCE) praised the legal framework for Georgia's presidential elections as comprehensive and conducive to democracy. Amendments to Georgia's electoral code were adopted a few months before the election to improve the electoral climate, including by strengthening provisions banning the use of government resources to back a selected candidate and requiring that presidential candidates resign from sensitive government posts. Most observers considered the nomination process for presidential candidates to be inclusive and transparent. Twenty-three presidential candidates were registered by the Central Election Commission (CEC) out of 54 who applied. Most individuals who were refused registration failed to properly gather the necessary 26,530 signatures, although five were rejected for holding dual citizenship, including Salome Zurabishvili, the former foreign minister. The campaign officially began on July 4, 2013, and ended on October 25. According to most polls, the campaign was a face-off between the GD and UNM candidates. The GD nominee was Giorgi Margvelashvili, who prior to the campaign had served as Minister of Education and Deputy Prime Minister. Prime Minister Ivanishvili often campaigned with Margvelashvili and stated on election day that he had voted for him (perhaps constituting a violation of electoral law, according to some observers). The UNM candidate was Davit Bakradze, the leader of the UNM faction in the legislature and a former foreign minister and legislative speaker. According to polls taken before the election, other notable candidates included Nino Burjanadze, the head of the pro-Russian Democratic Movement-United Georgia Party and the former legislative speaker; Giorgi Targamadze, head of the pro-Western and socially conservative Christian Democratic Movement; and Shalva Natelashvili, head of the populist Labor Party. Most observers characterized the campaigning as low-key, with only a half-dozen of the candidates campaigning actively throughout the country. At least some of the candidates may have viewed the campaign as a means to publicize themselves in preparation for local elections in mid-2014. The major events of the campaign included Ivanishvili's announcement in late September that he would allocate $1 billion of his personal fortune to a private equity fund to attract foreign investment and spur economic growth in Georgia. Opposition parties and civil society organizations expressed the view that this blurred the lines between Mr. Ivanishvili's roles as prime minister, GD campaigner, and private citizen. The other major campaign event was Ivanishvili's pledge to step down as prime minister soon after the election of the new president. Margvelashvili and Bakradze attacked each other's policies but mostly avoided most personal attacks, while the campaigns of some other candidates witnessed greater vilification of opponents. Margvelashvili stressed that by voting for a GD candidate, the tension currently existing between the presidency (held by the UNM) and the prime ministership (held by GD) would be eliminated. He seconded GD's stance favoring Georgia's future membership in NATO and the EU, as well as supporting improved relations with Russia. Bakradze called for his election so that the presidency could continue to check the power of the GD-led government. Burjanadze urged voting for someone who would work on rapprochement with Russia and pursue "justice" against former UNM officials. The media environment was judged by many observers to be more balanced than previously. Ivanishvili closed down the family-owned TV9 television station, claiming that it might give an unfair advantage to GD (and also because he stated he could not find a buyer). The Rustavi-2 television station, formerly strongly pro-UNM, also was viewed as providing more balanced coverage. Georgia's Central Electoral Commission (CEC) reported that 46.6% of about 3.54 million registered voters turned out and that Margvelashvili received enough votes (over 50%) to avoid a legally mandated second round of voting for the top two candidates. Margvelashvili won handily, receiving over 62% of the vote, with Bakradze coming in second with about 22% of the vote (see Preliminary Presidential Election Results). Some observers suggested that the relatively low turnout, compared to past elections, could be attributable to the lesser constitutional powers to be wielded by the new president, public sentiment against fundamental political change, and the lack of charismatic UNM and GD candidates. Shortly after the polls closed, Bakradze congratulated Margvelashvili on his victory, pledged to work with him, and asserted that the poll results underlined that the UNM was the premier opposition party. Outgoing President Saakashvili stated that the election demonstrated Georgia's continued democratization and that the results should be respected, but averred that he viewed Margvelashvili's win and the policies of GD a temporary "regress" of Georgia's prospects. He asserted that Bakradze's poll results were very good, given the alleged intimidation that kept many UNM supporters at home, and that the party would be a strong opposition contender in future elections. A preliminary report by observers from the OSCE, the Parliamentary Assembly of the Council of Europe (PACE), the European Parliament (EP), and the NATO Parliamentary Assembly judged that the election was efficiently administered, with voting, counting, and tabulation viewed generally positively. The rights of expression, movement, and assembly were respected by the government and participants during the campaign, so that voters were able to express their choice freely on election day. Compared to the 2012 legislative elections, media were less polarized and many media presented more balanced coverage. The involvement of a large number of citizen observers and groups throughout the electoral process reportedly enhanced transparency. The monitors reported a few "isolated" instances of harassment of party activists by rival supporters and other violence during the campaign period. They evaluated the voting process as good or very good in the overwhelming majority of 1,467 polling stations where voting was observed. The voting process was viewed less positively in 44 polling stations where citizen observers and candidate and party representatives were reported to have interfered in the work of the polling places, and in 190 polling stations where the voting result form (protocol) was not filled in properly. Vote counting was assessed positively in 92 of 102 polling stations observed. The tabulation of voting protocols was viewed as good or very good in the great majority of 65 district electoral commissions observed. An observer group from the National Democratic Institute (NDI), a U.S. non-governmental organization, judged the election as evidence that the country was making further progress in democratization. It pointed out some problems, but judged that they did not appear to have a material impact on the outcome of the election. These included some violence against party workers gathering signatures for nominees or campaigning in various localities, and campaign rhetoric by some candidates that was weighted toward vilification of opponents as "criminals" and "traitors," or which claimed that the electoral process was fraudulent, eroding public trust. NDI warned that such problems could harm future democratization efforts (see also below). The International Society for Fair Elections and Democracy, the largest Georgian domestic election observer group, assessed the campaign as calmer, experiencing only about one-fifth the number of campaign violations as in 2012. It viewed the voting process as procedurally sound in the vast majority of polling places. The presidential election was the first peaceful transfer of presidential power in Georgia, following the first peaceful transfer of legislative power a year previously. The election ended the period of tension that existed between the presidency, held by UNM leader Saakashvili, and the cabinet government and legislature, controlled by GD (termed "co-habitation" by Georgian political observers). In a victory speech a day after the election, Margvelashvili hailed the end of "co-habitation" and the beginning of an era of comity among the presidency, cabinet, and legislature in formulating and implementing GD policies. The election was widely viewed as a popular re-affirmation of last year's shift of governmental power to GD. Although a few polls have appeared to indicate some increased dissatisfaction in recent months with some aspects of GD's stewardship, particularly related to employment and other economic issues, Prime Minister Ivanishvili has remained popular. UNM activists claim that the election showed that the party was supported by a greater percentage of the population than supported it in late 2012, indicating that UNM will survive and recover. They also argue that arrests and investigations of UNM officials, including the Secretary General of the UNM and former prime minister Vano Merabishvili, were unsuccessful in crippling the party in the run-up to the election. Prime Minister Ivanishvili stated that the support given to Bakradze was "surprisingly" higher than he had anticipated and represented a lack of "political culture" in Georgia, and he blamed Bakradze's showing on a low turnout by GD supporters. Some observers argue that Nino Burjanadze's third place finish shows that most Georgians had a cautious view of her plans for improving ties with Russia or for stepped-up prosecutions against former UNM officials. Burjanadze claimed that the vote was fraudulent because of an uneven playing field for the candidates. Nonetheless, she reportedly indicated that she would not oppose the outcome by launching protests. Fourth place finisher Shalva Natelashvili claimed that he had placed second in the election and should have faced Margvelashvili in a second round, but that GD had reassigned many of the ballots, and he demanded a recount. He and his supporters held some protest actions. Some observers regard the relative peacefulness of the election campaign (compared to the October 2012 legislative election violence) as a positive sign that democratization might be consolidating in Georgia. These observers suggest that since elections have become an effective means to change political power in Georgia, the impetus for mass demonstrations and a disruption of the democratic process has been reduced. On the other hand, some observers have raised concerns that with Saakashvili's exit from the presidency and Ivanishvili's intended resignation, a period of political instability could emerge if these former leaders eschew substantial political involvement. Such instability might include the fracture of the UNM or the GD coalition and intense competition or even violence between UNM and GD supporters during local elections in mid-2014. NDI has highlighted a number of trends in Georgian politics over the past year that could harm future democratization progress. These trends include coercion by GD supporters against directly or indirectly elected local executive and legislative officials (who are UNM members) to force them to resign or switch parties; politically motivated harassment of religious, ethnic, political, and sexual minorities and inadequate government responses to such harassment; and a continuing atmosphere of political polarization between UNM and GD. A major question for many Georgians during the election campaign was whether Ivanishvili would follow through on his statements that he would step down as prime minister soon after Margvelashvili's election. On November 2, 2013, Ivanishvili proposed that Interior Minister Irakli Garibashvili be confirmed by the legislature as the new prime minister. Ivanishvili indicated that Garibashvili already had been accepted by the leadership of GD and the legislative majority. Under the constitution, after the legislative majority approves Garibashvili as its candidate, he will be formally designated as the nominee by the president (in this case, soon after Margvelishvili's inauguration on November 17, 2013). The nominee will propose a cabinet and program, which will then be voted on by the legislature. Ivanishvili has stated that he will "move to the civil sector," but will maintain a "big influence" over decision-making processes in the country after leaving office. Observers who predict that Ivanishvili aims to play an influential role in future politics point to various statements, such as his intention to suggest a candidate for the planned 2014 Tbilisi mayoral election. A few observers assert that Margvelashvili's win, and the apparent support by GD for Garibashvili's elevation as prime minister, represents the consolidation of Ivanishvili's power over the political system. Garibashvili, in particular, has had a long career working for Ivanishvili and has pledged, if confirmed as prime minister, to continue Ivanishvili's policies. If Ivanishvili—whose personal wealth rivals Georgia's total GDP—continues to dominate Georgian politics, albeit informally, Georgia may come to more closely resemble other plutocratic developing countries, they suggest. Others dismiss such concerns, pointing to Ivanishvili's philanthropy and his intention to move to the private sector, and argue that Georgian democratization ultimately will be strengthened by the retirement of the "strongman." Some observers have raised concerns about a Georgian political environment in which both former leaders (Ivanishvili and Saakashvili) may wield influence without being formally accountable to the public as officeholders. Saakashvili was re-confirmed as the head of the UNM in August 2013, and has indicated that he will remain interested in politics and perhaps will enter business. Ivanishvili has appeared to make various statements about Saakashvili's possible future prosecution. On the one hand, he reportedly has indicated that he would forgive and reconcile with the former president. On the other hand, he has stated that Saakashvili might be arrested if it is established that crimes may have been committed, and has suggested that the prosecutions undertaken against his former ministers may be signs of Saakashvili's criminal culpability. London's Financial Times has raised concerns that if Saakashvili is soon arrested, the European Union (EU) may postpone or otherwise reconsider initialing an association agreement with Georgia at the late November 2013 Vilnius summit. As one of his last official acts, on October 30, 2013, President Saakashvili issued pardons for nearly 250 UNM officials and activists under arrest or investigation. Since many of the individuals had not yet been charged, Saakashvili may have anticipated a new wave of prosecutions after he steps down. Perhaps indicating continuing prosecutions, former defense minister Bacho Akhalaia was convicted on October 28 to nearly four years in prison on charges of abuse of office. A few days later, he was pardoned by outgoing President Saakashvili, but remains in detention pending trial on other charges. The Russian Foreign Ministry welcomed Margelashvili's election, and raised the hope that he would work to re-establish Georgia's diplomatic relations with Russia. In his victory speech on October 28, Margvelashvili averred that despite difficulties, Georgia-Russia relations had improved in the economic sphere with the opening of some trade, and called for a continuation of talks in Geneva on the return of refugees to Georgia's breakaway regions of Abkhazia and South Ossetia. At the same time, he asserted that Georgia would continue to oppose the recognition of the independence of the breakaway regions. He called for the UNM bloc in the legislature to support GD in the non-recognition policy and other foreign policies. Within a few days of the election, Russian officials affirmed continuing support for the Geneva settlement talks (from which they earlier had threatened to walk out), raised the possibility of a Georgia-Russia meeting at the end of November on improving ties, and approved added Georgian wine imports. On October 28, 2013, in what he termed a farewell address, President Saakashvili apologized "to everyone who became victims of injustice and humiliation," and expressed regret that he was overly trusting of officials in the Interior Ministry and prosecutor's office. He stated that he often was too hasty in pushing through reforms before reaching agreement with stakeholders, and that other reforms in the judicial and education systems lagged. At the same time, he pointed to what he viewed as his accomplishments in combating organized crime and corruption and bolstering national security. On October 28, 2013, the U.S. State Department praised the Georgian presidential election as generally democratic and expressing the will of the people, and as demonstrating Georgia's continuing commitment to Euro-Atlantic integration. The State Department called for all Georgian political forces to work together to ensure Georgia's political stability and stated that the United States looked forward to building upon the strong bilateral strategic partnership and Georgia's Euro-Atlantic aspirations. In his victory speech on October 28, Margvelashvili reaffirmed Georgia's Euro-Atlantic foreign policy orientation, including the pursuit of Georgia's membership in NATO and the EU. He stated that Georgia intended to participate in the EU's Eastern Partnership summit in Vilnius in late November 2013 and to initial association and free trade agreements as a confirmation of GD's "European choice." At the same time, he reiterated that GD would continue to pursue the normalization of ties with Russia. Successive U.S. Congresses have endorsed close U.S.-Georgia ties and have supported Georgia's continued sovereignty and independence. Through appropriations, hearings, and other legislation and oversight, Congress has strongly supported the goals of the 2009 U.S.-Georgia Charter on Strategic Partnership, which pledges boosted U.S. defense and security, trade, energy, and democratization cooperation with Georgia. Marking ongoing congressional concern over democratization trends in Georgia, several Members and staff have observed elections, including the October 2012 legislative and October 2013 presidential elections. Those who observed the latest election include Representative John Shimkus as well as staffers from other offices. Several Members have raised concerns about arrests and investigations launched against former Georgian officials and the implications for democracy and human rights. These concerns have been expressed during meetings with visiting President Saakashvili in May 2013, with visiting Foreign Minister Panjikidze in June and July 2013, and with other visiting GD officials and legislators. H.R. 1960 , the National Defense Authorization Act for Fiscal Year 2014, approved by the House on June 14, 2013, contains language introduced by Representative Michael Turner (§1244) raising concerns that arrests and other violence against former officials and UNM members in Georgia call into question Georgia's progress in democratization and respect for human rights, and threaten to negatively impact U.S.-Georgian political, economic, and security cooperation. Senator John McCain congratulated Margvelashvili on winning what by all accounts was a free and fair election that showed progress in the maturation and institutionalization of democracy. He also applauded outgoing President Saakashvili for his role as a transformational leader and for shepherding a peaceful transition of power through his statesmanship. Senator McCain stated that he hoped to work with the new president to enhance the U.S.-Georgia strategic partnership, including by reaching a free trade agreement, strengthening defense cooperation, deepening Georgia's Euro-Atlantic integration, and supporting Georgia's reclamation of its occupied territories. Senator Jim Risch hailed the election as a peaceful transition of power and called for strengthening the rule of law and institutions in the run-up to the 2014 local elections. He voiced appreciation for Saakashvili's "remarkable" stewardship of Georgia, and hope for a deepening U.S.-Georgia strategic partnership and for Georgia's Euro-Atlantic integration. Representative William Keating congratulated president-elect Margvelashvili and the people of Georgia on a successful election that demonstrated the growing maturity of Georgia's democracy and served as a sign that Georgia is ready to initial an association agreement with the EU in late November 2013. Other U.S. interests include the significant support the United States and NATO have received from Georgia for military operations in Afghanistan, and Georgia's role as a transit route for personnel and cargoes entering and exiting Afghanistan. Georgia also serves as a transit route for gas and oil pipelines from the Caspian region to European and other international markets. Outgoing President Saakashvili and other observers have raised concerns that GD's policy of seeking rapprochement with Russia could jeopardize Georgia's sovereignty and independence and relations with the West. These analysts have argued that Russia's recent signing of security and arms sales agreements with Armenia and Azerbaijan are indicative of Russian attempts to block increased South Caucasian regional security cooperation with the United States and NATO. Georgia's GD-led government has rejected such concerns and insisted that such rapprochement with Russia will not be permitted to jeopardize Tbilisi's commitment to integration with Western institutions such as NATO and the EU. As noted above, U.S. policymakers have generally viewed the Georgian presidential election as evidence of the country's continuing democratization and Euro-Atlantic orientation. They also have indicated that the United States hopes to continue to build ties with Georgia's GD-led government and to deepen the bilateral strategic partnership on defense and security, trade, energy, democracy, and human rights issues.

This report discusses Georgia's October 27, 2013, presidential election and its implications for U.S. interests. The election took place one year after a legislative election that witnessed the mostly peaceful shift of legislative and ministerial power from the ruling party, the United National Movement (UNM), to the Georgia Dream (GD) coalition bloc. The newly elected president, Giorgi Margvelashvili of the GD, will have fewer powers under recently approved constitutional changes. Most observers have viewed the 2013 presidential election as marking Georgia's further progress in democratization, including a peaceful shift of presidential power from UNM head Mikheil Saakashvili to GD official Margvelashvili. Some analysts, however, have raised concerns over ongoing tensions between the UNM and GD, as well as Prime Minister and GD head Bidzini Ivanishvili's announcement on November 2, 2013, that he will step down as the premier. In his victory speech on October 28, Margvelashvili reaffirmed Georgia's Euro-Atlantic foreign policy orientation, including the pursuit of Georgia's future membership in NATO and the EU. At the same time, he reiterated that GD would continue to pursue the normalization of ties with Russia. On October 28, 2013, the U.S. State Department praised the Georgian presidential election as generally democratic and expressing the will of the people, and as demonstrating Georgia's continuing commitment to Euro-Atlantic integration. The State Department called for all Georgian political forces to work together to ensure Georgia's political stability and stated that the United States looked forward to building upon the strong bilateral strategic partnership and Georgia's Euro-Atlantic aspirations. Successive U.S. Congresses have endorsed close U.S.-Georgia ties and have supported Georgia's continued sovereignty and independence. Congressional engagement has included humanitarian and other assistance to address economic problems in the 1990s and remediation support in the aftermath of the August 2008 Russia-Georgia conflict. Through appropriations, hearings, and other legislation and oversight, Congress has strongly supported the goals of the 2009 U.S.-Georgia Charter on Strategic Partnership, which pledges boosted U.S. defense and security, trade, energy, and democratization cooperation with Georgia. Among U.S. interests, NATO and the United States have received significant troop support from Georgia for military operations in Iraq and Afghanistan, and Georgia serves as a land, sea, and air route for the transit of personnel and cargoes to and from Afghanistan along the "Northern Distribution Network." Georgia's strategic location astride east-west and north-south trade and transit routes also is exemplified by its role as part of the "Southern Corridor" for gas and oil pipelines from the Caspian region to European and other international markets.

On September 26, 2006, by a vote of 394-22, the House approved a conference agreement on the FY2007 defense appropriations bill, H.R. 5631 . The Senate approved the agreement on September 29 by a vote of 100-0, and the President signed the bill into law, P.L. 109-289 , on the same day. The bill includes a continuing resolution to run the rest of the government through November 17, after Congress returns from its election recess. Also on September 29, the House approved a conference agreement on the FY2007 national defense authorization bill, H.R. 5122 by a vote of 398-23. The Senate approved the agreement on September 30 by unanimous consent. The President signed the authorization bill into law, P.L. 109-364 , on October 17. The conference agreement on the appropriations bill provides $436.6 billion in new appropriations for defense, including $366.6 billion in regular appropriations and $70 billion in additional appropriations as a "bridge fund" for operations abroad and for some other purposes. The total of regular appropriations is $4 billion below the Administration request. The total amount in the bill was a key issue. The Senate-passed bill provided $9 billion less than the request, which, in turn, allowed increases above the Administration request in non-defense appropriations while remaining within the budget resolution cap on total discretionary spending. But the White House threatened to veto the bill if it trimmed defense by more than $4 billion as a means of providing additional funds for non-security-related programs. The $70 billion in additional funds approved in the conference agreement is $20 billion higher than the $50 billion that each appropriations committee originally provided. In floor action, the Senate had added $16.2 billion in emergency funding. Of that amount, $13.1 billion was added by a Stevens-Inouye amendment to provide funds for the Army and Marine Corps to repair, upgrade, and replace equipment used in overseas operations in Iraq and Afghanistan. The Senate also added $1.8 billion for border security, $700 million for counter drug operations in Afghanistan, $200 million for enhanced intelligence to track down Osama bin Laden, $65 million for Predator UAVs, $20 million for peacekeepers in Sudan, and $175 million for wildfire suppression. In the conference agreement, the $20 billion added to the original $50 billion, is mainly to reset Army and Marine units. In all, according to the House Appropriations Committee, the bill provides over $17.1 billion to fully fund Army and $5.8 billion to fully fund Marine Corps reset costs. The agreement also provides $100 million for Afghan counter-drug operations and $200 million for wildfire suppression, but does not include the other Senate additions. Key issues resolved in the authorization conference agreement included whether, as in the House bill, to alter DOD provisions that require non-denominational prayer, whether, as in the Senate bill, to promote the head of the National Guard to four-star rank, and whether to approve multiyear procurement of the F-22 fighter aircraft. The authorization bill also approves Senate amendments to the Insurrection Act to allow the President substantially expanded authority to used the armed forces in response to domestic emergencies, allows all off-duty reservists, except Federal employees with Federal health insurance, to enroll in the TRICARE health insurance program with a premium or 28% of the program's cost, and provides expanded authority for the Defense Department to use its funds for security assistance to foreign governments. The House and Senate have reached final agreements on the FY2007 defense appropriations bill, and on the FY2007 national defense authorization bill. Tables 1 and 2 track congressional action on those measures. Earlier in the year Congress began, but never completed, action on the annual congressional budget resolution. The Senate passed its version of the resolution, S.Con.Res. 83 , on March 16. The House Budget Committee reported its version of the resolution, H.Con.Res. 376 , on March 31, and floor action began on April 6. But the leadership halted debate in the face of internal Republican opposition to the measure. On May 18, a compromise was announced, and the House approved the measure by a vote of 218-210. There has been no conference agreement on the budget resolution, however. In the absence of an agreement, on May 18, the House also approved a measure "deeming" the provisions of its version of the budget resolution, including a cap of $872.8 billion on total discretionary spending, to be in effect for purposes of subsequent House action. The "deeming" resolution was included in the rule ( H.Res. 818 ) governing debate on the FY2007 Interior and Environment appropriations bill ( H.R. 5386 ). The Senate attached a "deeming" measure to the FY2006 supplemental appropriations bill ( H.R. 4939 ). In action on related legislation, the House passed the Military Quality of Life/Veterans Affairs appropriations bill, H.R. 5385 , on May 19. The bill provides $58 billion for the Department of Defense, including funds for military construction and family housing, for some military personnel accounts, for some military operation and maintenance accounts, and for the defense health program. In the Senate, the military personnel, O&M, and defense health funds are provided in the regular defense appropriations bill, and the military construction and family housing funds are provided in the Military Construction/Veterans Affairs appropriations bill. That bill, also H.R. 5385 , was reported by the Senate Appropriations Committee on July 20, but has not been taken up on the Senate floor. As reported, it provides $16.3 billion for Department of Defense military construction and family housing. The following series of tables show congressional action on defense budget. Additional details will be added as congressional action proceeds. Table 3 shows congressional action on the FY2007 appropriations bills that provide funding for the Department of Defense. These are (1) the defense appropriations bills in the House and the Senate ( H.R. 5631 ) and (2) the military quality of life/Veterans Affairs appropriations bill in the House and the military construction/VA bill in the Senate (both H.R. 5385 ). The House military quality of life/VA appropriations bill includes about $42 billion for Military Personnel and for Operation and Maintenance accounts that are provided in the defense appropriations bill in the Senate. Table 3 shows the total in these accounts by bill. The conference agreement on the defense appropriation bill this year follows the organization of the House-passed bill – last year, the conference followed the Senate. So the totals shown in Table 3 for the conference agreement do not include amounts for military personnel, for operation and maintenance, and for defense health that will be provided in the military quality of live/VA appropriations bill, when it is completed. Please note that while this table shows all appropriations for the Department of Defense, it does not show funding provided in other appropriations bills for defense-related activities of other agencies. The largest amount of non-DOD defense-related funding is for Department of Energy nuclear weapons programs, for which the Administration has requested about $17 billion in FY2007. Funding for DOE defense programs is provided in the annual energy and water appropriations bill ( H.R. 5427 ). Other amounts for national defense not show here include FBI counterintelligence activities financed in appropriations for the Department of Justice and smaller amounts in other bills. Table 4 shows congressional action on the House and Senate versions of the FY2007 defense authorization bill by title. It is important to note that the authorization bill does not directly provide funds for most defense programs (the exception being some mandatory programs). Rather, it authorizes the appropriation of funds. In the appropriations bills, Congress may provide more than, less than, or the same as the amounts authorized to be appropriated, and it may provide funds for programs never specifically mentioned in authorization bills or associated report language. Table 5 shows congressional recommendations for defense budget authority and outlays in versions of the annual budget resolution— S.Con.Res. 83 as passed by the Senate and H.Con.Res. 376 as passed by the House. These amounts are not binding on the appropriations committees, however. Table 6 shows the Administration's FY2007 national defense request, by appropriations title, separating discretionary and mandatory amounts. The total for FY2006 includes a $70 billion placeholder for supplemental appropriations. The final FY2006 supplemental appropriations bill, however, H.R. 4239 , which was signed into law on June 15, P.L. 109-234 , provides $67.7 billion for national defense programs, $2.3 billion less. The total for FY2007 includes a $50 billion placeholder for a budget amendment for overseas operations. If the $50 billion placeholder is removed, the total discretionary request for the Department of Defense is $439.3 billion. This was the amount most often referred to in DOD press releases as the FY2007 Department of Defense request when the budget was released in February. On February 6, 2006, the White House formally released its FY2007 federal budget request to Congress. The request included $513.0 billion in new budget authority for national defense in FY2007, of which $50 billion was a placeholder for a later budget amendment to cover costs of overseas military operations, $441.2 billion was for regular operations of the Department of Defense (DOD), $17.0 billion was for Department of Energy (DOE) nuclear weapons programs, and $4.8 billion was for defense-related activities of other agencies (see Table 6 above). The $50 billion placeholder is not intended to cover the full costs of military operations in Iraq, Afghanistan, and elsewhere in FY2007. Rather, it is a "bridge fund" to cover costs in the initial months of FY2007. Remaining costs for the rest of the year will, if Congress agrees, be covered by a later supplemental appropriations bill. Along with the FY2007 budget request, the Pentagon released the results of the congressionally-mandated Quadrennial Defense Review (QDR) of defense policy. The year-long QDR was not a budget exercise, but it identified the kinds of military capabilities that senior DOD officials believe should be emphasized in years to come, and it endorsed a few budget decisions that were reflected in the FY2007 DOD request to Congress. Aspects of the Defense Department's FY2007 request that appear to be of most immediate concern to Congress include: In the FY2007 budget, the Administration has, for the first time, requested part of the funding to carry on military operations in Iraq and Afghanistan before the start of the fiscal year in the form of a $50 billion budget amendment to the FY2007 request. In this, the Administration has followed Congress's lead—Congress provided a "bridge fund" of $25 billion for Iraq and Afghanistan in the FY2005 defense appropriations bill and of $50 billion in FY2006. By submitting a budget amendment, the Administration gains a more direct and formal voice in proposing how to allocate the additional funds. The Administration will continue, however, to request more additional funding in an emergency supplemental appropriations bill to be submitted next year. Both the "bridge fund" and later supplemental appropriations will be requested over and above proposed limits on overall discretionary spending. The key point remains this: Either in the form of a bridge fund or of emergency supplemental appropriations, the Administration is requesting that additional war funding not count against restrictive caps on regular annual defense and non-defense appropriations. War expenditures, however, have become a very large part of total annual defense spending, and, for that matter, of total defense and non-defense appropriations. For FY2006, Congress approved a $50 billion bridge fund for war costs last fall, and, in June of 2006, it approved additional supplemental appropriations of $66 billion, for a total of $116 billion. A few comparisons may help put this amount into perspective. Regular DOD appropriations for FY2006 were $411 billion, so the $116 billion for war increases defense funding by 28%. In last year's budget resolution, the FY2006 cap on total "non-emergency" appropriations, both for defense and for non-defense programs, was $843 billion, which was subsequently trimmed by 1% to $835 billion. The $116 billion for war adds 14% to federal discretionary funding. At the end of last year's budget cycle, Congress imposed an across-the-board cut of 1% in all appropriations bills, which trimmed federal spending by $8.4 billion, 7% of the amount it is providing for war costs. An equally important point is that DOD requests for "additional" or "emergency" war appropriations are not subject to nearly the extent of review that Congress exercises over regular defense spending. The Administration decision to submit a budget amendment for a bridge fund is, at most, only a limited step in the direction of greater oversight. The amendment has not been submitted in advance of House action on the FY2007 defense authorization bill. Moreover, neither supplemental appropriations requests nor budget amendments are supported by the kind of detailed budget justification material that Congress expects to be provided with regular DOD funding requests. In part because of that, there appears to be a growing sentiment in Congress to the effect that full funding for ongoing military operations should be considered through the regular, annual defense authorization and appropriations process. Viewed in this way, the FY2007 budget appears to carry on the substantial defense buildup that has been underway for the past several years. But the story is a bit more complicated than that. The increase appears so large in part because Congress cut the FY2006 request by $8.5 billion—a $4.4 billion cut in the regular process and an additional across-the-board reduction of $4.1 billion at the end of the appropriations process. Moreover, in an effort to stay within tight limits on overall appropriations for FY2007, the Office of Management and Budget trimmed DOD's FY2007 budget by $3.8 billion compared to the amount that was planned last year for FY2007. Out-year budget projections for the regular defense budget show spending leveling off to very modest rates of growth. The average increase between FY2005 and FY2011 is 1.7% per year above inflation, far below the 5% per year growth between FY2001 and FY2005 (see Figure 1 ). That said, when additional and supplemental appropriations for war are included, total defense spending is continuing to grow. The total increase in defense between FY2005 and FY2006 will be about $56 billion if Congress approves the pending FY2006 supplemental. The increase between FY2006 and FY2007 could be as great. So, the summary story line might be termed the "tale of two budgets." The budget is getting very tight for programs that are funded strictly within the regular defense budget—military service officials have testified that the congressional cuts in the FY2006 defense budget are requiring substantial reductions in some operations. At the same time, supplemental appropriations are soaring, and money is readily available for programs that are tied to the war effort. For FY2006 Congress authorized active duty end-strength of 512,400 for the Army of 179,000 for the Marine Corps. By the end of FY2007, however, the Defense Department plans to restore Army and Marine Corps end-strength to the pre-FY2004, pre-Iraq, "base-line" level—482,400 for the Army, which is 30,000 troops lower than the current authorization, and 175,000 for the Marine Corps, which is 4,000 lower. Many Members of Congress have urged that the current authorized levels be made permanent in order to ease the pace of operations on ground forces. The Administration vigorously opposes a permanent increase, however, arguing that costs are high and that forces can be organized more efficiently to provide required combat troops. Meanwhile, the Air Force plans to eliminate at least 40,000 full-time equivalent positions over the next five years through a mixture of reductions in active duty, reserve, and civilian personnel. And the Navy is cutting 12,000 active duty personnel between FY2006 and FY2007. Though no additional Navy cuts have been announced formally, it is widely expected that the Defense Department will trim an additional 20,000 or so positions from the Navy over the next few years. The Army has been unable to recruit and retain enough troops in the National Guard to reach its authorized end-strength. In the FY2007 request, the Army has requested funding only for 333,000 troops, though, after the budget was released, Army officials said that they would shift money into personnel and other related accounts if recruitment and retention improves. In its future plans, however, the Army projects ARNG end-strength of 333,000. A more controversial issue is the Army plan to reduce the number of new, modularized ARNG combat brigades. As Army officials explain, the purpose of the change is to fully man the new brigades within authorized ARNG end-strength and to fully equip the combat units within available budget constraints. The change will likely mean that ARNG units in some states that will not, as had been planned, be outfitted as new, more capable combat brigades, will lose personnel. The units that remain, therefore, will also likely have less ability to carry out state disaster response and homeland defense missions. As a result, state governors and some National Guard leaders have been very critical of the plan. Since 1999, Congress has approved substantial increases in military pay and benefits. Compared to economy-wide indices, uniformed military personnel now cost as much as 33% more, above inflation, than in the late 1990s. In the FY2007 budget, the Administration is proposing measures to rein in the growth of pay and benefits. The proposed 2.2% military pay raise is the lowest since 1994. And the Administration has proposed increasing fees and co-pays for under-age-65 military retirees who are eligible for medical care through the military Tricare program. This is the first proposed increase in medical co-pays since the current Tricare medical care system for retirees and dependents was established in 1995. With the Defense Department carrying out its Quadrennial Defense Review in 2005, many expected some substantial changes in long-term budget priorities, including some cuts in major weapons programs. The QDR did not, however, make many far-reaching changes in on-going programs, and only a few reductions in weapons plans are reflected in the FY2007 budget request. Two have so far been controversial in Congress— A decision to halt procurement of the C-17 cargo plane in FY2007 after buying 180 of the aircraft since the program began in the mid-1980s; and A decision to drop plans to develop and buy engines for the F-35 joint strike fighter from two manufacturers and, instead, just to buy engines from one company. The official Department of Defense report on the 2005-2006 Quadrennial Defense Review, which was released along with the Administration's budget request in February, stated plainly that the year-long QDR exercise was not intended to be a systematic assessment of major defense programs. Instead, it was designed to provide a vision of the national security challenges facing the nation and to identify the kinds of military capabilities that are needed. True to its word, the QDR report announced very few major program decisions, though it did mention some. Perhaps the most significant is to add 15,000 special operations troops, though without increasing overall military end-strength. For the most part, the QDR report simply endorsed ongoing initiatives, though often with wording carefully designed to keep options for policy-makers open. The result is to leave undecided some very far-reaching defense policy issues. For the Navy, the QDR report endorsed increasing "green" and "brown" water capabilities, construction of new prepositioning ships, 11 rather than 12 deployable aircraft carriers, construction of two attack submarines per year at lower than current prices, and the conversion of a number of Trident II submarine-launched missiles to carry conventional (non-nuclear) warheads. But the report said nothing about other naval force issues. Notably, it did not mention the recently-released Navy shipbuilding plan for a combat fleet of 313 ships. Many question whether that plan is affordable. Regarding fighter aircraft acquisition plans in the Air Force, Navy, and Marine Corps, the QDR report endorsed a revised Air Force plan to stretch out F-22 procurement, but otherwise did not mention the number of short-range fighter and ground attack aircraft needed in the long term. The report put a great deal of emphasis on the need for long-range, prompt, global strike capabilities. This may appear to be at odds with plans to continue large investments in shorter-range strike aircraft that may have limited access to areas of combat in future conflicts, but the report did not address the issue. The report endorsed the Army's plan to reorganize into more deployable, modular combat brigades, but notably did not make an explicit commitment to provide the full funding needed to modularize all active and reserve combat units as the Army has planned. The report also endorsed the capabilities being developed in the Army's Future Combat System development program, but, notably, did not explicitly endorse the program as a whole. The report said very little at all about satellites and other space programs. The only mention of a space program was to endorse an Air Force plan to restructure the Transformational Communications Satellite (TSAT) program to incorporate less risky technology. Other space programs have experienced problems like those in the TSAT program, but these are not mentioned. Space programs overall have grown dramatically as a share of the defense budget, and cost growth in major programs has been pandemic. And a major policy issue is how to protect space based systems from future threats and whether the U.S. security will be advanced by developing offensive space capabilities. The QDR discusses none of these issues. Last year, congressional action on the annual defense authorization and appropriations bills featured extensive debates, first, over policy toward treatment of military detainees, and, toward the end of the year, over the pace of troop withdrawals from Iraq. This year, a continued debate over Iraq policy reemerged in congressional consideration of the FY2006 supplemental appropriations bill ( H.R. 49 3 9 ). That debate was renewed first in the House on June 15-16, when the leadership brought up a resolution ( H.Res. 861 ) declaring "that it is not in the national security interest of the United States to set an arbitrary date for the withdrawal or redeployment of United States Armed Forces from Iraq." The House approved the resolution by a vote of 256-153. The following week the Senate debated Iraq policy in floor action on the FY2007 defense authorization bill. On June 22, the Senate rejected two amendments on Iraq policy, one by Senator Levin calling for a phased reduction of troops to begin this year (rejected by a vote of 39-60) and another by Senator Kerry calling for withdrawal of most forces by July 1, 2007 (rejected by a vote of 13-86). In addition to Iraq policy, other issues have emerged. What follows is a list of selected issues that have come up as debate about the FY2007 defense budget has progressed. Funding cuts in the regular FY2007 defense appropriations bill: Last year, Congress trimmed $4.4 billion from the regular FY2006 defense appropriations bill and applied the money to non-defense appropriations. Later, at the end of the process, Congress trimmed defense appropriations by an additional $4.1 billion as part of an across-the-board 1% cut in all appropriations, as an offset for Katrina-related funding. This year, the Senate took a step to avoid similar guns versus butter trade-offs in the FY2007 budget by adding $3.7 billion to the budget resolution ( S.Con.Res. 83 ) cap on total discretionary spending. As last year, there appears to a considerable amount of opposition in Congress to proposed cuts in non-defense appropriations, and the defense bill may be seen as a source of offsetting funds because of the amount of money available for defense in emergency funding for overseas operations. Limits on emergency funding: The Senate-passed FY2007 budget resolution ( S.Con.Res. 83 ) puts a cap of $90 billion on total emergency funding. War costs, including $50 billion that the Administration plans to request as an attachment to the regular FY2007 defense appropriations bill, plus a later emergency FY2007 supplemental request expected next February, together with requests for funds for Katrina-recovery, bird flu, border security, agricultural disaster relief, and other purposes, will almost surely exceed the cap by a substantial amount. If Congress ultimately approves such a cap, anything above $90 billion would require offsetting rescissions, including, quite likely, cuts in regular defense funding. Providing full funding for overseas operations in regular defense funding bills: Both last year and the year before, the Senate added "Sense of the Senate" language to the defense appropriations bill urging the Administration to request full funding for ongoing military operations in the regular authorization and appropriations bills. The Administration did not concur. But there appears to be more support in Congress for that approach now. On June 14, the Senate approved by 98-0 an amendment by Senator McCain to require the President to request funding for Iraq in its regular, annual budget submission. Army and Marine Corps end-strength: The Administration is proposing ground force active duty end-strengths at the pre-2004 baseline level. Congress added 30,000 to Army and 4,000 to Marine Corps end-strength in FY2006, and there appears to be a great deal of support in Congress, particularly, but not only, among Democrats, for a permanent end-strength increase. Funding for Army National Guard end-strength: The FY2007 Army request trims about $500 million from Army personnel accounts and additional amounts from operation and maintenance accounts to reflect a troop level of 333,000 in the Army National Guard rather than the 350,000 authorized. Congress may mandate a higher force level. 2.2% pay raise: Every year between 2001 and 2006, Congress approved an increase in basic pay of ½% above the employment cost index (ECI), a measure of the average growth of nationwide pay and benefits. An increase of ECI + ½% was mandated for 2004, 2005, and 2006 in the FY2004 national defense authorization act ( P.L. 108-136 ). Now that provision has expired, and the normal pay raise, established in Section 1009 of Title 37, U.S.C., is equal to the ECI. The Administration, accordingly, has requested a pay raise equal to the ECI, which, for calendar year 2007, is 2.2%. If approved, that would be the lowest pay raise since 1994. There is considerable sentiment in Congress to provide more. Increased TRICARE fees and co-pays for under-65 retirees: There is also considerable sentiment in Congress against the Administration's proposed increases in fees and co-pays for TRICARE for retirees. The Administration argues, however, that rising medical benefits threaten to drive up military personnel costs substantially, and that concern has gained some traction in Congress. Flexibility for the Defense Department to provide support to foreign nations : The Defense Department made a number of legislative proposals to expand its flexibility to provide various kinds of support to foreign nations that, in the past, have generally been provided through foreign assistance programs. Several of these proposals expand or make permanent temporary measures that Congress has approved in bills providing funds for operations in Iraq and Afghanistan. The most expansive DOD proposal is to permit the Secretary of Defense, with the approval of the Secretary of State, to use up to $750 million of defense funds per year to build the capacities of foreign militaries to engage in counterterrorist operations or to participate in or support stability operations in which the United States is engaged. Funding for National Guard and reserve equipment: Funding for Guard and reserve units has become a more contentious issue in recent years, particularly as states look to National Guard units as the front line in possible homeland defense missions. Adding a representative of the Guard and reserve components to the Joint Chiefs of Staff: Several Senators have sponsored a bill to establish a 4-star rank reserve officer to serve on the JCS. The services have opposed such a measure. Retiring an aircraft carrier: The Defense Department wants to reduce the number of deployable aircraft carriers from 12 to 11. Last year, Congress included a provision in the FY2006 defense authorization act to prohibit such a reduction. Senator Warner, the Chairman of the Senate Armed Services Committee, now supports retiring a carrier, but there is still some opposition. The issue was initially addressed in action on the FY2006 supplemental appropriations bill, H.R. 4939 , when Senator Warner proposed an amendment to permit retirement of the U.S.S. Kennedy aircraft carrier. That measure was not approved in the conference agreement on the bill, however. As a result, the Senate addressed the issue in the FY2007 appropriation authorization—see below. Halting C-17 production: The Defense Department did not request funds for new C-17 cargo aircraft in FY2007, and instead asked for funding only to terminate production after 180 aircraft have been produced. The Air Force, however, included in its FY2007 unfunded priorities list (UPL) a proposal for 7 C-17s as replacements for aircraft that may be worn out due to excessive wartime use. Some legislators want to keep production lines open for the foreseeable future. B-52, F-117, and U-2 retirements: The Air Force has proposed cutting the number of active B-52s from 94 to 56 and retiring F-117 stealth attack aircraft and U-2 reconnaissance planes. In the past, Congress has repeatedly rejected Air Force proposals to retire B-52s. Stretching out F-22 procurement: The Air Force has requested stretching out F-22 production almost until F-35 procurement begins. The financing mechanism that it has proposed, however, violates long-standing DOD and Office of Management and Budget policy that requires full funding of complete end-items of equipment in annual appropriations for procurement programs. The stretch-out will increase total procurement costs, even though the Air Force wants to negotiate a multi-year contract for the remaining production. In the past, Congress has rejected Air Force proposals that violate the full funding policy, though it has supported incremental funding for more costly Navy ships. Eliminating funds to develop a second engine supplier for the F-35 Joint Strike Fighter: DOD has proposed eliminating development of an alternate engine for the F-35. This would save about $1.7 billion in development costs through FY2011, according to the Air Force, but it would also eliminate the benefits of ongoing competition between engine producers. Congress has held several hearings on the issue. Even senior DOD officials testifying on the matter have acknowledged being unenthusiastic about the proposal. A new refueling aircraft for the Air Force: While studies have found that current KC-135 refueling aircraft remain reliable, the Air Force wants a new tanker, arguing that possible corrosion of KC-135 air frames is a danger. Most recently, DOD has approved an initial request for information from industry about tanker options, the first step in acquiring a new aircraft. Converting Trident II missiles to carry non-nuclear warheads: The Quadrennial Defense Review placed a new, high priority on capabilities to strike targets promptly at long range. In the short term, DOD is proposing to convert several Trident II missiles to carry non-nuclear warheads for rapid strike missions. Congress has balked at providing the funds requested for the program until it can address key questions. In addition, beginning some time after 2015, DOD is proposing to build a new, long-range strike system, which could be a manned or unmanned bomber. Satellite and other space program acquisition: For the past several years, Congress has expressed its displeasure with large cost growth and extensive schedule delays in a number of DOD space programs. Congress has cut funds substantially and mandated restructuring of some programs, including the Transformational Communications Satellite (TSAT) and Space Radar programs. Press accounts have also reported large changes in the highly classified Future Imagery Architecture program. The Administration has announced a plan to restructure the TSAT program to rely on less risky technology. The continuing issue for Congress is whether recent changes in space programs have reduced risk sufficiently and how fast new programs should proceed. Missile defense funding and testing: Missile defense remains the largest acquisition program in the defense budget. Congress has been reluctant to cut funding in the past, though it has trimmed some programs and defense committees have expressed concern about the testing program. The Missile Defense Agency now deploying ground-based interceptors in Alaska though the deployed system has not been tested as an integrated whole. One issue for Congress may be whether to tie funding to the test program. Acquisition reform: Last year, Congress approved a measure intended to improve tracking of cost growth in weapons programs by requiring that the Defense Department report changes compared to original estimates of the costs rather compared to periodically rebaselined program estimates. The result has been to show a substantial number of acquisition programs with cost growth exceeding or approaching levels that would trigger a program review under the requirements of the Nunn-McCurdy amendment. Last year Congress rejected, however, a requirement that programs with excessive cost growth be reevaluated compared to alternatives. In March, Congress began action on the annual congressional budget resolution, but did not reach a conference agreement. In its place both the House and the Senate approved measures "deeming" a cap of $827.8 billion on total discretionary funds to be in place. For amounts recommended for national defense in the House and Senate resolutions, see Table 5 above. The Senate Budget Committee reported its version of the budget resolution on March 10, and the full Senate approved the measure, S.Con.Res. 83 , with amendments, on March 16. The committee recommended a level of defense spending about $3.7 billion below the Administration request. In floor action, the Senate adopted amendments that added $4 billion to the recommended defense total. The Senate also approved an amendment by Senator Lott to add $3.7 billion to the enforceable cap on total discretionary funding. This was intended to avoid cuts in defense appropriations as offsets for higher levels of non-defense spending. The Senate measure also put a limit of $90 billion on total emergency funding in FY2007, which is substantially below the amount that appears likely to be requested to finance ongoing military operations and domestic disaster-response commitments. This effort in the Senate to place constraints on emergency spending may become a major issue when Congress takes up an expected FY2007 supplemental appropriations request early in calendar year 2007. The House Budget Committee reported its version of the budget resolution, H.Con.Res. 376 , on March 31. The committee measure recommended the Administration-requested level of defense spending. The leadership did not bring the measure to the floor in April in the face of internal Republican opposition. In May, however, Republicans agreed on a measure that may provide room for a substantial increase in funding for some domestic discretionary programs while officially still adhering to the Administration's proposed cap on total discretionary spending. The House passed the revised measure on May 18 after rejecting several alternative budget resolutions. The House resolution includes a cap only on non-defense emergency funding. In the end, the House and Senate did not reach a conference agreement on the budget resolution. In its place, both the House and the Senate passed measures "deeming" all or parts of their different resolutions to be in effect for purposes of subsequent action on appropriations bills. The House deeming measure was attached to House Resolution 818, approved on May 18, which was the rule for floor consideration of the Department of the Interior appropriations bill. The House deeming language adopted the House-passed budget resolution in its entirety. The Senate deeming measure was attached to the FY2006 emergency supplemental appropriations bill, H.R. 4939 , P.L. 109-234 , which was signed into law on June 15, 2006. The Senate deeming language adopted only Sections 401 and 402 of the Senate-passed budget resolution. Section 401 established caps on regular appropriations and Section 402 permitted additional emergency appropriations for specified circumstances and within specified limits. The House Armed Services Committee marked up its version of the FY2007 defense authorization bill, H.R. 5122 , on May 3, and the House passed the measure on May 11. Highlights of the committee's bill and of floor action follow. The Senate Armed Services Committee marked up its version of the bill, S. 2766, on May 4 and reported it on May 9. Floor action in the Senate began on June 12, and the Senate passed by measure on June 22. Highlights of the committee's bill and of floor action are discussed below. Also Table 4 , above, shows the amounts authorized in each version of the defense authorization bill by title. Table A-4 in the Appendix to this report compares House and Senate authorized funding for selected major weapons programs. The House approved a conference agreement on the bill on September 29, and the Senate approved it on September 30. It is important to note that the defense authorization act does not provide funding for most defense programs, only the appropriations acts do. The appropriations acts may provide more than, less than, or the same as the amounts authorized for various programs; may provide money for programs not authorized, including new starts of programs; and may put restrictions on the use of funds that are not in the authorization or that are at odds with provisions in the authorization. The House Appropriations Committee marked up its version of the FY2007 defense appropriations bill, H.R. 5631 , on June 13, and the full House debated and approved the measure on June 20. The Senate Appropriations Committee marked up its version of the bill on July 20, and the full Senate began debate on the bill on August 1 and finally approved the bill on September 7. A conference agreement on the bill was announced on September 21, reported on September 25, and approved in the House on September 26 and in the Senate on September 29. Table 3 , above, shows funding provided in the bill and in the Military Quality of Life/VA appropriations bill in the House and in the Military Construction/VA bill in the Senate. Among the very broad range of issues that the House authorization bill addressed a few major points stand out. One is that the House Armed Services Committee appeared to have put somewhat more emphasis than DOD on maintaining current military capabilities than on pursuing long-term defense transformation. This was particularly true for some programs in which the risk of delays and cost growth in weapons development appears high. The committee seemed more inclined to support the current Army modularization program, for example, than to continue investing increasing amounts in the Future Combat System. Similarly, the committee slightly trimmed higher risk missile defense technologies in favor of more immediately deployable systems. And the committee continued, as it did in past years, to cut funding for satellite programs that may be seen as reaching too far ahead with technologically risky approaches, though cuts in the Transformational Communications Satellite (TSAT) and the Space Radar were not nearly as large as congressional cuts in the past two years. Another key point is that the committee supported larger Army, Marine Corps, and Army National Guard end-strength than the Administration wants. This may have very large long-term budget implications. Also, as in the past, the committee was reluctant to support proposed cuts in weapons programs. It did not agree to halt production of the C-17 cargo aircraft, for example, and it restored funds to develop an alternative, second engine supplier for the F-35 Joint Strike Fighter. The committee also did not fully support Administration proposals to rein in the cost of personnel pay and benefits, and it added a substantial new health benefit for reservists. The committee increased the proposed military pay raise from 2.2% to 2.7%, it rejected the DOD proposal to reduce health care costs by increasing under-65 retiree medical fees and co-pays, and it made all reservists, except federal employees covered by the government health insurance program, eligible to enroll in the TRICARE medical insurance program with a fee of 28% of the cost. The committee did approve one measure to increase co-pays for some prescription drug purchases. Significantly, the Committee did not approve a number of Administration proposals to give regional combatant commanders greater authority and resources to build the capabilities of foreign military forces. The Senate Armed Services Committee, in contrast, approved most of the Administration's proposals, although with some restrictions. Finally, the committee slowed down two programs that might be seen to have negative international diplomatic consequences—one to develop a laser that might be used as an anti-satellite weapon and the other a high-profile Administration proposal to convert some Trident II missiles to carry conventional (non-nuclear) warheads. Highlights of committee action include: $50 billion bridge fund for overseas operations: The committee approved $50 billion in emergency funding for costs of military operations in Iraq, Afghanistan, and elsewhere in FY2007. In FY2006, total costs of overseas operations were almost $120 billion, so average monthly $12 billion. If that rate continues, the bridge fund will cover costs for the first five months of FY2006—that is, through January, 2007. Additional funds will then be needed to cover costs for the remaining seven months of the year. Ground force end-strength: The committee bill increased Army end-strength by 30,000 (to 512,400), and Marine Corps end-strength by 5,000 (to 180,000). The bill also authorizes funding for an end-strength of 350,000 for the Army National Guard, 17,000 above the request. End-strength may be a major dispute between Congress and the Administration this year. Pay raise: The bill provided a pay raise of 2.7% for uniformed personnel, rather than the 2.2% requested. Tricare fees and co-pays for under-65 retirees: The bill rejected increases in retiree fees and co-pays through December 31, 2007 and established a task force to consider ways to control DOD medical costs. Tricare for reservists: The committee added an amendment in full committee markup to allow all reservists—except federal employees eligible for the government health insurance system—to enroll in Tricare by paying 28% of the cost of the program (the same cost share as federal employees pay). Last year, in the conference on the FY2006 authorization bill, Congress rejected a similar Senate amendment. Instead, Congress made Tricare available, with a fee of 50% of the cost, to reservists who were unemployed or who did not have access to employer-provided health insurance. The committee action is especially significant because the House, for the first time, approved Tricare for reservists in its version of the defense authorization—the Senate approved it for the past two years. Budget scoring of TRICARE-for-Life costs: In the FY2001 national defense authorization act, P.L. 106-398 ,Congress made over-65 military retirees eligible to receive medical care through the DOD TRICARE program as a supplement to Medicare. This has proved to be an expensive increase in benefits. In FY2007, the DOD budget includes more than $11 billion for contributions to the Medicare Eligible Retiree Health Care Fund to cover the actuarially determined cost of future benefits for current uniformed personnel. In the FY2005 defense authorization, P.L. 108-375 , Congress approved a measure intended to count those costs not as expenses of the Defense Department, but as costs to the general treasury. The provision expressed the sense of Congress that the shift in costs should not reduce the defense budget, but should, instead, permit an increase in funding for weapons programs and other defense priorities. The Office of Management and Budget (OMB), however, continued to score the contributions as discretionary funds in the Department of Defense budget, though as permanent rather than as annual appropriations. OMB also urged the chairmen of the House and Senate Budget Committees to direct the Congressional Budget Office to score the contributions in the same way, and both chairmen agreed. In its version of the FY2007 authorization, the House Armed Services Committee included a provision directly mandating that the costs of TRICARE-for-Life contributions not be scored as part of the DOD budget after FY2007. Death gratuity for federal civilian personnel: The bill provided the same death gratuity for civilian personnel killed in support of a military operation as for uniformed personnel. The FY2006 National Defense Authorization Act ( P.L. 109-163 ) increased the military death gratuity from $12,000 to $100,000. Funding for readiness: The committee objected to cuts in ship steaming days, flying hours, and depot maintenance and shifted $856 million from other programs in service operation and maintenance accounts to finance increases in these readiness-related activities. Army Future Combat System development: The committee expressed concern about cost growth, schedule delays, and the long-term affordability of the FCS program, cut $326 million from the $3.7 billion requested, and mandated a formal DOD review of program with a go/no go decision to be made by the end of 2008. Army modularization: The committee expressed concern about the affordability of the Army's program to build a new modular brigade-centered force structure in view of potentially competing costs of the FCS and of resetting the force after Iraq. The committee added funds for M-1 tank and Bradley Fighting Vehicle upgrades, saying that these programs were required to support modularization. It also required the Army to provide a long-term funding profile. Guard and reserve equipment: The committee added $318 million for Army National Guard (ARNG) equipment to support its addition of 17,000 to ARNG end-strength. Navy shipbuilding: The committee added $400 million in advance procurement to support building two Virginia-class submarines in FY2009, rather than the one now planned. The Navy has objected on the grounds that it will require too much money in FY2009 for submarines at the expense of other programs. The committee also mandated a submarine fleet of 48 boats, which is what the Navy currently plans. The committee approved the same amount of funding that the Navy requested for DD(X)/DDG-1000 destroyer procurement, but allocated all the funds to buy one ship rather than split the funding between two ships. This is of concern to some shipyard proponents, who want to begin providing funding to two shipyards. Last year, the committee had proposed eliminating the DD(X). Notably, the committee rejected an amendment in the full committee markup by Representative JoAnne Davis to provide advance funding for common long-lead items for three new aircraft carriers. Though the committee appears to support the Navy's 313 ship plan, it does not seem ready to lock in funding for some aspects of the Navy program. F-22 procurement profile: The committee rejected the Air Force plan for incremental procurement of the F-22 and added $1.4 billion in FY2007 ($2 billion was requested) to cover the full cost of buying 20 complete aircraft. F-35 alternate engine and development concurrency: The committee rejected the Air Force proposal to halt development of an alternate engine for the F-35 Joint Strike Fighter and added $408 million for second engine R&D. The committee also trimmed $241 million from long-lead funding for aircraft to be procured in FY2008, citing excessively concurrent development and procurement in the program. C-17 procurement: The committee added $300 million for three C-17s in Title IX of the bill, which authorizes emergency funding for overseas operations. The committee also required the Air Force to operate at least 299 heavy-lift cargo aircraft. So the committee would mandate at least seven more C-17s, rejecting the Administration's plan to terminate C-17 production after FY2007. B-52 and U-2 retirements: The committee prohibited any B-52 retirements until a replacement capability is available (which is not planned until some time after 2015) and prohibited retirement of any U-2s unless DOD certifies that the aircraft are not needed to mitigate any reconnaissance gaps identified in the Quadrennial Defense Review. Missile defense: The committee cut a net total of $185 million from missile defense R&D. It added $20 million for ground-based mid-course defense (GMD) testing and $40 million for Navy ship-based interceptor systems. It cut $100 million from the boost-phase Kinetic Energy Interceptor (KEI) program, $56 million for activating a third GMD site in Europe since no site has been agreed to, $65 million from the multiple kill vehicle program, and $41 million for a high-altitude airship sensor program. The committee also prohibited expenditure of $200 million for the GMD program until the system has completed two successful intercept tests. The committee also included a policy provision requiring a report on the purpose, costs, vulnerability, and international diplomatic implications of space-based interceptors. Space systems: The committee cut $80 million from the Transformational Communications Satellite (TSAT) program and $30 million from the Space Radar, reflecting continued congressional concern about technical risks in both programs. The committee provided $20 million and established a new office to promote development of new, low-cost, rapidly deployable satellites. Anti-satellite weapons: The committee included a policy provision that prohibits the use of funds to develop laser space technologies for anti-satellite weapons. This provision may be a response to Air Force development of such capabilities at a laser and optics test facility in New Mexico. Trident II missile conversion: The committee included a policy provision requiring consultations with allies about the Quadrennial Defense Review decision to convert Trident II missiles to carry conventional warheads. Information technology funding cut: The committee cut $341 million from DOD information technology programs, which total $31 billion, as one means of offsetting increases in other programs. VH-71 Presidential helicopter funding cut: The committee trimmed $39 million from the program due to development delays. Department of Energy nuclear weapons programs: The committee required the Energy Department to submit a report on plans to transform the nuclear weapons production complex and specified a number of policy objectives. Cooperative threat reduction with the former Soviet Union: The committee cut $35 million for a U.S. supported Russian system to convert plutonium to non-weapons-grade fuel because of concerns that the system could, in fact, produce more plutonium. And the committee cut another $115 million from $290 million requested for another plutonium conversion technology. Acquisition of programs with large cost growth: The committee approved an amendment in full committee markup that would require DOD to allow competing contractors to make challenge bids for work on programs that exceed critical cost growth ceilings—currently 25% growth over original estimates. DOD support for foreign nations: The committee included in the bill a DOD proposal to allow up to $200 million a year to be used for logistical support of foreign nations engaged in combined military operations with the United States and to permit DOD to provide equipment temporarily to foreign military forces in combined operations. It did not include the DOD proposal to use defense funds to build the capacity of foreign militaries for counterterrorism or stability operations, as the Senate Armed Services Committee did (see below for a discussion), nor did it approve other, related Administration proposals. Provisions restricting acquisition of foreign-made items in defense acquisition: As it has in the past, the House Armed Services Committee included a number of provisions in its version of the authorization bill to limit defense acquisition of foreign-made goods. One provision, Section 812, would prohibit defense contracts with a foreign company that has received government subsidies. Another, Section 831, would prohibit procurement of a specialty metal or item critical to national security unless it is reprocessed, reused, or produced n the United States. Section 832 would establish a board to identify items critical to national security. Prohibition on procurement of items from companies that provide defense goods to China: The House committee also included a provision, Section 1211, that would prohibit defense purchases from any company that provides material on the U.S. Munitions List to China. On May 9, the House Rules Committee considered almost 100 proposed floor amendments to the authorization bill. In an initial rule on the bill, it permitted just eight of them, and in a second rule, permitted 27 more—12 as part of three en bloc amendments and another 15 amendments that were debated separately. Democrats objected to the Rules Committee's refusal to permit several amendments, including an amendment by Representative Skelton, the ranking Democrat on the Armed Services Committee, that would have reversed a measure in the committee bill that increased co-pays for some prescription drug purchases. Perhaps the most high profile amendment to pass (by a vote of 252-171) was a proposal by Representative Goode to permit the Secretary of Defense to assign military personnel to support the Department of Homeland Security in border protection. Mr. Goode has offered a similar amendment for the past several years, and before that, Representative Traficante perennially offered a similar measure. The amendment has often passed in the House but has never been accepted in the final conference agreement. This year, there was an extensive floor debate. And after its approval, the President proposed a program to deploy 6,000 National Guard troops to support border operations. The House repeated another perennial debate over an amendment by Representatives Andrews, Davis (CA), Sanchez (CA), and Harman to permit privately funded abortions for U.S. military personnel or their dependents at military hospitals overseas. It was rejected by a vote of 191-237. The House also rejected, by a vote of 124-301, an amendment by Representative Tierney to cut $4.7 billion from the Missile Defense Agency budget and allocate the funds to other defense priorities. And the House rejected, by a vote of 202-220, a motion by Representative Salazar to recommit the bill to committee with instructions to report back a measure that includes an amendment to change current procedures under which Survivor Benefit Plan benefits are reduced. Under current law, benefits to survivors of those who die while in service are reduced by the amount of Veterans Affairs benefits. Other amendments permitted by the rule were all approved by voice vote. One measure that passed was to require a study of the health impact of past ocean dumping of chemical weapons. In general debate on the bill, both Democrats and Republicans on the Armed Services Committee repeated lauded the committee bill as a bipartisan measure that was approved in the committee by a vote of 62-1. Table 7 summarizes House floor action on selected amendments. The Senate Armed Services Committee marked up its version of the defense authorization, S.  2769 , on May 4. A few themes stand out in the markup. One is that the Senate committee approved 30,000 more troops than requested for the Army and 5,000 more for the Marine Corps and also authorized 350,000 troops for the Army National Guard (ARNG), 17,000 above the number for which the Army requested funding. The House also approved the same, higher end-strength for ground forces. So Congress did not agree with Administration plans to reduce active ground forces to the pre-Iraq level. The Senate committee also undertook a number of initiatives to strengthen government-wide capabilities to engage in counterterrorism and stability operations. One potentially far-reaching initiative is to agree to an Administration proposal to expand the authority of regional military commanders to train and equip foreign military forces and to provide humanitarian and other assistance to foreign nations. These activities have traditionally been managed by the State Department under legal authorities that include, among other things, human rights conditions. In bills funding operations in Afghanistan and Iraq, Congress has temporarily provided some of this authority, but the Administration wants Congress to write it into permanent law. The committee restricted funding for the most far-reaching measure to two years, saying that the program it should be regarded as a pilot project with an assessment to follow. The committee also required consultations with ambassadors and did not agree to allow waivers of human rights and other restrictions on assistance. The Senate committee appeared more supportive of the Army Future Combat System (FCS) than the House committee, and provided the full $3.7 billion requested for the program. The committee did, however, mandate a review of the program, including an independent cost estimate of the program itself and of all associated Army programs. If the most recent Army cost estimates for the FCS appear unstable, Congress may consider ending or substantially restructuring the program. Highlights of the committee markup include: Total funding: The Committee authorized $517.7 billion for defense discretionary programs, including $50.0 billion in emergency funding overseas operations and $467.7 billion in budget including authority for DOD, DOE and other non-emergency programs. The total is $4 billion above the request and above the House authorization. Army and Marine Corps end-strength: The committee authorized end-strengths of 512,400 for the Army, 30,000 above the request, and of 180,000 for the Marine Corps, 5,000 above the request. Army National Guard end-strength: The committee also approved an end-strength of 350,000 for the ARNG, 17,000 above the request, and stipulated that, if the Army fails to recruit and retain enough personnel to meet the authorized level, and money saved may be used only to procure ARNG equipment. Military pay raise: The committee approved the requested pay raise of 2.2% rather than the 2.7% raise the House authorized. TRICARE fees and co-pays for under-65 retirees: As did the House, the Committee rejected increases in retiree TRICARE fees and co-pays. The Committee also required the Government Accountability Office to carry out a full audit of DOD health care costs, including comparisons of the Administration's proposed fee increases with increases in federal civilian health insurance fees. Flexibility for DOD to support foreign nations for counterterrorism operations: The Senate committee agreed to a number DOD's proposals to allow regional combatant commanders flexibility to use DOD funds to train and equip foreign militaries and to provide humanitarian and reconstruction assistance to foreign governments in support of counterterrorism operations, though with some amendments. In particular, the committee agreed to make available $200 million per year for the next two years, rather than $750 million per year indefinitely, to build the capabilities of foreign militaries. The committee specified that no more than $50 million per year could be used by any one regional combatant commander, and required detailed consultations with U.S. ambassadors. The committee also required the President to develop a plan to better coordinate interagency counterterrorism practices. With the appropriations committees cutting foreign operations funding for the State Department and AID, the Defense Department is, in effect taking on many roles that the State Department formerly carried on. Detainee treatment: The committee required an official government-wide coordinated legal opinion on whether specified interrogation techniques constitute cruel and inhuman treatment. Use of armed forces for domestic activities: The committee proposed amendments to the Insurrection Act that would make it easier for the President to employ the armed forces to respond to domestic emergencies, such as the aftermath of Hurricane Katrina. UAV policy: The committee directed the Secretary of Defense to develop a comprehensive policy on UAVs and to give UAVs a preference in developing new systems. Navy shipbuilding: The committee added $1.5 billion to the shipbuilding request for a total of $12 billion. Increases include accelerating LPD procurement, increased advance procurement funds for the CVN-21 carrier and the LHA(R) amphibious ship. The committee included $50 million in advance procurement funding for long-lead items for three new CVN-21-class carriers, a measure that the House committee specifically rejected in a vote in the full committee markup. Permitting a reduction from 12 to 11 deployable aircraft carriers: The committee bill includes a provision repealing last year's requirement that the Navy maintain 12 deployable carriers. If approved this would allow retirement of the USS Kennedy . Continued C-17 production: As in the House bill, the committee bill rejects the DOD proposal to terminate C-17 production. The Senate bill authorizes funds for 2 aircraft in FY2007 and advance procurement for continued production later. Army Future Combat System (FCS) funding: As opposed to the House, the Senate committee authorized the full $3.7 billion requested for FCS development. The committee also, however, required a review of the program, including an independent cost estimate, though not with a view to a go/no go decision, as the House mandated. Readiness: The committee used the $50 billion emergency "bridge" fund as a means of adding funds to regular service accounts to correct some readiness-related shortfalls. The committee added $515 million in the emergency funds, for example, for Navy operations, $231 million for Army operations, and $106 million for Marine Corps operations. So, in effect, the committee is ameliorating constraints on the regular service budgets by adding funds for regular military operations to the emergency fund. Acquisition reform: The committee approved several measures to reform defense acquisition procedures, though none nearly so far-reaching as the House committee measure to recompete projects with excessive cost growth. One Senate committee measure is to align the tenure of program managers with the progress of their programs and another to require that incentive payments be more directly linked to acquisition outcomes. Land exchanges to build buffers around military facilities: The Defense Department has long been concerned about the encroachment of civilian development on military facilities. The Senate committee approved a measure to allow DOD to exchange excess land for other land that would be a buffer for military sites. Cooperative threat reduction with former Soviet states: In contrast to the House authorization, the Senate committee made no reductions in the $1.7 billion requested for Department of Energy nonproliferation programs (which finance plutonium purchases and reprocessing, for example) or the $372 million for the Department of Defense Cooperative Threat Reduction program. R&D science and technology funding target: Congress has required that the Defense Department invest 3% of the overall budget in basic science and technology (S&T) R&D programs. DOD has perennially fallen short of that target. The Senate committee included a provision requiring annual growth of 2% per year above inflation in S&T accounts. Missile defense funding: The Senate committee approved the full $9.3 billion requested for Missile Defense Agency (MDA) R&D programs (see Table A-2 for details of the request), but, like the House, shifted funds away from longer-term, more risky programs to near term projects. The committee added $200 million for Ground-based Midcourse Defense (GMD) flight testing and $100 million for the Navy interceptor system. It cut $200 million from the $406 million requested for the boost-phase Kinetic Energy Interceptor. Space systems: The committee expressed support for DOD's restructuring of the Transformational Communications Satellite (TSAT) program, but trimmed $70 million from the program (an 8% cut) saying that it could not be executed. The committee also cut $66 million (a 24% cut) from the Space Radar program and expressed concern about the lack of a cost sharing agreement with the intelligence community. Long-range strike/Trident II missile conventional warhead: The committee expressed support for DOD's plan to develop prompt global strike capabilities, and provided the full $127 million requested to convert Trident II missiles to carry non-nuclear warheads. But, like the House committee, the Senate committee was concerned about the international diplomatic issues and prohibited expenditure of more than $32 million on conversion until the Secretary of Defense, after consulting with the Secretary of State, provides a report on the matters at issue. B-52 retirements: The committee prohibited the proposed retirement of B-52 bombers until the Air Force reports on force requirements, but also approved a measure that (1) permits the retirement of up to 18 B-52H aircraft, (2) requires that remaining B-52Hs all be equipped with the specific upgrades, and (3) says the committee expects no additional B-52H retirements. F-35 Joint Striker Fighter alternative engine: Like the House, the Senate committee added $400 million to continue development of an alternate second engine for the F-35. F-35 schedule delays: The committee cut $1.2 billion from F-35 procurement funds due to schedule delays. F-22 funding: Like the House, the Senate committee rejected the Air Force plan to stretch out F-22 production and to provide funding incrementally rather than financing the full cost of deployable aircraft in the year for which funding is requested. The committee added $1.4 billion for full funding for the requested 20 F-22s. The Senate began floor consideration of its version of the defense authorization bill, S. 2766 , on June 12. On June 15, the Senate began a debate over Iraq policy. By a vote of 93-6, the Senate agreed to a motion by Senate Minority Leader Reid to table an amendment by Senator McConnell, SA 4269, requiring the President to establish a schedule for withdrawing U.S. combat troops from Iraq by December 31, 2006, leaving only troops needed to stand up Iraqi security forces. Senator McConnell brought up the measure that was originally authored by Senator Kerry, though Senator Kerry himself had not offered it, to force a debate on the matter. Later, on June 21 and 22, the Senate considered two other Iraq policy amendments, one by Senator Levin to require that troop reductions begin this year and another by Senator Kerry requiring that most troops be withdrawn from Iraq by July 1, 2007. The Senate rejected both measures on June 22. The Senate considered one other measure related to the war, an amendment by Senator McCain, SA 4242, to require the President to request funding for ongoing military operations with the regular federal budget request submitted in February of each year (approved by a vote of 98-0 on June 13). For the past two years, the Senate has approved amendments by Senator Byrd expressing the Sense of the Senate urging this, but the Administration has continued to request funding in supplementals. In the past, in bill signing statements Presidents have, on several occasions, rejected as unconstitutional, legislative provisions that direct the Administration to include particular programs or activities in budget requests. Administrations have, nonetheless, sometimes adhered to such congressional requirements. In the conference report on the FY1996 defense appropriations act, P.L. 104-61 , Congress required the Administration to request funding for Southwest Asia operations in the regular FY1997 defense request, though it did so not in the bill, but only in report language. The Clinton Administration agreed and requested funding for ongoing operations in Southwest and Bosnia in its FY1997 request. The McCain amendment, like the Byrd amendments to the FY2005 and FY2006 defense appropriations bills, would mean that the full cost of ongoing military operations—almost $120 billion in FY2006—would be considered along with the rest of the federal budget at the start of next year's Congress. Table 8 briefly reviews Senate floor action on selected amendments. Ultimately, the total amount provided for national defense in the regular appropriations bills (not including emergency appropriations) is determined by the allocation of funds among appropriations subcommittees. Under Section 302(a) of the Congressional Budget Act of 1974, the annual congressional budget resolution allocates a specific amount of discretionary budget authority to the appropriations committees. Under Section 302(b) of the Budget Act, the appropriations committees are required to report back on the allocation of the total to the subcommittees. The House-committee-passed FY2007 budget resolution, H.Con.Res. 376 , approves a total of $872.8 billion in discretionary budget authority, which is $475 million below the Administration request, and the resolution allocated that amount to the appropriations committee under Section 302(a) of the Budget Act. The Senate-passed budget resolution approves $877.0 billion in discretionary spending, $3.7 billion above the Administration request, and allocates the total to the appropriations committee. On May 4, the House Appropriations Committee reported its initial subcommittee allocations under Section 302(b) of the Budget Act. Table 9 shows the committee action. It is important to note that these allocations may be revised periodically as congressional action on the appropriations bills proceeds. The initial House allocations trim $4.0 billion from the defense subcommittee, compared to the Administration request, $824 million from the Military Quality of Life/VA subcommittee, and $2.4 billion from the foreign operations subcommittee. These cuts, compared to the request, in defense and foreign affairs allow increases, again compared to the Administration request, mainly in Labor-HHS appropriations and homeland security appropriations. Last year, Congress trimmed $4.4 billion from DOD programs in the regular appropriations bills. The initial House allocations appear to follow the same approach. The House Defense Appropriations Subcommittee marked up its version of the FY2007 defense appropriations bill on June 7, and the full committee marked up the bill, which became H.R. 5631 , on June 13. Among the committee's decisions, a few themes stand out. First, in accordance with the committee's 302(b) allocations, the committee approved a total $377.6 billion in the bill, $4.1 billion below the Administration request. The committee made about $2 billion of the cuts in "General Provisions" of the bill. Of these cuts $823 million are in rescissions of prior year funds (amounts identified by the committee in cooperation with the Defense Department), $949 million in revised inflation estimates, and $100 million in savings from foreign currency fluctuations. These are perennial sources of savings in appropriations bills. They have generally been used, however, to offset congressional additions to the budget rather than to trim the total amount in the bill. The committee also cut a net of $1.1 billion from procurement, $1.9 billion from operation and maintenance (O&M), and $1.2 billion from military personnel accounts, while it added $2.1 billion to R&D accounts. Of the cuts in military personnel, $784 million are from projected underexecution of approved personnel levels as reported by the Government Accountability Office (GAO) and $288 million from the Air Force to reflect a shift of Operation Noble Eagle costs (which provides security at military bases and air defense overflights) to the additional emergency appropriations in Title IX of the bill. In O&M, $433 million of savings are from shifting Operation Noble Eagle costs to Title IX, and substantial additional amounts are from shifting to Title IX funds for the regular pay of military technicians who are mobilized for overseas operations. In the procurement accounts, many of the committees cuts from the request are from following the authorization bill in shifting part of the requested amounts for several programs, such as M-1 tank upgrades, to emergency war funds in Title IX. Second, the committee did not provide funds for the 2.7% military pay raise approved in the House-passed authorization bill nor did it provide funds for increases in end-strength over the requested levels. This avoided the need for any increases in the military personnel accounts compared to the request. If the authorization conference report provides a 2.7% pay raise rather than the 2.2% requested, the appropriators may then either agree to add funds to the bill in conference or, instead, require the Defense Department to absorb the costs and transfer funds from other accounts. The committee approved an increase of general transfer authority to $4.75 billion in the regular bill with an additional $2.5 billion in Title IX to accommodate such requirements. On end-strength levels, the committee appears to assume that any increases will continue to be funded from emergency appropriations for war costs in FY2007, as they have been in the past. On major weapons programs, as is usually the case, the House appropriators generally followed the House authorization bill. As in the authorization, the appropriations— Cut $326 million from Army Future Combat System R&D; Cut funding for Transformational Communications Satellite R&D, though by $100 million rather than by $80 million; Cut funding for Space Radar R&D, though by $66 million rather than by $30 million; Added $50 million for DDG-51 destroyer modernization, though not the $200 million in the authorization; Added $1.4 billion to cover the full cost of procuring 20 F-22 aircraft, rejecting the Air Force incremental funding plan; Added $200 million in R&D to develop a second engine for the F-35 Joint Strike Fighter (the authorization approved $245 million); Reduced funds to commence F-35 procurement; Eliminated funds to shut down C-17 cargo aircraft production, Eliminated $38 million requested to convert Trident II D-5 missiles to carry conventional warheads; and Shifted some procurement funds that were requested in the regular appropriations accounts to be funded with emergency funds for the war. In contrast to the authorization, the House appropriators— Did not add $400 million in advance procurement for a second Virginia-class attack submarine in FY2009; and Eliminated funding requested to begin procurement of 12 EA-18G electronic warfare versions of the F-18 aircraft and instead shifted funds to add 12 F/A-18E/F aircraft. Traditionally, House floor debate on the defense appropriations bill is very brief and, although the bill generally comes to the floor with an open rule, very few amendments are proposed. This year, however, a number of controversial amendments were considered on the floor, including several proposals to strip specific congressional earmarks of funds from the bill. The House considered the bill on the floor on June 20, 2006. A number of less controversial amendments were approved by voice vote, including amendments By Representative Murtha to restore funding for the Perpetually Available and Secure Information Systems program; By Representative Granger to delete a provision in the committee bill that would prevent foreign sales of the F/A-22 fighter; By Representative Castle to prohibit award fees for performance that does not meet contract requirements; By Representative Markey to prohibit funds in the bill from being used in contravention laws or regulations to implement the UN Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; By Representative Inslee to prohibit the use of funds to implement some provisions of the National Security Personnel System that a Federal court found not to preserve adequate collective bargaining and adverse action appeals procedures; and By Representative Holmes to prohibit the use of funds to privatize base operation support services at Walter Reed Army Medical Hospital. The House also debated and rejected several amendments on matters of U.S. national security policy, including a measure to prohibit National Security Agency surveillance activities not authorized through the Foreign Intelligence Surveillance Act (FISA), a measure to prohibit military action against Iran without advance congressional approval, and a measure to delete a provision in the committee bill to prohibit the establishment of permanent basing rights agreement in Iraq. The measures that the House rejected include amendments By Representative Steve King to strike section 9012 of the Committee bill which prohibits funds from being used to enter into a basing rights agreement with Iraq (failed 50 - 376); By Representative Chocola to prohibit the use of funds from being available for the development, deployment, or operation the Defense Travel System (failed 141 - 285); By Representative Schiff to prohibit funds from being used to engage in electronic surveillance in the United States except as authorized under the Foreign Intelligence Surveillance Act of 1978 (failed 207 - 219); By Representative Hinchey to prohibit any of the funds from being used to initiate military operations against Iran except in accordance with Article I, Section 8 of the Constitution (failed 158 - 262); and By Representative Hinchey to prohibit any funds from being used for any contract with the Lincoln Group (failed 153 - 268). Four amendments were proposed and then withdrawn by their sponsors, specifically amendments By Representative Jackson-Lee to require that not less than $10 million be used for prosthetic research; By Representative Engel to comment the Navy for having the highest percentage of Alternative Fuel Vehicles acquired by any federal agency during FY2005; By Representative Stearns to prohibit the use of funds to interpret voluntary religious discussions as "official" as specified in the Air Force revised interim guidelines concerning free exercise of religion; and By Representative Filner to prohibit funds from being used to place a social security account number on any military identification card. Finally, the House rejected several amendments by Representative Flake to remove certain earmarks of funds for specific projects, including funding for the Wind Demonstration Project; the Institute for Exploration at Mystic Aquarium in New London, Connecticut; the JASON Education Foundation; the Center for Rotorcraft Innovation; the Illinois Technology Transition Center; the Northwest Manufacturing Initiative; the Lewis Center for Education Research; the Advanced Law Enforcement Rapid Response Training Program; and the Leonard Wood Research Institute. The Senate Appropriations Committee announced its initial 302(b) allocations to the subcommittees on June 22, 2006. The allocations provide $9.1 billion less than the Administration requested for the defense subcommittee, leaving substantially more for other subcommittees, particularly Labor-HHS-Education, with $5 billion more than the Administration requested (see Table 10 ). The committee's initial 302(b) allocations put the Senate directly at odds with the White House on budget priorities and, to a degree, on the use of emergency appropriations to fund programs requested in the regular, non-emergency defense budget. The White House Statement of Administration Policy (SAP) on the House-reported version of the defense appropriations bill, issued on June 20, complained that the House bill cut $4 billion from the request and shifted about $2 billion from the regular "base" DOD budget to the emergency spending accounts in Title IX of the House measure. "Base funding requirements," the White House said, "should not be shifted to supplemental bills as a way to increase non-security related discretionary funding." Moreover, the SAP warned very strongly, in text that was underlined in the official letter, that the President would veto a defense bill that cut spending too deeply: " If the President is presented with a final DOD appropriations bill that significantly underfunds the Department of Defense to shift funds to non-security spending, his senior advisors would recommend that he veto that bill [emphasis in the original]." The Senate committee version of the defense appropriations bill would make available $453.5 billion for the defense programs in covers, including $50 billion in funding for overseas operations. An additional $11.3 billion is available as a permanent appropriation for retiree medical benefits, increasing the total appropriation for FY2007 to $464.8 billion (see Table 3 ). Perhaps the most controversial issue in the Senate bill is that the total amount is $9.1 billion below the Administration request. A House cut of $4.1 billion in its version of the bill prompted the White House to threaten a veto if the final bill "underfunds" defense in order to shift funds to non-defense programs. The Senate 302(b) allocations straightforwardly shift $9.5 billion from defense and military construction appropriations to non-defense appropriations bills. Though usually remaining unspoken, the premise of the Senate and House 302(b) cuts in defense is that the cuts can be made up from funding provided as additional money for overseas operations. So a directly related issue is the extent to which the Senate bill shifts funding from the regular defense appropriations accounts to Title IX of the bill that provides additional funding for Iraq and Afghanistan. The White House Statement of Administration Policy (SAP) on the House version of the appropriations bill also complained about this practice. The White House estimated that the House bill shifts about $2 billion of funding from the regular defense bill to the amounts provided as additional appropriations that are exempted from the $872.8 billion cap on total discretionary funding in FY2007. The Senate bill provides funds for many of the same programs as the House bill as additional appropriations, including funds for M-1 tank and Bradley Fighting Vehicle upgrades, to continue C-17 production, and for V-22 tilt rotor aircraft. There is a further complication in the Senate. Section 402 of the Senate-passed budget resolution, S.Con.Res. 83 , (1) establishes the $872.8 billion cap on FY2007 discretionary funding, (2) exempts funding that is designated as "emergency" appropriations from the cap, but also, (3) sets a cap of $86.3 billion on emergency funding in FY2007 (the total was reduced from $90 billion in a floor amendment). The FY2006 supplemental appropriations bill, H.R. 4939 "deems" all of these requirements to apply in the Senate in the absence of a conference agreement on the budget resolution. This presents a problem for the appropriators, however, because costs of a later emergency FY2007 supplemental request for Iraq and Afghanistan, expected next February, together with costs of Katrina-recovery and other disaster relief, bird flu preparations, border security, agricultural disaster relief, and other purposes, will almost surely exceed the cap by a substantial amount. It will still be possible to go ahead with emergency funding for these purposes, but only with offsetting rescissions of funds for costs that exceed the cap. As a result, the Senate Appropriations Committee took a step to reduce the potential need for offsets by declaring only part of the funding for Iraq and Afghanistan in the bill as FY2007 emergency funding. Within Title IX of the bill, only funds in Chapter 1, Military Personnel, and Chapter 2, Operation and Maintenance, are designated as emergency funding exempt from the FY2007 caps. These chapters provide $42.1 billion of the $50 billion in Title IX. Funds in Chapter 3, Procurement, Chapter 4, RDT&E, Chapter 5, Revolving and Management Funds, and Chapter 6, Related Agencies, which provide $7.9 billion, are simply made available "on enactment" of the bill. The effect is to have these amounts scored as FY2006 rather than FY2007 money. This is the key point. The additional $7.9 billion in FY2006 funds will not trigger a point of order for exceeding FY2006 discretionary spending levels, since room remains under the FY2006 budget caps due to the $8 billion across-the-board cut in appropriations that Congress made at the end of last year. Aside from the overall budget issues, the Senate Appropriations Committee version of the defense appropriations bill addresses a number of other key policy matters. The $9.1 billion of cuts in spending come mainly in operation and maintenance (O&M), $3.8 billion, and in general provisions of the bill, $2.6 billion (see Table 3 above). Within O&M, the major cuts include $332 million in Army depot maintenance because of a reduced peacetime requirement, a cut of about 1/3 in the $974 million requested—Title IX of the bill provides $2.5 billion for Army depot maintenance and another $2.5 billion for Army reset, which involves some similar maintenance at the unit level; $245 million for an Army peacetime training offset, referring to training not done because troops are deployed abroad, a cut that otherwise might offset requirements for additional funds in Title IX; $188 million in Army unobligated balances; $215 million for a Navy peacetime training offset; $200 million for unexplained growth in Air Force air operations; $160 million from deterring some Air Force facilities repairs; $275 million for an overstatement of Air Force civilian personnel; $400 million for Air Force peacetime flying hour requirements; $200 million for a reduction based on the increase from prior year Air Force requirements; $108 million in Air Force unobligated balances; $220 million in Special Operations Command (SOCOM) funds realigned in part to Title IX; and $108.8 million in defense-wide unobligated balances. Within General Provisions of the bill, the major cuts include $53.2 million cut from Federally Funded Research and Development Centers (FFRDCs); $985.3 million in rescissions of prior year appropriations; $92 million from unspecified Army and Air Force efficiencies; $71 million from advisory and assistance services; $85 million in travel funds; and $520 million for changed economic assumptions, applied proportionately to amounts for procurement, R&D, and some other titles of the bill. On personnel-related policy, the committee provided funds for a pay raise of 2.2%, though the authorization conference agreement may agree to a 2.7% raise as in the House bill; agreed to an increase of 30,000 in Army and 5,000 in Marine Corps active duty end-strength, though with funds provided in Title IX (the report does not explicitly make that point, but the funding totals in Title IX reflect amounts the Administrations estimates would be need for what it calls "overstrength"); and provided $164 million to support an Army National Guard end-strength of 350,000 rather than the 333,000 for which funding was requested. On major weapons programs, the committee cut 6 helicopters and $40 million from the 18 aircraft and $141 million requested in the Army Armed Reconnaissance Helicopter program; cut 223 aircraft and $18 million from the 39 aircraft and $199 million requested for the Army Light Utility Helicopter program; cut $78 million for Bradley Fighting Vehicle mods, but added funds in Title IX; cut $254 million from the $3.7 billion requested for Future Combat System R&D, compared to a $326 million cut in the House bill; cut $220 million for 1 of the 2 Littoral Combat Ships (LCS) requested, complaining that Navy cost figures in the past were incomplete and therefore understated costs; eliminated $455 million requested in the National Defense Sealift fund to build one T-AKE cargo ship saying that the Navy had not begun building 5 previously funded ships and that $2.4 billion of prior year funding remains unexpended; added $117 million for one oceanographic survey ship; eliminated the almost $1.3 billion requested in the Navy and Air Force to begin procurement of the F-35 Joint Strike Fighter, but added $340 million in R&D to continue development of an alternative aircraft engine for the program; like the House, added $1.4 billion to fully fund procurement of 20 F-22 fighter aircraft; rejected the Administration proposal to shut down C-17 production after FY2007 and shifted $329 million requested in the regular budget to fund the shutdown to Title IX to purchase 7 aircraft; cut 4 aircraft and $257 million from the 12 aircraft and $905 million requested for the Navy EA-18G aircraft and added $219 million for 4 F/A-18E/F aircraft—the House had cut all 12 EA-18s and added funds for 12 F/A-18s; cut $230 million of the $867 million requested for Transformational Communications Satellite R&D, compared to $100 million cut in the House bill; cut $109 million of the $266 million requested for the Space Radar compared to $66 million cut in the House bill; and provided $340 million for National Guard and Reserve equipment, compared to $500 million in the House bill. For additional details on selected major weapons programs, see Table A-5 . The Senate began floor action on the defense appropriations bill on the evening of August 1, and both the majority and minority leaders expressed the hope that the Senate could complete action before adjourning for the August recess on Friday, August 3. On August 3, however, Senator Reid said that as many as 50 Democratic amendments remained to be addressed. Although Senator Stevens argued that the Senate should stay through the night, in the end the leadership agreed to resume consideration of the fill when the Senate returned on September 5. The Senate took up the bill on September 5 and completed action on September 7. The most high profile debate when the Senate returned was on an amendment by Senator Reid and other Democrats expressing the sense of the Senate on the need for a new direction in Iraq policy and in the civilian leadership of the Department of Defense – a direct rebuke to Secretary of Defense Rumsfeld. The Senate debated the measure for much of the day on September 6, though it was finally ruled out of order by the chair as not germane. The largest substantive change in the bill on the Senate floor was an amendment by Senator Stevens and Senator Inouye, the chairman and ranking member of the defense subcommittee, respectively, to add $13.1 billion in emergency funds to repair and replace equipment being used by Army and Marine units in Iraq and Afghanistan. Between the time the bill was reported on July 20 and the time the it came up on the floor, an ongoing debate about Army and Marine Corps readiness became increasingly heated. In June, Army and Marine Corps officials testified to congressional committees about the estimated costs of "resetting" units to repair, upgrade, and replace equipment either worn out or lost in overseas operations or left in the theater by units returning to home. The Army estimated as yet unfunded, long term reset costs of $17 billion and the Marine Corp estimated costs of $12-13 billion. In addition, in July, leaders of the Army National Guard have said that it would take $21 billion over the next few years to reset ground forces and to reequip the force to meet official requirements for new "modular" units. In response, Senators Reed and Dayton announced that they would propose an amendment to the appropriations bill to add $10 billion to "reset" Army and Marine Corps units returning from operations abroad. This led Senator Stevens to work with DOD and the White House on an alternative, which ultimately became his and Senator Inouye's surprise $13.1 billion amendment. The second largest addition of emergency funding was an amendment by Senators Sessions and Kyl to add $1.8 billion for border security. This was to fund fences and vehicle borders that the Senate authorized in action on the Immigration Reform Act, S. 2611 , in May, but that was not funded in the Homeland Security Appropriations Act, H.R. 5441 . Now that the Senate has approved the funding as part of the defense bill, the issue is (1) whether the defense bill, rather than the homeland security appropriations bill is the proper vehicle for it and (2) whether and how to find offsets for the increased funding. A third debate on the Senate floor did not involve a large amount of money, but nonetheless became quite contentious. On August 2, Senator Durbin proposed an amendment earmarking $2 million in Army R&D funds for a program to improve imaging of brain injuries. Senator Stevens opposed the amendment, arguing that the Senate needed to limit the amount of money it perennially adds to the defense appropriation bill for medical R&D programs, many of which, such as breast cancer and prostate cancer research, are at best only indirectly related to military requirements. Senator Inouye supported Senator Stevens and the Senate tabled the amendment by a largely party-line vote of 54-43. Subsequently, a number of veterans organizations complained that requested FY2007 funding for an Army-funded center for treating brain injuries was lower than the FY2006 level. When the Senate returned in September, Senator Allen offered an amendment to add $19 million for brain injury programs. Between the time it began debate on August 1 and the time it passed the appropriations bill on September 7, the Senate disposed of almost 90 amendments. As is usually the case, most of the amendments were non-controversial measures to add relatively small amounts for specific projects. In action on the more significant amendments, the Senate on the opening evening of debate on August 1, approved a proposal by Senators Stevens and Inouye, Senate Amendment (SA) 4751, to add $13.1 billion in emergency funds to reequip Army and Marine Corps units returning from Iraq—this amendment was as an alternative, approved by the White House and the Defense Department, to an amendment earlier proposed by Senators Reed and Dodd to add $10.2 billion to "reset" Army and Marine forces; approved an amendment by Senators Bond and Leahy, SA 4827, to specify that $2.4 billion of the $13.1 billion provided in the Stevens/Inouye amendment be allocated to National Guard and Reserve units; approved, by a vote of 94-3, an amendment by Senator Sessions, SA 4775, adding $1.8 billion in emergency funds for fences and vehicle barriers on the Mexican border—this was a substitute for a similar amendment, SA 4788, by Senator Kyl; rejected, by a vote of 54-43, an amendment by Senator Durbin, SA 4781, to add $2 million, with an offset, for an Army medical R&D program—in this, the Senate supported Senator Stevens's effort to limit the amount medical R&D earmarks; approved a proposal by Senator Coburn, SA 4848, to require the Defense Department to list, identify the location, and assess the utility of all congressional earmarks in the defense bill; approved another proposal by Senator Coburn, SA 4784, with Senator Obama, to require the Defense Department to post electronically all reports to Congress required by the act within 48 hours after they are submitted and to post all budget justification material; approved, by a vote of 96-0, another amendment by Senator Coburn, SA 4785, to require reports on the risk of improper Department of Defense payments for travel; approved an additional amendment by Senator Coburn, SA 4787, to limit DOD funding for conferences to $70 million; approved an amendment by Senator Allen, SA 4883, to provide $19 million for a DOD/VA brain injury center; rejected by a vote of 30-70 an amendment by Senators Feinstein and Leahy, SA 4882, to require that rules of engagement prohibit cluster munitions from being used near large groups of non-combatants; tabled by a vote of 54-44 an amendment by Senators Kennedy and Reid, SA 4885, to require that quarterly reports on Iraq include more information on trends toward civil war; tabled by a vote of 50-48 an amendment by Senators Mikulski and Sarbanes to privatize base support services at the Walter Reed Hospital; considered an amendment by Senator Rockefeller, SA 4906, that was then withdrawn, to eliminate parts of the bill authorizing intelligence activities, a measure the Senator proposed to urge passage of the intelligence authorization bill; approved, by a vote of 98-0, an amendment by Senator Conrad, SA 4907, to add $200 million in emergency funds enhance intelligence community efforts to capture Osama bin Laden and other key leaders of al Qaeda; approved, after rejected a motion to table the measure by a vote of 45-51, an amendment by Senator Schumer, SA 4897, to provide $700 million in emergency funds (in Title VI of the bill, rather than in Title IX), for counter-drug programs in Afghanistan; approved an amendment by Senator Boxer, SA 4913, to require a report on procedures and guidelines the event of further sectarian violence in Iraq; approved an amendment by Senators Kennedy and Hatch, SA 4857, to prohibit privatization of civilian work if contractors have an advantage because they provide inferior retirement benefits; approved an amendment by Stevens and Murkowski, SA 4917, to allow the Secretary of the Army to reimburse servicemembers and their families for financial hardships due to extended deployment overseas; approved an amendment by Senators Reid and Obama, SA 4912, to provide $20 million in emergency funds to assist the African Union force in Sudan; approved and amendment by Senator Bingaman, SA 4915, to appropriate $275 million in emergency FY20006 funds for wildfire suppression; approved, by a unanimous vote of 98-0, an amendment by Senators Reed and Bayh, SA 4911, to provide $65.4 million in emergency funds to procure Predator UAVs for Special Operations forces; and tabled by a vote of 51-44 an amendment by Senator Menendez, SA 4909, to prohibit the use of funds for a public relations program designed to monitor news media in the United States and the Middle East and promote positive coverage of the war in Iraq. Table 11 provides a list of Senate action on these and some other selected amendments to the bill. Conferees announced an agreement on the defense appropriations bill on September 21 and issued a conference report on September 25, H.Rept. 109-676 . Perhaps the most contentious issue resolved in the conference agreement was the total amount of spending in the bill. Both the House and the Senate Appropriations Committees provided less money for defense than the Administration requested as a means of freeing up funds for non-defense appropriations bills while still remaining under the cap of $872.8 billion on total discretionary spending in the House and Senate versions of the FY2007 budget resolution. The House trimmed $4.1 billion, from the request, while the Senate cut $9.1 billion. Most of the reductions were made up, indirectly, with funding provided as emergency appropriations (or, technically, in the House, as funding for overseas contingency operations). But the White House objected to the process of, in effect, using emergency funds to offset defense cuts which, in turn, left room under discretionary spending caps to increase non-defense spending. So, in the formal OMB Statement of Administration Policy on the House-passed defense appropriations bill, the White House threatened to veto the measure if it cut funding by more than $4 billion as a means of allowing increased non-security spending. The White House stuck to this position when House and Senate appropriators proposed a compromise that would trim defense by about $6 billion. In the end, the appropriations conference agreement cut defense by $4 billion. It remains to be seen how this will play out when Congress resumes consideration of non-defense appropriations bills after it returns in November. Another key issue resolved in the conference agreement was how to address complaints from the Army and Marine Corps about shortfalls in funding to "reset" their forces – that is, to repair, upgrade, and replace equipment used in operations in Iraq and Afghanistan. The services insisted that even the additional funding provided for reset in the $50 billion bridge fund for overseas operations in the early months of FY2007 was inadequate to meet their established requirements. In response, in floor action on the appropriations bill, the Senate added $13.1 billion in emergency funding to meet Army and Marine Corps reset goals. The conference agreement goes still further. It increases the total in the bridge fund to $70 billion, and, according to figures in a House Appropriations Committee press release on the conference agreement, it provides $17.1 billion for Army and $5.8 billion for Marine Corps reset, a total of $22.9 billion. The Senate also added some other emergency funding to the bill during floor action, including $1.8 billion for fences and vehicle barriers on the Mexican border, $700 million for counter-drug measures in Afghanistan, $200 million for intelligence programs to help capture Al Qaeda leaders, $65 million for Predator UAVs, $20 million for help to peacekeepers in Sudan, and $275 million for wildfire suppression. The conference agreement rejected most of these measures – it left border security to be addressed in other appropriations bills, provided $200 million for Afghan counter-drug operations, $20 million for Sudan, and $200 million for wildfires – the wildfire money was provided in a new title, Title X, of the bill. In addition, the conference agreement resolved a number of disagreements, both between Congress and the Administration and between the House and the Senate, over funding for major weapons systems. On some of the key weapons issues, the conference agreement, rejects the Administration proposal to terminate C-17 cargo aircraft production after FY2007 and buys 22 aircraft, 12 in the regular bill and 10 in the "bridge fund" for operations abroad; approves a Navy proposal to provide partial funding for 2 DDG-1000 destroyers—formerly DD(X)—rather than providing full funding for just one ship as in the House bill; includes funds as requested for one T-AKE cargo ship and for 2 Littoral Combat Ships (LCS), rather than eliminating T-AKE funds and procuring only one LCS, as in the Senate bill; also adds $117 million, as in the Senate bill, for a T-AGS ocean survey ship; provides $3.4 billion for Army Future Combat system R&D, about $300 million below the request; slows F-35 Joint Strike Fighter procurement, with funds to buy 2 rather than the requested 5 aircraft, but does not eliminate FY2007 aircraft procurement funds as the Senate bill did, and also adds $340 million to maintain development of an alternative engine; provides full funding for F-22 procurement in FY2007, rather than partial funding as the Air Force requested, and also approves the requested multiyear procurement of F-22s, although the multiyear contract must also be approved in the defense authorization bill; follows the Senate bill by shifting funds for 4 EA-18Gs to procurement of 4 F/A-18s—the House had eliminated all funds for the 8 EA-18s requested and added funds for 12 F/A-18s; provides $70 million in R&D for a new refueling aircraft to replace KC-135 tankers, which will allow the Air Force to carry on a request for bids in what appears to be a very high-stakes, high-profile competition between Boeing and Airbus; adds $290 million for National Guard and reserve equipment; reduces funding for the Transformational Communication Satellite (TSAT) by $130 million, for the Space Radar by $80 million, and for the Evolved Expendable Launch Vehicle by $80 million; for missile defense, cuts $48 million from the Kinetic Energy Interceptor, adds $200 million for the Ground-Based Missile Defense program, adds $85 million for sea-based missile defense, and adds $58 million for the U.S.-Israeli Arrow system. On other issues, the conference agreement provides funding for a 2.2% military pay raise – if the authorization conference agreement approves a raise of 2.7% as in the House-passed bill, then the Defense Department can reprogram funds or ask for supplemental appropriations to cover the cost; provides funds for Army National Guard end-strength of 350,000, 17,000 above the request, in regular appropriations and provides funds for 30,000 additional Army and 5,000 additional Marine active duty personnel in the overseas bridge fund; eliminates $127 million requested for deploying conventional warheads on the Trident II missile and instead provides $5 million for a study of short- and long-term alternatives for the global strike mission and $20 million for technology common to any future system; in the bridge fund for operations in Iraq and Afghanistan, also provides $1.5 billion to train and equip Afghan security forces, $1.7 billion for Iraqi security forces, and $500 million for the Commander's Emergency Response Fund for military forces in Iraq to support reconstruction projects; requires a report on Iraq that includes measures of various trends, including information on militias; and provides that none of the funds provided in the Act may be used None of the funds made available in contravention of U.S. laws implementing the 1985 UN Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment. One issue that has received a great deal of attention among military advocacy organizations – and that has stimulated a lot of mail to congressional offices – was not resolved in the conference agreement on the defense appropriations bill, but will, presumably be addressed in final action on the military quality of live/VA appropriations bill. That issue is funding for a Defense and Veterans Brain Injury Center. During floor action on the defense appropriations bill, the Senate added $19 million for the center within funding for the Defense Health Program (DHP). The conference agreement on the defense appropriations bill, however, does not include funding for DHP. Instead, it is provided in the military quality of life/VA bill. Final action on DHP, including action on brain injury funding, will be discussed in CRS Report RL33409, Veterans ' Medical Care: FY2007 Appropriations , by [author name scrubbed]. House and Senate conferees announced an agreement on the defense authorization bill on the evening of September 28, the agreement was officially reported on September 29 and approved by the House on September 29 and the Senate on September 30. In the course of conference negotiations, it was periodically reported that disputes over various measures were holding up final agreement. One of the last issues to be resolve was, reportedly, whether to accept a House provision that permitted military chaplains to offer prayers "according to the dictates of their conscience." Conferees resolved the issue by dropping the House provision, but by including language in the report on the bill that requires the Army and Navy to rescind recent directives on prayer and return to earlier practices. The defense authorization conference agreement resolves a number of other major defense policy issues. Table 12 provides a side-by-side summary of House, Senate, and conference action on selected major issues. Among the key that the conference resolved, a few merit a bit more comment. TRICARE for reservists: The conference agreement allows non-deployed, as well as mobilized reservists, with the exception of Federal employees eligible for the Federal health benefits plan, to sign up for health insurance through the DOD-run TRICARE program, with a premium of 28% of the cost, equal to the cost share Federal employees pay for their insurance. Over the past few years, Congress has been inching toward this kind of measure, progressively making TRICARE available to certain reservists. The Administration opposed full expansion of access to TRICARE, on the grounds that it was an unnecessary cost, covering reservists who have access to private health insurance. Congress has no decided to go ahead with expansion of TRICARE eligibility anyway. Army and Marine Corps End-Strength: For FY2007, Congress has, for the third year in a row, approved higher Army and Marine Corps end-strength than the Administration wants. This has not yet had any great budgetary impact, first, because the cost of additional end-strength has been paid with emergency supplemental funding, rather than within the regular defense budget, and second, because DOD has not been able to recruit up to the full target level in any event. It remains, however, a harbinger of disputes in the future that could have major budget implications. Both the services clearly want additional personnel. The issue is whether Congress will agree to a permanent increase in the defense budget to pay for it, or whether costs will have to be absorbed. This year, Congress has also set targets for further increases in end-strength in FY2008 and FY2009. Amendments to the "Insurrection Act:" The conference agreement accepted a substantial Senate amendment to Chapter 15 of Title 10 U.S. Code, know as the "Insurrection Act." Previously these provisions allowed the President to use armed forces to suppress a rebellion, an insurrection, or domestic violence if state authorities are unable to do so. The new provisions, approved in the wake of Hurricane Katrina, give the President authority to use armed forces in response to natural disasters, terrorist attacks, or health emergencies if state and local agencies cannot ensure order. Expanded authority for cooperation with foreign governments: Since the attacks of September 11, 2006, Congress has given the Defense Department increased authority to use its funds to cooperate with foreign military forces and foreign governments. Section 1206 of the FY2006 defense authorization act allowed the Defense Department to use funds to build the capacity of foreign militaries. The Defense Department requested a substantial further expansion of such authorities in its proposed FY2007 legislative measures. Section 1206 of the FY2007 authorization permits a further expansion of the FY2006 section 1206 authorities to allow military commanders to build the capacity of foreign governments to carry out counterterrorist operations and to support stability operations, including some economic development activities. For Additional Reading CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11 , by [author name scrubbed]. CRS Report RL33298, FY2006 Supplemental Appropriations: Iraq and Other International Activities; Additional Hurricane Katrina Relief , by [author name scrubbed] et al. CRS Report RS22455, Military Operations: Precedents for Funding Contingency Operations in Regular or in Supplemental Appropriations Bills , by [author name scrubbed]. CRS Report 98-756, Defense Authorization and Appropriations Bills: FY1970-FY2009 , by [author name scrubbed] FY2007 Defense Budget Issues for Congress: Slides from a CRS Seminar , February 10, 2006, by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. Available on line at http://www.crs.gov/products/browse/documents/WD00005.pdf . CRS Report RS20851, Naval Transformation: Background and Issues for Congress , by [author name scrubbed]. CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by [author name scrubbed]. CRS Report RL32513, Navy-Marine Corps Amphibious and Maritime Prepositioning Ship Programs: Background and Oversight Issues for Congress , by [author name scrubbed]. CRS Report RL32418, Navy Attack Submarine Procurement: Background and Issues for Congress , by [author name scrubbed]. CRS Report RL33161, The Joint Tactical Radio System (JTRS) and the Army ' s Future Combat System (FCS): Issues for Congress , by [author name scrubbed]. CRS Report RL32888, The Army ' s Future Combat System (FCS): Background and Issues for Congress , by [author name scrubbed]. CRS Report RL32476, U.S. Army ' s Modular Redesign: Issues for Congress , by [author name scrubbed]. CRS Report RL33390, Proposed Termination of Joint Strike Fighter (JSF) F136 Alternate Engine , by [author name scrubbed]. CRS Report RL33543, Tactical Aircraft Modernization: Issues for Congress , by [author name scrubbed]. CRS Report RS20859, Air Force Transformation , by [author name scrubbed]. CRS Report RL30563, F-35 Lightning II Joint Strike Fighter (JSF) Program: Background, Status, and Issues , by [author name scrubbed]. CRS Report RL30685, Military Airlift: C-17 Aircraft Program , by [author name scrubbed]. CRS Report RL33067, Conventional Warheads for Long-Range Ballistic Missiles: Background and Issues for Congress , by [author name scrubbed]. CRS Report RS21754, Military Forces: What Is the Appropriate Size for the United States? , by [author name scrubbed]. CRS Report RS22402, Increases in Tricare Costs: Background and Options for Congress , by [author name scrubbed]. CRS Report RL33446, Military Pay and Benefits: Key Questions and Answers , by [author name scrubbed]. CRS Report RL33432, U.S. Disposal of Chemical Weapons in the Ocean: Background and Issues for Congress , by [author name scrubbed]. CRS Report RS21988, Radioactive Tank Waste from the Past Production of Nuclear Weapons: Background and Issues for Congress , by [author name scrubbed] and [author name scrubbed].

In the week before Congress adjourned for recess on September 30, the House and Senate passed conference agreements on both the FY2007 national defense authorization bill, H.R. 5122, and the FY2007 defense appropriations bill, H.R. 5631. The President signed the appropriations bill into law, P.L. 109-289, on September 29, and he signed the authorization bill into law, P.L. 109-364, on October 17. The conference agreement on the appropriations bill provides $436.6 billion for defense, including $366.6 billion in regular appropriations and $70 billion in additional appropriations, mainly as a "bridge fund" for operations abroad. The total of regular appropriations is $4 billion below the Administration request. The Senate-passed bill provided $9 billion less than the request, which freed that much to add to non-defense appropriations bills. The White House , however, threatened to veto the defense bill if reduced defense by more than $4 billion. In action on other key issues, the appropriations bill– rejected the Administration proposal to terminate C-17 cargo aircraft production after FY2007 and provided funds for 22 aircraft; approved a Navy proposal to provide partial funding for 2 DDG-1000 destroyers—formerly the DD(X)—rather than providing full funding for just one ship as in the House bill; included funds as requested for one T-AKE cargo ship and for 2 Littoral Combat Ships (LCS), rather than eliminating T-AKE funds and procuring only one LCS, as in the Senate bill; and slowed F-35 Joint Strike Fighter procurement, with funds to buy 2 rather than the requested 5 aircraft, but did not eliminate FY2007 aircraft procurement funds as had the Senate bill. On key defense policy issues, the authorization bill provided a 2.2% pay raise, as requested, rather than or a 2.7% raise as in the House bill; approved access for all reservists, except Federal employees with Federal health insurance, to the DOD TRICARE medical insurance program with a premium of 28% of the cost of the program; rejected House language permitting chaplains to use denominational prayers according to each chaplain's conscience, but, instead, in report language, required the Army and Navy to rescind recent directives on prayer and return to earlier policies; agreed to a substantially amended Senate change in the Buy American Act to allow use of foreign-supplied specialty metals in U.S.-built systems; and did not agree to a Senate provision giving the head of the National Guard four-star rank and the authority to make independent budget requests, but assigned these issues to a commission on the reserves.

Electronic waste (e-waste) is a term that is used loosely to refer to obsolete, broken, or irreparable electronic devices like televisions, computer central processing units (CPUs), computer monitors (flat screen and cathode ray tubes), laptops, printers, scanners, and associated wiring. Rapid technology changes have led to increasingly large e-waste surpluses. Electronic devices, particularly older units in use today or in storage, contain a host of hazardous constituents such as lead, mercury, or chromium, as well as plastics treated with brominated flame retardants. The presence of these constituents has led to end-of-life (EOL) management concerns from state and federal environmental agencies, environmental organizations, and some Members of Congress. E-waste is essentially unregulated at the federal level—meaning it can be disposed of with common household garbage in municipal solid waste landfills (the primary disposal method) or incinerators. The Environmental Protection Agency (EPA) has stated that landfill disposal of e-waste is safe. However, EPA's preferred method of EOL management is reuse or recycling. Further, state and local waste management agencies have expressed concerns regarding the potential cumulative impact to human health and the environment of landfilling millions of pounds of e-waste. As a result, individual states have begun to enact their own e-waste management requirements. To date, 23 states and New York City have enacted some form of e-waste management law. Those laws include provisions such as restrictions on landfill disposal of certain e-wastes and the establishment of mandatory recycling programs, generally paid for by electronics manufacturers. In the coming years, it is likely that more states will enact similar laws. New state requirements, mixed with increased consumer awareness regarding potential problems with landfilling e-waste, have led to an increase in recycling. With that increase have come new questions about e-waste EOL management. Instead of questions only about the potential impacts associated with e-waste disposal , questions have arisen regarding the potential danger associated with e-waste recycling . Because e-waste recycling is largely unregulated, virtually no data are available to track its fate. Accurate data regarding how much is generated, how it is managed, and where it is processed (either domestically or abroad) are largely unavailable. What is known is that e-waste recycling may involve costly, complex processes and that there is an insufficient, though growing, national recycling infrastructure to enable the United States to fully manage its own e-waste. It also is known that markets for e-waste (either for reuse or recycling for scrap) are largely overseas. As a result, the majority of e-waste collected for recycling appears to be exported for processing. Although it is difficult to know exactly how much e-waste collected for recycling is exported, it appears that India or developing countries in Asia or Africa are most likely to receive it. Those countries are more likely to have electronics manufacturing plants that can cheaply repair or refurbish e-waste for reuse. Also, developing countries are more likely to value e-waste more highly than developed countries for its potential to recycle for scrap. While some exports may be sent to facilities that manage e-waste in a way that protects workers and the environment, a significant amount is likely sent to countries that have few if any protections for workers or the environment, or that have regulations that are not enforced. The result is that recycling operations in those countries may pose a significant risk to human health and the environment. Increasingly, environmental organizations, university researchers, and the media have documented contamination to air, soil, and water, and health impacts to the people working and living near these operations—particularly to children (these issues are discussed in more detail in the section " Impacts of E-Waste Exports "). Concerns regarding the potential impact of exporting e-waste for processing in developing countries have led to increased scrutiny from members of the public and environmental organizations, as well as some Members of Congress. On May 21, 2009, Representative Gene Green introduced H.R. 2595 , a bill that would amend the Solid Waste Disposal Act (42 U.S.C. 6921) to establish certain e-waste export restrictions. There have also been several congressional hearings on issues associated with e-waste management, one of which specifically addressed issues associated with e-waste exports. There are various issues of concern with regard to e-waste disposal and recycling. This report looks at issues specifically related to its export for recycling. Particularly, it discusses documented impacts to human health and the environment that have been tied to unsafe recycling practices in developing countries. It provides an overview of various factors necessary to understand why e-waste disposal has become a concern in the United States. Specifically, the report discusses issues that have motivated certain stakeholders to divert e-waste from landfill disposal and, hence, increase recycling. It also discusses waste management requirements in the United States, to illustrate how e-waste disposal and recycling are essentially unregulated; and why processing e-waste in undeveloped countries has, and will likely continue to have, a predominant role in the recycling process. It is difficult to determine how much e-waste is exported from the United States to developing countries. It is further difficult to determine how much of the waste that is exported is sent to facilities that will manage it safely as opposed to those that use disassembly and disposal methods that will expose workers to toxic chemicals with little, if any, protection. It is also difficult to determine how much e-waste may be sent to countries that have a limited regulatory framework to protect the local environment—potentially exposing the surrounding communities to resulting contamination. What is becoming easier to document is the impact that e-waste exports are having on less developed nations. With increased exports have come increased media attention on the improper handling of e-waste in those areas and its resulting impacts. Various reports have graphically documented health and safety threats to workers and environmental contamination from e-waste recovery practices in developing countries. It is difficult to document all e-waste recycling hubs, but popular destinations for e-waste exported from the United States (and other developed countries) are waste processing operations in Guiyu in the Shantou region of China, Delhi and Bangalore in India, and the Agbogbloshie site near Accra, Ghana. Multiple studies have documented environmental and health effects of uncontrolled waste processing activities. Environmental impacts include contamination of all local environmental media—soil, air, surface water, and ground water. For example, a June 2009 study found that the primary hazardous recycling operations in Guiyu involve metal recovery that involves open burning of wires to obtain steel and copper, cathode ray tube (CRT) cracking to obtain copper-laden yokes, desoldering and burning of circuit boards to remove solder and chips, and acid stripping chips for gold; plastic recycling through chipping and melting; and dumping of materials that cannot be further processed (such as leaded CRT glass and burned circuit boards) and residues from recycling operations (such as ashes from open burn operations, spent acid baths, and sludges). It was observed that burning circuit board plastics treated with brominated flame retardants emitted harmful heavy metals, dioxins, and aromatic hydrocarbons. Further, heavy metal contamination in surface water and sediments was found that could be attributed to the direct effects of e-waste recycling operations in Guiyu. Copper from surface water was found to be 2.4 to 131 times the reference background concentrations, and sediment samples were 3.2 to 429 times the reference levels. The study also found severe levels of contamination for lead, cadmium, mercury, and arsenic in sediment and surface water as a result of recycling operations. In addition to environmental contamination, impacts on humans have been observed. In a 2007 study, children from one to six years old in Guiyu were compared to those living in a neighboring town where no e-waste processing was done. Children in Guiyu were found to have blood lead levels (BLL) that were significantly higher than those in the neighboring village. The study concluded that elevated BLLs in Guiyu children were common as a result of exposure to lead contamination caused by primitive e-waste recycling activities. To understand why e-waste is exported, it is helpful to understand why landfill disposal has become a concern to certain stakeholders in the United States. Those concerns center largely around the waste's increasing volume and the hazardous constituents, such as lead and mercury, it likely contains (particularly in older electronic devices). Increased awareness has encouraged state waste management and water resources agencies to consider the potential impacts to human health and the environment associated with e-waste and has led to increased efforts to divert e-waste from landfill disposal. The proliferation of and increasingly rapid technological advances in electronics mean that the volume of e-waste generated in the United States is large and growing. Data regarding electronic products sold, stored, recycled, and disposed of are limited. However, in 2008, EPA completed a study that attempted to gather more current data. According to that study, in 2007, of the 2.25 million tons of televisions, cell phones and computer products ready for end-of-life (EOL) management, 18% (414,000 tons) were collected for recycling and 82% (1.84 million tons) were disposed of, primarily in landfills. Further, EPA estimated that approximately 235 million units sold between 1980 and 2007 were obsolete and in storage, awaiting some method of EOL management. Although EPA estimates that e-waste comprises about 2% of the municipal solid waste stream, it is anticipated that this percentage will grow as consumers continue to replace old and outdated electronic equipment and discard equipment in storage. Electronic devices may contain any of a host of hazardous constituents. Cathode ray tubes (CRTs) found in televisions and computer monitors and printed circuit boards (PCBs, also referred to as printed wire boards, or PWBs), often contain significant amounts of lead. CRTs contain an average of four pounds of lead but may contain more, depending on the size, age, and make of the device. Although high lead levels in CRTs and PWBs often get the most attention from federal and state waste regulators, electronic devices such as personal and laptop computers, keyboards, and computer mice may contain toxic constituents such as arsenic, cadmium, chromium, or mercury. In addition to potentially toxic constituents, plastics used in electronic devices often contain brominated flame retardants (BFRs). BFRs are widely used in plastic cases and cables for fire retardancy. Plastics containing BFRs cannot be recycled as easily as plastics such as those used in plastic bottles or other containers. While an individual electronic device may not have dangerously high levels of a given toxic material, the cumulative impact of large volumes of e-waste being disposed of in a municipal solid waste landfill has become troubling to many state waste management agencies. Broadly speaking, discarded e-waste has two potential fates—it may be disposed of (most likely in a landfill) or it may be recycled. Once the device is in the hands of the recycler, it may be resold and reused "as is" or it may undergo some degree of refurbishing. Products that cannot be reused or refurbished are either dismantled or shredded, with the resulting material separated into secondary material streams and at least partially recovered. The resale of electronic devices for reuse or material recovery may occur domestically or abroad. Regardless of whether an electronic device is disposed of or recycled, there are virtually no federal environmental regulatory requirements applicable to its management. Factors specific to e-waste that affect the lack of regulation are useful in understanding the challenges associated with addressing e-waste management issues. Federal standards regarding waste management are specified under provisions of the Resource Conservation and Recovery Act (RCRA, 42 U.S.C. §6901 et seq.). RCRA establishes criteria for managing both "solid" and "hazardous" waste. All regulatory requirements arising from the act stem from the initial determination of whether an item is actually a "waste" and, further, if that waste is "hazardous." Solid waste is defined under the law as "any garbage, refuse ... or other discarded material." Subtitle D of RCRA establishes state and local governments as the primary planning, regulating, and implementing entities for the management of nonhazardous solid waste, such as household garbage and nonhazardous industrial solid waste. Landfills that collect household garbage are predominately regulated by state and local governments. EPA has, however, established minimum criteria that certain types of landfills must meet in order to stay open. Also under Subtitle D, states are encouraged (but not required by regulation) to develop comprehensive plans to manage nonhazardous industrial solid waste and municipal solid waste. Under Subtitle C of RCRA, EPA has established regulations on the transport, treatment, storage, and disposal of "hazardous wastes." For a material to meet the regulatory definition of hazardous waste, it must first meet the definition of "solid waste." Further, for waste to be considered hazardous, it must either be listed specifically or exhibit any of four hazardous characteristics: ignitability, corrosivity, reactivity, and toxicity. E-waste would most likely exhibit toxicity characteristics, meaning it would be harmful or fatal when ingested or absorbed (because it contains toxic substances such as mercury or lead). When toxic wastes are disposed of on land, contaminated liquid may drain (leach) from the waste and pollute ground water. A common test method to determine the toxicity level of a waste is the Toxicity Characteristic Leaching Procedure (TCLP). The TCLP test is intended to simulate conditions that would likely occur in a landfill, and measures the potential for toxic constituents to seep or "leach" into groundwater. EPA has determined that CRTs and printed circuit boards meet the regulatory definition of hazardous waste, but has not determined if other electronic devices and components would consistently fail TCLP (i.e., exceed toxicity limits). Studies have determined that devices such as personal computer central processing units (CPUs), laptop computers, printers, computer mice, and keyboards have the potential to exceed toxicity limits, but it has not been determined that entire classes of electronic devices will always be toxic. Toxicity levels would likely vary by manufacturer, make, and model. Even if a device meets the definition of hazardous waste, that does not necessarily mean that the device must be disposed of in accordance with RCRA's hazardous waste regulations. EPA regulations have established many exclusions and exemptions to its hazardous waste disposal requirements. Implementing exclusions or exemptions is often used as a mechanism to facilitate recycling. Examples of e-wastes that are excluded or exempt from the definition of hazardous waste are: Any electronic devices discarded by household consumers . Devices that can be reused . Scrap metal, processed scrap metal, precious metals, whole circuit boards, shredded circuit boards, processed CRT glass, intact CRTs, and partially processed CRTs sent for recycling . RCRA establishes certain minimum waste management standards that states must meet, but states have the option to implement requirements that are more stringent than those specified under RCRA. To date, 23 states and New York City have opted to regulate e-waste more strictly. Although the specific requirements vary somewhat from state to state, all have the same goal—to avoid landfill disposal and incineration of certain types of e-waste. Most state laws have certain broad elements in common, such as specifying the electronic devices covered under the law; how a collection and recycling program will be financed; collection and recycling criteria that must be met to minimize the impact to human health and the environment; and restrictions or requirements that products must meet to be sold in the state. EPA's stated policy on e-waste management is to encourage equipment reuse, recycling, and then disposal, in that order. Further, EPA has acknowledged that e-waste can be safely disposed of in municipal solid waste landfills. However, that is not its preferred management option. There are no federal laws that require e-waste recycling by commercial entities or households. Also, as with e-waste disposal, there are few federal environmental regulatory requirements applicable to recycling operations themselves (including the export of e-waste for recycling or reuse). The term "recycler" broadly refers to a company that may engage in any of a number of activities including collecting, sorting, demanufacturing, or processing of waste. E-waste recycling can be a labor-intensive process (see " Factors Influencing E-Waste Exporting ," below). Any federal regulation applicable to recycling operations would likely address human impacts associated with the disassembly process and apply to workplace health and safety operations. Any environmental regulations applicable to a recycling operation would likely apply to the management of residual waste generated during the recycling process. Exporting e-waste is generally considered a potential element of the recycling process, wherein electronic devices are sent for reuse, refurbishment, or materials recovery. As with disposal and other elements of the recycling process, there are no requirements applicable to e-waste exporting as a whole. However, there are export notification requirements that apply to certain CRTs. Those requirements are stipulated under EPA's 2007 "CRT Rule." Export notification requirements under the CRT Rule are summarized in Table 1 , below. High demand for used electronic products can facilitate illegal export—at least with respect to CRTs. Export notification requirements do not apply to CRTs exported for reuse. A recycler can export CRTs without notification by claiming such a purpose. In 2008, the Government Accountability Office (GAO) determined that EPA was not sufficiently enforcing the export notification requirements specified under the CRT Rule. Since then, EPA has initiated enforcement actions against several recyclers for not submitting the proper notifications. In addition to a lack of regulatory restrictions on recycling activities, there are currently no consistently applied industry standards applicable to e-waste recyclers. This can actually pose a problem to recyclers that limit their exports. A recycler that removes hazardous constituents from e-waste, sorts and disassembles its e-waste, and exports the waste to a responsible recycler or confirms that devices are in working order before exporting them for reuse, will likely offer its services at a significantly higher rate than a recycler that simply ships unsorted e-waste abroad. The recycler that ships unsorted e-waste can still make the claim that it is operating in a "green" way because it diverts the waste from landfill disposal. A recycler can also claim that it does not export its waste, but that is a claim that would be very hard for the average consumer (or even a state or charitable organization using the recycler) to confirm. Various electronics manufacturers have adopted company polices that address issues associated with exports to developing countries. For example, Hewlett-Packard (HP) and Dell have adopted company policies that ban exports of nonworking electronics to developing countries. Also, since 2008, voluntary recycler certification programs have been developed by environmental organizations, the recycling industry, and EPA. Certification programs implemented by environmental organizations, such as the Basel Action Network's "E-Stewards" program, would prohibit certain e-waste exports. EPA's "Responsible Recycling (R2) Practices" program specifies that a recycler exporting e-waste must obtain "assurances from downstream vendors both domestically and internationally … [that] show that the materials are being handled properly and legally by downstream vendors throughout the recycling chain." Any impact these voluntary certification programs may have has yet to be seen. At this point, it is difficult to determine how effectively voluntary certification programs may be enforced. It is also difficult to determine if voluntary programs will have an effect on companies willing to make false or misleading claims about the environmental attributes of their recycling services. Since e-waste recycling is largely unregulated, accurate data regarding the end markets, both domestic and abroad, are not publicly available. Therefore, it is difficult to know how much e-waste that is collected for recycling is actually exported for processing. However, in a 2008 report, EPA consulted an industry expert to develop a "best estimate" of the end markets for CRT-containing devices (televisions and computer monitors). According to that estimate, between 77% and 89% of those end markets were outside the United States. EPA acknowledged that such data are fluid—market conditions change rapidly. Also, since this estimate only applies only to CRTs, it is not possible to apply those estimates to all e-waste. Still, it can be estimated that the majority of e-waste collected for recycling is processed, at least to some extent, abroad. There are various reasons why recyclers export e-waste instead of recycling it domestically. Most reasons relate to the high costs of processing the waste domestically and the lower costs and higher demand for the material abroad. E-waste collected for recycling may be reused or processed for parts or components. Before it can be determined which of those two fates it may meet, the device will require a certain level of sorting, inspection, and testing. If a product is ultimately processed for parts or components, it would have to go through various processing activities. Unlike recyclable products that contain essentially a single component, like plastic bottles or newspaper, electronic devices contain a host of mixed materials that may not be easily separated or extracted. Before the device can be recycled it may go through any of a number of steps, including some or all of the following: D emanufacturing into subassemblies and components —involves a worker manually disassembling a device or component to recover value from working and nonworking components (e.g., video cards, circuit boards, cables, wiring, plastic or metal housing). D epollution —the removal and separation of certain materials to allow them to be handled separately to minimize impacts to human health and the environment (e.g., batteries, fluorescent lamps, CRTs, or plastics embedded with brominated flame retardants). M aterials separation —manually separating and preparing material for further processing. At this stage, materials that have already been disassembled would be sorted into material categories. Me chanical processing of similar materials —generally involves processing compatible plastic resins, metals, or CRT glass to generate market-grade commodities. M echanical processing of mixed materials —generally involves processing whole units, after depollution, followed by a series of separation technologies. M etal refining/smelting —after being sorted into components or into shredded streams, metals can be sent to refiners or smelters. At this stage, thermal and chemical management processes are used to extract metals of many types. Many of the processes described above must be done by hand and can be labor intensive. This can be a costly operation. Depending on the value of the commodities being extracted, among other factors, a recycler may find it more profitable simply to send all of the e-waste it collects abroad, where labor is less costly but health and safety practices may not be implemented when extracting hazardous materials or precious metals. If an e-waste collector or recycler offers its services for free, it likely ships whole units abroad. Limits on domestic recycling apply to both the infrastructure (the network of waste collection, transportation, and sorting activities) and the actual processing of the waste. Compared to paper, glass, and plastic recycling, electronic recycling has a short history. An e-waste recycling infrastructure is still being developed. E-waste may be collected at state- or locally-sponsored household hazardous waste collection sites or events (meaning, it is not collected on an on-going basis, but may be collected semi-monthly or semi-annually). E-waste may also be collected at manufacturer or retailer sponsored events. Regardless of where it is collected or who is responsible for collecting it—consumers will likely be required to drop off their e-waste. According to the Government Accountability Office (GAO), cost and inconvenience inhibit consumers from recycling used electronics. Most stakeholders agree that if e-waste is to be recycled, it must be as easy for consumers to recycle electronics as it is to buy them. Many local and state agencies, retailers, and electronics manufacturers have worked with EPA to sponsor pilot programs providing convenient, free recycling services to consumers. Although such events often collect large amounts of e-waste, it is difficult to determine what happens to the waste after collection. The extent to which e-waste may be processed domestically after collection is also limited. A company that operates as a "recycler" may actually be a waste consolidator that sends the waste to another vendor to sort or process it in some way. Those downstream vendors may separate the units for reuse, ship whole units abroad for processing, or process it domestically to some degree (see the list of potential steps in recycling under " Costly and Complex Domestic Recycling Processes ," above). However, once a unit has been broken down into its component parts, the presence of recycling facilities with the ability and capacity to recycle those components is limited, and varies from region to region. For example, there are few facilities in the United States capable of processing CRT glass. There are also limited opportunities in the United States for copper and precious metal recovery from circuit boards or for processing flame retardant-containing plastic. Further, most consumer electronics manufacturers (who provide the market for materials recovered from recycled electronics) have manufacturing operations overseas. For example, almost all glass manufacturers that may reuse CRT glass are located overseas. Demand abroad is high in both recycling and reuse markets. When U.S. consumers discard electronic products, they are not necessarily broken. In developing countries, there is high demand for electronics that American consumers may deem "waste." According to EPA estimates, in 2005, 61% of CRTs collected for recycling were refurbished or remanufactured into new televisions abroad. Also, a study specific to exports to Peru found that 85% of used personal computers (PCs) imported by Peru were reused rather than recycled. The study concluded that decisions regarding the end-of-life management of computers were driven by reuse as opposed to recycling. Further, in 2008, GAO reported that there is significant demand for used electronics in developing countries. In particular, GAO reported: In a search of one Internet e-commerce site, we observed brokers from around the world place 2,234 requests to purchase liquid-crystal display (LCD) screens. On the same site, we found 430 requests for central processing units and 665 requests for used computers. In an extensive search of two Internet e-commerce sites over a 3-month period, we observed brokers in developing countries make 230 requests for about 7.5 million used CRTs. Brokers in developing countries represented over 60 percent of all requests we observed. Developing countries also have a high demand for scrap. Demand for plastics for recycling is almost entirely overseas. An unintended consequence of avoiding potential negative impacts of domestic e-waste disposal has been a contribution to actual environmental contamination and human health impacts to some communities in developing countries. If environmentally preferable management of e-waste is the goal, is recycling it preferable to landfill disposal if recycling means exporting the waste to developing countries? Determining how to address this issue—that is, take into consideration concerns regarding domestic e-waste disposal and the negative impacts of recycling abroad—involves many factors. One significant factor is the lack of timely, accurate data needed to help fully understand the scope of the potential problem. It is almost impossible to know exactly how much e-waste is generated, to what extent it is processed domestically (e.g., to what degree it is sorted or disassembled by domestic recyclers), how much is exported, and, of the waste that is exported, how much is actually reusable or sent to a facility that will manage it properly. That is not to say that all or even the majority of e-waste that is exported is managed improperly. It is simply impossible to know using existing data. Electronics manufacturers are currently driven by various forces to make their products more easily recyclable and with fewer hazardous constituents. Any future changes to electronic devices have no impact, however, on the hundreds of millions of devices currently in use or obsolete devices currently in storage. Eventually those devices will make their way to the disposal or recycling markets. The high cost of domestic recycling, high demand for exports, and a lack of barriers to export will continue to drive reuse and recycling markets abroad. As stated previously, the current regulatory structure involves no or very limited prohibition on exports and limited options for reuse or recycling (although, those options will likely increase as e-waste collection increases). As long as there are legitimate reuse markets and recycling operations in developing countries, an outright prohibition on exports would be problematic, particularly when limited opportunities for recycling exist in the United States. This presents policy-makers with multiple challenges: principal among them are how to address the obstacles that limit domestic recycling, and how one might establish export controls that facilitate reuse and recycling but prohibit delivery of e-waste to operations that do not protect workers or their environment.

Electronic waste (e-waste) is a term that is used loosely to refer to obsolete, broken, or irreparable electronic devices like televisions, computer central processing units (CPUs), computer monitors (flat screen and cathode ray tubes), laptops, printers, scanners, and associated wiring. E-waste has become a concern in the United States due to the high volumes in which it is generated, the hazardous constituents it often contains (such as lead, mercury, and chromium), and the lack of regulations applicable to its disposal or recycling. Under most circumstances, e-waste can legally be disposed of in a municipal solid waste landfill or recycled with few environmental regulatory requirements. Concerns about e-waste landfill disposal have led federal and state environmental agencies to encourage recycling. To date, 23 states have enacted some form of mandatory e-waste recycling program. These state requirements, mixed with increased consumer awareness regarding potential problems with landfilling e-waste, have led to an increase in recycling. With that increase have come new questions about e-waste management. Instead of questions only about the potential impacts associated with e-waste disposal, questions have arisen regarding the potential danger associated with e-waste recycling—particularly when recycling involves the export of e-waste to developing countries where there are few requirements to protect workers or the environment. Answering questions about both e-waste disposal and recycling involves a host of challenges. For example, little information is available to allow a complete assessment of how e-waste is ultimately managed. General estimates have been made about the management of cathode ray tubes (CRTs, the only devices where disposal is federally regulated), but little reliable information is available regarding other categories of e-waste. For example, accurate data regarding how much is generated, how it is managed (through disposal or recycling), and where it is processed (domestically or abroad) are largely unknown. Further, little information is available regarding the total amount of functioning electronics exported to developing countries for legitimate reuse. What is known is that e-waste recycling involves complex processes and it is more costly to recycle e-waste in the United States. It also is known that most consumer electronics manufacturers (who provide the market for material recovery from recycled electronics) have moved overseas. As a result, the majority of e-waste collected for recycling (either for reuse or recycling) appears to be exported for processing. Although there may be limited data regarding how e-waste is managed, the consequences of export to developing countries that manage it improperly are becoming increasingly evident. In particular, various reports and studies (by the mainstream media, environmental organizations, and university researchers) have found primitive waste management practices in India and various countries in Africa and Asia. Operations in Guiyu in the Shantou region of China have gained particular attention. Observed recycling operations involve burning the plastic coverings of materials to extract metals for scrap, openly burning circuit boards to remove solder or soaking them in acid baths to strip them for gold or other metals. Acid baths are then dumped into surface water. Among other impacts to those areas have been elevated blood lead levels in children and soil and water contaminated with heavy metals. The impacts associated with e-waste exports have led to concerns from environmental organizations, members of the public, and some Members of Congress.

In 2013, then-Secretary of Defense Leon Panetta warned that "budget uncertainty could prompt the most significant military readiness crisis in more than a decade." Four years later, observers are debating whether a readiness crisis has indeed come to pass, disagreeing on how ready the U.S. military currently is, and debating what steps should be taken to improve military readiness. Little consensus has emerged, partly because the term readiness is not used in the same way by all observers or participants in the debate. Recently, DOD has made readiness a central justification for increased funding as necessary to address "immediate and serious readiness challenges." DOD's funding request for FY2017 favors preparations that improve the military's capability in future years, like buying new equipment, whereas the FY2018 budget request favors more immediate training and maintenance shortfalls. In both cases, however, the request is justified in terms of improving readiness, contributing to the confusion by using the term readiness in different ways. As these examples show, "readiness" is used both in a narrow sense to discuss the military's current level of training and the status of its maintenance, and in a broader sense to describe the military's overall capability, which includes how large the force should be and what kinds of weapons it should have, even if those changes will not take effect for several years. To help Congress understand the different uses of the term readiness, this report explores these two common uses of the term with examples, attempts to clarify the two uses, and discusses why it is so difficult to define the term. It also provides historical examples of when the two uses of the term readiness received different priorities than they do today. The report then considers how the different uses of the term readiness inform how Congress might evaluate certain issues: Is there a readiness crisis? What should the U.S. military be ready for? How should readiness be measured? How does the FY2018 budget request affect the U.S. military's readiness? While this report discusses how differing uses of the term readiness affect the debate, it does not evaluate the current state of the U.S. military's readiness or provide a conclusive definition of readiness. Despite many definitions of readiness, CRS has identified two principal uses of the term. One, readiness has been used to refer in a broad sense to whether U.S. military forces are able to do what the nation asks of them. In this sense, readiness encompasses almost every aspect of the military. For example, Lieutenant General Joseph Anderson of the U.S. Army testified Readiness is the capability of our forces to conduct a full range of military operations to defeat all enemies, regardless of the threats that they pose. It is generated through manning, training and equipping our units and leader development. Similarly, in 2014, retired General Gordon Sullivan used readiness in this broad sense, tying readiness largely to the size of the force: More than 100 years ago, the siren song of reductions in defense manpower was luring the unsuspecting onto the shoals of unpreparedness for future conflict ... This cycle of readiness followed by unpreparedness has repeated itself all too often throughout our history. Two, readiness has also been cast more narrowly as only one component of what makes military forces capable. In this sense, readiness is parallel with other aspects of the military, like force structure and modernization (which usually refer, respectively, to the size of the military and the sophistication of its weaponry). For example, General Stephen Wilson of the U.S. Air Force, in testimony, used readiness in the latter sense: ...current budget levels require the Air Force to continue making difficult tradeoffs between force structure, readiness , and modernization. Two years earlier, General Norton Schwartz, then-Chief of Staff of the Air Force, also used readiness in its narrow sense, parallel with other components: When we speak of operational effectiveness, we are talking about securing the appropriate balance of three separate but very closely related dimensions— readiness , modernization, and force structure—that mutually affect each other, and must be carefully integrated together. For other uses of the term beyond these, see the Appendix . Speakers often seek to clarify in which of the two principal uses they are describing readiness by applying a variety of adjectives. Richard Betts in his 1995 book on readiness distinguished them by calling the broader use "structural readiness," and the narrower conception "operational readiness." More recently, General Glenn Walters of the U.S. Marine Corps used "institutional readiness" to invoke the broader use and "unit readiness" to invoke the narrower use: Marine Corps institutional readiness is built upon five pillars: Unit Readiness ; Capability and Capacity to Meet Joint Force Requirements; High Quality People; Installation Capability; and Equipment Modernization. Brad Carson and Morgan Plummer, former DOD officials, distinguished the two uses in the following terms: [A] ... more limited meaning that might be called ' strategic readiness ' : the ability of the military to accomplish the tasks demanded by the national command authority. This is the implicit definition used regularly in congressional testimony and public commentary. ... [Another] definition of readiness, still more parsimonious, might be called ' force readiness ' : the resource ratings of units, their ability to perform generic combat tasks, and, to a lesser extent, the ability of combatant commands to execute set-piece operational plans. These attempts to clarify the term "readiness" acknowledge that both uses embody accepted concepts: the broader use capturing the military's ability to accomplish its overall goals and the narrower use capturing the military's ability when its size and type of weaponry are held steady. These attempts also highlight that the two concepts are interdependent, as illustrated by DOD's official definition of readiness. DOD's official doctrinal definition of readiness is The ability of military forces to fight and meet the demands of assigned missions. This definition, however, does not resolve the confusing use of the term. If "military forces" is assumed to hold the size and composition of the forces steady, this definition would imply the narrow use of readiness. Since one can posit military forces changing in size and composition to "meet the demands of assigned missions," however, the definition does not rule out the broader use. DOD also doctrinally defines "operational readiness" as The capability of a unit/formation, ship, weapon system, or equipment to perform the missions or functions for which it is organized or designed. The two DOD definitions seemingly follow the two principal uses of readiness: the broader and the narrower. But as shown by the examples above, many users do not consistently follow the doctrinal definitions, invoking the word readiness , unmodified, for both senses of the term. The two uses do not lend themselves to strict definition because they are interdependent: greater readiness in the narrow sense, such as better trained personnel, may offset the disadvantages of a smaller or a less technologically sophisticated force, depending on what task the military is executing. Alternatively, the military could be ready in the broader sense because its size and the sophistication of its weapons make up for shortfalls in such areas as training or how often a unit has used its equipment before experiencing combat. These difficulties extend to what budget lines support "readiness." No authoritative list exists. If, however, readiness is used in the narrow sense—as one piece of what makes the military able—it can be contrasted against other pieces, such as buying new equipment. In this sense, the operations and maintenance (O&M) appropriations title, which must be spent sooner than other parts of the budget, can be considered a proxy for narrow readiness funding as opposed to other appropriations such as the procurement appropriations title, which can be spent over multiple years. O&M as an entire appropriations title, however, may not be the best way to measure readiness in the narrow sense. The full title includes funding for activities often not associated with readiness, even a narrow sense, like funding Junior ROTC for high school students, real estate management, and enterprise communications networks. A potentially better way to capture the narrow concept of readiness is to focus on Budget Activity 1, Operating Forces, which includes only the O&M funding for operational units of the military services. Tables displayed later in this report will show all three categories. While these accounts provide rough proxies for readiness in the narrower and broader sense, they are not exclusive to either sense, thus preventing any absolute judgments. How the term readiness is used is important to Congress because DOD has made readiness central in its justifications for increased funding. The Trump Administration released a National Security Presidential Memorandum on January 27, 2017 directing DOD to conduct a 30-day readiness review and concurrently to develop a FY2017 budget amendment for military readiness and other subjects. Secretary of Defense Mattis then issued a memorandum on January 31, 2017 stating the Administration's priorities in "strengthening the U.S. Armed Forces" would be approached "in a campaign of three phases:" First, addressing "immediate and serious readiness challenges" in a FY2017 budget amendment request; Second, refining and improving the FY2018 budget request to "focus on balancing the program, addressing pressing programmatic shortfalls, while continuing to rebuild readiness;" and Third, preparing the FY2019 budget request and five-year defense program throughout calendar year 2017. The FY2019 request is to be informed by the 2018 National Defense Strategy, which DOD was to begin in spring 2017, and "inform our targets for force structure growth." The Secretary's memorandum also emphasized enhancing lethality against high-end competitors and effectiveness against a broad spectrum of potential threats. The third phase did not mention readiness. DOD fulfilled phase one of its approach when it released its request for additional FY2017 appropriations on March 16, 2017. The FY2017 budget amendment seems to blur the first two phases of the DOD Secretary's memorandum by invoking both the broader and narrower uses of "readiness." It states "[t]he first step in rebuilding the U.S. Armed Forces is increasing readiness," but goes on to state "[t]his request also begins to address future warfighting readiness by filling programmatic holes that were created by previous budget cuts." The overview acknowledges this second category does not address immediate challenges, as listed in the memorandum: While these investments will not achieve full readiness in FY2017, they are vital to growing and maintaining a higher state of warfighting readiness in the future. These types of investments such as new planes and new ground vehicles, which will not be delivered to the troops this year but that, if not purchased, will create a capability gap in the future. Despite invoking both uses of the term readiness, the requested funding seemed most concerned about broader readiness, preparing for the future, more than immediate, narrower concerns. Table 1 shows the percentage change proposed in the budget amendment for O&M and procurement for each military department. Given that the military departments requested larger increases in procurement than O&M, the budget amendment does not seem to give priority to readiness in the narrow sense. Two of the military departments did request greater percentage increases for the more limited budget activity, operating forces, than for the entire O&M title. However, these departments still requested a smaller increase for this activity than for procurement funding. If, on the other hand, readiness is used in the broader sense, the budget amendment may support greater readiness because of its greater investments in procurement funding as well as O&M related to operating forces. By investing in future equipment, the amendment can be understood as preparing the military for future tasks. In the Consolidated Appropriations Act, 2017 ( H.R. 244 , enacted as P.L. 115-31 ), Congress mostly supported the Trump Administration's approach, albeit at lower funding levels. The explanatory statement emphasized addressing readiness in the narrow sense: The agreement provides additional readiness funds for the Services within the operation and maintenance accounts. This funding shall be used only to improve military readiness, including increased training, depot maintenance, and base operations support. The funding provided in Title X, "Department of Defense—Additional Appropriations" of Division C, however, follows the same pattern as the requested additional appropriations: greater relative increases for operating forces O&M than overall O&M, but even greater relative increases for procurement. The one exception is Navy procurement, which received a smaller increase than Navy O&M did. Much of that difference stems from the appropriations act already including 11% more Navy procurement funding in its base amount than DOD requested. Table 2 displays the increases in additional appropriations Congress provided relative to the omnibus's base funding. The appropriations act provided $12.5 billion in additional appropriations compared to DOD's request for $24.7 billion. This difference is reflected in the lower overall percentage increases in Table 2 than Table 1 . Nevertheless, the pattern of funding increases remains much the same. Though both the request and the appropriations emphasize the need to address readiness in the narrow sense, immediately funding by percentage favors concerns about broader readiness by prioritizing equipment that will be fielded further in the future. Today, when someone uses readiness in the broad sense they usually also assume it is good to maintain high levels of readiness in the narrow sense. Few in the contemporary debate argue for forces—no matter how large—that are not ready in the narrow sense. In earlier eras, however, observers argued readiness in the narrow sense came at the expense of other, more important goals, which could leave the military less ready in the broader sense. Three eras stand out. In the first era, the time between World War I and World War II, most observers assumed the size of the military forces needed to fight a war would be many times larger than those the United States would maintain during peacetime. Almost everyone assumed the U.S. military was not and would not be ready in the narrow sense. The Army Chief of Staff, General of the Armies John Pershing, explicitly argued to maintain standing forces at a lower level of readiness in the narrow sense in order to be ready in the broader sense: Had the United States in the Spring of 1917 possessed twenty-five or thirty divisions completely organized and equipped, but only sufficiently trained to meet the requirements of the 'national position in readiness' above outlined, each of these divisions would have been advanced many months as compared with the entirely new divisions that it was necessary to create. In the second era, the early Cold War, President Eisenhower came to office in 1953 believing the Soviet Union posed a long-term threat that had to be met not just with military strength but economic power. To maintain U.S. economic competitiveness and readiness in the broad sense, he was willing to accept less ready forces in the narrow sense: [Eisenhower] underscored his administration's recognition 'that the time has clearly come when the United States must take conclusive account, not only of the external threat posed by the Soviets, but also of the internal threat posed by the long continuance and magnitude of Federal spending.'... [Eisenhower] went on, Truman's quest to build up America's military strength 'to a state of readiness on a specified D-day' had 'largely overlooked or totally ignored the length of time over which this costly level of preparedness would have to be maintained.' In the third era, following the collapse of the Soviet Union in 1991, some observers expected a lengthy respite from international military conflict. As a result, they argued U.S. defense resources should be devoted to developing leap-ahead technologies, which would better ready the U.S. military for future challenges. They argued this future readiness in the broad sense made sacrificing current readiness, in the narrow sense, worthwhile: The 'Transformation Approach' is based on the belief that the United States should accept greater short-term risk by limiting global engagement, canceling procurement of current or next-generation weapons systems, selectively lowering current readiness and operational tempo, cutting some force structure, and shrinking the defense infrastructure in order to accelerate the development and adoption of advanced systems, concepts, and organizations . In all three eras, some officials were willing to sacrifice readiness in the narrow sense, usually because of how they prioritized the contingencies for which the military should be ready and at what point in time the force needed to be ready. These past views suggest that broader readiness need not require readiness in the narrow sense, although most observers assume so today. Whether observers see a readiness crisis often depends on whether they are using readiness in its broad or narrow sense. For example, in arguing there is a readiness crisis, Gary Schmitt of the American Enterprise Institute explicitly says the narrower use of readiness—in his terms "operational readiness"—is not important compared to the broader use of readiness, "operational capability:" Operational 'readiness' without operational capability is meaningless—in fact, it is dangerous. In contrast, former DOD Comptroller Robert Hale explicitly called for skepticism about broader readiness concerns even as he acknowledged narrow readiness issues, which he calls "small 'r' readiness": We've heard strong concerns expressed recently by the service [Vice Chiefs of Staff] on readiness... So I think we got to be a little skeptical... So I mean, a little skepticism, but realize there is a small 'r' readiness problem. Carter Ham of the Association of the U.S. Army captures both uses in responding to a Wall Street Journal opinion piece: That ['America's fighting forces remain ready for battle'] is largely true today with respect to the current fight against ISIL and other terrorist organizations, but it may not be true tomorrow. These different uses also often imply different actions Congress could take. Whether one uses readiness in its broad or narrow sense often signals whether the steps being suggested for Congress are expanding the military and procuring new equipment or prioritizing funding for immediate purposes. Justin Johnson of the Heritage Foundation sees a crisis when he uses the term in its broad sense; therefore, he argues the military should be increased in size and provided new equipment: Today's men and women in uniform put their lives on the line for our country, but they are doing so with less training, worn out equipment, and fewer brothers and sisters in arms to back them up. With threats rising across the globe, all Americans should be concerned about the troubling state of the U.S. military. In contrast, Todd Harrison of the Center for Strategic and International Studies refers to readiness only in its narrow sense; he therefore argues expanding the military is the wrong step to take: This is not evidence of a readiness crisis as much as it is evidence of a force structure crisis. The readiness shortfalls cited by the Services are due to insufficient funding to support the number of brigades, flying squadrons, and ships in the force today... But the solution some are proposing is to increase the size of the military, which will just exacerbate existing problems rather than resolve them. The two uses, however, are not the only reasons observers disagree over whether there is a readiness crisis. In the article that prompted most of the commentary above, former Director of the Central Intelligence Agency and General David Petraeus and Michael O'Hanlon of the Brookings Institution dismissed concerns of a readiness crisis altogether while still arguing for expanding the military's size and procuring certain types of equipment. Another issue for Congress is what the U.S. military should be ready for. The two identified uses of readiness complicate the debate. The Army Chief of Staff, General Mark Milley, illustrated this difficulty in testimony: On the high military risk, to be clear, we have sufficient capacity, and capability and readiness to fight counterinsurgency and counterterrorism. My high military risk refers specifically to what I see as emerging threats and potential for great power conflict.... Here, General Milley uses readiness in the narrow sense, as a component—along with capacity, usually describing the size of the force, and capability, usually describing the sophistication of the force's weapons—of whether the military can succeed at counterinsurgency and counterterrorism. In doing so, he implies the U.S. Army is ready in the broad sense to fight counterinsurgency and counterterrorism. However, he goes on to say the U.S. Army is at high military risk of not being ready for great power conflict. In the passage, therefore, General Milley assesses the U.S. Army as ready in the narrow sense even as he expresses concern it is not ready in the broad sense. Whether the military is ready in the broad sense depends on what the military should be ready for, and cannot be answered by describing readiness in the narrow sense. For more information on the range of missions the U.S. military may need to be prepared for, see CRS Report R44023, The 2015 National Security Strategy: Authorities, Changes, Issues for Congress , coordinated by Nathan J. Lucas and CRS Report R43838, A Shift in the International Security Environment: Potential Implications for Defense—Issues for Congress , by Ronald O'Rourke. A recurring issue for Congress is how to measure readiness given the two identified uses of the term. Measuring readiness may become even more pressing given a report that DOD is newly classifying information regarding the military's readiness, which could cause some observers to discount DOD's assessments. Since 1996, Congress has required the Secretary of Defense to submit a quarterly report regarding the readiness of the active and reserve components. These reports were built on internal DOD readiness reporting dating back to 1957. In 1999, Congress also required DOD to establish a "comprehensive readiness reporting system." DOD answered this congressional direction by instituting a new readiness reporting system in 2002, the Defense Readiness Reporting System (DRRS). DRRS is based on the older readiness reporting system, Status of Resources and Training System (SORTS). SORTS reported four resource areas: personnel, equipment, supplies, and training. The SORTS data showed how actual resource levels compared to targeted resource levels, with the lowest creating the C-rating, or the overall unit assessment. However, a commander can change the C-rating to ensure the report reflects his or her judgment of the unit's readiness regardless of the quantitative measures. DRRS keeps the underlying SORTS data, though it uses a finer scale for the quantitative metrics, and then asks commanders to supply a subjective mission assessment of how well their unit can execute the following missions: core, the missions for which the unit was designed; and assigned, the mission the unit is tasked if assigned to an existing war plan; or the mission the unit is conducting in real-world operations if a certain percentage of the unit is deployed. The unit's mission assessment and its C-ratings should correlate. The commander can still change the C-rating to ensure they do. This readiness reporting system combines the two uses of the term readiness at the unit level. As a summary of what is on hand, the quantitative metrics correspond to the narrow sense of readiness. The C-rating and mission assessment correspond to the broader sense of readiness. DRRS allows commanders to adjust the implications of the quantitative metrics to match their broader assessment. These unit assessments are then rolled-up through the military hierarchy to create overviews of larger units' readiness. By entwining the two senses of readiness, DRRS limits the accuracy in measuring either. Because commanders can overrule the quantitative measures of readiness in a narrow sense, the reporting becomes subjective and influenced by senior leaders. By using the same ratings regardless of which mission the commander is assessing, the reporting can distort how many units are ready in the broader sense. For example, the Army directs its Brigade Combat Teams to be rated as less ready when trained and deployed to an operational mission that is not the same as its "core" mission. That means the reporting system can label a unit as "not ready" even when it is operationally deployed conducting a mission directed by the president. Whether the unit should be rated against the mission it is conducting or the mission it was designed for becomes a question of what the U.S. military should be ready to do. DOD's readiness reporting system has neither clarified the use of the term readiness nor resolved the recurring debate on whether there is a readiness crisis, as described in 2013 by the Government Accountability Office (GAO): Furthermore, unless DOD provides guidance to the services on the amount and types of information to be included in the quarterly reports, including requirements to provide contextual information such as criteria or benchmarks for distinguishing between acceptable and unacceptable levels in the data reported, DOD is likely to continue to be limited in its ability to provide Congress with complete, consistent, and useful information. In response, Congress has regularly directed changes to the readiness reporting system and the quarterly reports. Congress has amended the required content of the quarterly report seven times, including in three of the last four National Defense Authorization Acts. Two of these provisions required greater detail on what data the reports will provide, while another changed the report's frequency from monthly to quarterly and another required an independent study of the report. Three other provisions expanded what topics the report would cover, including the National Guard's ability to support civil authorities, prepositioned stocks, Cyber Command, major exercises and cannibalization rates. The FY2017 provision, however, eliminated the requirement for reporting on prepositioned stocks and the National Guard's ability to support civil authorities. Congress has also directed modifying the reporting system another two times, mandating the system measure the rates at which equipment was cannibalized and whether DOD's contracting system could support wartime missions. These continuing flaws have meant Congress is unable to use the readiness reporting system to evaluate the U.S. military in the broader sense of readiness. For example, in 2016, GAO found that neither the formal DRRS nor other reports could measure the military services' progress in recent years to recover readiness after the drawdown of the wars in Iraq and Afghanistan: The Office of the Secretary of Defense, the Joint Chiefs of Staff, the combatant commands, and the military services assess and report, through various means and using various criteria, the readiness of forces to execute their tasks and missions. Some key reporting mechanisms include the Defense Readiness Reporting System, the Joint Forces Readiness Review, and the Quarterly Readiness Report to Congress. These processes provide snapshots of how ready the force is at a given point in time... Specifically, while most of the services continue to monitor overall operational readiness through the Defense Readiness Reporting System, they have not fully developed metrics to measure progress toward achieving their readiness recovery goals. The difficulties experienced by GAO prevent Congress from finding commonly agreed standards to discuss readiness. Another issue for Congress is evaluating how DOD's FY2018 budget request may affect readiness and how Congress might respond to the request. DOD released its FY2018 budget request on May 23, 2017. It reiterated the Defense Secretary's three phase plan: addressing immediate challenges to readiness in the FY2017 budget amendment; continuing focus on readiness and filling programmatic holes in the FY2018 budget request; and implementing a new National Defense Strategy in the FY2019 budget request. In contrast to the FY2017 budget amendment and final FY2017 appropriations, the FY2018 budget request seems to favor funding for narrow over broad readiness. The budget requests double-digit percentage increases for O&M accounts for the Departments of Army and Navy, as shown in Table 3 . The budget requests even greater relative increases for O&M Budget Activity 1, which funds the operating forces. The request provides smaller percentage increases for procurement accounts. The greater increases for the daily operations accounts than the procurement accounts are seen to characterize the budget request as focused on narrow readiness. Some observers, however, have suggested that the budget fails to fulfill the Administration's promise to rebuild the armed services, essentially invoking readiness in the broader sense. The Chairman of the Senate Armed Services Committee, Senator John McCain, called the defense budget request "inadequate to the challenges we face." In response to such concerns, DOD's acting comptroller emphasized the FY2018 budget request was not designed to enlarge the military: You will not see a growth in force structure ... You will not see a growth in the shipbuilding plan. You will not see a robust modernization program. As with the FY2017 budgets, assessing whether the FY2018 budget request improves readiness depends on whether one is using readiness in the broader or narrower sense. The Trump Administration has made readiness a central justification for its request for increased defense spending. At the same time, readiness is used in differing ways that cloud the debate on how ready the military is and what steps would make it more ready. Clarifying how readiness is used in particular cases may assist Congress to determine what steps and what level of spending are needed to maintain readiness or redress any identified shortfalls. The term readiness is frequently used for more particular cases than the two principal uses described in the section " Two Principal Uses ." Common examples include the following: medical readiness: "a healthy and fit fighting force that is medically prepared to provide the Military Departments with the maximum ability to accomplish their deployment missions throughout the spectrum of military operations;" dental readiness: whether servicemembers have dental issues, particularly issues that might affect whether the servicemember can deploy; family readiness: "support to the individual Service Member and their family to successfully balance life, career and mission events;" financial readiness: focused on servicemembers' personal finances, including indebtedness, consumer advocacy and protection, money management, credit, financial planning, insurance and consumer issues; physical readiness: usually called physical fitness; equipment readiness: how maintenance and parts availability affect equipment's operating status; logistics readiness: whether units and bases have supplies and equipment on-hand or can access them in a timely manner; and contingency contracting readiness: evaluating whether officers approved to sign contracts are prepared to deploy in support of military operations. These uses of the term differ from the two principal uses largely because they are not mission-specific (arguably excepting medical readiness). Servicemembers are fit or not regardless of what tasks they are performing. Servicemembers' families are making sound financial choices or not regardless of the servicemember's role in the military. Equipment has its needed parts or not regardless of the unit's mission. Readiness in these senses may help determine whether the force is ready both in the narrow or broader sense of the two principal uses of readiness. A military is not likely to win a war, if most of its servicemembers are sick or most of its equipment is missing parts. Only in extreme cases will being ready in one of these areas offset disadvantages in other areas. Healthier servicemembers will not likely compensate for missing parts for equipment. In contrast, better training in the narrow sense of readiness may compensate for less effective weapons (thus affecting the broader sense of readiness). Used in these even-narrower senses, the term readiness invokes operational need without identifying the specific operation for which it is intended. Medical Readiness Medical readiness can be an exception. When used as above, medical readiness is an example of an even-narrower use of readiness. Medical readiness, often called individual medical readiness, equals whether servicemembers are cleared as healthy or not regardless of what they are deploying to do. Medical readiness is also sometimes used to describe whether the military medical force is able to support tasks the military is asked to accomplish, as in the below statement: Our medical forces must stay ready through their roles in patient-centered, full tempo healthcare services that ensure competence, currency, satisfaction of practice, while fostering innovation. We can't separate care from home—care at home from readiness, as what we do and how we practice at home every day translates into the care we provide when we deploy. Used this way—describing the readiness of the medical forces themselves—medical readiness is still a sub-component of the narrow sense of readiness, but one that is interdependent with other components of the broader sense of readiness. If the military is operating where injured personnel have access to peacetime medical infrastructure, medical readiness may not affect the military's broader readiness. If the military is operating with no access to peacetime medical infrastructure and suffering casualties, medical readiness may be the most important factor in the force's broader readiness. The interdependence is further complicated by the military medical establishment's dual mission to provide care for military beneficiaries and to provide medical care to military servicemembers during wartime or contingency operations. By being more ready to provide medical care in war, the military medical establishment may be less ready to provide beneficiary care and vice versa.

Many defense observers and government officials, including some Members of Congress, are concerned that the U.S. military faces a readiness crisis. The Department of Defense has used readiness as a central justification for its FY2017 and FY2018 funding requests. Yet what makes the U.S. military ready is debated. This report explains how differing uses of the term readiness cloud the debate on whether a readiness crisis exists and, if so, what funding effort would best address it. CRS has identified two principal uses of the term readiness. One, readiness is used in a broad sense to describe whether military forces are able to do what the nation asks of them. In this sense, readiness encompasses almost every aspect of the military. Two, readiness is used more narrowly to mean only one component of what makes military forces able. In this second sense, readiness is parallel to other military considerations, like force structure and modernization, which usually refer to the size of the military and the sophistication of its weaponry. Both uses embody accepted concepts: the broader use capturing the military's ability to accomplish its overall goals and the narrower use capturing the military's ability when its size and type of weaponry are held steady. These two senses of the term are interdependent. Today, most observers assume the military should be as ready as possible in the narrow sense, but in past eras some favored accepting lower readiness in a narrow sense in order to redirect resources in ways they felt improved the military's readiness in the broad sense (to include funding a larger force or newer equipment). Use of either sense of readiness affects Congress's evaluation of certain key issues: Is there a readiness crisis? Most observers who see a crisis tend to use readiness in a broad sense, asserting the U.S. military is not prepared for the challenges it faces largely because of its size or the sophistication of its weapons. Most observers who do not see a crisis tend to use readiness in a narrow sense, assessing only the state of training and the status of current equipment. For what scenarios, contingencies, and threats should the U.S. military be ready? Some senior officials express confidence in the military's readiness for the missions it is executing today—although other observers are not as confident—but express concern over the military's readiness for potential missions in the future. How is readiness measured? Because of the two uses of the term, measuring readiness is difficult; despite ongoing efforts, many observers do not find DOD's readiness reporting useful. How might DOD's FY2018 budget request improve readiness? DOD's request increases operating accounts more than procurement accounts. If readiness is used in a narrow sense, these funding increases may be the best way to improve the military's readiness. If readiness is used in a broader sense, that funding may not be sufficient, or at least the best way to improve readiness.

Omnibus appropriations acts have become a significant feature of the legislative process in recent years as Congress and the President have resorted more frequently to their use to bring action on the regular appropriations cycle to a close. Following a discussion of pertinent background information, this report reviews the recent use of such measures and briefly addresses several issues that their use raises. Each year, Congress and the President may enact discretionary spending in the form of regular appropriations acts, as well as continuing and supplemental appropriations acts. The number of regular appropriations bills had been fixed at 13 for several decades, but a realignment of the House and Senate Appropriations subcommittees at the beginning of the 109 th Congress reduced the number of regular appropriations bills normally considered each year to 11 (starting with the FY2006 cycle). The number of regular appropriations bills was increased to 12 at the beginning of the 110 th Congress (starting with the FY2008 cycle) due to further subcommittee realignment and has remained at that level through the date of this report. If action is not completed on all of the regular appropriations acts toward the end of a congressional session, Congress will sometimes combine the unfinished regular appropriations into an omnibus measure. In some instances, action on the unfinished acts carries over into the following session. An omnibus act may set forth the full text of each of the regular appropriations acts included therein, or it may enact them individually by cross-reference. The House and Senate consider annual appropriations acts (and other budgetary legislation) within constraints established in a yearly budget resolution required by the Congressional Budget Act of 1974, as amended. Budget resolution policies are enforced by points of order that may be raised during House and Senate consideration of spending, revenue, and debt limit legislation. On occasion, budget policies may be modified by agreements reached between congressional leaders and the President; such modifications may be accommodated during legislative action through the use of waivers of points of order, emergency spending designations, and other budgetary or procedural devices. Discretionary spending has also been subject to statutory limits. These were first implemented between FY1991 and FY2002 by the Budget Enforcement Act (BEA) of 1990, as amended. Under this statutory mechanism, separate discretionary spending limits were applied to two different measurements of spending: budget authority and outlays. The discretionary spending limits were enforced by the sequestration process, which involved automatic, largely across-the-board reductions in discretionary spending in order to eliminate any breach of the limits. Pursuant to the Budget Control Act of 2011 ( P.L. 112-25 ), discretionary budget authority for FY2012-FY2021, with some exceptions, is again subject to statutory spending limits on defense and non-defense spending. For nearly two centuries, regular appropriations bills were considered by the House and Senate as individual measures and enacted by the President as standalone laws. In 1950, the House and Senate undertook a one-time experiment in improving legislative efficiency by considering all of the regular appropriations acts for FY1951 in a single bill, the Omnibus Appropriations Act of 1950 (81 st Congress, P.L. 759, September 6, 1950). The following year, the House and Senate returned to the practice of considering the regular appropriations acts individually. Over the past few decades, however, the House and Senate on several occasions have combined multiple regular appropriations acts into "consolidated" appropriations measures, sometimes enacting individual bills by cross-reference. Beginning in the late 1970s, certain omnibus acts have also sometimes been titled by Congress as "continuing appropriations acts," despite the fact that these acts generally incorporate the texts of multiple regular appropriations acts for full-year funding or enact such texts by reference. This is in contrast to the usual form of continuing appropriations, which provides funding at a rate with anomalies. This report includes only the former type of "continuing appropriations act" in its account of omnibus appropriations acts. During the 31-year period covering FY1986-FY2016, 22 different omnibus measures were enacted for 19 different fiscal years. (Two separate omnibus appropriations acts were enacted for FY2001, FY2009, and FY2012. ) The 22 omnibus appropriations acts covered a total of 170 regular appropriations acts. Each of the omnibus acts funded between two and 13 regular appropriations acts, on average funding almost eight (7.7) of them. Eighteen of the omnibus measures were bills or joint resolutions carrying the designation "omnibus," "consolidated," or "omnibus consolidated" appropriations in the title; seven were titled as continuing appropriations acts (FY1986, FY1987, FY1988, the first ones for FY2009 and FY2012, FY2013; and FY2015); and one was the VA-HUD Appropriations Act for FY2001, which also included the Energy and Water Development Appropriations Act for FY2001 (see Table 1 , and, at the end of the report, Table 3 ). During this period, a total of 390 regular appropriations acts were enacted or covered by full-year continuing appropriations. Of these, 191 (48.9%) were enacted as standalone measures, 158 (43.6%) were enacted in omnibus measures, and 29 (6.9%) were enacted in other forms (largely full-year continuing appropriations acts). Each year, a median of six regular appropriations acts were enacted as standalone measures, and 5.5 were enacted in omnibus measures. Sixty-five (16.7%) of the 390 regular appropriations acts were enacted on or before October 1, the start of the fiscal year. Nine of these bills were included in omnibus measures (six in FY1997 and three in FY2009), and the rest were enacted as standalone measures. On average, about two (2.1) regular appropriations bills per year were enacted before the start of the fiscal year during this period. Ten of the 18 omnibus appropriations acts bearing the designation "omnibus," "consolidated," or "omnibus consolidated" in their title originated in the House as a regular appropriations bill and were expanded in coverage (and their titles redesignated) at the stage of resolving House-Senate differences. These included the appropriations acts for Defense ( H.R. 3610 ) in FY1997; Transportation ( H.R. 4328 ) in FY1999; District of Columbia ( H.R. 3194 ) in FY2000; Labor-HHS-Education ( H.R. 4577 ) in FY2001; Agriculture ( H.R. 2673 ) in FY2004; Foreign Operations ( H.R. 4818 ) in FY2005; State-Foreign Operations ( H.R. 2764 ) in FY2008; Transportation, Housing and Urban Development ( H.R. 3288 ) in FY2010; Agriculture ( H.R. 2112 ) and Military Construction-VA ( H.R. 2055 ) in FY2012 and Military Construction-VA ( H.R. 2029 ) in FY2016. In the case of the FY1997, FY1999, FY2000, FY2001, FY2004, FY2005, FY2010, and the second FY2012 omnibus appropriations acts, the transformation from a regular appropriations bill into a consolidated appropriations measure occurred as part of the conference proceedings between the House and Senate. For the first FY2012 omnibus, the additional appropriations acts were added as a Senate floor amendment to a House-passed regular appropriations bill before conference occurred. For FY2008, conference procedures were not used and the transformation occurred in connection with an exchange of amendments between the two chambers. The acts for FY2000 and FY2001 enacted regular appropriations measures by cross-reference instead of including their full text (except for FY2000 appropriations for the District of Columbia). None of the other seven omnibus appropriations acts bearing such designations involved the transformation of a regular appropriations act. Four of the acts (one for FY1996, two for FY2009, and one for FY2013) originated as omnibus measures and retained this status throughout consideration. In FY2003, the omnibus measure originated in the House as a simple continuing resolution ( H.J.Res. 2 ) but was expanded in coverage and redesignated during Senate floor action. Most recently, the vehicles for the FY2014 and FY2015 omnibus acts were originally non-appropriations measures ( H.R. 3547 and H.R. 83 , respectively) that were amended to include omnibus appropriations. Several issues pertaining to the use of omnibus appropriations have been the focus of debate in recent years. These issues include the extent to which regular appropriations that are enacted in omnibus measures have been passed by the House and Senate prior to final congressional action, the use of across-the-board rescissions, and the inclusion of legislative provisions. One of the chief concerns regarding the use of omnibus appropriations acts is that it reduces the opportunities for Members to debate and amend the regular appropriations acts that are incorporated therein. This concern may be lessened if the regular appropriations acts incorporated into omnibus measures have been previously passed by the House and Senate before action on a final version. During the FY1986-FY2016 period, the House was more likely than the Senate to have passed the regular appropriations on initial consideration that were eventually incorporated into omnibus acts, with the House passing 116 out of the 170 regular appropriations bills, while the Senate passed 72 (see Table 2 ). For both the House and the Senate, between FY1986 and FY2001, the majority of appropriations acts that were ultimately included in omnibus measures were previously passed by the House and Senate each fiscal year. However, during certain fiscal years between FY2003 and FY2016, one or both chambers passed fewer than half of the regular appropriations bills that were ultimately enacted in omnibus form. For the House, this occurred in five different instances over four fiscal years: FY2003, FY2009, FY2012, and FY2014. For the Senate, this occurred in eight different instances over six fiscal years: FY2005, FY2009, and FY2012-FY2016. To adhere to restraints imposed by congressional budget resolutions, the discretionary spending limits, and ad hoc budget agreements between congressional leaders and the President (or to meet other purposes), Congress and the President from time to time incorporate across-the-board rescissions in discretionary budget authority into annual appropriations acts. During the 15 fiscal years covering FY2000-FY2016, six government-wide, across-the-board rescissions were included in omnibus appropriations acts. The government-wide across-the-board rescissions included in omnibus appropriations acts ranged in size from 0.032% to 0.80% of covered appropriations: 0.38% rescission for FY2000 in P.L. 106-113 ; 0.22% rescission for FY2001 in P.L. 106-554 ; 0.65% rescission for FY2003 in P.L. 108-7 ; 0.59% rescission for FY2004 in P.L. 108-199 ; 0.80% rescission for FY2005 in P.L. 108-447 ; and 0.032% rescission for security budget authority and 0.2% rescission for nonsecurity budget authority for FY2013 in P.L. 113-6 . Omnibus appropriations acts sometimes include other across-the-board rescissions that apply to individual appropriations acts as set forth in separate divisions of the measure. P.L. 108-199 , for example, included two requirements for uniform spending cuts in nondefense programs: (1) a 0.465% rescission of budget authority in the Commerce-Justice-State Appropriations division; and (2) a rescission of $50 million in administrative expenses for the Departments of Labor, Health and Human Services, and Education. Further, P.L. 108-447 included three other provisions requiring across-the-board rescissions focused on particular divisions of the act: (1) a 0.54% rescission in the Commerce-Justice-State Appropriations division, (2) a 0.594% rescission in the Interior Appropriations division, and (3) a rescission of $18 million in the Labor-HHS-Education Appropriations division, applicable to administrative and related expenses for departmental management (except for the Food and Drug Administration and the Indian Health Service). More recently, Section 3001 of P.L. 113-6 provided across-the-board rescissions that were applicable to various projects and activities in certain divisions of the act. For security discretionary budget authority in Divisions A through E, 0.1% was rescinded. For nonsecurity discretionary budget authority, 2.513% was rescinded in Divisions A and E, and 1.877% was rescinded in Division B. The significance of these across-the-board rescissions has differed with regard to budget enforcement. The FY2000 and FY2013 rescissions were an integral component of the plan that successfully avoided a sequester at the end of the session. The FY2001 rescission contributed to overall discretionary spending being below the statutory limits, but the across-the-board rescission proved to be unnecessary in avoiding a sequester. With regard to the FY2003 rescission, the House and Senate did not reach agreement on a budget resolution and the statutory discretionary limits had expired the fiscal year before; nonetheless, the across-the-board rescission was used to adhere to an informal limit reached between congressional leaders and President Bush and to avoid a veto of the omnibus appropriations act. Similarly, the FY2004, FY2005, and FY2008 rescissions were used to keep the costs of the measures under overall limits acceptable to the President. Although House and Senate rules and practices over the decades have promoted the separate consideration of legislation and appropriations, this separation was created to serve congressional purposes and has not always been ironclad. In many instances, during the routine operation of the annual appropriations process, minor provisions are included in appropriations acts that technically might be regarded under the precedents as legislative in nature but arguably do not significantly undermine the distinction between legislation and appropriations. At other times, however, the legislative provisions included in annual appropriations acts—especially omnibus appropriations acts—have been much more substantial and have represented a deliberate suspension of the usual procedural boundaries. Both House and Senate rules prohibit the inclusion of legislation in appropriations bills in specified circumstances. Clauses 2(b) and 2(c) of House Rule XXI prohibit the inclusion of legislative provisions on regular appropriations bills reported by the committee or added during the floor process. However, continuing resolutions are not considered by House rules to be regular appropriations bills and thus do not fall under the purview of these restrictions. In the Senate, Rule XVI prohibits the inclusion of legislative provisions in general appropriations legislation but allows exceptions in specified circumstances. The rules in the House and Senate barring the inclusion of legislation in appropriations are not self-enforcing, can be waived, and allow some exceptions. Thus, omnibus appropriations acts have sometimes been used as vehicles to address substantive legislative concerns. Over the past two decades, there are some instances of the incorporation of significant legislative provisions within omnibus appropriations acts. For example, the Consolidated Appropriations Resolution for FY2003 ( P.L. 108-7 ) included the Agricultural Assistance Act of 2003, amendments to the Price-Anderson Act and the Homeland Security Act, and provisions dealing with the U.S.-China Economic and Security Review Commission, among other legislative matters. The Consolidated Appropriations Act for FY2008 ( P.L. 110-161 ) included such items as the Emergency Steel Loan Guarantee Act of 1999 Amendments, the Harmful Algal Bloom and Hypoxia Research and Control Act of 1998 Amendments, the ED 1.0 Act, and the Kids in Disasters Well-being, Safety, and Health Act of 2007. Most recently, Divisions M through P of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) contained the texts of a number of significant legislative provisions, reauthorizations, and new laws, including: the Intelligence Authorization Act for Fiscal Year 2016; the Cybersecurity Act of 2015; and the James Zadroga 9/11 Victim Compensation Reauthorization.

Omnibus appropriations acts have become a significant feature of the legislative process in recent years as Congress and the President have used them more frequently to bring action on the regular appropriations cycle to a close. Following a discussion of pertinent background information, this report reviews the recent enactment of such measures and briefly addresses several issues raised by their use. For nearly two centuries, regular appropriations acts were considered by the House and Senate as individual measures and enacted as standalone laws. In 1950, the House and Senate undertook a one-time experiment in improving legislative efficiency by considering all of the regular appropriations acts for FY1951 in a single bill, the Omnibus Appropriations Act of 1950. The following year, the House and Senate returned to the practice of considering the regular appropriations acts individually. During the 31-fiscal year period covering FY1986-FY2016, a total of 390 regular appropriations acts were enacted or covered by full-year continuing appropriations. Of these, 191 (48.9%) were enacted as standalone measures, 170 (43.6%) were enacted in omnibus measures, and 29 (6.9%) were enacted in other forms (largely full-year continuing appropriations acts). Each year, a median of six regular appropriations acts were enacted as standalone measures, and 5.5 were enacted in omnibus measures. During this period, 22 different omnibus measures were enacted for 19 different fiscal years. (Two separate omnibus appropriations acts were enacted for FY2001, FY2009, and FY2012.) Each of the omnibus acts funded between two and 13 regular appropriations acts (7.5 median). Eighteen of the omnibus measures were bills or joint resolutions carrying the designation "omnibus," "consolidated," or "omnibus consolidated" appropriations in the title; seven were titled as continuing appropriations acts (FY1986, FY1987, FY1988, FY2009, the first for FY2012, FY2013; and FY2015); and one was the VA-HUD Appropriations Act for FY2001, which also included the Energy and Water Development Appropriations Act for FY2001. In addition to the customary concern—of sacrificing the opportunity for debate and amendment for greater legislative efficiency—that arises whenever complex legislation is considered under time constraints, the use of omnibus appropriations acts has generated controversy for other reasons. These include whether adequate consideration was given to regular appropriations acts prior to their incorporation into omnibus appropriations legislation, the use of across-the-board rescissions, and the inclusion of significant legislative (rather than funding) provisions. This report will be updated at the conclusion of the annual appropriations process.

On October 4, 2006, the President signed into law the FY2007 Department of Homeland Security Appropriations Act ( P.L. 109-295 , H.R. 5441 ), which has a provision (Section 546) extending the deadline requiring U.S. citizens traveling by land or sea between the United States and the Caribbean (as well as Canada, Mexico, and Central and South America) to have passports or other documents denoting identity and citizenship. The deadline was extended from January 1, 2008, to June 1, 2009, or earlier if the Secretary of State and Secretary of Homeland Security jointly certify certain criteria regarding the new document or passport card being developed. A deadline of January 8, 2007, remains in place for U.S. citizens to have passports for travel by air between the United States and the Caribbean (as well as Canada and Mexico.) On August 28, 2006, Guyana held national elections in which President Baharrat Jagdeo was re-elected with almost 55% of the vote. Some observers had anticipated political violence, but the elections were the most peaceful and orderly in recent history, according to the Carter Center, which observed the elections. On July 3, 2006, Haiti's participation in the Caribbean Community (CARICOM) was formally reinstated at the organization's summit in St. Kitts and Nevis. Haiti's participation had been suspended after the departure of President Jean Bertrand Aristide from power in February 2004. On June 12, 2006, the House approved H.Res. 792 (Meeks) by voice vote, recognizing the 40 th anniversary of Guyana's independence and extending best wishes to Guyana for peace and further development, progress, and prosperity. On April 22, 2006, Guyana's Agriculture minister, along with his two siblings and a security guard, were shot and killed in an apparent robbery. On April 12, 2006, U.S. and CARICOM trade officials meeting in Washington began preliminary exploration of a potential free trade agreement. The officials also agreed to revitalize a dormant U.S.-CARICOM Trade and Investment Council that had originally established in the early 1990s. On March 30, 2006, Portia Simpson Miller was sworn in as Jamaica's first female Prime Minister. She replaced outgoing Prime Minister P.J. Patterson as the leader of the ruling People's National Party who had governed since 1992. On March 22, 2006, Secretary of State Condoleezza Rice met with CARICOM foreign ministers in Nassau, Bahamas. She maintained that the United States wants to deepen its relations with the region and called for support for the new democratically elected government in Haiti. On February 14, 2006, the Senate approved H.Con.Res. 71 (Lee), by unanimous consent, expressing the sense of Congress that there should be established a Caribbean-American Heritage Month. (The House had approved the resolution on June 27, 2005.) Subsequently, on June 5, 2006, President Bush proclaimed June as Caribbean-American Heritage Month. The Caribbean, encompassing 16 independent nations, is a diverse region of some 34 million people that includes some of the hemisphere's richest and poorest nations (see Table 1 ). The region consists of 13 island nations, from the Bahamas in the north to Trinidad and Tobago in the south; Belize, which is geographically located in Central America; and the two nations of Guyana and Suriname, located on the north central coast of South America. Many countries in the region share a common African ethnic and British colonial heritage, while Cuba and the Dominican Republic were Spanish colonies, Haiti was French, and Suriname was Dutch. The dates of independence of these countries range from Haiti in 1804 to St. Kitts and Nevis in 1983. The largest nations in terms of land area are Guyana and Suriname, while those with the largest populations are Cuba, the Dominican Republic, and Haiti. The island nations of the Eastern Caribbean are among the smallest countries in the world. Politically, all Caribbean nations, with the exception of communist Cuba, have elected democratic governments. Most of the former British colonies have parliamentary forms of government, with the exception of Guyana, the Dominican Republic, Haiti, and Suriname, which are republics headed by presidents. In terms of regional integration, 14 of the region's independent nations belong to the Caribbean Community (CARICOM), with the exception of the Dominican Republic (which has observer status) and Cuba. CARICOM was formed in 1973 to spur regional economic integration. Some critics argue that it has been slow to promote integration, compared to other regional economic groupings, but progress has been made in moving toward a single economic market and in establishing a Caribbean Court of Justice. In addition to CARICOM, six Eastern Caribbean nations are members of the Organization of Eastern Caribbean States (OECS), the subregional organization designed to stimulate economic integration and foreign policy harmonization. The six OECS nations also share a common currency, the Eastern Caribbean dollar, with monetary policy managed by the Eastern Caribbean Central Bank. The Caribbean Development Bank (CDB), headquartered in Barbados, promotes economic development and regional integration. With the exception of Cuba and Haiti, regular elections have been the norm, and for the most part have been free and fair. In 2005, Dominica and Suriname held elections in May, and St. Vincent and the Grenadines held elections in December. Haiti was expected to hold elections in 2005, but significant problems and political instability resulted in those elections being postponed several times, until they were ultimately held on February 7, 2006. Guyana was scheduled to have presidential elections before the constitutional deadline of August 4, 2006, but the Guyana Elections Commission decided in April to postpone the elections in order to provide more time to improve the accuracy of the electoral register. Successful elections ultimately were held on August 28, 2006, without the political violence that some observers had anticipated. Looking ahead, parliamentary elections are due in St. Lucia by December 2006, while elections in the Bahamas, Jamaica, and Trinidad and Tobago are due in 2007. (See Table 2 for a listing of leaders and elections for head of government.) Although many Caribbean nations have maintained long democratic traditions, they are not immune from terrorist and other threats to their political stability. In 1993, stability on St. Kitts was threatened following violent protests after disputed elections; order was restored with the assistance of security forces from neighboring states. In 1990, the government of Trinidad and Tobago was endangered by a coup attempt by a radical Muslim sect. Earlier in the 1980s, the government of Eugenia Charles in Dominica was threatened by a bizarre coup plot involving foreign mercenaries. And of course, Grenada, under the socialist-oriented government of Maurice Bishop, experienced a break from the democratic norm after it assumed power in a nearly bloodless coup in 1979 and installed a people's revolutionary government. After the violent overthrow and murder of Bishop in 1983, the United States intervened to restore order and end the Cuban presence on the island. Many Caribbean nations experienced an economic slump in 2001-2002 due to downturns in the tourism and agriculture sectors, although most Caribbean economies have rebounded since 2003. Countries that depend on tourism were hurt by the aftermath of the September 2001 terrorist attacks in the United States and the subsequent U.S. economic recession and sluggish recovery. The banana and sugar sectors in the Eastern Caribbean were damaged by a tropical storm in 2002 and a drought in 2003. Both sectors face uncertain futures in light of the European Union's plan to phase out preferred market access from former Caribbean colonies for bananas by 2006 and for sugar by 2009. The Haitian economy experienced decline beginning in 2001, with political instability exacerbating already difficult economic conditions in the hemisphere's poorest nation. The strongest performing economies in recent years have been those of the Dominican Republic, fueled by the apparel sector, and Trinidad and Tobago, with substantial energy resources. In 2003, however, the Dominican economy experienced a decline in economic growth due to the financial strains caused by the collapse of one of the largest domestic banks. In 2004 and 2005, the region's strongest economic performers averaging growth rates over 5% for those two years, were Antigua and Barbuda, Cuba, the Dominican Republic, St. Kitts, St. Lucia, Suriname, and Trinidad and Tobago. Those countries not faring well in 2004 because of devastating hurricanes and tropical storms included Haiti, with a 3.5%% decline in gross domestic product (GDP), and Grenada, with a GDP decline of 3%. For 2005, however, Grenada's economy rebounded with growth over 5%, while Haiti's growth was 1.8%. In Guyana, economic growth has been stagnant or minimal over the past several years. In 2005, the economy declined 3% because of high oil prices and floods, which early in the year severely affected agriculture and mining activities. Overall, concern that rising oil prices could cause an economic setback for some countries has been alleviated to some extent by Venezuela's new subsidized oil program for Caribbean countries known as PetroCaribe. Nevertheless, some observers have also been concerned about the region's high level of public debt, with several Caribbean nations having debt levels that exceed 100% of their GDP. U.S. interests in the Caribbean are diverse, and include economic, political, and security concerns. During the Cold War, security concerns tended to eclipse other policy interests. In the aftermath of the Cold War, other U.S. policy interests emerged from the shadow of the East-West conflict in the Caribbean that focused on concerns about the Soviet and Cuban threat. U.S. policy priorities shifted from one emphasizing security concerns to a new focus on strengthened economic relations through trade and investment. Today, in the aftermath of the September 2001 terrorist attacks in the United States, security concerns have re-emerged as a major U.S. interest in the Caribbean. The Administration describes the Caribbean as America's "third border," with events in the region having a direct impact on the homeland security of the United States. It describes Caribbean nations as "vital partners on security, trade, health, the environment, education, regional democracy, and other hemispheric issues." The United States has close relations with most Caribbean nations, with the exception of Cuba under Fidel Castro. The U.S.-Caribbean relationship is characterized by extensive economic linkages, cooperation on counter-narcotics efforts and security, and a sizeable U.S. foreign assistance program supporting a variety of projects to strengthen democracy, promote economic growth and development, alleviate poverty, and combat the AIDS epidemic in the region. The region has had preferential treatment of its exports to the U.S. market since the early 1980s, and U.S. efforts are now focused on helping the region prepare for hemispheric free trade. Despite close U.S. relations with most Caribbean nations, there has been tension at times in the relationship. For example, relations between Caribbean Community (CARICOM) nations and the United States became strained in the aftermath of the departure of President Jean Bertrand Aristide from power in February 2004. CARICOM nations called for an investigation into the circumstances surrounding Aristide's departure, and Haiti's participation in CARICOM was suspended. After Haiti held elections in February 2006 leading to the inauguration of Rene Preval as president, CARICOM subsequently reinstated Haiti's participation in CARICOM at their July 2006 summit. Caribbean nations that depend on tourism such as Jamaica and the Bahamas are concerned about the potential negative effects on tourism in the region because of a new U.S. passport requirement, as of January 8, 2007, for U.S. citizens traveling by air to the Caribbean, as well as to Canada and Mexico. (The deadline for the Caribbean originally had been set for December 31, 2005, and applied to air and sea travel.) The new requirement was mandated by the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ). The deadline for U.S. citizens traveling by land and sea to the Caribbean, as well as to Canada and Mexico, had been set for January 1, 2008. In September 2006, however, Congress approved legislation ( P.L. 109-295 , Section 546) extending the deadline for requiring passports (or a passport card currently under development) for land or sea travel to June 1, 2009, or earlier if the Secretary of State and Secretary of Homeland Security jointly certify certain criteria regarding the new passport card being developed. The Caribbean tourism industry fears that the impact of January 8, 2007, air travel passport requirement will be catastrophic for Caribbean economies. Americans do not presently need a passport to travel to several Caribbean islands. For example, in 2005, some 50% of Americans traveling to Jamaica did not have a passport. Caribbean governments also argue that a majority of tourism revenues are derived from tourists arriving by air and maintain that the recent changes in U.S. law providing for a different deadline for sea travel was done to appease cruise ship carriers. A controversial issue in U.S. relations with the Caribbean has been a World Trade Organization (WTO) complaint filed by Antigua and Barbuda challenging U.S. restrictions on cross-border Internet gambling. Antigua, which has invested in Internet gambling as a means of diversifying its economy, maintains that it has lost millions of dollars because of the U.S. restrictions. In July 2006, the WTO established a dispute resolution panel to determine whether the United States had complied with a 2005 WTO ruling that backed Antigua's claim that the U.S. restrictions violate the United States' market access commitments under the WTO's General Agreement on Trade in Services (GATS). Antigua maintains that the United States has taken no action to comply with the previous ruling. In September 2006, Congress approved legislation to crack down on unlawful Internet gambling ( P.L. 109-347 , Title VIII, H.R. 4954 ). CARICOM officials have expressed concerns about the U.S. inaction in the WTO case and told U.S. officials that they consider it a regional Caribbean issue with the United States as opposed to just a U.S. bilateral issue with Antigua and Barbuda. (For more, see CRS Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases , by [author name scrubbed] and CRS Report RS22418, Internet Gambling: Two Approaches in the 109 th Congress , by [author name scrubbed].) U.S. relations with Haiti were strained under the government of Jean Bertrand Aristide because of concerns over corruption and human rights, but there has been renewed cooperation with Haiti, first under the interim government that took office in February 2004, and more recently under the newly elected government of President Rene Preval inaugurated in May 2006. The Administration is hoping that an elected government will support the development of functioning institutions and infrastructure and a reduction in violence that will help realize such as goals as improving the human rights situation, reducing poverty, and decreasing narcotics trafficking. Migrant interdiction has been a key component of U.S. policy toward Haiti. (For further on U.S. policy toward Haiti, see CRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991 and Current Congressional Concerns , and CRS Report RL33156, Haiti: International Assistance Strategy for the Interim Government and Congressional Concerns , both by [author name scrubbed]; and CRS Report RS21349, U.S. Immigration Policy on Haitian Migrants , by [author name scrubbed].) Since the early 1960s, U.S. policy toward Cuba has consisted largely of isolating the island nation through economic sanctions, including a trade embargo. The Bush Administration has essentially continued this policy, although it has further tightened economic sanctions, especially on travel. Another component of U.S. policy consists of support measures for the Cuban people, including private humanitarian donations, U.S.-sponsored radio and television broadcasting to Cuba, and U.S. funding to support democracy and human rights. U.S. immigration policy toward Cuban migrants has been described as a "wet foot/dry foot policy," with the U.S. Coast Guard interdicting Cuban migrants at sea and returning them to Cuba, while those Cubans who reach shore are generally allowed to apply for permanent resident status. (For further information on policy toward Cuba, see CRS Report RL32730, Cuba: Issues for the 109 th Congress ; CRS Report RL33622, Cuba ' s Future Political Scenarios and U.S. Policy Approaches ; CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances ; all three by [author name scrubbed]; and CRS Report RS20468, Cuban Migration Policy and Issues , by [author name scrubbed].) The United States has provided considerable amounts of foreign assistance to the Caribbean over the past 25 years. U.S. assistance to the region in the 1980s amounted to about $3.2 billion, with most concentrated in Jamaica, the Dominican Republic, and Haiti. An aid program for the Eastern Caribbean also provided considerable assistance, especially in the aftermath of the 1983 U.S.-led military intervention in Grenada. In the 1990s, U.S. assistance to Caribbean nations declined to about $2 billion, or an annual average of $205 million. Haiti was the largest recipient of assistance during this period, receiving about $1.1 billion in assistance or 54% of the total. Jamaica was the second largest U.S. aid recipient in the 1990s, receiving about $507 million, almost 25% of the total, while the Dominican Republic received about $352 million, about 17% of the total. Eastern Caribbean nations received about $178 million in assistance, almost 9% of the total. The bulk of U.S. assistance was economic assistance, including Development Assistance, Economic Support Funds, and P.L. 480 food aid. Military assistance to the region amounted to less than $60 million during the 1990s. Since FY2000, U.S. aid to the Caribbean region (including FY2006 aid estimates) has amounted to almost $1.6 billion, because of increased HIV/AIDS assistance to the region (especially to Guyana and Haiti), disaster and reconstruction assistance in the aftermath of several hurricanes and tropical storms in 2004, and increased support for the interim government in Haiti following the departure of President Jean-Bertrand Aristide from power. Haiti accounted for some 51% of assistance to the Caribbean region during this period. As in the 1990s, the bulk of assistance to the region consisted of economic assistance. With regard to hurricane disaster assistance, Congress appropriated $100 million in October 2004 in emergency assistance for Caribbean nations ( P.L. 108-324 ), with $42 million for Grenada, $38 million for Haiti, $18 million for Jamaica, and $2 million for other countries affected by the storms. Overall assistance to the Caribbean amounted to $393 million in FY2005 and an estimated $306 million in FY2006 (see Table 5 ). For FY2007, the Administration has requested about $322 million in assistance for the Caribbean, with about $198 million or almost 62% of the total for Haiti, $35 million for the Dominican Republic, $31 million for Guyana, and almost $17 million for Jamaica. Assistance to the small nations of the Eastern Caribbean (Antigua and Barbuda, Barbados Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines) is provided through USAID's Caribbean Regional program, which also funds some region-wide projects; for FY2007, the Administration requested $11.6 million for the program. The Eastern Caribbean would also receive about $1.5 million in military assistance and $3.2 million to support a Peace Corps presence. The request of $3 million for the "Third Border Initiative" (TBI) would fund regional projects for the 14-nation Caribbean Community (CARICOM) plus the Dominican Republic that focus on improving travel and border security in the region, disaster preparedness, and greater business competitiveness. A request of $4 million for Operation Enduring Friendship, a military assistance program, would support efforts to increase maritime security in the Dominican Republic, Honduras, Panama, the Bahamas, and Jamaica. (See Tables 5 and 6 ). Looking ahead to future years, several Caribbean nations are potential recipients for Millennium Challenge Account (MCA) assistance, an initiative to target foreign assistance to countries with strong records of performance in the areas of governance, economic policy, and investment in people. Although Haiti and Guyana have been candidate countries potentially eligible for MCA funds since FY2004 (because of low per capita income levels), neither country has been approved to participate in the program because they have not met MCA performance criteria. Guyana, however, was designated an MCA threshold country for FY2005 and FY2006 and could be approved in future years for MCA funding. In FY2006, the per capita income level for MCA-eligibility increased to $3,255 or below, and as a result, three additional Caribbean countries—the Dominican Republic, Jamaica, and Suriname—became potentially eligible for MCA funding but ultimately were not approved for participation. For FY2007, the same five Caribbean countries—Haiti, Guyana, the Dominican Republic, Jamaica, and Suriname—are listed by the Millennium Challenge Corporation (MCC) as potential candidates for MCA funding. (For additional information see CRS Report RL32427, Millennium Challenge Account , by [author name scrubbed].) One obstacle in the provision of U.S. military assistance to the Caribbean has been that several Caribbean nations that are parties to the International Criminal Court (ICC) have not signed agreements to exempt Americans from ICC prosecution, so-called "Article 98 agreements." Pursuant to the American Servicemembers' Protection Act (ASPA, P.L. 107-206 , title II), U.S. military assistance is prohibited to countries that are parties to the ICC and do not have Article 98 agreements. In July 2003, the Administration announced the termination of military assistance to six Caribbean nations: Antigua and Barbuda, Barbados, Belize, Dominica, St. Vincent and the Grenadines, and Trinidad and Tobago. Subsequently, Antigua and Barbuda signed an Article 98 agreement in September 2003; Belize signed one in December 2003; and Dominica signed one in May 2004. This leaves Barbados, St. Vincent, and Trinidad and Tobago as the three Caribbean countries forgoing U.S. military assistance because of the ASPA sanction. Trinidad and Tobago, which played a leading role in the establishment of the ICC, has strongly resisted signing an agreement, as has Barbados. (For additional information see CRS Report RL33337, Article 98 Agreements and Sanctions on U.S. Foreign Aid to Latin America , by [author name scrubbed].) Because of their geographic location, many Caribbean nations are transit countries for cocaine and heroin from South America destined for the U.S. and European markets. In addition, two Caribbean nations—Jamaica and St. Vincent and the Grenadines—are large producers and exporters of marijuana. Of the 16 countries in the Caribbean region, President Bush in September 2006 designated four of them as major drug-producing or drug-transit countries pursuant to annual legislative drug certification requirements: the Bahamas, the Dominican Republic, Haiti, and Jamaica. The President urged the new government in Haiti to strengthen law enforcement and the judiciary to bring drug trafficking and crime under control. All four designated Caribbean countries are major transit countries for illicit drugs to the U.S. market, and Jamaica is the largest marijuana producer and exporter in the Caribbean. The Bahamas cooperates extensively with the United States on counternarcotics measures, including interdiction efforts through Operation Bahamas and Turks and Caicos (OPBAT), a multinational interdiction effort, and efforts that target Bahamian drug trafficking organizations. The Dominican Republic, a major transit country for both cocaine and heroin, cooperates closely with the United States, although the State Department's March 2006 International Narcotics Control Strategy Report notes that "corruption and weak governmental institutions remained an impediment to controlling the flow of illegal narcotics" through the country. Jamaican cooperation with U.S. law enforcement agencies on counternarcotics efforts is described by the State Department report as excellent in most cases, although it maintains that the government needs to further intensify its law enforcement efforts and enhance international cooperation. In Haiti, anti-drug efforts have been hampered over the years by weak institutions, poor economic conditions, and political instability. Under the interim government, the country's continued economic and political crises resulted in little attention to counternarcotics efforts, according to the State Department, but a new Director General of the Haitian National Police reportedly has worked to combat drug-related crime and police corruption. Many other Caribbean nations, while not designated major transit countries, are still vulnerable to drug trafficking and associated crimes because of their geographic location. In particular, the State Department's March 2006 report maintains that such crimes have the potential to threaten the stability of the small states of the Eastern Caribbean, and to varying degrees, have damaged civil society in some of these countries. Given the poor outlook for the banana industry in the Caribbean, some observers believe that it will be difficult to contain marijuana production unless there is adequate support to diversify these economies away from banana production. St. Vincent and the Grenadines is the largest marijuana producer in the Eastern Caribbean. Efforts to crack down on money laundering also constitute a major component of U.S. anti-drug strategy, and became increasingly important as a counter-terrorist strategy in the aftermath of the September 2001 terrorist attacks in the United States. The State Department's list of major money laundering countries (also categorized as "jurisdictions of primary concern") includes six Caribbean countries—Antigua and Barbuda, the Bahamas, Belize, the Dominican Republic, Haiti, and St. Kitts and Nevis—and one British Caribbean dependency, the Cayman Islands. The Department of State maintains that although Antigua and Barbuda has comprehensive legislation to regulate its financial sector, the country remains vulnerable to money laundering because the sector is loosely regulated and because of its Internet gaming industry. The Bahamas has enacted strong anti-money laundering laws that has made it difficult for drug traffickers to deposit large amounts of cash; as a result, traffickers have begun storing large quantities of cash in safe houses, purchasing real estate, vehicles, and jewelry, and processing money through legitimate businesses and shell companies. In Belize, money laundering is believed to occur primarily in the country's growing offshore financial center. Money laundering in both the Dominican Republic and Haiti stem from their roles as major drug transhipment points. In the Dominican Republic, financial institutions engage in transactions with money derived from illegal drug sales in the United States, with courier and wire transfers the primary methods for moving the funds. St. Kitts and Nevis, according to the State Department, is at major risk for corruption and money laundering because of the high volume of narcotics being trafficked through the country and because of the presence of known traffickers on the islands. The Financial Action Task Force on Money Laundering (FATF), an inter-governmental body with the objective of combating money laundering and terrorist financing, has published a list of non-cooperative countries and territories in the fight against money laundering since 2000. The FATF evaluative process has been a major factor in Caribbean countries improving their anti-money laundering regimes. Four Caribbean nations and one dependent territory were on the first FATF non-cooperative list issued in 2000: the Bahamas, the Cayman Islands, Dominica, St. Kitts and Nevis, and St. Vincent and the Grenadines. Grenada was added to the list in September 2001. Subsequent actions by all these nations to improve their anti-money laundering regimes resulted in all of them being removed from the list by June 2003. The Bahamas and the Cayman Islands were removed from the list in June 2001; St. Kitts and Nevis in June 2002; Dominica in October 2002; Grenada in February 2003; and St. Vincent in June 2003. Once a nation is removed from the list, the FATF continues to monitor developments in the country to ensure compliance. Some Caribbean officials and others have complained that pressure to strengthen and enforce anti-money laundering regimes in the region will have a detrimental effect on its offshore financial sectors. They maintain that the anti-money laundering measures required have been indiscriminate and constitute an attack on legitimate business conducted in the small financial sectors of the region. In particular, after the U.S. congressional passage of new anti-money laundering provisions in the USA PATRIOT Act ( P.L. 107-56 , Title III), approved in the aftermath of the September 11 terrorist attacks, some feared that the stricter scrutiny of transactions between U.S. and Caribbean financial institutions would threaten the offshore financial industry in the Caribbean. The act's anti-money laundering provisions include a prohibition on U.S. correspondent accounts with shell banks (banks that have no physical presence in the chartering country) and tighter bank record keeping requirements. Some observers maintain that the strengthening of anti-money laundering regimes in the Caribbean will have the end result of increasing the attractiveness of the region's offshore financial sectors for legitimate business transactions. According to this view, such efforts as the FATF evaluative process and the newer anti-money laundering measures under the PATRIOT Act will help change the reputation of the Caribbean as being a haven for money launderers and tax evaders. The United States has offered a one way duty-free preferential trade arrangement for a wide range of products from Caribbean Basin nations since the early 1980s as an incentive for increased investment and export production in the region. In 1983, Congress enacted the Caribbean Basin Economic Recovery Act (CBERA) ( P.L. 98-67 ), the centerpiece of a broader U.S. foreign policy initiative known as the Caribbean Basin Initiative (CBI) linking Central America and Caribbean nations together under one preferential trade program. The CBERA allowed duty-free importation of many categories of products with certain exceptions. Most apparel and textile goods were ineligible under the CBERA, but in the late 1980s imports of apparel from CBERA countries that were assembled from U.S. components were eligible for reduced duties. These production-sharing arrangements boosted the apparel sectors of several Caribbean Basin countries, including most significantly the Dominican Republic. In 1990, Congress enacted so-called CBI II legislation, the Caribbean Basin Economic Recovery Expansion Act of 1990 ( P.L. 101-382 , Title II), that enhanced the benefits of CBERA and made its provisions permanent. Congress approved the Caribbean Basin Trade Partnership Act (CBTPA) ( P.L. 106-200 , Title II) in 2000, which expanded preferential tariff treatment for Caribbean Basin nations, providing them with NAFTA-like tariff treatment. This includes preferential treatment for qualifying textile and apparel products. The CBTPA benefits are scheduled to expire in September 2008, or upon entry into force of the Free Trade Area of the Americas, whichever comes first. Of the 15 independent Caribbean countries eligible for CBTPA benefits (Cuba is not eligible), only 8 have been designated to participate in the program because they fully meet the eligibility criteria set forth in the CBTPA. Belize, the Dominican Republic, Haiti, and Jamaica were designated in October 2000; Guyana was designated in November 2000; Trinidad and Tobago was designated in February 2001; and Barbados and St. Lucia were designated in June 2001. The remaining Caribbean countries continue to benefit from the CBERA program, with the exception of Cuba, which is not eligible, and Suriname, a former Dutch colony which has never elected to participate in the CBI trade program. Since the United States first implemented a preferential trade program for Caribbean Basin imports in 1984, the overall performance of exports has been mixed (see Table 3 ). The Dominican Republic has been the Caribbean country that has benefitted most from the program, and its apparel sector expanded significantly because of production-sharing arrangements. Overall U.S. imports from the Caribbean (not including Central America) amounted to about $4.8 billion in 1984 and to about $14.5 billion in 2005, an increase of about $9.7 billion. The Dominican Republic accounted for $3.6 billion of the increase. Trinidad and Tobago, an oil and gas exporter, increased its exports destined for the United States from $1.4 billion in 1984 to about $7.9 billion in 2005. For other Caribbean nations, however, such as Haiti and the Bahamas, overall exports to the United States have declined or been stagnant since the early 1980s. Bahamian exports to the United States fell when the country's oil refinery closed in 1985; the country's economy remains based on tourism and financial services. U.S. exports to the Caribbean region (including agricultural exports to Cuba, which have been allowed since late 2001 ) rose from $8.9 billion in 2001 to $12.3 billion in 2005 (see Table 4 ). Four Caribbean countries—Dominican Republic, Trinidad and Tobago, Jamaica, and the Bahamas—are the destination for the lion's share of U.S. exports to the region. In 2005, U.S. exports to these four countries accounted for 78% of total U.S. exports to the Caribbean. The United States ran a trade deficit of almost $2.2 billion with the Caribbean in 2005, largely because of and natural gas imports from Trinidad and Tobago. For all other Caribbean nations, the United States ran a significant trade surplus. All Caribbean nations with the exception of Cuba are participating in the negotiations for a Free Trade Area of the Americas (FTAA), although negotiations for that agreement have been stalled since 2004. Within CARICOM, while some governments, like Trinidad and Tobago, are enthusiastic about the FTAA, other Caribbean governments, especially the smaller countries of the region, have reservations about the FTAA and its impact on the region. While participating in the FTAA negotiations, Caribbean nations argue for special and differential treatment for small economies, including longer phase-in periods. CARICOM has also called for a Regional Integration Fund to be established that would help the smaller economies meet their needs for human resources, technology, and infrastructure. In the meantime, CARICOM, which often has been criticized for acting too slowly, is trying to prepare itself for hemispheric integration by moving ahead with its own regional integration. In April 2005, CARICOM members established the Caribbean Court of Justice, headquartered in Port-of-Spain in Trinidad and Tobago, that will serve as region's final court of appeal and replace the Privy Council based in London. The Court is expected to play an important role in the region's economic integration by ruling on trade disputes in the CARICOM Single Market and Economy (CSME). The CSME allows for the free movement of goods, services, and capital. It became operational in January 2006, with Barbados, Jamaica, and Trinidad leading the way in moving ahead with its implementation. By July 2006, 12 out of 14 CARICOM nations had joined the CSME, with the exception of the Bahamas and Haiti. Eastern Caribbean nations were enticed to join in part by a decision to establish a regional Development Fund and Development Agency (to be operational by July 2007) for poorer or disadvantaged countries. Some observers have expressed skepticism that the CSME will have a significant impact on Caribbean economies since intra-CARICOM trade is small. Barbadian Prime Minister Owen Arthur, however, asserted in early October 2006, that the CSME has already increased his country's regional exports as well as job and investment opportunities for its citizens. On April 12, 2006, U.S. and CARICOM trade officials meeting in Washington began exploring the possibility of a free trade agreement, although Caribbean ministers reportedly maintained that they would only negotiate such an agreement if it included extensive transition periods for Caribbean nations. The officials also agreed to revitalize a dormant Trade and Investment Council that had originally been established in the early 1990s. The council will be the mechanism used to continue exploratory talks on an FTA as well as other trade and investment issues. The Dominican Republic and the United States completed negotiations for a Free Trade Agreement on March 15, 2004, that was ultimately integrated with a free trade agreement negotiated with Central American countries. Ultimately, Congress approved legislation ( P.L. 109-53 ) in July 2005 implementing the U.S.-Dominican Republic-Central America Free Trade Agreement (DR-CAFTA). The agreement had faced political uncertainty in Congress because of divergent U.S. views on relaxing trade rules for sensitive agricultural and textile imports and on labor provisions. The Dominican Republic views the agreement as a means of ensuring the continuation of U.S. preferential treatment for textiles and apparel and a means to attract U.S. investment. The Bush Administration views the agreement as a way for the region to help create jobs, attract foreign investment, and advance good governance. (For further information, see CRS Report RL31870, The Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) , by [author name scrubbed].) In the 109 th Congress, two identical bills referred to as the Caribbean Basin Trade Enhancement Act of 2005— H.R. 1213 (Hyde), introduced March 10, 2005, and S. 704 (Martinez), introduced April 5, 2005—would authorize up to $10 million in FY2006 for the Organization of American States (OAS) to establish a Center for Caribbean Basin Trade and up to $10 million for the OAS to establish a skills-training program for Caribbean Basin countries. As first announced by President Bush at the April 2001 Summit of the Americas, the "Third Border Initiative" (TBI) had the goals of deepening cooperation in fighting the spread of HIV/AIDS, responding to natural disasters, and making sure the benefits of globalization are felt in even the smallest economies. The Caribbean was described as an often overlooked "third border," where illegal drug trafficking, migrant smuggling, and financial crime threaten U.S. and regional security interests. The initiative consisted of a package of programs to enhance diplomatic, economic, health, education, and law enforcement cooperation and collaboration. Most significantly, the initiative included increased funding to combat HIV/AIDS in the region. In the aftermath of the September 2001 terrorist attacks in the United States, the Third Border Initiative expanded to focus on issues affecting U.S. homeland security in the fields of administration of justice and security. Economic Support Funds (ESF) under the TBI have been used to help Caribbean airports modernize their safety and security regulations and oversight, which is viewed an important measure to improve the security of visiting Americans. TBI funds have also been used to support border security such as the strengthening of immigration controls; to help Caribbean economies move toward greater competitiveness; and to support an improvement of environmental management. TBI funding amounted to $3 million in FY2003, almost $5 million in FY2004, $8.9 million in FY2005, and an estimated $2.97 million in FY2006. The FY2007 request for the TBI is for $3 million. (See Tables 5 and 6 on U.S. assistance to the Caribbean at the end of this report.) According to the State Department's TBI budget request for FY2007, enhancing border security will become of paramount importance in 2007 when eight Caribbean nations (Antigua and Barbuda, Barbados, Grenada, Guyana, Jamaica, St. Kitts and Nevis, St. Lucia, and Trinidad and Tobago) host the Cricket World Cup, an event drawing thousands of visitors from around the world. In September 2006, CARICOM officials were finalizing a regional security plan for the sporting event, which will be held in March and April 2007. In addition to the TBI, the United States has also provided support to improve port security in the Caribbean region, with the objective of helping ports comply with the more stringent set of maritime regulations embodied in new International Ship and Port Facility Security (ISPS) Code, which went into effect on July 1, 2004. The ISPS is a set of maritime regulations for ships and port facilities with the objective of preventing terrorist incidents. There has been concern among Caribbean nations about the high cost of implementing these security regulations. Some of the larger, richer countries in the Caribbean will be better equipped to afford these extra security costs, while some of the smaller and poorer nations will have difficulty coming into compliance. The U.S. Coast Guard has responsibility for conducting foreign port security assessments to see whether the ports are in compliance with the ISPS standards. Trade sanctions are an option if the port is not in compliance. By November 2004, all Caribbean nations had self-reported that they were in compliance with the more stringent standards of the ISPS Code. The Coast Guard is currently involved in visiting foreign ports worldwide to ensure that security practices are up to standards. The United States has provided some support to help Caribbean nations come into compliance with the ISPS Code: the U.S. Maritime Administration (MARAD) in the Department of Transportation organizes, manages, and implements the Inter-American Port Security Training Program (IAPSTP) for the Organization of American States; the State Department's Bureau for International Narcotics and Law Enforcement Affairs funds a port security technical assistance program for Western Hemisphere countries; and USAID has funded a project specifically for Eastern Caribbean nations to help assess the status of each port's security requirements and its security plans. Several Caribbean ports are included in the Container Security Initiative (CSI), a program implemented by U.S. Customs and Border Protection of the Department of Homeland Security. The CSI program helps ensure that high-risk containers are identified and inspected at foreign ports before they are placed on vessels for delivery to the United States. In September 2006, three Caribbean ports became operational CSI ports: Caucedo, Dominican Republic; Kingston, Jamaica; and Freeport, Bahamas. Other Latin American ports in the CSI program are the Central American port of Puerto Cortes, Honduras, and the South American ports of Buenos Aires, Argentina, and Santos, Brazil. In the 108 th Congress, a legislative initiative called for additional foreign assistance in order to improve foreign port security worldwide, but no final action was completed before the end of the session. The Senate approved the Maritime Transportation Security Act, S. 2279 (Hollings), in September 2004, which would have provided for the Administrator of the Maritime Administration, in coordination with the Secretary of State, to identify foreign assistance programs that could facilitate implementation of port security antiterrorism measures in foreign countries. The act also would have called for a report on the security of ports in the Caribbean Basin, including an assessment of the effectiveness of the measures employed to improved security at such ports and an assessment of the resources and program changes needed to maximize security at Caribbean Basin ports. In the 109 th Congress, two bills would provide for foreign assistance programs for Caribbean Basin ports. S. 744 (Nelson, Bill), introduced April 11, 2005, would establish a Caribbean Basin Port Assistance Program. Under the legislative initiative, the Administrator of MARAD in the Department of Transportation, in coordination with the Secretary of State, would identify foreign assistance programs that could facilitate implementation of port security antiterrorism measures at Caribbean Basin ports. The Administrator and the Secretary would establish a program for such assistance in consultation with the Organization of American States. In addition, the Secretary of Homeland Security would be required to submit a report to Congress on status of port security in Caribbean Basin countries. S. 1052 (Stevens), the Transportation Security Improvement Act of 2005, includes a provision (Section 504) that would establish a program to facilitate implementation of port security antiterrorism measures in foreign countries, with particular emphasis on ports in the Caribbean Basin; this bill was introduced May 17, 2005, and reported by the Senate Committee on Commerce, Science, and Transportation on February 27, 2006 ( S.Rept. 109-216 ); identical provisions are also included in S. 2791 (Stevens), introduced May 11, 2006. Rising crime is a major security challenge throughout the Caribbean. The murder rate in Jamaica continues to soar, with 1,445 people killed in 2004 and more than 1,600 people in 2005. With rate of 60 murders per 100,000 inhabitants in 2005, Jamaica had the highest murder rate in the world. In late February 2006, Jamaicans were shocked over the brutal killings of six family members, including four young children in the western part of the country. High levels of violent crime, including murder and kidnaping, also have plagued Trinidad and Tobago and Haiti. Even smaller Caribbean nations like St. Lucia have experienced a surge in violent crime. On April 22, 2006, Guyana's Agriculture minister, along with his two siblings and a security guard, were shot and killed in an apparent robbery. Gangs involved in drug trafficking, extortion, and violence are responsible for much of the crime. Some observers believe that criminals deported from the United States have contributed to the region's surge in violent crime in recent years, although some maintain that there is no established link. Jamaica has advocated the development of an international protocol regarding the deportation of criminals. A major concern for Caribbean nations—the majority of which are net energy importers—has been the rising price of oil and the potential effect of such rising prices on economic growth and social stability. In the Caribbean region, only three nations—Trinidad and Tobago, Cuba, and Barbados—have significant oil and gas reserves. Of these, only Trinidad and Tobago is a major oil and gas producer, accounting for 60% of proven oil reserves and 91% of natural gas reserves in the region. The country is also the largest supplier of liquified natural gas (LNG) to the United States, accounting for 75% of all U.S. LNG imports. Apart from Trinidad and Tobago, Cuba also produces oil, but still imports a majority of its consumption needs. Barbados also produces a small amount of oil, which is refined in Trinidad and Tobago, but it imports 90% of its oil consumption needs. Venezuela is now offering oil to Caribbean nations on preferential terms in a new program known as PetroCaribe, and there has been some U.S. concern that the program could increase Venezuela's influence in the Caribbean region. Since 1980, Caribbean nations have benefitted from preferential oil imports from Venezuela (and Mexico) under the San Jose Pact, and since 2001, Venezuela has provided additional support for Caribbean oil imports under the Caracas Energy Accord. PetroCaribe, however, would go further with the goal of putting in place a regional supply, refining, and transportation and storage network, and establishing a development fund for those countries participating in the program. Under the program, Venezuela announced that it would supply 190,000 barrels per day of oil to the region, with countries paying market prices for 50% of the oil within 90 days, and the balance paid over 25 years at an annual rate of 2%. When the price of crude oil is over $50 a barrel, as it is now, the interest is cut to 1%. To date, 14 Caribbean nations are signatories of PetroCaribe. Barbados, which already receives discounted petroleum rates from Trinidad, has declined to sign the agreement, and Trinidad, which has its own significant energy resources, has declined to sign. (For additional information, see CRS Report RL33693, Latin America: Energy Supply, Political Developments, and U.S. Policy Approaches , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].) The AIDS epidemic in the Caribbean, where infection rates are among the highest outside of sub-Saharan Africa, has already begun to have negative consequences for economic and social development in the region. In 2005, an estimated 300,000 adults and children in the Caribbean were reported to be living with HIV, with the epidemic claiming 24,000 lives during the year, making it the leading cause of death among adults aged 15-44 years. The Caribbean countries with the highest adult prevalence or infection rates were Haiti, with a rate over 3%; the Bahamas, Guyana, and Trinidad and Tobago with rates over 2%; and Barbados, Belize, the Dominican Republic, Jamaica, and Suriname with rates over 1%. In contrast to other parts of Latin America, the mode of transmission in several Caribbean countries has been primarily through heterosexual contact, making the disease difficult to contain, because it affects the general population. Haiti and the Dominican Republic account for the majority of the region's infected population. The U.S. Agency for International Development (USAID) notes that Haiti's poverty, conflict, and unstable governance have contributed to the rapid spread of AIDS; in some urban areas, HIV infection rates are almost 10%. In both countries, however, there are indications that the epidemic could be reaching a turning point because of prevention efforts. In Haiti, life expectancy is almost six years lower than it would be without the epidemic, and in the Bahamas and Guyana, the number of deaths among 15-34 year olds is two and one half times higher because of the epidemic. As the epidemic continues, already-strained health systems will be further burdened with new cases of AIDS. As a result of the epidemic, there are some 250,000 AIDS orphans in the Caribbean, with 200,000 of those in Haiti. Sex tourism is reportedly a factor contributing to rising HIV infection rates in some Caribbean countries. Officials in Trinidad and Tobago have expressed concern about the growth of sex tourism, the so-called "beach bum" phenomenon, and the link to the spread of AIDS. In Jamaica, the resort town of Montego Bay has the highest HIV infection rates in the country. In the Dominican Republic, AIDS activists are concerned about child prostitution in resort areas and the spread of HIV. According to the World Bank, continued increases in HIV prevalence in the Caribbean will negatively affect economic growth. The epidemic, according to the Bank, will have a negative impact on such economic sectors as agriculture, tourism, lumber production, finance, and trade because of lost productivity of economically active adults with the disease. In particular, the labor market in the region will be dealt a shock because of deaths from AIDS. The Prime Minister of St. Kitts and Nevis, Denzil Douglas, maintains that the epidemic threatens to cripple the labor force just as the region needs to become more competitive in world markets amid the momentum toward hemispheric free trade. Looking ahead, the World Bank warned in 2001 that "what happened in Africa in less than two decades could now happen in the Caribbean if action is not taken while the epidemic is in the early stages." The U.S. Agency for International Development (USAID) has been the lead U.S. agency fighting the epidemic abroad since 1986. USAID's funding for HIV/AIDS in Central America and the Caribbean region rose from $11.2 million in FY2000 to $33.8 million in FY2003. Because of the inclusion of Guyana and Haiti as focus countries in the President's Emergency Plan for AIDS Relief (PEPFAR), funded largely through the Global HIV/AIDS Initiative (GHAI) account, U.S. assistance to the Caribbean and Central America for HIV/AIDS increased to $47 million in FY2004, $82.5 million in FY2005, and an estimated $92.7 million in FY2006. For FY2007, the Administration requested $88 million in GHAI funding for Guyana ($25 million) and Haiti ($63 million), and another $25 million for non-focus countries and programs in Central America and the Caribbean through the Child Survival and Health funding account. Some Members of Congress want to expand the list of Caribbean countries beyond Guyana and Haiti that were cited in 2003 HIV/AIDS legislation, the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 ( P.L. 108-25 ). In the 108 th Congress, both the House-passed FY2004-FY2005 Foreign Relations Authorization Act, H.R. 1950 (Section 1818), and the Senate Foreign Relations Committee's reported FY2005 Foreign Relations Authorization Act, S. 2144 (Section 2518), had provisions that would have added 14 Caribbean countries to those listed in the 2003 legislation, but no final action was taken on these measures. In the 109 th Congress, S. 600 , the Foreign Affairs Authorization Act, FY2006 and FY2007, contains a provision (Section 2516) that would add 14 Caribbean countries to the list of focus countries targeted for increased HIV/AIDS assistance. Other legislative initiatives in the 109 th Congress include the following: P.L. 109-95 ( H.R. 1409 , Lee), approved by both houses in October 2005, and signed into law November 8, 2005, amends the Foreign Assistance Act of 1961 to provide assistance for orphans and other vulnerable children in developing countries, including in the Caribbean; H.R. 164 (Millender-McDonald), introduced January 4, 2005, would amend the Foreign Assistance Act of 1961 to provide for the establishment of pediatric centers in certain developing countries, including Guyana, to provide treatment and care for children with HIV/AIDS; and S. 350 (Lugar) and H.R. 945 (Lee), both introduced in February 2005, would provide assistance to combat infectious diseases in Haiti, including HIV/AIDS, and to establish a comprehensive health infrastructure. For further information, see CRS Report RL32001, HIV/AIDS in the Caribbean and Central America , by [author name scrubbed]; and CRS Report RL33485, U.S. International HIV/AIDS, Tuberculosis, and Malaria Spending: FY2004-FY2008 , by [author name scrubbed]. Since 2004, the Caribbean Basin region has been devastated by numerous storms and floods. Several Caribbean nations—especially Haiti, Grenada, Jamaica, and the Bahamas—were hard hit during the 2004 Atlantic hurricane season. Hurricane Charley struck western Cuba in August 2004, damaging over 70,000 homes and thousands of hectares of crops. Hurricane Frances struck the Bahamas in September 2004, causing widespread damage throughout the country's islands. In the same month, Hurricane Ivan caused severe damage across the Caribbean: it devastated Grenada, damaging some 80% of the nation's housing, and destroying or damaging much of country's public infrastructure; it passed over Jamaica, causing damage in the western part of the island and in southern coastal towns; it struck the British dependency of the Cayman Islands, damaging 50% of the homes on the island of Grand Cayman; and it affected western Cuba, damaging houses and crops. Tropical Storm Jeanne caused devastating mudslides and floods in northern Haiti in September 2004 that killed some 3,000 people, with over 2,800 of those in the city of Gonaives. Another 300,000 Haitians were affected by the loss of homes, livelihoods, and infrastructure. The 2005 Atlantic hurricane season had an unprecedented 28 named storms, including 15 hurricanes, with six of these—Hurricanes Dennis, Emily, Stan, Wilma, Beta, and Tropical Storm Gamma—causing widespread damage and more than 800 deaths in Central America and the Caribbean. This surpassed the previous record of 21 named storms in 1933. In early July, Hurricane Dennis heavily damaged central Cuba with floods, tidal surges, and landslides and also affected Haiti's southern peninsula with heavy rains. Later in July, Hurricane Emily passed near Grenada, causing destruction in the northern part of the island that had been spared by Hurricane Ivan in 2004. In early October, Hurricane Stan made landfall near Veracruz, Mexico and generated severe floods in southern Mexico and Central America, especially in Guatemala where more than 600 people were killed. In late October, Hurricane Wilma made landfall in Mexico's Yucatan peninsula, affecting more than 1 million people, while Hurricane Beta caused flooding in Honduras and Nicaragua. Late in the season, Tropical Storm Gamma caused extensive flooding in northern Honduras in November. The National Oceanic and Atmospheric Administration (NOAA) initially forecast another active season in 2006, with 13-16 named storms. Of these, 8-10 were predicted to become hurricanes and 4-6 were predicted to be major hurricanes of Category 3 strength or higher (over 110 miles per hour). (The average Atlantic hurricane season, according to NOAA, averages 11 named storms, with 6 becoming hurricanes, and 2 of these major hurricanes.) These predictions proved wrong, however, and this year probably will not reach the average of past years. As of late October 2006, there were nine named storms, including five hurricanes, a relatively weak hurricane season. Early in the season, Tropical Storm Alberto hit Cuba with heavy rains in June, but without significant damage. In August 2006, Tropical Storm Ernesto caused flooding in Haiti and the Dominican Republic. In response to the devastating 2004 hurricane season, the United States provided immediate humanitarian assistance to several Caribbean nations, especially Grenada, Haiti, and Jamaica, but also the Bahamas, the Dominican Republic, and Cuba. USAID's Office of Foreign Disaster Assistance (OFDA) set up Disaster Assistance Response Teams (DARTs) to respond to the storms, with team members located in the various islands. By the end of October 2004, USAID had provided almost $23 million in emergency humanitarian assistance, largely for assistance to respond to Hurricane Ivan and Tropical Storm Jeanne. In addition, the 108 th Congress appropriated $100 million in emergency assistance ( P.L. 108-324 ) in late October 2004 to provide longer-term reconstruction assistance for Caribbean nations afflicted by the storms. The reconstruction assistance was targeted as follows: $42 million for Grenada, $38 million for Haiti, $18 million for Jamaica, and $2 million for other countries affected by the storms. In Grenada, USAID's assistance program had two phases. The first was a short-term program to restore and revitalize rural communities, repair schools and health centers, and reestablish the productive capacity of small and medium-size businesses. The second, longer-term phase focused on rebuilding infrastructure, revitalizing the business sector, and restoring the government's economic management capacity. In Haiti, the reconstruction program had two major components. A community revitalization component involved road repair, disaster mitigation, water system rehabilitation, drainage and clean up, public building rehabilitation, and household repairs. A rural revitalization component involved hillside stabilization, irrigation, and an early warning system for flooding on the La Quinte River, which flows past Gonaives, the city that was devastated by Tropical Storm Jeanne. The Jamaica assistance program also had two phases. The first was an immediate recovery program to help repair community infrastructure and help revitalize the agricultural sector. The second phase involved the repair and rebuilding of homes, assistance for business recovery, and the rehabilitation and re-supply of schools. Other smaller hurricane assistance programs targeted affected communities in the Bahamas and Tobago, and also provided assistance to Eastern Caribbean nations to design and implement risk reduction efforts for low-income housing. In May 2006, GAO issued a report reviewing USAID's $100 million disaster assistance program for the Caribbean. GAO concluded that USAID had completed many of the activities within a planned one-year timeframe, expending 77% of the assistance by December 2005, but that several factors had hampered the agency's ability to complete all the projects within the timeframe. These factors included severe weather that delayed some projects in Jamaica and Haiti, coordination challenges that negatively affected USAID's completion of construction projects in Grenada and Jamaica, difficulty identifying housing recipients in all three countries, and security challenges in Haiti. For the 2005 hurricane season, USAID provided about $12.5 million in disaster assistance to Central American and Caribbean nations as well as Mexico, about $6.4 million of which was provided by OFDA. Guatemala, which was hard hit by Hurricane Stan, received the bulk of the assistance, $9.2 million, with $4 million of that in emergency food assistance. Other countries that received lesser amounts of assistance, ranging from $1.2 million to $50,000 in descending order, were El Salvador, Mexico, Nicaragua, Honduras, Cuba, Grenada, the Bahamas, Haiti, and Costa Rica. Many of the hurricane recovery and reconstruction projects implemented by USAID in Central America and the Caribbean have included components to strengthen disaster mitigation efforts. For the Hurricane Ivan and Tropical Storm Jeanne recovery programs in the Caribbean, disaster mitigation efforts were an integral part of the reconstruction process. Better building standards were incorporated into the programs. In Haiti, civil protection committees were established and risk management plans were implemented as well as hillside stabilization efforts and early warning systems for floods. Grenadian officials maintain that, while reconstruction is still not complete, the country is better prepared than in past years for withstanding hurricanes. OFDA also provides support for disaster preparedness and mitigation programs in Latin America and the Caribbean to reduce the loss of life and lessen the economic impact caused by disasters. In the Caribbean, OFDA has provided support to the Caribbean Development Bank since 2000 to establish a disaster mitigation facility that supports activities to reduce risk and losses from disasters in the English-speaking Caribbean. OFDA has also supported efforts of the U.N. Development Program (UNDP) in Haiti to reduce natural hazards faced by vulnerable populations. According to Adolfo Franco, USAID's Assistant Administrator for Latin America and the Caribbean, OFDA has collaborated with NOAA to improve disaster mitigation efforts in the region. The agencies work with countries in the region to provide state-of-the-art hurricane warnings and updates and to improve the capacity of forecasters in the region to provide early warnings. In the aftermath of the 2004 hurricane season, NOAA also deployed new hurricane buoys to enhance monitoring and forecast storm tracking in the Caribbean. NOAA's National Weather Service (NWS) also issues various forecasts for the Caribbean Basin region, and most weather agencies in the region are in communication with the NWS. Nine Caribbean Basin nations also participate in a cooperative forecasting operations agreement with NOAA's International Activities Office. H.Con.Res. 71 (Lee) , introduced February 17, 2005, passed by the House on June 27, 2005, and by the Senate on February 14, 2006, expresses the sense of Congress that there should be established a Caribbean-American Heritage Month (Subsequently, on June 5, 2006, President Bush proclaimed June as Caribbean-American heritage month.) H.Con.Res. 175 (Rangel) , introduced June 8, 2005, and passed by the House (382-6, 2 present), and S.Con.Res. 90 (Dodd) , introduced May 1, 2006, acknowledge African descendants of the transatlantic slave trade in all of the Americas with an emphasis on descendants in Latin America and the Caribbean, recognize the injustices suffered by these African descendants and recommend that the United States and the international community work to improve the situation of Afro-descendant communities in Latin America and the Caribbean. H.R. 953 (Menendez) , introduced February 17, 2005, and S. 682 (Dodd) , introduced March 17, 2005, would authorize the establishment of a Social Investment and Economic Development Fund for the Americas to proved assistance to reduce poverty and foster increased economic opportunity in Western Hemisphere countries, including in the Caribbean. H.R. 1130 (Waters) , introduced March 3, 2005, would provide for the cancellation of debts owed to international financial institutions by eligible poor countries, including the Caribbean nations of Guyana, Haiti, and Jamaica. H.R. 5784 (Lee) , introduced July 13, 2006, would authorize assistance for a United States-Caribbean educational exchange program and for a USAID program to extend and expand existing primary and secondary school initiatives in the Caribbean. P.L. 109-295 ( H.R. 5441 ) , FY2007 Department of Homeland Security Appropriations, signed into law October 4, 2006; Section 546 of the bill amends the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) by extending the deadline requiring U.S. citizens traveling by land or sea between the United States and Canada, Mexico, Central and South America, the Caribbean, and Bermuda to have passports or other documents denoting identity and citizenship. The deadline was extended from January 1, 2008 to June 1, 2009, or earlier if the Secretary of State and Secretary of Homeland Security jointly certify certain criteria regarding the new document or passport card being developed. (Note: A deadline of January 8, 2007, remains in place for U.S. citizens to have passports for travel by air between the United States and Canada, Mexico, Central and South America, the Caribbean, and Bermuda.) P.L. 109-53 ( H.R. 3045 ) , the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act; both houses approved in July 2005, and the measure was signed into law August 2, 2005. Two identical bills referred to as the Caribbean Basin Trade Enhancement Act of 2005— H.R. 1213 (Hyde) , introduced March 10, 2005, and S. 704 (Martinez) , introduced April 5, 2005—would authorize up to $10 million in FY2006 for the Organization of American States (OAS) to establish a Center for Caribbean Basin Trade and up to $10 million for the OAS to establish a skills-training program for Caribbean Basin countries. H.R. 3176 (Menendez) , introduced June 30, 2005, would amend the Caribbean Basin Economic Recovery Act to provide for preferential treatment for certain apparel articles that are both cut (or knit to shape) and sewn or otherwise assembled in a beneficiary country under the act from fabrics or yarn not widely available in commercial quantities. S. 1052 (Stevens) , the Transportation Security Improvement Act of 2005, introduced May 17, 2005, reported by the Senate Committee on Commerce, Science, and Transportation on February 27, 2006, includes a provision (Section 504) that would establish a program to facilitate implementation of port security antiterrorism measures in foreign countries, with particular emphasis on ports in the Caribbean Basin; identical provisions are included in S. 2791 (Stevens) , introduced May 11, 2006. S. 744 (Nelson, Bill) , introduced April 11, 2005, would establish a Caribbean Basin Port Assistance Program. P.L. 109-95 ( H.R. 1409 , Lee ) , introduced March 17, 2005, approved by both houses in October 2005, and signed into law November 8, 2005, amends the Foreign Assistance Act of 1961 to provide assistance for orphans and other vulnerable children in developing countries, including in the Caribbean. H.R. 164 (Millender-McDonald) , introduced January 4, 2005, would amend the Foreign Assistance Act of 1961 to provide for the establishment of pediatric centers in certain developing countries, including Guyana, to provide treatment and care for children with HIV/AIDS. H.R. 945 (Lee) , introduced February 17, 2005, would provide assistance to combat infectious diseases in Haiti, including HIV/AIDS, and to establish a comprehensive health infrastructure. S. 600 (Lugar) , introduced March 10, 2005, the Foreign Affairs Authorization Act, FY2006 and FY2007, contains a provision (Section 2516) that would add 14 Caribbean countries to the list of focus countries targeted for increased HIV/AIDS assistance. The list already includes Guyana and Haiti. P.L. 109-13 ( H.R. 1268 ) , Emergency Supplemental for FY2005, signed into law May 11, 2005, provided $10.2 million for buoys for the Pacific and Atlantic Oceans, Gulf of Mexico, and Caribbean Sea for observing ocean conditions at depth. Several legislative initiatives have been introduced in the 109 th Congress regarding support for a U.S. tsunami detection and warning system, including in the Caribbean region. These include S. 50 (Inouye) , passed by the Senate July 11, 2005; H.R. 1674 (Boehlert) , reported by the House Committee on Science September 28, 2006; and S. 1753 (DeMint) , introduced September 22, 2005, and reported by the Committee on Commerce, Science, and Transportation December 8, 2005 ( S.Rept. 109-204 ). For analysis of these initiatives, and information on additional legislative initiatives, see CRS Report RL32739, Tsunamis: Monitoring, Detection, and Early Warning Systems , by [author name scrubbed]. H.Con.Res. 441 (DeFazio) , introduced June 29, 2006, would express the sense of Congress regarding the "regrettable" votes cast by certain Caribbean countries (Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines) for a resumption of commercial whaling at the 58 th annual International Whaling Commission meeting in St. Kitts in June 2006. Numerous legislative initiatives have been introduced in the 109 th Congress regarding Cuba's human rights situation, U.S. economic sanctions (including the overall embargo, travel restrictions, and restrictions on financing for U.S. agricultural exports to Cuba), and radio and television broadcasting. For a listing of legislative initiatives and action, see CRS Report RL32730, Cuba: Issues for the 109 th Congress , by [author name scrubbed]. H.Res. 792 (Meeks) , approved by the House by voice vote on June 12, 2006, recognizes the 40 th anniversary of Guyana's independence and extends best wishes to Guyana for peace and further development, progress, and prosperity. H.Con.Res. 74 (Meeks) , introduced February 17, 2005, would express the sense of Congress with respect to the urgency of providing adequate assistance to Guyana, devastated by severe flooding. Also see H.R. 164 in the " HIV/AIDS in the Caribbean " section above; and H.R. 1130 in the "General" section above. Numerous legislative initiatives have been introduced in the 109 th Congress regarding Haiti, including on migration, reconstruction assistance, health assistance, and on the establishment of an independent commission examining the U.S. role in the 2004 "coup" in Haiti. For a listing of legislative initiatives and action, see CRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991 and Current Congressional Concerns , by [author name scrubbed] and [author name scrubbed]. H.Res. 727 (Waters) , introduced March 14, 2006, would congratulate Portia Simpson Miller for becoming the first female Prime Minister-designate of Jamaica. H.Con.Res. 362 (Jackson-Lee) , introduced March 16, 2006, would congratulate Prime Minister Portia Simpson Miller for becoming the first democratically elected female Prime Minister of Jamaica. Two bills— H.R. 342 (Owens) , introduced January 25, 2005, and S. 297 (Schumer) , introduced February 7, 2005, would provide for adjustment of immigration status for certain aliens granted temporary protected status in the United States because of conditions in Montserrat. CRS Report RL33337, Article 98 Agreements and Sanctions on U.S. Foreign Aid to Latin America , by [author name scrubbed]. CRS Report RL32322, Central America and the Dominican Republic in the Context of the Free Trade Agreement (DR-CAFTA) with the United States , by [author name scrubbed] et al. CRS Report RL32730, Cuba: Issues for the 109 th Congress , by [author name scrubbed]. CRS Report RS21718, Dominican Republic: Political and Economic Conditions and Relations with the United States , by [author name scrubbed] and [author name scrubbed]. CRS Report RL31870, The Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) , by [author name scrubbed]. CRS Report RS21930, Ethanol Imports and the Caribbean Basin Initiative (CBI) , by [author name scrubbed]. CRS Report RS20864, A Free Trade Area of the Americas: Major Policy Issues and Status of Negotiations , by [author name scrubbed]. CRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991 and Current Congressional Concerns , by [author name scrubbed] and [author name scrubbed]. CRS Report RL32001, HIV/AIDS in the Caribbean and Central America , by [author name scrubbed]. CRS Report RS22372, Jamaica: Political and Economic Conditions and U.S. Relations , by [author name scrubbed]. CRS Report 98-684, Latin America and the Caribbean: Fact Sheet on Leaders and Elections , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33693, Latin America: Energy Supply, Political Developments, and U.S. Policy Approaches , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL32733, Latin America and the Caribbean: Issues for the 109th Congress , coordinated by [author name scrubbed]. CRS Report RL33162, Trade Integration in the Americas , by [author name scrubbed]. CRS Report RL33200, Trafficking in Persons in Latin America and the Caribbean , by [author name scrubbed]. CRS Report RL32739, Tsunamis: Monitoring, Detection, and Early Warning Systems , by [author name scrubbed]. CRS Report RL32487, U.S. Foreign Assistance to Latin America and the Caribbean , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].

With some 34 million people and 16 independent nations sharing an African ethnic heritage, the Caribbean is a diverse region that includes some of the hemisphere's richest and poorest nations. The region consists of 13 island nations, from the Bahamas in the north to Trinidad and Tobago in the south; Belize, which is geographically located in Central America; and the two nations of Guyana and Suriname, located on the north central coast of South America. With the exception of Cuba and Haiti, regular elections in the region are the norm, and for the most part have been free and fair. Nevertheless, while many Caribbean nations have long democratic traditions, they are not immune to threats to their political stability, including terrorism. Many nations in the region experienced economic decline in 2001-2002 due to downturns in the tourism and agriculture sectors. Most Caribbean economies have rebounded since 2003, although the extensive damage resulting from several storms in 2004 caused economic difficulties for several countries. U.S. interests in the Caribbean are diverse, and include economic, political, and security concerns. The Bush Administration describes the Caribbean as America's "third border," with events in the region having a direct impact on the homeland security of the United States. It maintains that Caribbean nations are "vital partners on security, trade, health, the environment, education, regional democracy, and other hemispheric issues." The U.S.-Caribbean relationship is characterized by extensive economic linkages, cooperation on counter-narcotics efforts and security, and a sizeable U.S. foreign assistance program. U.S. aid supports a variety of projects to strengthen democracy, promote economic growth and development, alleviate poverty, and combat the AIDS epidemic in the region. In the aftermath of several devastating storms in 2004, Congress approved $100 million in emergency supplemental funding (P.L. 108-324) to support humanitarian efforts and reconstruction in Haiti, Grenada, and Jamaica. Despite close U.S. relations with most Caribbean nations, there has been tension at times in the relationship. For example, relations with Caribbean nations became strained in the aftermath of the departure of Haitian President Jean Bertrand Aristide from power in February 2004. More recently, Caribbean nations that depend on tourism are concerned about the potential negative economic effects of a new U.S. requirement, as of January 8, 2007, for U.S. citizens traveling by air to the Caribbean (as well as to Canada and Mexico) to hold a passport. This report deals with broader issues in U.S. relations with the Caribbean, including foreign assistance, anti-drug trafficking and anti-money laundering cooperation, support to combat the HIV/AIDS epidemic in the region, and security concerns such as port security and border security efforts. It does not include an extensive discussion of Haiti and Cuba. U.S. policy toward these Caribbean nations is covered in the following products: CRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991 and Current Congressional Concerns, by [author name scrubbed] and [author name scrubbed]; and CRS Report RL32730, Cuba: Issues for the 109th Congress, by [author name scrubbed].

The 114 th Congress is likely to face numerous water resource issues as it conducts oversight and deliberates on authorizations and appropriations related to federal water resource development, management, and protection. Such issues include how to make investment decisions in the face of fiscal constraints; how to maintain and reinvest in an aging portfolio of federal infrastructure (e.g., dams, locks, and levees); how to effectively respond to and prepare for flood and drought emergencies; and how to distribute investment between activities to meet new demands for water supplies, navigation, flood management, and aquatic ecosystem restoration and protection. These issues often arise at the regional level but have a federal connection. For example, Congress may be faced with responding to various water-related crises, such as extreme drought or flooding issues (e.g., California drought in 2014 and coastal flooding issues associated with Hurricane Sandy or other storms). More broadly, Congress may be faced with addressing navigation challenges due to drought-induced low river flows or floods and water supply needs of farm and urban communities while also protecting threatened and endangered species. The crux of many of these challenges is how to balance competing demands for water and river management, including how to cope with the growing budget limitations and the effect of federal project operations on the environment. This report first discusses recent congressional activity and possible topics for the 114 th Congress. Next, it provides an overview of the federal role in water resources development, management, and protection, including a discussion of the two major federal water resources agencies—the U.S. Army Corps of Engineers (Corps) and the Bureau of Reclamation (Reclamation)—and related legislation. The report then provides an overview of overarching policy issues, including flood and drought preparedness and response, project funding and authorization priorities, and aquatic ecosystem restoration. The water resource issues of the 114 th Congress are shaped in part by the actions of past Congresses. Legislative activity often is specific to the federal water resource management agencies, such as the U.S. Army Corps of Engineers in the Department of Defense and the Department of the Interior's Bureau of Reclamation, or it is specific to water use by particular sectors, such as energy, agriculture, navigation, recreation, and municipal and industrial use. Occasionally, Congress takes up broader water resource policy issues, such as coordination of federal water resource activities and programs. Legislation enacted for both the Corps and Reclamation during the 113 th Congress was less than in prior Congresses, in large part due to congressional earmark policies, which may limit authorization of and appropriations for site-specific projects; however, some broad legislation was enacted for both agencies. The 113 th Congress enacted an omnibus Corps authorization bill, the Water Resources Reform and Development Act of 2014 (WRRDA 2014, P.L. 113-121 ). Congress also included in separate legislation ( P.L. 113-295 ) a provision increasing the fuel tax on commercial barges on federal inland waterways. In addition, the 113 th Congress provided regular and supplemental appropriations for the Corps to conduct its work and performed oversight on its flood and drought management and navigation actions, among other activities. The 113 th Congress also provided appropriations for Reclamation to conduct its ongoing activities. Energy and environmental policy affect water resources management and development. Two bills intending to facilitate the development of nonfederal hydropower were enacted in the 113 th Congress: a small conduit hydropower development bill to facilitate nonfederal hydropower development at Reclamation facilities ( P.L. 113-24 ) and a separate bill making alterations to the Federal Energy Regulatory Commission licensing process for certain projects ( P.L. 113-23 ). Several provisions related to water management in California were included in enactment of the FY2014 Consolidated Appropriations Act ( P.L. 113-76 , H.R. 3547 ) in January 2014. Also included in P.L. 113-76 was a one-year extension of the CALFED authorization (§207), and reauthorization of the Reclamation States Emergency Drought Relief Act of 1991 (extended through 2017; §206). The 113 th Congress also reauthorized the National Integrated Drought Information System (NIDIS, P.L. 113-86 ), which, among other research, produces various Drought Monitor products. The 113 th Congress also enacted a farm bill ( P.L. 113-79 ). In addition to providing support for farmers and crop production, farm bills provide support for agricultural water conservation and efficiency measures, conservation programs in priority watersheds, and groundwater protection and recharge, as well as water resource and infrastructure needs associated with soil and water conservation. The 2014 farm bill also amended and added to existing drought and flood disaster assistance for agricultural producers. The 113 th Congress considered but did not enact legislation to augment developed water supplies (e.g., water storage, water reuse), settle Indian water rights claims, lift restrictions on firearms at Army Corps projects, and provide direction for individual water projects and facilities. Several bills also would have authorized various regional aquatic ecosystem restoration efforts. These bills generally addressed issues related to the construction of projects for water quality and habitat restoration, as well as governance and reporting for ongoing federal restoration actions. Several bills related to aquatic ecosystem restoration throughout the country were considered in the 113 th Congress and were pending at its conclusion. These bills generally addressed issues related to water quality and habitat restoration, as well as project construction for restoration and water supply allocation among users and the environment. Bills authorizing comprehensive ecosystem restoration initiatives were introduced for the Great Lakes (e.g., H.R. 2773 and S. 1232 ), Long Island Sound ( H.R. 2174 and S. 1080 ), and Lake Tahoe ( H.R. 3390 and S. 1451 ). These bills addressed governance of ecosystem restoration initiatives and the reauthorization of funding to continue restoration efforts, among other things. Other bills addressed specific aspects of ongoing restoration initiatives, such as expediting restoration project approval in the Everglades ecosystem. H.R. 5764 did pass the House, but was not voted on in the Senate. H.R. 5764 would have authorized the Great Lakes Restoration Initiative and $300 million in appropriations annually from FY2015 to FY2019. The 113 th Congress also considered several different versions of California drought legislation, as well as other legislation to augment water supplies or deal with low water supplies on a broader level. The House twice passed legislation aimed at addressing operation of the federal Central Valley Project (CVP) in California ( H.R. 3964 and H.R. 5781 ) and the Senate also passed legislation to address CVP operations in times of drought emergencies ( S. 2198 ). However, House and Senate negotiators did not come to agreement on bill language prior to the end of the 113 th Congress. The 113 th Congress also considered water research and development legislation targeted at specific programs or issues, such as research related to desalination (e.g., H.R. 745 ) and state water resources research institutes ( S. 970 ). Similarly, the 113 th Congress considered legislation ( H.R. 5189 and S. 1971 ) to coordinate federal research and technologies to better understand and decrease the risks from the interdependencies of the energy (e.g., water use for oil and gas production and power plant cooling) and water sectors (e.g., energy for water transport and treatment). Unlike the 112 th Congress ( H.R. 5826 ), the 113 th Congress did not consider legislation addressing the broad federal water science and research portfolio. Water science and research is spread across more than 20 federal agencies. No single water research strategy or formal coordination or prioritization mechanism exists. Some stakeholders are concerned that current research is insufficient to prepare the United States to confront domestic and international water challenges. The 114 th Congress may address some measures left pending at the end of the 113 th Congress, and may consider other proposals as well. Because of recent water conditions (e.g., drought in portions of the West and Southwest), disasters, or legal or agency developments, certain basin issues are likely to receive congressional attention. These include the operation of federal reservoirs on the Sacramento and San Joaquin rivers (Central Valley Project in California) and on the Missouri River and its tributaries. Other river basins that may receive attention in the 114 th Congress include the Colorado, Klamath, and Rio Grande river basins. Additionally, future operation of Corps facilities on the Columbia River and its tributaries is central to discussions that are underway regarding modification of the Columbia River Treaty with Canada. Because of recent drought conditions in California and much of the West, Congress might again address drought assistance, planning, and preparedness through oversight hearings and/or legislation, including through Energy and Water Development Appropriations. (See " Drought and Flood Preparedness and Response " section below.) The 114 th Congress may conduct oversight of restoration activities, including those in the Chesapeake Bay, Everglades, Gulf Coast, Great Lakes, San Joaquin River, and Sacramento and San Joaquin Rivers Delta and its confluence with San Francisco Bay (Bay-Delta). Common themes in regional restoration efforts include demand for new project services (e.g., improved or new flood control, water supply, and navigation facilities), protection of threatened and endangered species, drought and flood management, and water quality concerns. The 114 th Congress also may react to efforts by the Administration to implement updated planning guidance for federal water resources projects and to guide federal investment in floodplains. Similarly, Congress may respond to Administration-wide efforts to incorporate climate change adaptation into agency plans and actions, including those being developed by the Corps and Reclamation. The 114 th Congress also may engage in discussion of how threatened and endangered species designations and related critical habitat and environmental mitigation requirements affect water resource project construction and operations. The federal government has long been involved in efforts to facilitate navigation, expand irrigation, and reduce flood and drought losses. For example, nearly every large river basin in the country—from the Columbia, Sacramento, and Colorado rivers in the West to the Missouri, Mississippi, and Delaware rivers—contains one or more federal dam or navigation projects. These projects have largely been constructed by the Corps and Reclamation. More recently, federal involvement has expanded to include municipal water supply development and efforts to protect water-related resources such as fish and wildlife. Increasing pressures on the quality and quantity of available water supplies have resulted in heightened local and regional water use conflicts throughout the country, particularly in the West and Southeast. Pressures include population growth, environmental regulation, in-stream species and ecosystem needs, water source contamination, agricultural and energy water demands, climate change and variability, and changing public interests, such as heightened demand for in-stream recreation. Congress historically has played a major role in water resources through authorization of and appropriations for regional and site-specific activities; however, numerous responsibilities are split or shared with state, local, and tribal governments, particularly related to water allocation and resource planning and management. Congress also establishes the policies that define the federal role in planning for federal water resource projects, and provides direction for construction, maintenance, inspection, and support of federal projects. Congress makes these decisions within the context of multiple and often conflicting objectives, competing legal decisions, long-established institutional mechanisms (e.g., century-old water rights, and contractual obligations), and in response to events such as floods, droughts, and structural failures. Federal water resource construction activities shrank during the last decades of the 20 th century, marking the end of earlier expansionist policies that had supported large federal investments in dams and hydropower facilities, navigation locks and channels, irrigation diversions, and flood control levees, as well as basin-wide planning and development efforts. Fiscal constraints, changes in national priorities and local needs, few remaining prime construction locations, and environmental and species impacts of construction and operation of federal projects all contributed to this shift. Although these forces are still active, there are proposals for renewed federal financial and technical assistance to address growing pressures on developed water supplies, to manage regional water resources to meet demands of multiple water uses, and to address the aging stock of water resources infrastructure. Recent drought conditions in the West and Southwest on top of extended and widespread drought in 2012, coastal flooding due to Hurricane Sandy and Hurricane Katrina, and Midwest floods of 2011 have raised other questions about the federal role in water resources. In particular, disasters have brought attention to the trade-offs in approaches to distributing federal appropriations among competing water resources projects, to risk management in water resources, and to the trade-offs in benefits, costs, and risks of the current division of responsibilities among local, state, and federal entities. Most of the large dams and water diversion structures in the United States were built by, or with the assistance of, Reclamation or the Corps. Historically, Reclamation projects were designed principally to provide reliable supplies of water for irrigation and some municipal and industrial uses. Corps projects were planned principally to improve navigation and reduce flood damages, with power generation, water supply, and recreation being incidental benefits. Reclamation currently manages hundreds of dams and reservoirs in 17 western states, providing water to approximately 10 million acres of farmland and 31 million people, as well as 58 power plants capable of producing 40 billion kilowatt-hours of electricity annually (enough for approximately 3.5 million homes), and which generate more than $1 billion in revenues annually. The Corps operates nationwide, and its activities are diverse. The Corps has constructed thousands of flood damage reduction and navigation projects throughout the country, including nearly 12,000 miles of commercially active waterways, nearly 1,000 harbors, and 600 dam and reservoir projects (with 75 hydroelectric plants generating 68 billion kilowatt-hours annually). Additionally, the Corps constructed, usually with nonfederal participation, roughly 9,000 miles of the estimated 100,000 miles of the nation's levees, but the agency only maintains 900 miles. The remaining levees are operated by nonfederal entities, often local governments or special districts. The Natural Resources Conservation Service (NRCS) in the U.S. Department of Agriculture also facilitates water resources development, primarily for flood control in small watersheds and for soil and water conservation purposes. For more information on USDA conservation programs and policies, see CRS Report R40763, Agricultural Conservation: A Guide to Programs , by [author name scrubbed]. Many other federal agencies have water-related programs (e.g., the Environmental Protection Agency, the U.S. Geological Survey, the National Oceanographic and Atmospheric Administration, National Aeronautics and Space Administration, Federal Emergency Management Agency, and energy-related agencies such as the Federal Energy Regulatory Commission and Power Marketing Administrations). However, the remainder of this report focuses on the projects, programs, and policies of the Corps and Reclamation. For more information on federal water projects and programs—including types of financing and financial assistance—see CRS Report RL30478, Federally Supported Water Supply and Wastewater Treatment Programs , coordinated by [author name scrubbed]. For more information on other federal water activities, see CRS Report R42653, Selected Federal Water Activities: Agencies, Authorities, and Congressional Committees , by [author name scrubbed] et al. During most years, the Corps responds to needs arising from flood and drought events, as well as performing its regular activities of constructing and operating and maintaining navigation, flood control, and ecosystem restoration projects and issuing permits for activities that may affect navigable waters and wetlands. As previously noted, Congress authorizes Corps water resources activities and makes changes to the agency's policies generally in an omnibus authorization bill, often titled as a Water Resources Development Act (WRDA). Although WRDA enactment is usually attempted on a biennial schedule, enactment is less regular in part because of multiple and conflicting stakeholder interests and tensions over potential changes in Corps policies. Also, the bill is not a reauthorization bill, per se—rather, it is largely an authorization bill, since few Corps authorities expire. The most recent WRDAs were enacted in 2000, 2007, and 2014. Congress typically appropriates funds for these activities in annual Energy and Water Development Appropriations acts, and, at times, it uses supplemental appropriations bills to fund Corps emergency activities. Hurricane Sandy in 2012 and Midwest flooding in 2011 raised many questions that the 114 th Congress may pursue, including those related to national flood risk and federal actions to reduce that risk. In many cases, Corps facilities and their operations are central to debates over multi-purpose river management, especially during drought and flood conditions. For example, reservoir management by the Corps, such as in the Apalachicola-Chattahoochee-Flint basin (which provides much of the water supply for Atlanta, Georgia), often is controversial and has been challenged in the courts. Likewise, Corps operation of dams on the Missouri River and its effect on downstream navigation, flood control, species, and upstream water supplies also remain controversial. Such controversies stem from conflicts over the various authorized uses and purposes for multipurpose projects. Since the early 1900s, Reclamation has constructed and operated many large, multi-purpose water projects, such as Hoover Dam on the Colorado River and Grand Coulee Dam on the Columbia River. Water supplies from these projects have been primarily for irrigation; however, some municipalities also receive water from Reclamation projects. Many of the largest facilities also produce hydropower. Construction authorizations slowed during the 1970s and 1980s due to several factors. In 1987, Reclamation announced a new mission recognizing the agency's transition from a water resources development and construction organization to one primarily occupied with managing water resources, including managing water and related resources in an environmentally and economically sound manner. Since then, increased population, prolonged drought, fiscal constraints, and water demands for fish and wildlife, recreation, and scenic enjoyment have resulted in increased pressure to alter operation of many Reclamation projects. Such changes have been controversial, however, as water rights, contractual obligations, and the potential economic effects of altering project operations complicate any change in water allocation, delivery, or project operations. In contrast to the Corps, there is no tradition of a regularly scheduled authorization vehicle (e.g., a WRDA) for Reclamation projects. Instead, Reclamation projects are generally considered individually; however, occasionally individual project authorizations are rolled into an omnibus bill, such as P.L. 111-11 enacted in in the 111 th Congress or P.L. 102-575 enacted in the 102 nd Congress. Because project authorizations are typically enacted in stand-alone legislation, project authorizations and Reclamation bills in general have slowed considerably since the 112 th Congress and the onset of congressional earmark moratoria. As with the Corps, Reclamation river and reservoir management in the face of drought conditions and climate change may also receive congressional attention. In many cases, Reclamation facilities and their operation are central to debates over multi-purpose river management, particularly during times of drought or years of lower than normal precipitation and runoff. For example, controversies associated with Reclamation water resources management in the Sacramento and San Joaquin river watersheds (CA), the Colorado River Basin, and the Klamath River Basin (CA and OR) have often been exacerbated by low water flows and have also been the subject of extended litigation—sometimes even in normal water years. Likewise, ongoing issues associated with Reclamation's operation of pumps in the San Francisco Bay/San Joaquin and Sacramento Rivers Delta (Bay-Delta) and their effect on water users and threatened and endangered species also are quite controversial. This situation also has been exacerbated by low water conditions in some years, including 2014—the third-driest water year on record for California and one of the most extreme drought years on record. Drought and resultant low water supplies are again projected for California and other western areas for the 2015 water year. Examples of Reclamation-related water project and management issues that may be considered during the 114 th Congress include the following: response to drought, and operations of federal reservoirs and water delivery; regulatory impediments to new water storage projects; status of Reclamation's Safety of Dams program; authorization, appropriations, and reporting to address aging infrastructure; Sacramento-San Joaquin Valley water reliability and species concerns (e.g., Bay-Delta Conservation Plan, CALFED reauthorization, and proposals to address Central Valley Project water supplies); miscellaneous project adjustments; Klamath River Basin restoration and Klamath project management; Colorado River water management; San Joaquin River restoration settlement funding and oversight. A broader issue that could receive attention from Congress is oversight of Reclamation's mission and its future role in western water supply and water resource management generally. As public demands and concerns have changed, so has legislation affecting Reclamation. For example, some project sponsors are considering new partnerships in project development, with project construction largely to be undertaken by nonfederal sponsors. In part, this has developed due to project sponsor frustration in delays over new project studies. Some are pursuing independent nonfederal financing of water resources infrastructure (see section on " Changing Federal Partnerships ," below). Further, many in Congress have questioned Reclamation's shift in focus from a water resources development agency to a water resources management agency and believe Reclamation is not doing enough to develop new water storage. Others argue for increased funds and attention to augment water supplies in the West through water reuse, recycling, aquifer storage and recovery, and desalination technologies. Some also have expressed frustration with regulatory hurdles facing project development and expansions. On the other hand, some groups contend Reclamation has not done enough to protect species and the environment generally. In addition to issues related to federal projects, the 114 th Congress faces a number of overarching water resources issues, including flood and drought management and response; project funding and authorization priorities; and aquatic ecosystem restoration. Congress is often faced with reacting to natural disasters such as droughts and floods. Drought conditions in California and elsewhere in the West and Southwest, and widespread drought in 2012, have left many areas vulnerable to drought-induced impacts, such as water supply and use limitations, reduced agricultural and power production, and degraded fish and wildlife habitat. Responsibilities for drought planning and response are split among various levels of government and involve many different federal agencies. Although Congress has enacted legislation to coordinate drought information through the National Integrated Drought Information System (NIDIS), there is no overarching national drought policy. In addition to NIDIS reauthorization ( P.L. 113-86 ) and drought-related provisions of the 2014 farm bill, the 113 th Congress enacted legislation ( P.L. 113-121 ) that authorized the Corps to assess its reservoir operations during drought and expanded EPA loan and loan guarantee opportunities and eligibility for water supply systems, as discussed in CRS Report R43298, Water Resources Reform and Development Act of 2014: Comparison of Select Provisions . Multiple bills in the 113 th Congress addressed drought operations of Reclamation facilities (e.g., H.R. 3964 , H.R. 4239 , and S. 2198 ). Others addressed water efficiency, conservation, and alternative supplies (e.g., H.R. 5363 , S. 2771 ); several would have facilitated federal or nonfederal water storage projects (e.g., H.R. 3980 , H.R. 5412 ). Additionally, some bills (e.g., S. 2016 ) proposed changes to the Stafford Act, an emergency assistance act. The majority of these bills consisted of authorizations, with many provisions' implementation contingent upon appropriations; a few bills proposed appropriations to address the western U.S. drought (e.g., H.R. 4039 , S. 2016 ). Because of ongoing drought conditions in much of the West, Congress might again address drought planning and preparedness through oversight hearings and/or specific legislation. For more information on drought impacts and congressional response, see CRS Report R43407, Drought in the United States: Causes and Current Understanding , by [author name scrubbed] and [author name scrubbed]; CRS Report IF00058, Drought Policy, Response, and Preparedness (In Focus) (pdf), by [author name scrubbed] and [author name scrubbed]; CRS Report RS21212, Agricultural Disaster Assistance , by [author name scrubbed]; and CRS Report R42854, Emergency Assistance for Agricultural Land Rehabilitation , by [author name scrubbed]. Periodic but intense flooding also garners attention from Congress. For example, Hurricane Sandy flooding in 2012 and Midwest floods in 2011 tested the nation's emergency response system and resulted in billions of dollars in damages. Although the Corps is the principal flood-fighting agency, other agencies also play a role in flood response and mitigation, such as FEMA's disaster assistance, flood insurance, and pre-disaster mitigation programs. Additionally, responsibilities for flood damage reduction are spread among federal, state, local, and tribal governments. States and local governments in many ways play a primary role in floodplain management because of their jurisdiction over land use decisions and local zoning ordinances—deciding where and how development may occur. The 113 th Congress was engaged in some aspects of flood policy: policies affecting FEMA's National Flood Insurance Program, flood damage reduction program and project authorizations in WRRDA 2014, and oversight recovery for areas recently affected by floods. Given the magnitude of the nation's flood risk (e.g., over $10.6 trillion in insured properties in coastal counties on the East Coast and along the Gulf of Mexico) and how the nation's flood risk is increasing, the 114 th Congress may consider additional ways to reduce flood risk, such as by improving infrastructure and protecting natural flood mitigation, removing disincentives to improved floodplain management, or promoting more pre-disaster recovery plans for highly vulnerable areas. U.S. water infrastructure is aging; the majority of the nation's dams, locks, and levees are more than 50 years old. Failure of these structures could have significant effects on local communities as well as regional and national impacts. Major capital investments in these structures have been limited in recent years and repairing these facilities would cost billions of dollars. Congressional funding has largely been at the project level and has remained essentially flat, while funding needs have increased over time. To date, no comprehensive reporting or funding solutions to these issues has been enacted. Some propose funding mechanisms that might be more conducive to major capital investments in these projects, such as authorization of loan programs for some infrastructure types, or else including water resource infrastructure among the eligible recipients of funding from an infrastructure bank (such as that proposed in H.R. 2553 in the 113 th Congress). Others have proposed utilizing revenues from project beneficiaries (e.g., hydropower revenues, increased user fees) to fund project repairs and upgrades, or even deauthorizing and/or transferring projects to nonfederal entities, such as state or local governments. Still others think that Congress requires more uniform information on the extent of this issue before it considers major funding solutions. In the 113 th Congress, the Senate held a hearing on this topic and enacted legislation that would require increased reporting by Reclamation on its aging infrastructure backlog ( S. 1800 ). (See also discussion below on " Changing Federal Partnerships .") Some have expressed frustration with the pace of authorization for federal water resource projects, and this has resulted in some local sponsors pursuing projects with limited federal partnership or support, or with expectations of future federal reimbursement or credit. An example is the potential construction of Sites Reservoir in California—an off-stream water storage project associated with the federal Central Valley Project (CA). Language authorizing nonfederal construction of proposed federal projects (as long as no federal funding is used) was included in H.R. 1837 and H.R. 6247 in the 112 th Congress and H.R. 3964 in the 113 th Congress. The FY2014 Consolidated Appropriations Act ( P.L. 113-76 , H.R. 3547 ) included a provision authorizing the Secretary of the Interior to partner with local joint power authorities to advance authorized planning and feasibility studies, among other things, including providing grants for such purpose (§208). The 113 th Congress (e.g., P.L. 113-121 ) expanded the ability for nonfederal entities to advance funding for federal projects to spur project construction. Such proposals, however, raise the question of whether federal investment is needed if local sponsors can finance the projects on their own, whether the federal government will be able to meet the expectations for reimbursement, and whether the nonfederal sponsors with available financing will determine which projects get reimbursed from limited federal water resources infrastructure funds. Another approach was initiated in the 113 th Congress through its authorization of Title X of WRRDA 2014, the Water Infrastructure Finance and Innovation Act (WIFIA). The title authorized a pilot program, to be administered by the Corps and the Environmental Protection Agency, for loans and loan guarantees for certain flood damage reduction, public water supply, and wastewater projects. WIFIA was modeled after a similar program that assists transportation projects, the Transportation Infrastructure Finance and Innovation Act, or TIFIA, program. Water resource project funding is often a part of the debate on congressionally directed spending, or "earmarks." Although water resource project development has historically been directed by Congress, the site-specific nature of the authorizations and appropriations process resulted in projects being subject to earmark disclosure rules and earmark moratoria beginning in the 112 th Congress. Earmark moratoria appear to be altering the makeup of Corps and Reclamation appropriations in particular by reducing the congressional additions of specific projects to the budget, and by Congress funding broad categories of activities rather than specific projects. As a result, some projects that have historically benefitted from congressional support have received less (or no) funding in recent enacted appropriations bills. In addition to funding impacts, earmark moratoria have also influenced consideration of site-specific authorizations of water resource projects. The 114 th Congress may consider the status and priority of major federal efforts to restore aquatic ecosystems that have been altered or impaired by development, habitat loss, and federal water resource projects. Some of these restoration initiatives include those in the Everglades, California Bay-Delta, Great Lakes, Gulf Coast, Chesapeake Bay, Klamath Basin, and elsewhere. The 114 th Congress may consider a number of issues pertaining to these ecosystems. For example, Congress may consider legislation to authorize a framework for governance and a comprehensive restoration plan for the Great Lakes and might conduct oversight over the implementation of restoration efforts in the Gulf Coast region. Further, lack of congressional authorization for new construction projects in the Everglades, such as the Central Everglades Planning Project (CEPP), has caused concern that the initiative could be delayed. Congress might consider policies that would streamline authorizations to allow for more projects to be implemented. Funding for existing and new restoration initiatives might generate controversy and could face challenges in the 114 th Congress. Deliberations over FY2016 appropriations could also address ecosystem restoration initiatives in various appropriations bills.

The 114th Congress faces many water resource development, management, and protection issues. Congressional actions shape reinvestment in aging federal infrastructure (e.g., dams, locks, and levees) and federal and nonfederal investment in new infrastructure, such as water supply augmentation, hydropower projects, navigation improvements, and efforts to restore aquatic ecosystems. These issues often arise at the regional or local levels but frequently have a federal connection. Ongoing issues include competition over water, drought and flood responses and policies, competitiveness and efficiency of U.S. harbors and waterways, and innovative and alternative financing approaches. The 114th Congress also may continue oversight of operations of federal infrastructure during drought and low-flow conditions, past large-scale flooding issues (e.g., Hurricane Sandy, Hurricane Katrina, Missouri and Mississippi River floods), and balancing hydropower generation, recreational use, and protection of threatened and endangered species. In addition to oversight, each Congress also provides appropriations for major federal water resource agencies, such as the U.S. Army Corps of Engineers (Corps) and the Bureau of Reclamation (Reclamation). The issues before the 114th Congress are shaped in part by what earlier Congresses chose to enact and consider. Measures considered but not enacted by the 113th Congress include California drought legislation, various drought policy and water efficiency and conservation measures, regional restoration legislation (e.g., Klamath Basin, Great Lakes, Chesapeake Bay), actions to expedite water storage projects and permits, settlement of Indian water rights claims, and a lifting of restrictions on firearms at Army Corps projects. Because of recent water conditions, disasters, or legal or agency developments, certain river basin issues are particularly likely to receive congressional attention during the 114th Congress. The Columbia River, Missouri River, and Sacramento and San Joaquin River (Central Valley Project) basins fall into this category. Other potential topics of congressional interest include emergency drought or flood legislation, private and public hydropower, water research and science investment and coordination, aging infrastructure, and environmental policy. The 113th Congress enacted an omnibus Corps authorization bill, the Water Resources Reform and Development Act of 2014 (WRRDA 2014, P.L. 113-121). In addition to authorizing new programs (e.g., Water Infrastructure Finance and Innovation Act) and Corps construction projects, the legislation also established new processes that may shape how subsequent Corps project authorizations are identified. A Corps authorization bill often is considered by each Congress; enactment, however, has been less regular, with the most recent bills enacted in 2014, 2007, and 2000. The 113th Congress also enacted legislation to facilitate small conduit hydropower development (P.L. 113-23 and P.L. 113-24). This report discusses recent congressional activity and possible topics for the 114th Congress. It provides an overview of the federal role in water resources development, management, and protection, with a focus on projects of the two major federal water resources agencies—Reclamation and the U.S. Army Corps—and related legislation. It also discusses overarching policy issues, such as drought and flood management and response, project funding and authorization priorities, and aquatic ecosystem restoration.

Congress has enacted laws requiring individuals and facilities to take measures to protect environmental quality and public health by limiting potentially harmful emissions and discharges, and remediating damage. Enforcement of federal pollution control laws in the United States occurs within a highly diverse, complex, and dynamic statutory framework and organizational setting. Multiple statutes address a number of environmental pollution issues, such as those associated with air emissions, water discharges, hazardous wastes, and toxic substances in commerce. Regulators and citizens take action to enforce regulatory requirements in a variety of ways to bring violators into compliance, to deter sources from violating the requirements, or to clean up contamination (which may have occurred prior to passage of the statutes). Implementation and enforcement provisions vary substantially from statute to statute, and are often driven by specific circumstances associated with a particular pollution concern. Given these many factors, it is difficult to generalize about environmental enforcement. This report focuses on enforcement of federal environmental pollution control requirements under the Clean Air Act (CAA); the Clean Water Act (CWA); the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund); and other statutes for which EPA is the primary federal implementing agency. The report provides a brief synopsis of the statutory framework that serves as the basis for pollution control enforcement, including an overview of the key players responsible for correcting violations and maintaining compliance. Implementation and enforcement of pollution control laws are interdependent and carried out by a wide range of actors including federal, state, tribal, and local governments; the regulated entities themselves; the courts; interest groups; and the general public. Figure 1 , below, presents the array of local, state, tribal, and federal entities that constitutes the environmental pollution control enforcement/compliance framework and organizational setting. A diverse set of regulatory approaches and enforcement tools is applied to a sizeable universe of regulated entities by these multiple regulating authorities to ensure compliance. A general discussion of enforcement monitoring and response tools is included in this report, followed by a summary of recent fiscal year federal funding levels for enforcement activities. Discussion of available enforcement data sources, as well as tables illustrating examples of trends in enforcement activities, is presented in the two appendixes. While this report touches on many aspects of environmental enforcement, it does not describe every aspect and statute in detail. Rather, the report is intended to provide a broad perspective of environmental enforcement by highlighting key elements, and a general context for the range of related issues frequently debated. Information included in this report is derived from a variety of sources. These sources, including relevant subject-matter CRS reports providing in-depth discussion of specific topics and laws, are referenced throughout. Several themes reflecting congressional concerns over time since EPA was established in 1970 are reflected throughout the major sections of this report. Congress has conducted oversight, primarily in the form of hearings, on various aspects of the organizational infrastructure and operations designed to enforce pollution control statutes. These aspects of enforcement have also been the topic of investigations by the Government Accountability Office (GAO) and EPA's Office of Inspector General (EPA-OIG). The federal government's oversight of and coordination with states in implementing and enforcing federal pollution control laws have been of particular interest to Congress. The following sections briefly discuss some of the key issue areas. Since many, but not all, of the federal pollution control statutes authorize a substantial role for states, state autonomy versus the extent of federal oversight is often at the center of debate with regard to environmental enforcement. Not unexpectedly, given the "cooperative federalism" that is often used to characterize the federal, state, and tribal governments in the joint implementation and enforcement of pollution control requirements, relationships and interactions among these key enforcement players often have been less than harmonious. Disagreements involving environmental priorities and strategic approaches, and balancing the relative roles of compliance assistance with enforcement, contribute to the complexity and friction that come with enforcing national pollution control laws. Other contributing factors include the increasing number of statutory and related regulatory pollution control requirements (some with conflicting mandates) and the adequacy of the resources available for their implementation. The effects of variability among statutes, coupled with variability in federal and state interpretations and regulations, are often central to the debate. Some argue that this variability leads to too much inconsistency in enforcement actions from state to state, region to region, or between federal versus state actions. Others counter that this represents the flexibility and discretion intended by the statutes to address specific circumstances and pollution problems. A July 2007 GAO report found that progress had been made regarding federal oversight of state environmental enforcement programs, and that there had been improvements with regard to cooperative federal-state planning and priority setting. However, the GAO concluded that a greater effort was needed to achieve more consistency and effectiveness, and that these issues continue to need improvements. In a December 2011 report, the EPA OIG found that although "OECA had made efforts to improve state performance and consistency … state performance remains inconsistent across the country, providing unequal environmental benefits to the public and an unlevel playing field for regulated industries." The level of federal funding allocated to states and tribes to support effective enforcement of federal pollution control laws has also been a long-standing congressional concern. In March 2012, the Environmental Council of the States (ECOS) reported concerns among state environmental agencies with regard to the extent of reductions in federal funding for state environmental protection activities. In a 2008 study, ECOS reported that during 2005-2008 states expected spending to implement federal environmental laws to double while federal appropriations declined. Subsequently, ECOS reported that although federal funding for enforcement allocated to states increased marginally from FY2009 to FY2010, overall, reductions in state budget revenue are impacting their ability to maintain viable environmental enforcement programs. In a September 2012 ECOS report, budget environmental agency data collected from 49 states indicated that total funding from the federal government decreased between FY2011 and FY2012, and further decreases were expected for FY2013. In 2007, GAO reported that, although funding overall for enforcement activities had increased somewhat, it generally had not kept pace with the increasing number of mandates and regulations, or with inflation. The federal enforcement funding and personnel, primarily within EPA and the Department of Justice (DOJ), to ensure effective enforcement of environmental statutes has also been a concern of both appropriations and authorizing committees in Congress. Recently, in addition to funding priorities among the various EPA programs and activities (including enforcement), several promulgated and pending EPA regulatory actions have been central to debates on EPA's appropriations. Some Members expressed concerns related to these actions during hearings of EPA's appropriations, and authorizing committees continued to address EPA regulatory actions through hearings and consideration of legislation during the 113 th Congress. During the FY2011 and FY2012 appropriations deliberations, several provisions were proposed, and a subset adopted, that restricted the use of funding for the development, implementation, and enforcement of certain regulatory actions that cut across the various environmental pollution control statutes' programs and initiatives. Although no separate FY2013 Interior, Environment, and Related Agencies bill that includes funding for EPA was passed in the House and Senate, and no bills were introduced for FY2014, these regulatory actions remained prominent during the debate. Many other aspects of pollution control enforcement have been the subject of debate, and highlighted in congressional hearings and legislation. Some additional areas of continued interest include whether there is a need for increased compliance monitoring and reporting by regulated entities; impacts of environmental enforcement and associated penalties/fines on federal facilities' budgets (most notably the Department of Defense, or DOD, and Department of Energy, or DOE); how best to measure the success and effectiveness of enforcement (e.g., using indicators such as quantified health and environmental benefits versus the number of actions or dollar value of penalties); whether penalties are strong enough to serve as a deterrent and maintain a level economic playing field, or too harsh and thus causing undue economic hardship; how to balance punishment and deterrence through litigation with compliance assistance, incentive approaches, self-auditing or correction, and voluntary compliance; the effect of pollutant trading programs on enforcement; and the level of funding required to effectively achieve desired benefits of enforcement. These issues result from disparate values and perspectives among stakeholders, but also from the factors that are the focus of this report: the statutory framework, those who work within this framework, and the tools and approaches that have been adopted for achieving compliance with pollution control laws. The discussion below, beginning with identification of the principal statutes and key players, followed by an overview of integrated systems of administrative and judicial enforcement, compliance assistance, and incentive tools, is intended to provide a macro-perspective of environmental enforcement infrastructure and operations. As Congress has enacted a number of environmental laws over time, as well as major amendments to these statutes, responsibilities of both the regulators and the regulated community have grown. Organizational structures of regulatory agencies have evolved in response to their expanding enforcement obligations. Regulators also must adapt to an evolving, integrated system of administrative and judicial enforcement, compliance assistance, and incentive tools (see discussion under " Enforcement Response and Compliance Tools ," later in this report). The 11 laws listed in Table 1 generally form the legal basis for the establishment and enforcement of federal pollution control requirements intended to protect human health and the environment. The discussion in this report focuses on these federal environmental laws for which the U.S. Environmental Protection Agency (EPA) is the primary federal implementing agency. Since EPA was created in 1970, Congress has legislated a considerable body of law and associated programs to protect human health and the environment from harm caused by pollution. Those federal statutes, intended to address a wide range of environmental issues, authorize a number of actions to enforce statutory and regulatory requirements. Enforcement of this diverse set of statutes is complicated by the range of requirements, which differ based on the specific environmental problem, the environmental media (e.g., air, water, land) affected, the scientific basis and understanding of public risks, the source(s) of the pollutants, and the availability of control technologies. Regulatory requirements range from health and ecologically based numeric standards, or technology-based performance requirements, to facility-level emission and discharge permit limits. Several of the pollution control laws require regulated entities to obtain permits, which typically specify or prohibit certain activities, or delineate allowable levels of pollutant discharges. These permits are often the principal basis for monitoring, demonstrating, and enforcing compliance. In recent years, an increasing number of administrative initiatives have favored incentive-based regulatory approaches, such as trading of permitted emissions, which can affect the applicability of traditional enforcement approaches. Regulating authorities establish enforcement response and compliance assistance programs to address the enforcement provisions of particular federal pollution control statutes. These environmental statutes typically authorize administrative, civil judicial, and criminal enforcement actions for violations of statutory provisions. For example, Section 309 of the CWA, Section 113 of the CAA, and Section 1414 of the Safe Drinking Water Act (SDWA) cover enforcement provisions. As provisions for specific actions vary from statute to statute, each EPA regulatory program office establishes detailed criteria for determining what sanctions are preferable (and authorized) in response to a given violation. The statutes often provide a level of discretion to regulators for addressing specific circumstances surrounding certain environmental problems or violations of national requirements. Enforcement of the many provisions of the major environmental laws across a vast and diverse regulated community involves a complex coordinated process between federal (primarily EPA and DOJ), state, tribal, and local governments. Congress provided authority to states for implementing and enforcing many aspects of the federal statutory requirements. Citizens also play a role in ensuring that entities comply with environmental requirements, by reporting violations or filing citizen lawsuits, which are authorized under almost all pollution control laws. The following discussion highlights the roles of these key players. Primarily through its program offices (e.g., air, water, solid waste), EPA promulgates national regulations and standards. Other federal agencies (e.g., the Department of the Interior, Army Corp of Engineers) and states, tribes, various stakeholder groups, and citizens may contribute input to EPA at various stages of regulatory development (including required public comment). (States may also establish their own laws based on the national requirements; see the discussion later in the " States and "Delegated Authority" " section of this report.) EPA (and states) inform the regulated community of their responsibilities and administer permitting, monitoring, and reporting requirements. EPA also provides technical and compliance assistance, and employs a variety of administrative and judicial enforcement tools as authorized by the major environmental laws it administers, as well as incentive approaches, to promote and ensure compliance. Since EPA's establishment, the agency's enforcement organization has been modified a number of times, and continues to evolve. EPA's Office of Enforcement and Compliance Assurance (OECA) at headquarters and in the 10 EPA regional offices sets the general framework for federal enforcement activities in coordination with the agency's program offices, states and tribes, and other federal agencies, particularly DOJ. OECA serves as the central authority for developing and implementing a national compliance and enforcement policy, and coordinating and distributing policies and guidance. EPA's National Enforcement Initiatives (NEI) and OECA's National Program Managers (NPM) Guidance are primary strategic planning tools that set out national enforcement program priorities and coordinate and monitor state, regional, and EPA headquarters implementation of environmental enforcement/compliance activities. EPA's 10 regional offices, in cooperation with the states, generally are responsible for a significant portion of the day-to-day federal enforcement activities. The NEI is developed every three years with the cooperation of EPA regions and states/tribes, identifying overall program directions as well as specific enforcement activities/priorities. In June 2013, EPA-OECA announced its decision to continue the initiatives that were the focus of the FY2011-FY2013 NEI released February 22, 2010, for the FY2014-FY2016 NEI cycle. OECA NPM Guidance and other agency NPM Guidance are issued annually based on a three-year cycle coinciding with the NEI, identifying allocation of resources and expected outcomes, and serves as the basis for the enforcement agreements ("commitments") with the regional offices. The OECA NPM Guidance applies to OECA, all EPA regional enforcement programs, and states and tribes implementing EPA-approved inspection and enforcement programs. The agency is currently operating under the FY2014 OECA NPM Guidance finalized June 14, 2013, but on March 14, 2014, released an FY2015 draft NPM Guidance Addendum. The EPA National Enforcement Investigations Center (NEIC) provides technical expertise to the agency and states. The center administers an investigative team that assigns investigators to the regional offices as needed. OECA also facilitates EPA's National Enforcement Training Institute (NETI), established under Title II of the 1990 Pollution Prosecution Act ( P.L. 101-593 ). NETI provides a wide spectrum of environmental enforcement training online to international, federal, state, local, and enforcement personnel, including lawyers, inspectors, civil and criminal investigators, and technical experts. OECA's headquarters personnel conduct investigations and pursue or participate in national enforcement cases, particularly those potentially raising issues of national significance. More often enforcement activities fall to the regional offices. EPA (and the states') enforcement actions often require coordination with other federal agencies, most frequently DOJ. In coordination with EPA, the Department of Justice (DOJ)—at its headquarters and through the U.S. Attorneys' offices around the country—plays an integral role in judicial federal enforcement actions of environmental regulations and statutes. EPA refers cases (including some initiated by states) to DOJ for an initial determination of whether to file a case in federal court. DOJ represents EPA in both civil and criminal actions against alleged violators, maintaining close interaction as needed with EPA, states, and tribes during various stages of litigation. DOJ also defends environmental laws, programs, and regulations, and represents EPA when the agency intervenes in, or is sued under, environmental citizen suits. For FY2013, EPA-OECA reported the referral of 138 civil cases to DOJ, and that 297 criminal cases were opened. Many of these cases are handled by DOJ's Environment and Natural Resources Division (ENRD). EPA and DOJ work conjunctively with the other federal agencies as cases warrant. EPA and DOJ coordinate with a number of other federal agencies, particularly when taking criminal action. Key federal agencies include the Federal Bureau of Investigation (FBI), Department of Transportation (DOT), Department of Homeland Security (DHS, particularly the Coast Guard and U.S. Immigration and Customs Enforcement, or ICE), Fish and Wildlife Service, Army Corps of Engineers, Defense Criminal Investigative Service, National Oceanic and Atmospheric Administration (NOAA), U.S. Internal Revenue Service (IRS), and U.S. Securities and Exchange Commission (SEC). These agencies may provide support directly in response to violations of laws implemented by EPA, or, as is often the case, in circumstances where multiple laws have been violated. Most federal pollution control statutes, but not all, authorize EPA to delegate to states the authority to implement national requirements. For a state to be authorized, or "delegated," to implement a federal environmental program, it must demonstrate the capability to administer aspects of the program's requirements, including the capacity to enforce those requirements. Delegated authority must be authorized under the individual statute, and states must apply for and receive approval from EPA in order to administer (and enforce) federal environmental programs. While many federal pollution control laws provide authority for states to assume primary enforcement responsibilities, there is significant variability across the various laws, including as to standards states must meet and EPA's authority in determining whether states are authorized or have primacy. In some cases, state primacy is almost automatic. Some federal pollution control laws limit the authority to a specific provision, while others do not authorize delegation at all. For example, Section 1413 of the Safe Drinking Water Act (SDWA) authorizes states to assume primary oversight and enforcement responsibility (primacy) for public water systems, and Section 402 of the Clean Water Act (CWA) authorizes state-delegated responsibilities under that act to issue and enforce discharge permits to industries and municipalities. Under CERCLA (Superfund), states are authorized to participate in the cleanup of waste, from taking part in initial site assessment to selecting and carrying out remedial action, and negotiating with responsible parties. Under FIFRA, states may have primacy for enforcing compliance requirements contained on labels of registered pesticides, but are not granted enforcement authority related to registering pesticides or pesticide establishments. Programs under other laws, such as the Toxic Substances Control Act (TSCA), do not provide authority for state delegation. EPA can also authorize state government officials to conduct inspections for environmental compliance on behalf of the agency, subject to the conditions set by EPA, even if a specific statute does not provide delegation authority. However, there must be authority under the specific statute for authorizing such inspections. Even if delegation is authorized under a federal statute, states may opt not to seek delegation of a particular environmental program, or they may choose only to implement a select requirement under a federal law. For example, as of November 2012, 46 states had obtained the authority to operate the national permitting program under Section 402 of the CWA, but EPA had only delegated authority to two states to operate the wetlands permitting program under a separate CWA provision, Section 404. A majority of states have been delegated authority to implement and enforce one or more provisions of the federal pollution control laws. Authorized states generally implement the national laws and regulations by enacting their own legislation and issuing permits, which must be at least as stringent as the national standards of compliance established by federal law. States consider and approve environmental permits, monitor and assess environmental noncompliance, provide compliance assistance and information to the regulated community and the public, conduct inspections, and take enforcement actions. Local government authorities also play a role in permitting and monitoring. For example, EPA has delegated authority to implement Section 112 of the Clean Air Act (CAA) to at least three county governments. However, local governments generally act within the context of assuring states' requirements. For example, local authorities may incorporate land use and other issues as well as code requirements (fire, construction, building safety, plumbing, etc.) in their consideration of permits. A more detailed discussion of the many facets of local authorities is beyond the scope of this report. A significant proportion of inspections and enforcement actions are conducted by the states. Comparable, comprehensive data from the same or similar sources are not readily available for purposes of directly comparing enforcement activities in states relative to EPA. While EPA routinely reports trends in its major enforcement actions in the annual OECA accomplishments reports and on its website, the agency does not generally include state-specific activities. There are a number of limitations with regard to states' information currently retained by EPA in its databases (e.g., not all states report relevant information into the EPA databases, reported data are not provided consistently from state to state, and reporting requirements are variable from statute to statute). EPA has made an effort to enhance and improve enforcement reporting by states. The agency has been implementing its State Review Framework (SRF) tool developed and introduced in 2004, to improve its oversight of state enforcement programs. Under this SRF tool, EPA representatives visit and evaluate each state's compliance and enforcement program based on specified criteria. In February 2013, on its Enforcement and Compliance History Online website (ECHO; see Appendix A ), EPA released interactive dashboards and comparative maps that include state-level enforcement data for the most recent five years. Information includes the number of completed inspections, types of violations found, enforcement actions taken, and penalties assessed by state, and users can customize the presentation to view state activity as well as view comparisons with EPA activity. Through discussions and reports, EPA provides feedback to each state and based on its review, outlines recommendations for improvement. Full implementation of SRF was initiated by EPA in July 2005 and the agency reported that reviews of all states and territories were completed in 2007. EPA began conducting Round 2 of reviews in 2008 and completed reviews for most states by the end of calendar year 2012. OECA, with its partners, has also conducted an evaluation of the implementation of the first cycle of SRF recommendations and initialed revisions to SRF guidance for conducting subsequent reviews. OECA continues to work with its partners in evaluating implementation of SRF recommendations. Despite these efforts, there are still perceived differences between states, EPA regions, and EPA headquarters. In recent years, ECOS has served as a forum to improve coordination and promote joint strategic planning between the states and EPA. In addition to other strategic planning tools, EPA and states established the National Environmental Performance Partnership System (performance partnerships, or NEPPS) in 1995 in an effort to improve the effectiveness of EPA-state coordinated environmental management. Under this system, which includes elements of compliance and enforcement, EPA and states enter into individual partnerships (performance partnership agreements) to address jointly agreed-upon priorities based on assessments of localized environmental conditions. The partnerships can be broad in scope or comprehensive strategic plans, and often serve as work plans for funding through EPA grants. Absent delegation, EPA continues to enforce the federal law in the state, although a state can enforce its own environmental laws where not preempted by federal law. Even with delegation, EPA retains the authority and responsibility as determined by each statute to take enforcement measures, generally taking action when there is a violation of an EPA order or consent decree, or when the federal government deems a state to have failed to respond to a major violation in a "timely and appropriate" manner. Additionally, when a noncompliance case involves an emergency or matters of potential national concern, such as significant risk to public health and safety, the federal government will typically intercede. There are cases where states request the federal government to step in and other cases where the federal government on its own initiative acts on violations that are the subject of state enforcement action or settlement, known as "overfiling." EPA contends that overfiling occurs infrequently and that certain environmental statutory provisions preclude EPA from overfiling. These provisions are not explicit in all the pollution control statutes, and are limited to specific subsections and violations. Although overfiling of states' enforcement actions has occurred under various pollution control statutes, historically, overfiling of Resource Conservation and Recovery Act (RCRA) violations has been the subject of considerable debate and litigation. States have strongly objected to overfiling, and the utility and extent of overfiling with respect to environmental enforcement has been the subject of considerable litigation, debate, and literature. EPA and states increasingly have recognized the role of tribal governments in environmental enforcement, where tribes, rather than states, have primary jurisdiction. Indian tribes, as sovereign governments, can establish and enforce environmental programs under their own laws, but must obtain approval from EPA to administer federal environmental programs on their land. As with states, some of the federal statutes authorize tribes, with EPA approval, to assume responsibility for implementing certain federal pollution control programs. To obtain EPA approval, tribes must demonstrate adequate authority and jurisdiction over the activities and lands to be regulated. Where there is no approved tribal program, EPA exercises its federal authority and may undertake direct program implementation. In some instances, particularly when there are criminal violations, EPA may retain a role in compliance and enforcement even when there is an approved tribal program. In addition to the federal statutes, a tribal government's authority for environmental protection can arise from federal executive orders, treaties, and agreements with the United States and/or state and local governments, some of which explicitly reserve rights pertaining to the environment. When addressing environmental issues within tribal lands, EPA abides by the January 24, 1983, American Indian policy statement, which reaffirmed the government-to-government relationship of Indian tribes with the United States. Relatively few tribes have obtained authority for implementing federal pollution control laws, and EPA identified tribal environmental compliance as a national enforcement and compliance priority in its FY2005-FY2007 and its FY2008-FY2011 enforcement strategic plans in an effort to enhance tribal governments' capabilities to implement federal environmental statutes. The primary focus was public drinking water systems, federal pollution control statutes applicable to schools, and unregulated dumping of solid waste. EPA's National Enforcement Initiatives (NEIs) for FY2011-FY2013, which were retained for the FY2014-FY2016 cycle, did not designate Indian Country as one of the six national enforcement initiatives; however, the sector will continue to be addressed through the structure established under the previous designated initiative or through the regular program compliance assistance, inspections, investigations, and enforcement conducted in regional offices and states. EPA continues to provide enforcement and regulatory guidance via the Tribal Compliance Assistance Center. Private individuals play an important role in enforcing certain aspects of federal pollution control laws. Citizen participation, specifically authorized by Congress in many of the federal pollution control statutes, occurs in several ways. Individuals can identify and report violations of the laws, provide comments on settlements that are reached between the federal government and violators of the environmental laws in enforcement cases, and initiate enforcement proceedings directly in response to alleged violations. In addition, individuals may bring actions against EPA for failing to execute nondiscretionary duties required under federal environmental laws. To further enhance public participation and reporting of potential environmental violations, EPA-OECA introduced the "National Report a Violation" website in January 2006. The website provides access to OECA's online citizens' tips and complaints form and related contact information. EPA reported that the number of citizen tips and complaints increased from 1,485 in FY2005 to 3,274 in FY2006. According to EPA, more than 18,000 total tips were reported to date, including more than 7,800 received in FY2008 (not reported for FY2009 through FY2013). Additionally, in FY2009 EPA introduced the "EPA Fugitives" website to solicit public assistance in locating alleged environmental criminal fugitives. (See brief overview of the website in the " Criminal Judicial Enforcement " section of this report.) The size and diversity of the regulated community are vast, spanning numerous industrial and nonindustrial entities, small and large, and their operations. The following discussion provides an overview of the regulated community, and highlights the role and activities of the key regulated entities in the enforcement of the primary pollution control statutes. The universe of the regulated community as a whole is very large (see discussion below). The majority of those in the regulated community are required to comply with multiple statutes because of the nature of their activities and operations. The regulated community includes a diverse range of entities and operations, including utilities, refineries, manufacturing and processing facilities, agriculture producers and processors, mobile sources (e.g., private and commercial vehicles), and others. Local, state, tribal, and federal governments are also part of the regulated community, as they are engaged in a range of activities and operations—utilities, construction, waste and wastewater management, drinking water management, transportation, and pest management—that generate pollution similar to nongovernment sectors. Regulated entities vary in their activities and operations, and in size—ranging from small individual business operations such as dry-cleaners to facilities and operations that are part of large corporations and conglomerates. Regulatory agencies generally categorize regulated entities into minor and major emitters/dischargers based on factors such as total earnings, number of employees, production volume, and amount of emissions, for purposes of implementing and enforcing the various statutes. In certain circumstances, some of the pollution control statutes make specific distinctions with regard to major and minor emitters/dischargers. A designation of "major" generally applies to those entities that, because of their size or operations, have the potential to have a significant impact on the environment. Most of the statutes and accompanying regulations include authorities for reducing the stringency, and in some cases providing exemptions from regulatory requirements to minimize their impacts on small businesses and operations. There is no readily available, current, comprehensive list and description of the complete universe of those who are regulated under all of the major pollution control statutes. EPA has been criticized for not adequately defining the regulated universe, a step that GAO determined to be a critical component necessary to evaluate the effectiveness of enforcement. EPA-OECA compiled data regarding the size of the regulated community in September 2001, and estimated a total universe of more than 41 million. Although cited by EPA subsequently from time to time, most commonly in strategic planning documents, the agency has not updated the estimate. There are, however, data and information that provide some indications of the size and diversity of this universe—for example, in EPA's primary enforcement and compliance databases (see additional discussion in Appendix A ). EPA's publicly available Enforcement and Compliance History Online (ECHO) provides for integrated searches of data for more than 800,000 facilities for compliance with CWA, CAA, and RCRA. The data are primarily based on permitted facilities. Another EPA centrally managed database is the Facility Registry System (FRS), which primarily identifies "facilities, sites or places" subject to federal pollution control requirements; it contains more than 2.5 million unique facility records. The FRS database is primarily based on permit information for CWA, CAA, and RCRA, but includes information reported regarding CERCLA sites. It does not include information indicating the universe regulated under other statutes. In yet another source, the ECOS indicated that states reported that more than 3 million regulated facilities required state agency oversight for environmental compliance in 2003. The differences in the various sources are an indication of the difficulty involved in accurately and consistently tracking the size of the regulated populations. EPA's various program offices (e.g., air, water, and waste) maintain and publish information and profiles regarding characterizations of regulated entities and their operations. Generally included are estimates of the types and amounts of emissions and discharges, or wastes being handled. For example, EPA's Office of Air and Radiation (OAR) maintains a national database of air emissions estimates for individual point- or major-source categories. The database contains information on stationary and mobile sources that emit common ("criteria") air pollutants and their precursors, as well as hazardous air pollutants (HAPs). The categories presented in these sources do not reflect 100% of the total number of facilities being regulated. Another source for characterizing the sectors of the regulated community is EPA's "Sector Notebooks." EPA has defined sectors as distinct parts of the economy that share similar operations, processes or practices, environmental problems, and compliance issues. EPA recognizes that there are likely a number of circumstances where regulated entities within specific geographic regions may have unique characteristics that are not fully reflected in the profiles contained in the sector notebooks. In addition, some of the notebooks were completed several years ago. Nevertheless, notebook profiles provide fairly comprehensive characterizations of key sectors included within the regulated community. Table 2 lists industry and government sectors for which the agency has completed sector notebooks and developed compliance assistance tools. Unless a statutory exemption exists, federal facilities are subject to the federal pollution control statutes, and generally also must adhere to the environmental laws and regulations of the states and municipalities in which they are located, to the same extent as others in the regulated community. EPA concluded 61 enforcement actions against federal agencies for alleged violations of federal pollution control laws during FY2013, the same as FY2012. This is compared to 57 enforcement actions during FY201 1 and 52 during FY2010. Federal agencies are also subject to relevant requirements of executive orders. Nearly $866.5 million in penalties was assessed for federal facility violations during FY2013, compared to $615.0 million assessed in FY2012, $9.0 million in FY2011, and $749,000 in FY2010. In addition, violators agreed to invest more than $128.0 million in cleanup and improved operations to comply with environmental laws in FY2013, compared to roughly $160.0 million in FY2012, more than $5.0 billion in FY2011 and an estimated $163.0 million in FY2010. EPA no longer provides aggregated summaries of federal facility enforcement actions in its annual results report; however, the agency provides an interactive mapping tool of concluded enforcement cases that includes the capability to search information for individual federal facilities based on location. Regulating federal facilities under pollution control laws presents certain unique challenges. Although all are potentially subject to pollution control laws and regulations, a majority of federal agencies and their facilities are not involved in activities that would generally warrant compliance requirements. According to EPA, facilities operated by DOD and DOE make up a significant portion of the universe of "major" federal facilities. Major federal facilities generally refer to those facilities that, because of their size or operations, have the potential to have a significant impact on the environment. Compliance/enforcement information for DOD and DOE is reported individually, while other federal agencies are generally categorized together as Civilian Federal Agencies. The major federal pollution control laws provide EPA with authorities to enforce requirements and impose penalties at federal facilities that are not in compliance. The Federal Facility Compliance Act of 1992 specifically amended RCRA to clarify that DOD and all other federal facilities are subject to penalties, fines, permit fees, reviews of plans or studies, and inspection and monitoring of facilities in connection with federal, state, interstate, or local solid or hazardous waste regulatory programs. The SDWA includes similar language regarding federal facilities, but most of the other federal environmental laws do not include such specific provisions. CERCLA (Superfund) Section 120 requires federal agencies with NPL sites to investigate and clean up the contamination, and significantly contaminated federal facility sites have been listed on EPA's National Priorities List (NPL). Whether other pollution control laws should be amended to clarify their applicability to federal facilities has been an issue of debate in Congress. EPA and states apply a set of environmental enforcement tools to identify and correct noncompliance, restore environmental damage, and impose penalties intended to deter future violations. Compliance with pollution control laws is addressed through a continuum of response mechanisms, ranging from compliance assistance to administrative and civil enforcement, to the stronger criminal enforcement. The spectra of tools, which escalate in terms of their level of severity and intensity, are authorized in each of the environmental statutes. The following sections of this report provide a brief overview of the various enforcement response mechanisms. Over the years, EPA and states have sought to effectively balance the provision of guidance and assistance to prevent violations or achieve compliance by regulated entities with federal pollution control requirements, with the imposition of strong enforcement actions in response to violations. Some critics have depicted environmental enforcement as overly litigious, or requiring unwarranted remedies. Others counter that actions are not pursued with enough rigor and frequency, or that penalties are not severe enough to deter noncompliance. EPA officials have countered that, in some instances, the agency is relying more on settlements and focusing on requiring increased expenditures on pollution control technologies, and that it is focusing judicial actions on larger and more complex cases that are expected to result in larger environmental benefits. EPA and states maintain a considerable degree of flexibility in determining how to respond to potential violations, to the extent authorized by individual statutes. Initially, a potential violation is identified through monitoring, inspecting, citizen reporting, or through self-reporting by the regulated entity. As a first step in the enforcement process, unless an imminent danger or hazard has been determined, EPA and states may attempt to obtain corrective actions by simply issuing a warning or notifying a facility that minor violations may exist, and granting reasonable time for compliance. EPA or a state may then (or sometimes as a first step) initiate a civil administrative action under its own authority without involving the judicial process, or file formal civil or criminal judicial actions in court. Sanctions imposed, whether through negotiated settlements or decisions by the court, generally include required actions to achieve compliance and to correct environmental damage (injunctive relief), and may include monetary penalties (and incarceration in the case of criminal violations). During the last 10 years, settlements increasingly have also included requirements that violators undertake mutually agreed-upon environmentally beneficial projects supplemental to other sanctions. As noted, EPA, states, and the courts have considerable discretion in determining sanctions and remedies on a case-by-case basis so that the individual circumstances of each case are appropriately addressed. A majority of environmental violations are addressed and resolved administratively by states and EPA, and many of these cases are settled through negotiations between the government and the alleged violator. For example, during FY2013, EPA issued 873 administrative compliance orders and filed 1,440 final administrative penalty order complaints. In comparison, also during FY2013, 137 civil judicial cases were filed with the court, and 176 civil judicial enforcement cases were concluded. Civil judicial cases constitute the second-largest category of environmental enforcement actions. Historically, judicial actions focused on violation of a single environmental statute. In recent years, EPA and states have increased the frequency of reliance on a multimedia (multi-statute) approach and multimedia investigations. The number of administrative and judicial enforcement actions and penalties often fluctuate significantly from year to year. These fluctuations are generally a reflection of a combination of factors, including statutory deadlines; new or amended requirements in response to new scientific information or amended and new regulations; increased or decreased resources; environmental priority changes at the federal or state levels; and increased or improved monitoring/reporting. For example, EPA reported that the number of administrative penalty order complaints issued by the agency more than doubled, from 2,229 complaints in FY2005 to 4,647 in FY2006, then declined to 2,237 in FY2007, 2,056 in FY2008, 1,914 in FY2009, 1,901 in FY2010, and 1,735 in FY2011. The number of administrative penalty order complaints increased to 1,760 in FY2012, then declined to 1,407 in FY2013. EPA reported that the combined $1.15 billion in civil penalties (administrative and judicial) assessed in FY2013 was an all-time high, due to a record settlement of $1.0 billion reached with the Transocean defendants to resolve alleged violations associated with the Deepwater Horizon Gulf of Mexico oil spill. Additionally, the total dollar amount of penalties collected in a given year could reflect the completion of one or two large cases. For example, the settlement with the Transocean entities represented nearly 90% of the civil penalties assessed for FY2013. Illustrations of the frequency of enforcement actions by type over time are presented in Appendix B ; this appendix also includes illustrations of administrative, judicial, and criminal penalties assessed over time by statute. Critical steps in enforcing environmental laws include the compilation of monitoring data, and inspection and evaluation of the activities of the regulated community to determine who is complying with applicable regulatory requirements and permit conditions, and who is not. Compliance monitoring, evaluations, and investigations all serve to identify violations and provide insights into potential priority issue areas that may need to be addressed more broadly. Monitoring and reporting can be both media program-based (e.g., air, water, waste) and sector-based (e.g., industrial, mobile source, utilities), and are often included in permit requirements. Data reported and obtained, as well as observations and evidence collected by inspectors, enable EPA and states to identify specific environmental problems and determine whether a facility is in compliance. The information and evidence could eventually be used in an enforcement action. The mere collection of information or threat of inspection itself often creates an awareness of the regulators' interest, and can encourage compliance. EPA identifies several forms of compliance monitoring that are used differently by the agency and states, depending upon the statute, the nature of the pollutants, and the types of facilities being regulated: Self-Monitoring/Reporting . Most environmental laws require (typically through permitting) regulated entities/facilities to monitor and record their own compliance status and report some or all of the tracking results to the responsible regulating authority. In addition to informing the regulators, self-monitoring also allows a company to measure its performance and evaluate its strategies for achieving or maintaining compliance. Review of Records . Regulatory agencies review data and information reported or otherwise compiled and collected. Full and Partial Inspections/Evaluations . Individual facility environmental inspections, conducted by EPA regional staff and the states, are the primary tool used by regulators for initial assessment of compliance. Through sampling, emissions testing, and other measures, inspections examine environmental conditions at a facility to determine compliance (or noncompliance) with specific environmental requirements, and to determine whether conditions present imminent and substantial endangerment to human health and the environment. Inspections/evaluations can be conducted all at once or in a series of partial inspections. Area Monitoring . Area monitoring looks at environmental conditions in the vicinity of a facility, or across a certain geographic area. Examples of methods used for area monitoring include ambient monitoring and remote sensing. According to EPA's most recent reported trends data, a total of 18,000 EPA enforcement inspections and evaluations were conducted under the various statutes during FY2013. Although most inspections are carried out by the states, annual data for the total number of inspections conducted by states are not readily available due to data-reporting variability and other limitations. Based on a subset of states surveyed, ECOS reported that roughly 136,000 compliance inspections were conducted by states in 2003 for the major federal environmental programs—air, drinking water, surface and groundwater, hazardous waste, and solid waste. The total number of inspections reported by ECOS does not account for all inspections conducted by states under federal pollution control programs—for example, inspections under FIFRA are not included. In reports to EPA by states under the Pesticide Enforcement Grant program, states, tribes, and territories reported between 90,000 and 100,000 FIFRA inspections each fiscal year for FY2006 through FY2008. These FIFRA activities, typically administered by states' departments of agriculture, are not reflected in the EPA or the ECOS totals. To put the ECOS number of inspections into perspective, in 2003, the ECOS survey identified 440,000 regulated facilities under these five major environmental programs. EPA's Facility Registry System (FRS), which identifies facilities and sites subject to federal environmental regulation, currently contains unique records for more than 2.5 million facilities (see the above discussion under the heading Regulated Community). Appendix B presents data on the number of inspections conducted annually by EPA over time. As noted earlier, a majority of environmental pollution control violations are addressed and resolved administratively by states and EPA without involving a judicial process. EPA or a state environmental regulatory agency may informally communicate to a regulated entity that there is an environmental problem, or it may initiate a formal administrative action in the form of a notice of violation or an Administrative Order to obtain compliance. An Administrative Order imposes legally enforceable requirements for achieving compliance, generally within a specified time frame, and may or may not include sanctions and penalties. An initial step in the enforcement process is often a Notice of Violation, or in some instances, a warning letter. Warning letters are issued mostly for first-time violations that do not present an imminent hazard. These notifications are intended to encourage regulated entities to correct existing problems themselves and come into compliance as quickly as possible. According to EPA, in many cases, these notices are not escalated to further formal enforcement action because a facility corrects problems and returns to compliance in response to the notice. Through administrative enforcement actions, EPA and states may (1) require that the violator take specific actions to comply with federal environmental standards, (2) revoke the violator's permit to discharge, and/or (3) assess a penalty for noncompliance. As indicated previously, administrative actions frequently end in negotiated settlements. These mutually agreed-upon resolutions are typically in the form of a Consent Agreement or Final Administrative Order/Penalty. According to EPA's reported FY2013 annual results, during FY2013, EPA initiated 873 administrative compliance orders and 1,407 administrative penalty order complaints. EPA imposed penalties in 1,440 final administrative penalty orders during FY2013, representing a total value of $48.0 million. Federal administrative orders are handled through an administrative adjudicatory process, filed before an administrative law judge (ALJ), or, in the regions, by EPA's regional judicial officers (RJOs). The EPA Office of Administrative Law Judges (OALJ) is an independent office within the agency. ALJs, appointed by the EPA Administrator, perform adjudicatory functions and render decisions in proceedings between EPA and individuals, entities, federal and state agencies, and others, with regard to administrative actions taken to enforce environmental laws and regulations. RJOs, designated by each of the EPA Regional Administrators, perform similar adjudicatory functions in the EPA regions. Decisions issued by ALJs and RJOs are subject to review and appeal to the Environmental Appeals Board (EAB), which also functions independently of EPA. Environmental Appeals Judges are appointed by the EPA Administrator. Federal pollution control laws and regulations specify who may raise an issue before the EAB, and under what circumstances. EAB decisions often involve reviews of the terms of federal environmental permits and the amount of assessed financial administrative penalties. After civil administrative enforcement actions, civil judicial cases constitute the next-largest category of environmental enforcement. These are lawsuits filed in court against persons or entities who allegedly have not complied with statutory or regulatory requirements, or, in some cases, with an Administrative Order. Authorities for pursuing civil judicial actions and penalties are specified in each of the individual environmental statutes. Civil judicial cases are brought in federal district court by DOJ on behalf of EPA, and, for the states, by State Attorneys General. Not all of the cases referred to DOJ are filed with the court. The length of a civil case from its initiation to completion is highly variable, often extending across several years and sometimes across different presidential administrations. Like administrative enforcement actions, many civil judicial actions end as negotiated settlements, typically in the form of Consent Decrees. During FY2013, EPA-OECA referred 138 civil judicial cases to DOJ; 137 civil judicial complaints were filed with the court; and 176 cases were concluded (cases filed prior to and during FY2013). States and EPA may initiate criminal enforcement actions against individuals or entities for negligent or knowing violations of federal pollution control law. Criminal actions are especially pursued when a defendant knew, or should have known, that injury or harm would result. Knowing criminal violations of pollution control requirements are considered deliberate, and not the result of accident or error. In addition to the imposition of monetary fines and requirements to correct a violation and restore damages, conviction of a criminal environmental violation can result in imprisonment. EPA reported that 297 new environmental crime cases were opened during FY2013, roughly 7% fewer than the 320 criminal cases opened in FY2012. Authorities for pursuit of criminal actions vary under each of the statutes. For example, under the SDWA (42 U.S.C. §300h-2(b)), the criminal violations must be deemed willful—that is, they were committed with intent to do something prohibited by that law; the CWA (33 U.S.C. §1319(c)) authorizes criminal sanctions against those who have knowingly or negligently violated that statute. Recent examples of criminal actions include the illegal disposal of hazardous waste; importation of certain banned, restricted, or regulated chemicals; the export of hazardous waste without prior notification or permission of the receiving country; the removal and disposal of regulated asbestos-containing materials inconsistent with requirements of the law and regulations; tampering with a drinking water supply; and negligent maintenance resulting in discharge of hazardous materials. EPA maintains a database, Summary of Criminal Prosecutions Database , which provides the capability to conduct searches for information on concluded criminal enforcement cases by fiscal year. The EPA-OECA Office of Criminal Enforcement, Forensics, and Training (OCEFT), the office to which the agency's criminal investigators are primarily assigned, oversees implementation of the agency's federal environmental crimes investigation program. Within DOJ, the U.S. Attorneys Offices and ENRD's Environmental Crimes Section (ECS) prosecute criminal cases and work closely with EPA's OCEFT investigators. State and local law enforcement agencies and their environmental protection-related agencies, and other federal agencies, are also often key participants in federal environmental criminal actions. To facilitate investigations and cases, environmental crime task forces have been established nationally. These task forces are composed of representatives from federal (including representatives from DOJ-ECS and special agents from EPA), state, and local law enforcement, and environmental regulatory enforcement. The FBI, DOT, Coast Guard, Fish and Wildlife Service, Army Corps of Engineers, SEC, IRS, and other relevant federal agencies also may play significant roles. An increased emphasis on criminal enforcement of the pollution control laws occurred in the mid-1970s with the issuance of extensive guidelines for proceeding in criminal cases, and in 1981 with the creation of an Office of Criminal Enforcement and the hiring of criminal investigators in EPA's regional offices. During the late 1980s, criminal environmental enforcement was further enhanced when Congress conferred full law enforcement powers upon EPA criminal investigators as part of the Medical Waste Tracking Act of 1988 (18 U.S.C. §3063). Further, under Title II of the Pollution Prosecution Act of 1990 ( P.L. 101-593 ), Congress authorized the appointment of a director of a new Office of Criminal Investigations within EPA, and mandated the hiring of 200 criminal investigators by FY1996. Staffing levels of criminal investigators at EPA have been of interest to some Members, particularly during deliberations on appropriations. For example, the 1990 Pollution Prosecution Act ( P.L. 101-593 ) required EPA to hire and maintain 200 criminal investigators. A provision in the House-passed FY2008 Interior and Environmental Agencies Appropriations bill ( H.R. 2643 ) would have required EPA to bring the total number of investigators up to the level of 200 as statutorily required. The provision was not included in the FY2008 appropriations ( P.L. 110-161 , Title II of Division F). Congressional concerns regarding staff and funding for EPA's criminal (and civil) enforcement were also expressed in conference report language accompanying EPA appropriations for FY2003 through FY2005, and were the topic of a congressionally requested EPA-OIG investigation. EPA's criminal enforcement agents are authorized law enforcement officers who, in addition to investigating federal environmental statutes, investigate U.S. Criminal Code (Title 18) violations often associated with environmental crimes, such as conspiracy, false statements, and interfering with federal investigations. As noted, Congress has been concerned with the staffing of criminal investigators. Table 3 below shows the number of EPA investigators assigned to the criminal enforcement program for FY1997 through FY2015 (projected), as reported by EPA. The number of EPA special agents increased from about 50 in 1990 to more than 200 by 1998. As of September 2007, the number of EPA investigators had dropped to 168; this decline was an issue of concern in Congress and elsewhere. As a result of an EPA-OECA three-year hiring strategy to increase the number of criminal investigators, the number of investigators increased to 183 in FY2008, 186 in FY2009, and 206 in FY2010. The total number of criminal investigators declined to 202 in FY2011 and EPA expected the current 192 inspectors on board to be 191 by the end of FY2012. In recent years, there has been an across-the-board reduction in FTEs at EPA, and all programs—including the criminal program in OECA—have been affected. As of September 30, 2013, EPA had 177 special agents working on environmental crime investigations. In FY2009, EPA opened the "EPA Fugitives" website, which provides photographs and information about alleged violations of individuals who have avoided prosecution for allegedly committing environmental crimes. The site solicits assistance from the public and from law enforcement agencies to help locate identified environmental "fugitives," and provides guidance on how to report information related to the fugitives' identity and/or current location. EPA reported that creditable reports received through the website assisted in the arrest or capture of three fugitives and the surrender of two others during FY2009; four were sentenced and one awaits trial. Comparable information regarding "EPA Fugitives" was not reported by EPA in its FY2010, FY2011, FY2012, or FY2013 annual results; however, the agency indicated that information obtained through the "Report a Violation" website during FY2010 contributed to the opening of seven active criminal investigations, one of which resulted in an indictment. EPA did not report any similar direct correlations with the "Report a Violation" website in its FY2011, FY2012, and FY2013 annual results. Sanctions and penalties imposed for violation of federal environmental pollution control laws have been of interest to some in Congress and the topic of a 2010 EPA-OIG report. Settlements often require that violators achieve compliance and remedy environmental damages (injunctive relief). Monetary penalties may be included. Sanctions can also include permanent or temporary closure of facilities or specific operations, increased monitoring/reporting, revocation of existing permits or denial of future permits, and barring of receipt of federal contract funding or other federal assistance. The settlement-required corrective and compliance actions, and the monetary penalties (and possibly incarceration for criminal violations), are intended to correspond directly with the specific violations (noncompliance) and the extent (or "gravity") of action committed. Monetary penalties collected by the federal government as a result of an environmental enforcement agreement, order, or decision, are deposited with the U.S. Treasury. However, under CERCLA (Superfund) and CWA, money recovered for the costs of replacing or restoring natural resources is used to restore the resources. In the November 6, 2013, Federal Registe r , EPA published its modifications to civil violation penalties in a final rule revising statutory penalties at 40 C.F.R. Parts 19 and 27. The final rule increased most of the civil penalties by adjusting for inflation under the Debt Collection Improvement Act of 1996, which requires federal agencies to adjust civil monetary penalties for inflation every four years. Adjusted civil penalty amounts for the applicable administered statutes are identified in Table 1 in 40 C.F.R. 19.4, as presented in the November 6, 2013, FR Notice. These amounts apply to violations that occur after December 6, 2013. In addition to adjustments to the civil penalty amounts for the various applicable statutes, a technical revision in the November 2013 FR Notice breaks out the maximum civil penalty amounts imposed under Section 325(b) of the Emergency Planning and Community Right-to-Know Act (EPCRA; 42 U.S.C. 11045(b)). Previously grouped together, the maximum amounts under the three penalty authorities contained in Subsection (b) of EPCRA are now presented separately in Table 1 of 40 C.F.R. 19.4. States may have the explicit administrative authority to impose penalties under individual federal statutes. For example, the Safe Drinking Water Act requires (unless prohibited by a state's constitution) administrative penalty authority for states in certain dollar amounts as a condition of obtaining and/or retaining primacy for the Public Water System Supervision (PWSS) Program (§1413 (a)(6)). As of February 2014, 55 of 57 states (49) and territories had primacy authority for the PWSS program. Although authorized under several of the other federal pollution control laws, EPA has not required—and not all states have obtained—administrative penalty authority. In some states, unlike the federal government, penalties obtained (or shared) as a result of an environmental enforcement action can be used to directly fund activities for environmental agencies and programs in the state, and not always to fund the state's general treasury. In certain cases where the federal government has led the enforcement action, a state or states involved in the action may "share" resulting civil monetary penalties to the extent that the division is permitted by federal, state, and local law. A number of critical factors must be considered in accordance with EPA guidance when determining division of penalties, including the state's active participation in prosecuting the case and its authority to collect civil penalties. EPA's guidance emphasizes that an agreement to include a division of civil penalties with states must be completed prior to issuance of a final settlement (order or consent decree). The several statutes establish various factors to be considered in determining penalties: (1) the magnitude of environmental harm and the seriousness or gravity of a violation; (2) the economic benefit or gain to the violator as a result of illegal activity (noncompliance), including the gaining of a competitive advantage by the delaying or avoidance of pollution control expenditures that have been incurred by those in compliance; (3) violation history of the violator; and (4) in some circumstances, the ability of the violator to pay. Other factors, such as the degree of cooperation by the violator, whether the violation is self-reported, or the extent to which immediate action has been taken by the violator to mitigate potential harm, may also be considered. Precedents in previous cases involving similar violations are also a consideration when determining penalties. The federal pollution control statutes include civil administrative and judicial penalty assessment authority and limits, which are to be considered by ALJs or the courts in determining the appropriate penalty. Figure B-3 in Appendix B presents examples of dollar amounts of civil administrative, civil judicial, and criminal penalties assessed by EPA for the 20-year period FY1993-FY2013. According to EPA, a significant portion of the total annual dollar amount of all penalties assessed often reflects penalties assessed in a few cases, and, in some years, a single case. For example, EPA reported that a major RCRA case accounted for 26% of the total value of civil penalties reported in FY2006, and that, in FY2005, penalties assessed in a single RCRA corrective action case accounted for 53% of the reported assessed civil penalties for the year. For FY2013 EPA reported that the settlement with Transocean defendants accounted for $1.0 billion, nearly 90%, of the total reported assessed civil penalties. Nearly $1.4 billion of $1.5 billion in criminal fines and restitution assessed, and the majority of the $3.0 billion in court-ordered projects for FY2013, were attributed to the Deepwater Horizon Gulf of Mexico FY2013 criminal case, according to EPA's FY2013 annual results report. EPA and DOJ have established several policies and guidelines to be considered by counsel when negotiating agreements and setting penalties. EPA-OECA has also developed five computer models for calculating economic advantage, costs of Supplemental Environmental Projects (SEPs; see discussion under " Supplemental Environmental Projects (SEPs) ," below), and for measuring the ability to afford compliance requirements and penalties. The latter models vary depending on whether a violator is an individual, municipality, individual facility, or business entity (small business, large corporation, or conglomerate partnership). Findings of limited ability or inability to pay are one factor under which an enforcement case may be settled for less than the economic benefit of noncompliance. The models are to be used in conjunction with the policies and guidelines for calculating civil penalties. The available models are ABEL, for measuring a noncompliant entity's (e.g., a corporation's) ability to afford compliance costs, cleanup costs, and civil penalties; BEN, for calculating economic advantage/savings from delaying or avoidance of compliance and pollution control expenditures; INDIPAY, for measuring an individual violator's ability to afford compliance costs, cleanup costs, and civil penalties; MUNIPAY, for measuring a noncompliant municipality's ability to afford compliance and cleanup, and civil penalties; and PROJECT, for calculating cost to a violator of undertaking a SEP (see the discussion regarding SEPs later this report). Most federal pollution control statutes contain a provision expressly subjecting federal facilities to federal (and state and local) environmental regulation, and waiving sovereign immunity (thereby allowing federal agencies to be sued by nonfederal entities). Further, many federal environmental statutes authorize (or arguably authorize) EPA, states, and local governments to assess civil monetary penalties against federal agencies. (The Supreme Court rejected state authority to do so under the CWA.) DOJ has issued opinions concluding that the CAA and RCRA underground storage tank provisions give EPA authority to assess civil money penalties against federal facilities. However, DOJ limits these conclusions to administrative assessment of penalties. Citing its constitutional theory of the "unitary executive," DOJ has historically refused to allow EPA to enforce judicially against other federal agencies, though case law has consistently been to the contrary. In contrast with EPA enforcement, there is no longer serious doubt that the Constitution allows states and other nonfederal entities to use the citizen suit provisions in federal environmental statutes to judicially enforce those laws against federal facilities. During FY2013, EPA concluded 61 enforcement actions against federal facilities, and assessed nearly $866.5 million in penalties. Federal agencies committed to invest more than $128.0 million in FY2013 in injunctive relief to improve their facilities and operations to remedy (clean up) past violations, to comply with federal laws, and to prevent future violations/pollution. Agencies also committed to an additional $5.4 million in the form of supplemental environmental projects (see discussion in the following section) during FY2013. As indicated earlier in this report, EPA no longer provides aggregated summaries of federal facility enforcement actions in its annual results report. However, the agency provides an interactive mapping tool of concluded enforcement cases that includes the capability to search information for individual federal facilities based on location. In addition to requiring violators to achieve and maintain compliance, and imposing appropriate sanctions and penalties, enforcement settlements may also include Supplement Environmental Projects (SEPs). SEPs are projects that provide environmental and human health benefits that a violator may voluntarily agree to undertake in exchange for mitigation of penalties. A project must be related to the violation, and cannot be an activity the violator is legally required to take to achieve compliance. Penalties are to be mitigated by a SEP only during settlement negotiation, prior to imposition of the final penalty. EPA has established a SEPs policy and developed guidance for their legal requirements and applicability, and has specified eight categories of acceptable projects. These include pollution prevention, public health, and emergency and preparedness planning. EPA reported that 110 civil settlement cases during FY2013 included SEPs at an estimated value of $22.0 million, compared to 124 cases valued at $43.6 million during FY2012. The incorporation of SEPs into enforcement actions became more common during the last decade, particularly by federal regulators, because of the potential for direct environmental benefit from such projects, versus the use of a monetary fine or penalty alone. Some states with administrative penalty authority have also employed the use of SEPs in their settlements. Although these projects are required to be supplemental to other requirements, some contend that, in practice, inclusion of SEPs may result in lower monetary fines. The extent to which specific SEPs may have resulted in reduced monetary fines and penalties is not easily calculable. Environmental justice (EJ) has been an area of debate among industry and public interest groups, and ongoing concern highlighted in congressional hearings and legislation. For example, an administrative provision included in the Omnibus Appropriations Act, 2009 ( P.L. 111-8 , Title II), specified that none of the funds made available by this act may be used in contravention of, or to delay the implementation of, Executive Order No. 12898 relating to federal actions to address environmental justice in minority populations and low-income populations. On August 4, 2011, the White House announced the signing of a Memorandum of Understanding (MOU) on Environmental Justice and E.O. 12898 by the heads of 17 federal agencies. The MOU included a Charter to add more structure and efficiency to the Federal Interagency Working Group on Environmental Justice; processes and procedures to more efficiently assist communities, and guidance for agencies to better coordinate their EJ activities; and various commitments each agency will be responsible for meeting. Discussion of the full scope of issues and concerns regarding environmental justice is beyond the scope of this report. However, the following discussion briefly highlights environmental justice in the context of enforcement and compliance. The terms "environmental justice (or injustice)" and "environmental equity (or inequity)" may be interpreted broadly to describe the perceived level of fairness in the distribution of environmental quality across groups of people with different characteristics. In this sense, the environmental impact of any human activity might be evaluated to determine the distribution of environmental amenities and risks among people categorized according to any population characteristic, including gender, age, race, place of residence, occupation, income class, or language. In the political context, however, emphasis generally is more on the distribution of health risks resulting from exposure to toxic substances in residential or occupational environments of different racial, ethnic, or socioeconomic groups. The 1994 Executive Order 12898, Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations, directs each federal agency to "make achieving environmental justice part of its mission." EPA is the federal agency with lead responsibility for implementing the executive order. EPA's Office of Environmental Justice (OEJ), located in OECA, is responsible for coordinating efforts to include environmental justice into policies and programs across the agency's headquarters and regional offices. EPA's OEJ provides information and technical assistance to other federal agencies for integrating environmental justice into their missions, engages stakeholders to identify issues and opportunities, and administers EPA environmental justice grants. EPA incorporated Environmental Justice throughout its FY2014-FY2018 Strategic Plan. EPA initiated implementation of "Plan EJ 2014," a strategy for expanding its efforts to integrate environmental justice into its various programs and strengthen "the Agency's effort to improve the environmental conditions and public health in overburdened communities." EPA has issued annual reports documenting the progress toward meeting the commitments outlined in Plan EJ 2014 beginning with FY2013. Additionally, EPA released an "informational publication" entitled Creating Equitable, Healthy, and Sustainable Communities: Strategies for Advancing Smart Growth, Environmental Justice, and Equitable Development , in February 2013. EPA's OEJ developed the Environmental Justice Strategic Enforcement Assessment Tool (EJSEAT). EJSEAT remains a draft tool in development for internal EPA use only. OECA expects to use EJSEAT to "consistently identify possible environmental justice areas of concern," where potentially disproportionately high and adverse environmental and public health burdens exist, and assist EPA in making "fair" enforcement and compliance resource deployment decisions. OEJ published a "Toolkit for Assessing Potential Allegations of Environmental Injustice," primarily to assist agency staff in assessing allegations of environmental injustice. Citizens can evaluate overlap between environmental conditions and demographic characteristics by using EPA's EJView (formerly Environmental Justice Geographic Assessment Tool). A frequent criticism regarding implementation and enforcement of federal environmental requirements has been an emphasis, historically, on a "command and control" approach. In response to these criticisms, since the 1990s EPA and states have relied increasingly on compliance assistance to help the regulated community understand its obligations to prevent violations and reduce the need for enforcement actions, as well as to assist violators in achieving compliance. Many states have advocated compliance assistance and developed assistance programs designed to address specific environmental issues at the local level. EPA's Office of Compliance (OC) within OECA has introduced a number of compliance assistance programs, many of them developed in conjunction with support from the regions, states, and tribes. Each EPA region has a designated Compliance Assistance Coordinator who serves as an "expert" within the region on compliance assistance priorities, strategies, and performance measurement. The coordinators work with subject-matter experts in the regions and at headquarters in the development of compliance assistance guides and workshops, and contribute to other assistance activities such as conducting compliance assistance visits. In addition to providing compliance assistance across the individual pollution control statutes, sector-based assistance is also provided. Developed and introduced in partnership between EPA, states, academia, environmental groups, industry, and other agencies, the National Compliance Assistance Centers provide sector-specific assistance. There are currently 16 sector-specific web-based compliance assistance centers. As shown in Table 4 below, the sector-specific centers include, among others, agriculture, auto repair, federal facilities, local governments, and transportation. The use of compliance incentive approaches has been evolving. Incentives generally are policies and programs that may reduce or waive penalties and sanctions under specific conditions for those who voluntarily take steps to evaluate, disclose, correct, and prevent noncompliance. Examples include self-disclosure programs and related tools such as environmental audit protocols, Environmental Management Systems, and other innovation projects and programs designed to achieve environmental benefits. One of the earliest formal EPA incentive approaches is the EPA Audit Policy—"Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations"—in effect since 1995. Under the policy, certain violations are voluntarily reported after being discovered through self-audit. In many cases EPA eliminates civil penalties, and may offer not to refer certain violations for criminal prosecution. In early 2007, EPA solicited comments on the question of to what extent, if any, the agency should consider providing incentives to encourage new owners of recently acquired facilities to discover and disclose environmental violations, and to correct or prevent their reoccurrence. To further promote compliance through the use of various incentive approaches, EPA encouraged incentive approaches as part of its core program guidance included in the OECA FY2012 and FY2013 National Program Manager Guidance. However, EPA also continues to evaluate its various voluntary programs. In March 2009, for example, EPA notified participating stakeholders of its decision to discontinue the National Performance Track Program, which had been in place since July 2000. Designed as a private-public partnership to supplement EPA's existing regulatory activities, Performance Track encouraged facilities who met certain criteria to voluntarily work toward environmental goals that were beyond the legal requirements. EPA reported that at the time of its termination on May 14, 2009, the program had a total membership of nearly 547 facilities (including 82 new members in 2008) in 49 states and Puerto Rico. In her March 2009 memorandum to Performance Track stakeholders, former EPA Administrator Jackson announced her decision to halt the program "with the intent of refining those concepts that can lead us to a stronger system of environmental protection." EPA had conducted reviews of the Performance Track and the agency's environmental leadership programs in general. EPA's reliance on incentive approaches has been met with some skepticism by those who favor more traditional enforcement. Critics are concerned that incentive and voluntary approaches subtract resources from an already limited pool of enforcement resources. EPA and other supporters of these approaches contend that they result in cost savings by reducing burdens on investigators, achieve desired environmental improvements, and allow for the leveraging of additional resources through partnerships. Aspects of EPA's incentive approaches have been the subject of reviews by EPA-OIG and GAO. The adequacy of resources needed by EPA, DOJ, and the states to effectively enforce the major federal environmental pollution control laws is often highlighted during congressional debate of fiscal year appropriations. Historically, Congress has specified funding levels for certain aspects of EPA enforcement activities, or required the agency to undertake certain actions under annual appropriations; an example is the previously mentioned provision included in the House-passed FY2008 Interior and Environmental Agencies Appropriations bill ( H.R. 2643 ) that would have required EPA to hire criminal investigators to bring the total number of investigators up to the statutory requirement of 200, pursuant to the Pollution Prosecution Act of 1990. (The provision was not included in the FY2008 consolidated appropriations.) The President's FY2015 budget request included $583.0 million for EPA's enforcement program activities, compared to $560.9 million enacted for FY2014, $553.1 million enacted (post-sequestration) for FY2013, and $583.4 million enacted for FY2012. As of the date of this report, n o regular appropriations acts for FY2015 ha d been enacted . On September 19, 2014, President Obama signed into law the Continuing Appropriations Resolution, 2015 ( P.L. 113-164 , H.J.Res. 124 ). Section 101 of the act continues appropriations for federal departments and agencies generally at FY2014 enacted levels minus a 0.0554% rescission. The continuing resolution (CR) is authorized until December 11, 2014, or until the enactment of FY2015 appropriations. Funding for EPA under the CR is subject to the authority and conditions provided in the Interior, Environment, and Related Agencies Appropriations Act, 2014 (Division G, P.L. 113-76 ). Section 104 of the CR further states that continuing funding for all federal departments and agencies cannot be used to initiate or resume any project or activity that did not receive appropriations for FY2014. Table 5 , which follows, illustrates the distribution of funding and full-time equivalents (FTEs) among various enforcement activities across the agency's appropriations accounts for the FY2013 President's request and the three prior fiscal years enacted. Because of differences from fiscal year to fiscal year in the scope of the activities included within each of the accounts, apt direct comparisons below the appropriations account level are often difficult. These differences include the addition and discontinuation of program activities, as well as the reorganization and consolidation of certain activities. DOJ's resource (funding/staff) requirements and outlays associated with its litigation activities under the major federal pollution control statutes are, in the main, a subset of the funding (proposed and previously appropriated) for the Environment and Natural Resources Division (ENRD) in its annual budget justifications. As discussed previously, ENRD is responsible for the majority of DOJ's support of the federal pollution control laws, as well as many other responsibilities, including representing the United States in matters regarding natural resources and public lands, acquisition of real property by eminent domain for the federal government, and cases under wildlife protection laws. The President's FY2015 budget request for DOJ included $112.5 million for ENRD and an estimated 526 FTEs. An additional $21.8 million for up to 115 FTEs was included in the President's FY2015 request for EPA to be transferred by EPA to DOJ/ENRD through a reimbursable agreement for Superfund work. The FY2014 enacted levels for DOJ included $107.6 million and 526 FTEs for ENRD, plus an additional $23.1 million for up to 115 FTEs transferred from EPA for Superfund work. FY2012 enacted levels for ENRD were $108.0 million and 582 FTEs, plus $24.6 million for up to 115 FTEs transferred from EPA. Of the FY2014 enacted amount, including the transfers from EPA, roughly $67.0 million and 312 FTEs were for environmental litigation activities; $9.9 million and 46 FTEs were for criminal litigation conducted by DOJ's Environmental Crimes Section; and $57.1 million and 266 FTEs were for civil environmental enforcement and defensive litigation conducted by the Environmental Enforcement and the Environmental Defense Sections. Detailed reporting of federal funding to states and states' funding contributions for pollution control enforcement/compliance activities is not readily available. ECOS has tracked a broader category of state funding and expenditures that it defines as annual "environmental and natural resource spending," which, in more recent years, has been primarily based on survey data reported by states. The data, which include state and federal funding, are limited for purposes of enforcement of federal pollution control laws in that they combine environmental and natural resource spending. Also, states vary in how they track and report this type of spending. The data do provide a source of state funding from a national perspective. In its March 2008 state expenditures report, ECOS only analyzed regulatory environmental agency work, which includes work pursuant to the primary federal pollution control laws addressed in this report and related activities. For FY2008 ECOS projected a total expenditure for all states combined of $12.65 billion for these regulatory environmental protection activities. ECOS reported that $3.06 billion, or less than 25% of the projected amount, was from federal funding to states for these purposes. Based on a February 2010 survey of 36 states and Puerto Rico, ECOS reported that of the agencies represented by the survey respondents, 2,112 positions were eliminated or were being held vacant due to budget limitations in FY2010. In an August 2010 report, ECOS found that Overall, state environmental agencies' budgets have decreased from FY2009 to FY2011. That said, there is a budget increase from FY2009 to FY2010 among states that included SRF/ARRA [State Revolving Loan Funds/American Recovery and Reinvestment Act of 2009] administrative funds. There has been a slight overall drop in money coming from state general funds, while funds from the federal government have increased marginally, and funds from "other" sources, such as those raised through permitting fees, have remained relatively constant. Federal appropriations, in particular allocations to states, for adequate staffing and effective enforcement of federal environmental statutes to protect human health and the environment, will likely continue to be an issue of concern. Fully evaluating and measuring the overall effectiveness of current (and past) pollution control enforcement and compliance activities can be quite complicated. Discussion throughout this report highlights the difficulties inherent in characterizing the many facets of environmental enforcement at a macro level, and identifies many of the factors that may contribute to its perceived successes and shortcomings. However, several indicators do provide insight into a better understanding of the complexities associated with elements of enforcement, such as the vastness and diversity of the regulated community, the multiplicity of the activities and priorities across many regulating entities, and variability across statutes. Since the establishment of EPA in 1970, Congress has been concerned with a number of crosscutting issues associated with the enforcement of pollution control statutes and regulations, as reflected in provisions of enacted and amended environmental legislation over time. Congressional interest remains heightened, particularly with regard to the substance of intergovernmental relations, EPA-state relations, and fiscal requirements. Continued involvement for the remainder of the 113 th Congress with these issues could take several directions. One likely result could be additional oversight hearings. Alternatively, relevant appropriations legislation may contain provisions or language regarding funding for specific enforcement activities. Congressional interest might focus on further statutory approaches to establish changes in the EPA-states' partnership, such as legislation similar to past proposals concerning refinement of the National Environmental Performance Partnership System (performance partnerships, or NEPPS) and the associated grants award process. The 113 th Congress is also considering other statute-specific legislation to address other long-standing concerns that affect certain aspects of EPA enforcement/compliance activities under the various pollution control laws. The regulated community, public interest groups, federal and state officials, and Congress are often divided on whether to pursue legislation that would further expand or constrain enforcement/compliance. They are similarly divided with respect to proposals that would expand states' authority for implementing and enforcing certain aspects of the major federal pollution control laws. Views and congressional involvement with respect to these issues are likely to continue to evolve in the years ahead. Appendix A. Enforcement/Compliance Databases and Examples of Reported Results Enforcement/Compliance Databases and Reporting Compliance monitoring data are used to manage the compliance and enforcement program, and to inform the public of enforcement actions taken and penalties imposed. EPA and the states collect and maintain compliance/enforcement data in many forms. According to EPA's OECA FY2006 Accomplishments Report, ECOS reported that states collect about 94% of environmental quality data contained in EPA's databases, primarily from state-issued permits and monitoring programs. Information is often entered into multiple databases or transferred from state databases. Historically, the databases were often incompatible, making cross media/statute queries difficult. In recent years, EPA has been working to expand and modernize the integration of several of the individual databases to allow more cross referencing of compliance data by regulators and to provide querying capabilities to the public. EPA compiles data from the various databases and provides various statistics in the form of annual accomplishment and multi-year trends reports. Reporting has traditionally focused on statute-by-statute results, including actions initiated and concluded, and penalties and other sanctions assessed. The reliability and consistency of EPA and state databases, and how effectively the reported information can be used as an indicator of environmental progress and the impacts of environmental enforcement has been an issue of some debate, and questioned in reviews conducted by EPA-OIG and GAO. Critics contend, and EPA has long recognized, that while somewhat indicative of the failure to comply with environmental requirements, counting enforcement actions alone ("bean counting") does not provide a complete measure of the effectiveness of the national environmental enforcement/compliance program. EPA has expanded its reporting by including estimates of environmental benefits (pollution reduction and impacts avoided) in its "Annual Results" for the most recent fiscal years. Additionally, EPA developed a new web-based tool and interactive map that allow the public to obtain detailed information by location about the environmental pollution control enforcement actions taken at approximately 4,600 facilities. Released initially in December 2009, the interactive maps show facilities in the United States where EPA concluded an enforcement action between October 1, 2008, and September 30, 2013 (FY2013). The maps are provided on EPA's Annual Results website. The maps do not include environmental pollution control enforcement actions taken by state or local governments. EPA has taken steps to expand and modernize its primary publicly available enforcement reporting database Enforcement and Compliance History Online, or ECHO. In February 2013, EPA released interactive dashboards and comparative maps on the ECHO website that include state-level enforcement data for the most recent five years. As part of its ECHO modernization and redesign effort, following the September 2013 release of an ECHO Beta test site, EPA launched the initial phase of the modernized ECHO database in December 2013 (ECHO 2.0). The original ECHO website launched in 2002 was retired, and at the present time certain features are not available, but EPA has been continuously updating the website, and features from the original website have been modernized and phased in throughout 2014. On September 11, 2014, EPA announced its most recent upgrade "ECHO 2.3" which includes the addition of Resource Conservation and Recovery Act (RCRA) and EPA Civil Enforcement Case compliance data searching capabilities. The modernization of the ECHO database has also subsumed EPA's Online Tracking Information System (OTIS), which was available only to government employees (including tribal governments). OTIS was retired at the time of the December 2013 release of the modernized ECHO website. Overview of Enforcement/Compliance Databases A number of EPA's single- and multi-media national databases include enforcement and compliance data elements. While these databases are generally available to EPA staff, and in some cases state and local governments, most are not readily available to the public. The Enforcement and Compliance History Online, or ECHO, developed and maintained by OECA is the most prominent publicly accessible database. Introduced in 2002, ECHO queries provide a snapshot of the most recent three years of a facility's environmental compliance record, but are limited primarily to certain requirements under the CAA, CWA, and RCRA. EPA continues to expand the integration and capabilities of this and other databases. Finally, several state environmental agencies maintain additional information about compliance and enforcement (beyond what is reported to EPA systems). For a more complete list and descriptions of EPA's enforcement/compliance databases, see EPA's "Compliance and Enforcement Data Systems" web page at http://www.epa.gov/compliance/data/systems/index.html . The following brief summaries of several of EPA's integrated national databases are a consolidation of descriptions provided on the agency's website: Enforcement and Compliance History Online (ECHO) See http://echo.epa.gov/ . Originally released in 2002, ECHO is an interactive website that allows users to query permit, inspection, violation, enforcement action, informal enforcement action, and penalty information for individual or multiple facilities. Initial queries return a list of relevant facilities, each linked to a "Detailed Facility Report," indicating whether a facility has been inspected/evaluated, occurrence and nature of violations (noncompliance), nature of enforcement actions (including penalties) that have been taken, and contextual information about the demographics surrounding the facility. The ECHO database does not contain violations and enforcement information about all environmental laws for which EPA has primary jurisdiction, instead focusing only on actions for Clean Air Act (CAA) stationary source facilities, Clean Water Act (CWA) major direct discharge facilities, Resource Conservation and Recovery Act (RCRA) hazardous waste handlers, and systems violations of the Safe Drinking Water Act (SDWA). As noted by EPA, examples of data not generally available from ECHO include violations at CWA direct discharge minor facilities, CAA mobile source and asbestos violations, Toxic Substances Control Act (TSCA) and Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) violations, Superfund violations, and CWA wetlands and pretreatment violations. A "modernized" version of the ECHO website, ECHO 2.0, was launched on December 3, 2013, and the original ECHO website was retired (as was the nonpublicly available OTIS database). Not all features and data will be immediately available. The central features of the initial release were cross-statute (multimedia) facility searching and state comparative maps and dashboards. EPA began phasing in program-specific (air, water, waste searching) and other enhancements in January 2014, and will continue to do so throughout 2014 until all features of the original ECHO website are replaced. To date EPA released a variety of enhancements: ECHO Release 2.1 on March 24, 2014, ECHO Release 2.1.1 on April 18, 2014, ECHO Release 2.1 update on April 24, 2014, ECHO Release 2.2 on June 24, 2014, and ECHO Release 2.3 on September 10, 2014. EPA reports these updates, including a summary of upgrades and enhancements, on its ECHO "What's New" website at http://echo.epa.gov/whats_new . During the modernization process, some searches will be unavailable from time to time. As of the publication of this CRS report, EPA proposed the following estimated schedule for completing additional specific capabilities: Clean Air Act facility and pollution search — February 2015 EPA and State Annual Enforcement Actions Map — To be determined Prior to the modernization effort, in February 2013, EPA had released interactive dashboards and comparative maps on the ECHO website that include state-level enforcement data for the most recent five years. The feature remains available on the modernized version of the ECHO website. Information includes the number of completed inspections, types of violations found, enforcement actions taken, and penalties assessed by state, and users can customize the presentation to view state activity as well as view comparisons with EPA activity. EPA initially added an interactive maps feature for tracking federal enforcement activities in FY2011. Envirofacts See http://www.epa.gov/enviro/ . Envirofacts provides public access to information about environmental activities, such as releases, permit compliance, hazardous waste handling processes, and the status of Superfund sites, which may affect air, water, and land anywhere in the United States. Data are retrieved from various EPA source databases. Users can develop online queries, create reports, and map results. Facility Registry System (FRS) See http://ofmpub.epa.gov/sor_internet/registry/facilreg/home/basicinformation/ . FRS (a companion to the integrated facility searches in Envirofacts) can be used to create facility identification records, including geographical location, and to locate sites or places subject to environmental regulations or oversight (e.g., monitoring sites). Records are based on information from EPA program national systems, state master facility records, and data collected from EPA's Central Data Exchange. Integrated Compliance Information System (ICIS) See http://www.epa.gov/compliance/data/systems/icis/index.html . ICIS integrates data that are currently located in several separate data systems. ICIS contains information on federal administrative and federal judicial cases under the following environmental statutes: the CAA, CWA, RCRA, EPCRA, TSCA, FIFRA, CERCLA (Superfund), SDWA, and MPRSA. ICIS also contains information on compliance assistance activities conducted in EPA regions and headquarters. The web-based system enables states and EPA to access integrated enforcement and compliance data. The public can only access some of the federal enforcement and compliance information in ICIS by using the EPA Enforcement Cases Search and EPA Enforcement SEP Search through ECHO. Integrated Data for Enforcement Analysis (IDEA) See http://www.epa.gov/compliance/data/systems/multimedia/idea/index.html . IDEA maintains copies of EPA's air, water, hazardous waste, and enforcement source data systems that are updated monthly. An internal EPA database, IDEA uses "logical" data integration to provide a historical profile of inspections, enforcement actions, penalties assessed and toxic chemicals released, for EPA-regulated facilities. Online Tracking Information System (OTIS) The OTIS web link is no longer updated, http://www.epa.gov/compliance/data/systems/multimedia/aboutotis.html . Note: The OTIS website, available only to federal, state, and tribal government staff, was retired with the December 2013 release of the modernized ECHO website. Former OTIS content and "government-only features" will be accessible internally to government staff via EPA LAN ID and password, or through an EPA Portal ID log-in on the "ECHO Gov" portion of echo.epa.gov. OTIS was a collection of search engines that enabled EPA, state/local/tribal governments and certain other federal agencies to access a broad range of data relating to enforcement and compliance. No public access was available. This web interface application sent queries and drew data from the IDEA (discussed above) system, which integrates facility data from different EPA databases. IDEA copies many EPA and non-EPA databases, and organizes the information to facilitate cross-database analysis. See http://www.epa.gov/compliance/data/systems/multimedia/aboutotis.html (website no longer supported) . A number of other databases, mostly for single media, also include compliance/enforcement data. Many of these databases were the basis for certain data elements in the various IDEA and OTIS integrated databases, and typically were not directly available to the public. Other databases included the Air Facility System (AFS); Permit Compliance System (PCS); Resource Conservation and Recovery Act Information System (RCRAInfo); National Compliance Data Base System and Federal Insecticide, Fungicide, and Rodenticide Act/Toxic Substances Control Act Tracking System (NCDB/FTTS); and Safe Drinking Water Information System/Federal (SDWIS/FED). Although the information on the integrated systems did not represent "real time" data, it was updated once a month when OECA refreshed the source data systems. Additionally, EPA routinely made improvements to existing aspects of OTIS, IDEA, and ECHO, and often enhanced the system by adding new search capabilities and tools. For example, in December 2012 EPA announced that it had completed a major, multi-year database modernization for searching Clean Water Act actions. EPA decommissioned the previous Permit Compliance System (PCS) and replaced it with the new Integrated Compliance Information System for the National Pollutant Discharge Elimination System (ICIS-NPDES). As another example, in September 2012 EPA began adding greenhouse gas (GHG) emission data to the OTIS database, adding GHG Emission column in the Air and Multimedia search results, and new GHG rows to the Detailed Facility Report "Facility and Permits and Identifiers" section. Appendix B. Examples of Reported Enforcement Actions and Penalties over Time The following figures and tables provide examples of the type of enforcement data collected, compiled, and reported over time. They are intended to show proportional relationships of the various types of enforcement actions (e.g., administrative vs. judicial) in a given year and by statute, not annual or long-term enforcement trends. To compare the reported activities from year to year requires more detailed information regarding the specific circumstances in those years. There can be significant variability from year to year in how data were reported and which entities reported. EPA has refined terms and definitions in the data elements from year to year. Other factors that result in variability include the introduction of new regulatory requirements in a given year, and fruition of statutory deadlines. The figures presented below reflect longer-term data (15 to 20 years) through FY2013, whereas the tables generally provide data for the most recent five years, depending on the availability of data for the most recent fiscal year. Results are presented by action (e.g., administrative, civil judicial, criminal judicial), and where readily reported, for actions by statute (e.g., Clean Water Act, Clean Air Act). The data have been compiled from EPA's annual fiscal year results reports, National Enforcement Trends charts and tables, and data provided directly to CRS by EPA.

As a result of enforcement actions and settlements for noncompliance with federal pollution control requirements, the U.S. Environmental Protection Agency (EPA) reported that, during FY2013, regulated entities committed to invest an estimated $7.0 billion for judicially mandated actions and equipment to control pollution (injunctive relief), and $22.0 million for implementing mutually agreed-upon (supplemental) environmentally beneficial projects. EPA estimated that these compliance/enforcement efforts achieved commitments to reduce or eliminate 1.3 billion pounds of pollutants in the environment, primarily from air and water, and to treat, minimize, or properly dispose of 148 million pounds of hazardous waste. Noncompliance with federal pollution control laws remains a continuing concern. The overall effectiveness of the enforcement organizational framework, the balance between state autonomy and federal oversight, and the adequacy of funding are long-standing congressional concerns. This report provides an overview of the statutory framework, key players, infrastructure, resources, tools, and operations associated with enforcement and compliance of the major pollution control laws and regulations administered by EPA. It also outlines the roles of federal (including regional offices) and state regulators, as well as the regulated community. Understanding the many facets of how all federal pollution control laws are enforced, and the responsible parties involved, can be challenging. Enforcement of the considerable body of these laws involves a complex framework and organizational setting. The array of enforcement/compliance tools employed to achieve and maintain compliance includes monitoring, investigation, administrative and judicial (civil and criminal) actions and penalties, and compliance assistance and incentive approaches. Most compliance violations are resolved administratively by the states and EPA. EPA concluded 1,440 final administrative penalty orders in FY2013. Civil judicial actions, which may be filed by states or EPA, are the next most frequent enforcement action. EPA may refer civil cases to the U.S. Department of Justice (DOJ), referring 138 civil cases in FY2013. The U.S. Attorney General's Office and DOJ's Environmental Crimes Section, or the state attorneys general, in coordination with EPA criminal investigators and general counsel, may prosecute criminal violations against individuals or entities who knowingly disregard environmental laws or are criminally negligent. EPA reported the assessment of nearly $1.15 billion in civil penalties (administrative and judicial) and $4.5 billion in combined criminal fines, restitution, and court-ordered environmental projects during FY2013. Of the FY2013 totals, $1.0 billion in civil penalties and $4.0 billion in criminal fines, restitution, and court-ordered projects were associated with the Deepwater Horizon Gulf of Mexico judicial and criminal cases. Federal appropriations for environmental enforcement and compliance activities have remained relatively constant in recent fiscal years. Some contend that overall funding for enforcement activities has not kept pace with inflation or with the increasingly complex federal pollution control requirements. Congress appropriated $560.9 million for enforcement activities for FY2014, a 1.4% increase above the $553.1 million enacted for FY2013 (post-sequestration), but roughly 3.8% less than the $583.4 million enacted for FY2012. The President's FY2015 budget request included $583.0 million for EPA enforcement activities. On September 19, 2014, President Obama signed into law the Continuing Appropriations Resolution, 2015 (P.L. 113-164). The act provides FY2015 appropriations to federal agencies (including EPA) for continuing projects and activities generally at the rate and under the authority and conditions provided in the applicable conditions of the Consolidated Appropriations Act, 2014 (P.L. 113-76), less a 0.0554% rescission, until December 11, 2014, or until enactment of regular appropriations legislation.

Managing stormwater is one of the biggest and most expensive problems facing cities across the United States. Stormwater is in part a water quantity problem, and for decades the focus of local governments and public works officials was on how to engineer solutions to move rainwater rapidly away from urban areas to avoid the economic damages of flooding. Stormwater also is a pollution problem. As it moves across the surface of the land, stormwater picks up toxic contaminants, oil and grease, organic material, and other substances, which may be directly discharged into streams, thus delivering pollutants into nearby waterways. Or, it may enter the public sewer system through storm drains, and then the water quantity and water quality problems are joined in the water infrastructure system. Cities face dual challenges in managing stormwater—how to prevent or minimize stormwater entering sewers in the first place, thus preventing overflows from the start, and how to remediate overflows that occur. For a variety of reasons, many communities are exploring the use of so-called "green infrastructure" to address both types of challenges. Green infrastructure systems and practices use or mimic natural processes to infiltrate, evapotranspire, and/or harvest stormwater on or near the site where it is generated in order to reduce flows to municipal sewers. There are many success stories in communities around the country, each different, but there also are a number of issues about feasibility, sustainability, and cost-effectiveness. When rainwater falls, some of the water is absorbed into the ground, and the rest flows along the surface as runoff into rivers and streams. In forested areas, with porous and varied terrain, about half of rainfall infiltrates into the ground, where it recharges groundwater. About 40% returns to the atmosphere through evapotranspiration, and the remaining 10% flows along the surface as runoff. Unlike forested areas, urbanized areas often have around 45% or more of land surface that is impervious to rainfall, due to hard surfaces such as parking lots, roads, and rooftops. When rain hits impervious cover, it is unable to absorb into the ground and instead flows quickly into sewers and ditches and directly into rivers and streams. The Environmental Protection Agency (EPA) estimates that because of impervious surfaces such as pavement and rooftops, a typical city block generates five times more runoff than a woodland area of the same size, while only about 15% infiltrates into the ground for groundwater recharge. (See Figure 1 .) Further, the increased amount of runoff also increases pollutant loads that are harmful to aquatic life and public health into streams, rivers, and lakes. Pollutants can include sediment; oil, grease, and toxic chemicals from motor vehicles; road salts; pesticides and nutrients from lawns and gardens; bacteria and pathogens from pet waste and failing septic systems; and heavy metals from roofs, cars, and other sources. Stormwater runoff that does not directly enter streams and rivers instead enters public sewer systems. Two types of public sewer systems predominate in the United States: combined sewer systems and sanitary sewer systems. Combined sewers convey domestic and industrial wastewaters and stormwater runoff through a single pipe system to a wastewater treatment facility. Nationally, about 750 cities operate combined sewer systems. Most of these are located in the upper Midwest, mid-Atlantic states, and New England. During wet weather events, such as rainfall and snowmelt, the combined volume of wastewater and stormwater runoff entering combined sewers often exceeds conveyance capacity. Most combined systems are designed to discharge when the capacity of the sewer is exceeded. When this occurs, the untreated overflow is discharged directly to nearby surface waters, onto city streets, or as backups in basements prior to the wastewater treatment plant. Overflows pose particularly significant risks to human health when the discharges occur near sources of drinking water. Some combined sewer systems discharge infrequently, while others discharge every time that it rains. Combined sewer overflows (CSOs) are subject to permit requirements under the Clean Water Act (CWA). Permits authorizing discharges from CSO outfalls must include technology-based effluent limits. Since the beginning of the 20 th century, U.S. municipalities have generally constructed sanitary sewer systems, rather than combined sewer systems. Sanitary sewer systems convey domestic and industrial wastewater, but not large amounts of stormwater runoff, to a wastewater treatment works. Separate sanitary sewers are located in all 50 states, but are concentrated in the eastern half of the United States and on the West Coast. Areas served by sanitary sewer systems often have a municipal separate storm sewer system (MS4) to collect and convey runoff from rainfall and snowmelt. Overflows from sanitary sewers and separate storm sewers also can occur, as a result of blockages, line breaks, or sewer defects that allow excess stormwater and groundwater to overload the system. Discharges from MS4s serving more than 100,000 persons and smaller MS4 systems in urbanized areas also are subject to CWA permit requirements. Operators of these systems must implement stormwater best management practices that include public education, eliminating illicit discharges, and control of construction site and post-construction runoff. Traditional, or "gray," infrastructure systems for managing stormwater consist of pipes, storm drains, and concrete storage tanks. These systems are expensive to construct and maintain. EPA estimates that funding needs for stormwater management and projects to correct sewers that overflow total $106 billion over the next 20 years. Thus, the high cost of construction is one challenge with gray infrastructure that has led to considering options that are less costly. As a result, technologies or practices called green infrastructure are receiving increased attention. Green infrastructure, also known as Low Impact Development (LID), generally refers to the use of the natural landscape, instead of engineered structures, to capture and treat rainwater where it falls. EPA has defined it as using "natural hydrologic features to manage water and provide environmental and community benefits." At its heart, green infrastructure is a demand management technique that eliminates a portion of the stormwater entering municipal sewers or waterways, thereby raising the capacity of the sewer system by lowering pressure on it. Green infrastructure includes, but is not limited to, green roofs, downspout disconnection, trees and tree boxes, rain gardens, vegetated swales, pocket wetlands, infiltration planters, vegetated median strips, curb extensions, permeable pavements, reforestation, and protection and enhancement of riparian buffers and floodplains. (For images of some of these practices, see Appendix A .) Proponents contend that cities can downsize their gray infrastructure, extend its lifetime, save money, create green jobs, and enhance livability. These technologies do not entirely eliminate the need for gray infrastructure, but they can complement or supplement conventional infrastructure. Green infrastructure can alleviate local urban flooding by minimizing runoff volume and peak discharges. In addition, the infiltration, evapotranspiration, and slow release associated with green infrastructure approaches can control flood flows throughout a watershed. The economic benefits are a combination of the decreased costs of damage resulting from flooding and the reduced cost of constructing stormwater management and drainage infrastructure. The growing interest in green infrastructure practices is driven to a great extent by arguments that it is a cost-effective way to manage urban stormwater problems, particularly compared with costs of gray infrastructure. Cities with combined sewer systems have documented that the use of green infrastructure practices to reduce runoff volume is cost-competitive with conventional stormwater and CSO controls. In general, recent examples indicate that properly scaled and sited green infrastructure can deliver equivalent hydrological management of runoff as conventional stormwater infrastructure at comparable or lower costs. It has been estimated that green infrastructure is 5%-30% less costly to construct and about 25% less costly over its life cycle than traditional infrastructure. Several examples are described in the following box. In addition to controlling stormwater volume, a number of other benefits are frequently cited by advocates. Reducing Energy Costs. Green roofs provide insulation and shade for buildings, thus reducing their need for both heating and cooling costs. Water harvesting and reuse reduce the energy consumption of water utilities for conveyance and treatment. Preventing Disease and Protecting Local Economies. Green infrastructure practices can reduce pollutant loadings to waterways, which can help to minimize illness from recreational contact or consuming contaminated drinking water. Other Non-Water Benefits. Other non-water benefits include improved air quality (trees and plants filter the air, capturing pollution in their leaves and on their surfaces), reduced atmospheric carbon dioxide (green roof vegetation sequesters carbon), and lowered air temperature (trees and plants cool the air through evapotranspiration). Green roofs and lighter-colored surfaces in urban areas reflect more sunlight and absorb less heat, thus reducing the heat island effect (an urban heat island is a metropolitan area with large amounts of impervious surfaces, which is warmer than nearby suburban and rural areas). Green infrastructure is believed to improve urban aesthetics, increase property values, and provide wildlife habitat and recreational space for urban residents. Despite growing enthusiasm for these practices, a number of obstacles and challenges to integrating green infrastructure into stormwater programs have been identified. Overall, when considering green infrastructure options, decisionmakers confront risk and uncertainty related to skepticism regarding the ability or consistency with which practices deliver the level of benefits expected, and uncertainty that investing in green infrastructure will deliver better returns than more traditional practices. Many observers believe that the biggest barriers are lack of information on performance and cost-effectiveness, and uncertainty whether green infrastructure will contribute to achieving water quality improvements. Some of the obstacles are technical. For example, green infrastructure is not suitable in areas where soils don't drain, slopes are too steep, or where there just is not enough space. Stormwater is uniquely affected by local climate, soils, groundwater levels, and other site-specific parameters, all of which increase the complexity of design and construction. In many cases, there is insufficient technical knowledge and experience with the practices, and lack of data demonstrating benefits, costs, and performance. Many private and public engineers are not convinced that green infrastructure is effective in managing stormwater due to lack of performance data in various types of climates. Despite a growing literature on these topics (see Appendix B ), because the technology is relatively new, robust information regarding performance is lacking. Consequently, some municipalities, regulators, and financiers are reluctant to invest in it. Even advocates acknowledge that, from a design standpoint, it is important to realize that systems need to continue to function over time without excessive maintenance or monitoring being required, or the likelihood of abandonment increases. Many believe that a central repository of best management practices, designs, and specifications would be helpful to provide manuals and design standards for local developers, planners, and engineers. Without design standards, it is argued, local design professionals and engineers are less likely to deviate from familiar approaches involving gray infrastructure. Other barriers can be legal and regulatory. At the local level, barriers include local ordinances; building codes; plumbing and health codes; restrictions involving street width, drainage codes, and parking spaces; and restrictions on the use of reclaimed stormwater. Municipal codes and ordinances often favor gray over green infrastructure. A barrier that is both technical and legal is that green infrastructure is often located on private properties and thus is difficult for public agencies to ensure that proper maintenance is occurring and will continue long-term. At the state level, water and land-use policies and property rights can be complicating factors. For example, downstream water rights may be impacted if upstream water management practices reduce the quantity of water to downstream users. Some point to federal barriers, including lack of guidelines and performance standards, as well as lack of funding for demonstration projects to meet environmental mandates. A third type of barrier is financial, which has two main aspects—lack of funding to implement projects, and uncertainty over costs and cost-effectiveness. At the local level, it can be difficult to develop, increase, and enforce stormwater fees that can serve as revenue to implement green infrastructure. Although some communities have been able to adopt incentives, such as utility rate reductions, tax incentives, and/or regulatory credits (see " Paying for Green Infrastructure "), many others are constrained or unwilling to do so. Often there is no funding for design, development, and testing of large-scale projects, and without financing, local officials are reluctant to invest in projects with longer paybacks. Further, there is a perception, especially from private lenders and developers, that green infrastructure can be expensive to build and maintain. Funding and cost of implementation are viewed by some as the most significant barriers. In many cases there is not enough understanding about what green infrastructure will cost to design, construct, and maintain in comparison with traditional wastewater and stormwater approaches and insufficient economic analysis of the environmental and social benefits of green infrastructure. Green infrastructure is not in all cases less costly than conventional infrastructure. Due to uncertainties of the cost of long-term maintenance, many communities are not convinced of the long-term cost savings of green infrastructure practices. A final category is community and institutional barriers, encompassing some of the challenges already described. They include public perception, education of builders and developers, adjusting cultural values to appreciate green infrastructure aesthetics, and need for inter-agency and community cooperation to be successful. According to some officials, green infrastructure does not have the public acceptance that traditional infrastructure has. Even proponents acknowledge that the transition to green infrastructure is a multi-decade effort that will require enhanced public outreach, intensive monitoring, and inter-governmental coordination. As the previous discussion indicates, funding for and financing of green infrastructure projects is a challenge that many view as a key barrier to implementation. At the federal level, there are more than two dozen funding programs in seven departments and agencies that could potentially be applicable, but there is no single source of dedicated federal funding to design and implement green infrastructure solutions. For example, the Federal Emergency Management Agency (FEMA) administers a flood mitigation assistance program that can provide planning, project, and management grants for communities to implement practices that minimize losses due to flooding. Green infrastructure practices could be eligible, but they are not the focus of the program. Similarly, the Federal Highway Administration administers a congestion mitigation and air quality improvement program, under which congestion mitigation to improve air quality can incorporate green infrastructure components. It has been suggested that the process that communities go through to identify and navigate these programs is daunting. The largest source of federal financial assistance for municipal water infrastructure projects is authorized in the CWA and Safe Drinking Water Act (SDWA), which authorize federal grants to capitalize State Revolving Fund (SRF) loan programs. At the federal level, the SRF programs are administered by EPA, but project and funding decisions are administered by individual states. SRF assistance to communities can only fund the capital cost of projects, but EPA's definition of capital costs is broad. In addition to traditional gray infrastructure components, capital costs can also include tree plantings, green roofs, and downspout disconnections. Federal SRF capitalization grants are dependent on congressional appropriations, which have been flat or declining in recent years. Moreover, municipalities in many states reportedly have found it difficult to secure SRF loans for projects consisting solely of green infrastructure components. Recently, dedicated funds for green infrastructure have been provided through the SRF programs. The set-asides originated in the 2009 economic recovery act (American Recovery and Reinvestment Act, ARRA, P.L. 111-5 ). In regular appropriations since FY2010, Congress has directed that a portion of SRF capitalization grants shall go to projects that address green infrastructure, water or energy efficiency, or other environmentally innovative activities. In ARRA and in EPA appropriations acts for FY2010 and FY2011, Congress directed states to use not less than 20% of the federal capitalization grants for projects with green infrastructure and similar features. Since FY2012, Congress has modified the mandate for a Green Project Reserve to require that 20% of wastewater funds be so allocated by states, to the extent sufficient projects seek assistance, and to give states discretion to use up to 20% of drinking water funds for such projects, but not require them to do so. The U.S. Department of Agriculture's Rural Utilities Service provides grant and loan assistance for wastewater and drinking water projects in rural communities (with populations less than 10,000). Funds may be used for green infrastructure projects, but there is no required set-aside. Without federal or state assistance, communities take several approaches to financing public capital projects. Local ratepayers fund most wastewater treatment needs, including stormwater projects. Municipal bonds are the most frequently used tool for water infrastructure financing—at least 70% of U.S. water utilities rely on municipal bonds and other debt to some degree to finance capital investments. In 2011, bonds issued for water, sewer, and sanitation projects totaled $29.6 billion, of which $14.2 billion was new-money financing and the remainder was for refunding to refinance prior governmental bonds. Bonds or loans must be repaid, typically from user fees paid by customers. The number of stormwater utilities that charge fees as a dedicated funding source for projects has grown in recent years. These are fees that are charged to both taxpaying and tax-exempt properties, often based on the property's total area or amount of impervious surface (roofs, driveways, parking lots). The fee can be added to water, sewer, or other utility bills, or charged separately. In many locations, such fees are controversial, and have resulted in legal challenges over whether they are a "reasonable charge" for services provided, or are a tax. Other sources of funding for new stormwater projects can include special assessments (levied on property owners within a defined area that will benefit from the project), development fees (one-time charges or fees on developers), impact fees (another type of one-time fee related to the impact generated by a new development project), and permit and inspection fees (regulatory fees to cover the cost of permitting and inspection programs). Many municipalities try to encourage homeowners and developers to incorporate green infrastructure practices by offering incentives for both existing and planned developments. On existing property, incentives can be used to encourage landowners to retrofit sites, and incentives also can be used to entice developers to use green infrastructure practices when they are planning, designing, and constructing projects. For developers, key motivators include cost reductions, and streamlined permitting and inspection processes. For homeowners, cash rebates, discounts, tax credits, and grants motivate action. The four most common types of local incentive mechanisms are fee discounts or credits, development incentives, best management practice installation subsidies, and award and recognition programs. Many communities that charge stormwater fees also offer a fee discount or credit if a property owner decreases the site's impervious cover or adds other green infrastructure practices to reduce the amount of stormwater runoff that leaves the property. The concept underlying such arrangements is that private businesses, institutions, and homeowners will experience financial benefits sufficient to support on-site green infrastructure. Examples of cities that offer fee reductions include Portland, Oregon; Seattle; Columbus, Ohio; and Chesapeake, Virginia. An example of this approach in Philadelphia is described in the box below. Anne Arundel County, Maryland, offers property tax credits to landowners. Municipalities can offer incentives to developers who use green infrastructure practices. Municipalities might offer to waive or reduce permit fees, expedite the permit process, allow higher density development, or provide exemptions from local stormwater permitting requirements. For example, Chicago's Green Permit Program reviews permits faster for projects that meet certain design criteria that include better stormwater management practices. Portland, Oregon's, Floor Area Ratio Bonus increases a building's allowable area in exchange for adding a green roof. Knox County, Tennessee, offers a credit to developers when impervious areas are disconnected from the stormwater control system via filtration/infiltration zones that are designed to receive runoff. Some municipalities offer rebates or financing for installation of specific practices . The types of financing help may include grants, matching funds, low-interest loans, tax credits, or reimbursements. For example, some communities subsidize the cost of rain barrels, plants, and other materials that can be used to control stormwater. Santa Monica, CA, offers rebates on rain barrels and redirecting rain gutter downspouts to permeable surfaces, such as landscaped areas. Other cities that offer financing or rebates for rain barrels and rain gardens include Palo Alto, CA; Rock Island, IL; Chicago; and Minneapolis. Community award and recognition programs can help to encourage local participation in green infrastructure projects. For example, some communities highlight successful green infrastructure sites by featuring them in newspaper articles, on websites, and in utility bill mailings. Examples include Chicago; Portland, OR; and King County, WA. EPA's support for green infrastructure was apparent in the 1990s, but was initially slowed by concern about how water quality improvements could be verified. An important concern is that, because compliance with the Clean Water Act is a legal matter, there is little room for an approach that cannot guarantee results. By the mid-2000s, as reports increased of successful performance in U.S. cities, as well as examples of including green infrastructure solutions in MS4 permits and enforcement actions, EPA policies reflected growing endorsement. In 2007, EPA signed a memorandum of understanding with state water quality regulators, a group representing publicly owned wastewater utilities in large cities, and environmental groups to formalize the use of green technology approaches. The agency subsequently issued a series of policy memos and released a Green Infrastructure Strategic Agenda in 2013 (see Appendix B ). The 2013 Strategic Agenda, which updated earlier policy statements, identifies five major focus areas: federal coordination; CWA regulatory support; research and information exchange; funding and financing; and capacity building. Today, green infrastructure "is a clear priority for the administration." EPA has awarded funds to a number of communities to implement stormwater management through green infrastructure techniques. Since 2012, the agency has awarded grants ranging from $400,000 to $950,000 to 37 communities in 23 states for projects such as developing tools and guidance to identify green infrastructure opportunities and reviewing local codes and ordinances to identify barriers to green infrastructure. In 2012, EPA announced a $4 million grant to the National Fish and Wildlife Foundation to administer a Green Infrastructure Showcase Project grant program in communities of the Chesapeake Bay region. The agency has been supporting research: in 2014, EPA awarded grants to five universities to evaluate innovative green infrastructure practices in urban areas, using Philadelphia as the pilot area. EPA also has supported research evaluating green infrastructure BMPs. The Obama Administration's support for green infrastructure extends beyond EPA. Several other federal agencies administer programs that can assist green infrastructure projects, but none is as focused on green infrastructure and stormwater management as EPA. For example, at the U.S. Department of Housing and Urban Development, the Office of Community Planning and Development administers programs that support a wide range of community initiatives; many communities have identified or used these programs to implement green infrastructure projects. Through its Energy Efficiency and Conservation Block Grant program, the U.S. Department of Energy encourages the use of green infrastructure techniques to improve energy efficiency in transportation, building, and other sectors. At the U.S. Department of Agriculture, the Forest Service focuses activities on urban sustainability including green infrastructure, urban forest sustainability, stormwater management, and smart growth. The White House has shown interest and support, as well. EPA and the Council on Environmental Quality hosted a 2012 White House Conference on Green Infrastructure "to explore pathways to more broadly implement green infrastructure." In 2013, the White House announced support for green infrastructure, saying that the administration would prioritize smart infrastructure to create jobs and build a strong future for U.S. cities and would align federal agency resources to aid municipalities in building and investing in green infrastructure. Also in 2013, the White House held meetings that discussed financing water infrastructure improvements generally, including green and traditional gray approaches. Administration officials have promoted green infrastructure approaches as a way to help communities become more sustainable and their infrastructure more resilient in the face of changing climatic conditions. An additional aspect of urban stormwater management with implications for green infrastructure is a rule that EPA intended to apply to developed and redeveloped sites in communities with municipal separate storm sewer systems (MS4s). As previously described, many communities already are subject to CWA regulation to prevent harmful pollutants from entering MS4 systems. The rule in part was intended to respond to a 2009 report of the National Research Council of the National Academy of Sciences that recommended major changes to EPA's stormwater control program in order to focus the program on the flow volume of stormwater runoff instead of just its pollutant load. The rule also would respond to a 2010 settlement agreement between EPA and environmental litigants, which called for EPA to revise existing rules "to expand the universe of regulated stormwater discharges and to control, at a minimum, stormwater discharges from newly developed and redeveloped sites." EPA worked to develop a regulatory proposal for several years but abandoned the effort in 2014. The proposal, referred to as the "post-construction rule," would set a first-time stormwater retention performance standard and provide regulated entities with several suggested compliance options, including green infrastructure techniques, to limit runoff that would otherwise enter an MS4 system. The rule was expected to be a good opportunity for cities to use green infrastructure techniques such as porous pavements and grassy swales to meet the performance standard alone or in combination with gray infrastructure. Also, incorporating controls during development and redevelopment is more cost-effective than managing stormwater as an after-the-fact problem. Requirements in the rule would be incorporated into MS4 permits as the permits come up for renewal. Support for the rule included environmental advocates and some state and local government representatives, including those who believed that it would provide needed uniformity and consistency in stormwater programs across the nation. Other groups, such as developers, criticized EPA's efforts, and some contended that a national rule would encroach on state and local regulation of land use. During development of the rule, EPA reportedly considered standards that would require new construction and redevelopment to retain stormwater runoff from a range between the 80 th to 95 th percentile storm event for up to 24 hours after rainfall. The concept would have sites retain an inch or so of water, although the exact volume required would vary depending on a region's typical rainfall. According to EPA, at least 15 states and the District of Columbia already have similar performance standards that the agency examined as models for the national rule. Precedent for national performance standards to manage stormwater is reflected in legislation enacted in 2007. Section 438 of the Energy Independence and Security Act (EISA, P.L. 110-140 ) requires federal agencies to implement strict stormwater runoff requirements for development or redevelopment projects involving a federal facility in order to reduce stormwater runoff and associated pollutant loadings to water resources. It requires agencies to use site planning, construction, and other strategies to maintain or restore, to the maximum extent technically feasible, the predevelopment hydrology of the property. To assist agencies in meeting these requirements, EPA was directed to prepare issued technical guidance. The guidance, issued in 2009, provides two options for meeting the performance objective of preserving or restoring the hydrology of a site: retaining the 95 th percentile rainfall event (i.e., managing rainfall on-site for storm events whose precipitation total is less than or equal to 95% of all storm events over a given period of record), or site-specific hydrologic analysis (i.e., using site-specific analysis to determine predevelopment runoff conditions). Under the 2010 settlement with environmentalists, EPA was initially due to propose a national rule by September 2011 and complete the rule in 2014. Subsequently, the deadlines were renegotiated several times. Under the last extension, EPA was to propose regulations by June 17, 2013, but EPA missed that deadline, and on June 18, the environmental plaintiffs notified the agency that it was in breach of the legal settlement. At that point, EPA and the plaintiffs had reached a legal impasse; EPA reportedly continued to work on the rule, while the environmental groups considered further legal action. Among the challenges that EPA faced in developing the post-construction rule were what range of percentiles to specify, whether to treat greenfield and redevelopment differently so that redevelopment is not disadvantaged, and whether to expand regulation beyond existing MS4 boundaries to include nearby developing areas or even entire watersheds. Delays in developing the rule reportedly partly involved preparing the rule's cost-benefit analysis, such as measuring the benefits of using green infrastructure techniques, similar to difficulties that many communities have had in evaluating green infrastructure options (see " Potential Challenges "). After nearly four years of work, in mid-March 2014, EPA announced that it would defer action on the rule and instead would provide incentives, technical assistance, and other approaches for cities to address stormwater runoff themselves. In particular, the agency said it would leverage existing requirements to strengthen municipal stormwater permits and continue to promote green infrastructure as an integral part of stormwater management. Although EPA discontinued development of a national stormwater rule, the agency continues to pursue some of the ideas that the rule was expected to incorporate, such as emphasizing on-site retention of stormwater at construction sites or requiring green infrastructure, when individual MS4 permits come up for renewal. EPA is encouraging use of CWA permits to foster green infrastructure implementation, such as establishing standards for stormwater volume control for sites undergoing development or redevelopment. Similar concepts are reflected, for example, in the MS4 permit for Washington DC, issued by EPA in 2013, and EPA's 2014 proposed MS4 general permit for Massachusetts; both were crafted by EPA, which is the NPDES permitting authority in DC and Massachusetts. In the majority of states, permitting authority has been delegated to states. In those cases, EPA and others (e.g., environmental groups) are encouraging states to strengthen the terms of MS4 permits with green infrastructure measures. Congressional interest in these issues is reflected in legislation and oversight hearings in recent Congresses. In addition, as described previously, EPA appropriations acts since 2009 have directed a portion of funds that states receive for wastewater and drinking water improvements and upgrades to go to projects that address green infrastructure, water or energy efficiency, or other environmentally innovative activities. Legislation titled the Innovative Stormwater Infrastructure Act of 2015 has been introduced in the 114 th Congress to support research and implementation of green/innovative stormwater infrastructure ( H.R. 1775 / S. 896 ; and Title II, Subtitle C, of H.R. 2893 / S. 1837 ). The legislation directs EPA to provide assistance to establish centers for excellence to conduct research on green/innovative stormwater infrastructure and authorizes development and implementation grants. It directs the EPA Administrator to ensure the promotion of green infrastructure in EPA offices and programs and would require. In addition, the legislation directs EPA to establish voluntary measurable goals, to be known as the "innovative stormwater control infrastructure portfolio standard," to increase the percentage of water managed using such techniques. Similar legislation was introduced in the 112 th and 113 th Congresses. Two other bills in the 114 th Congress, S. 2768 and S. 2848 , include provisions calling for EPA to promote green infrastructure. Federal funding for all types of water infrastructure is a long-standing issue in Congress. More generally, recent legislative proposals also have addressed existing CWA funding provisions to assist traditional water infrastructure projects, but not with a particular green infrastructure focus. For example, the 113 th Congress enacted certain amendments to the CWA in the Water Resources Reform and Development Act (Title V of WRRDA, P.L. 113-121 ). The legislation allows use of CWA State Revolving Fund (SRF) monies "for measures to manage, reduce, treat, or reuse municipal stormwater," but it does not expressly mention green infrastructure. In the 111 th Congress, the House Transportation and Infrastructure Subcommittee on Water Resources held an oversight hearing on the growing use of green infrastructure. At the hearing, witnesses expressed some concern that green infrastructure enthusiasm by EPA, some local government officials, and environmental advocates may not be giving adequate attention to questions of cost—especially long-term maintenance costs—feasibility, and demonstrated environmental improvements. The most specific legislative action on green infrastructure is reflected in recent EPA appropriations acts, which have mandated a set-aside from funds for clean water and drinking water SRF capitalization grants (see " Paying for Green Infrastructure "). Environmental advocates have recommended actions that Congress could take to encourage and support green infrastructure, including enactment of legislation to assist demonstration projects and help improve the knowledge base about performance, cost-effectiveness, and similar topics (see " Congressional Interest "). Some support legislation to require federally funded roads and highways to control runoff pollution to an objective retention standard (similar to provisions in the Energy Independence and Security Act of 2007 applicable to federal facilities). Environmental advocates also have supported legislation to authorize federal assistance for water and wastewater infrastructure investment, and on appropriations legislation to fully fund capitalization grants for State Revolving Funds, since these funds can be a vehicle for green infrastructure investments. States, too, support assistance through the SRF programs to finance green infrastructure projects, as reflected in a resolution adopted by the Environmental Council of States (ECOS), but they do not support prescriptive approaches that would mandate green infrastructure. The kinds of federal policies and programs favored by stakeholder groups do have associated costs—for example, costs for grant or other types of infrastructure assistance, or for EPA or other federal agencies to research green infrastructure practices, develop guidance and model codes, or provide technical and other types of information to decisionmakers. In the current budgetary context, securing funds for both existing and new programs is a significant challenge. Further, many who are hesitant about investing in green infrastructure approaches, such as some engineers, consultants, and water utility officials, argue that the risk and uncertainty over whether green infrastructure will truly help achieve water quality objectives also involve costs. Nevertheless, advocates argue that without funding for green infrastructure practices, the economic damages and water quality impacts of stormwater will be more costly than if such practices are supported. Appendix A. Selected Green Infrastructure Practices The images below illustrate some green infrastructure practices and techniques being utilized by cities. Appendix B. Selected Green Infrastructure Bibliography The following references are a representative selection of the growing literature on green infrastructure. Many include case studies. David C. Rouse and Ignacio F. Bunster-Ossa, Green Infrastructure: A Landscape Approach , American Planning Association, Report Number 571, January 2013, 160 p. American Rivers, Water Environment Federation, American Society of Landscape Architects, and ECONorthwest, Banking on Green: A Look at How Green Infrastructure Can Save Municipalities Money and Provide Economic Benefits Community-Wide , April 2012, 41 p. The Nature Conservancy, Greening Vacant Lots: Planning and Implementation Strategies , December 2012, 129 p. Christopher Kloss and Crystal Calarusse, Rooftops to Rivers, Green Strategies for Controlling Stormwater and Combined Sewer Overflows , Natural Resources Defense Council, June 2006, 54 p. Noah Garrison and Karen Hobbs, Rooftops to Rivers II, Green Strategies for Controlling Stormwater and Combined Sewer Overflows , Natural Resources Defense Council, 2011, 134 p. Alisa Valderrama, Lawrence Levine, Eron Bloomgarden, Ricardo Bayon, Kelly Wachowicz, and Charlotte Kaiser, Creating Clean Water Cash Flows, Developing Private Markets for Green Stormwater Infrastructure in Philadelphia , Natural Resources Defense Council, EKO Asset Management Partners, and The Nature Conservancy, Report R:13-01-A, January 2013, 87 p. Jeffrey Odefey, Permitting Green Infrastructure: A Guide to Improving Municipal Stormwater Permits and Protecting Water Quality , report of American Rivers, January 2013, 40 p. Noah Garrison, Robert C. Wilkinson, and Richard Horner, A Clear Blue Future, How Greening California Cities Can Address Water Resources and Climate Challenges in the 21 st Century , Natural Resources Defense Council, NRDC Technical Report, August 2009, 53 p. Clean Water America Alliance, Barriers and Gateways to Green Infrastructure , September 2011, 38 p. Center for Neighborhood Technology and American Rivers, The Value of Green Infrastructure: A Guide to Recognizing Its Economic, Environment and Social Benefits , 2010, 80 p. Charles T. Driscoll, Caitlin G. Eger, David G. Chandler, et al, Green Infrastructure: Lessons from Science and Practice , a publication of the Science Policy Exchange, June 2015, 32 p. Environmental Finance Center Network, Green Infrastructure Resource Directory , June 2012, 11 p. Nell Green Nylen and Michael Kiparsky, Accelerating Cost-Effective Green Stormwater Infrastructure: Learning from Local Implementation , UC-Berkeley School of Law Center for Law, Energy & the Environment, February 2015, 51 p. U.S. Environmental Protection Agency, Low Impact Development (LID) "Barrier Busters" Fact Sheet Series , a seven-part series of fact sheets for state and local decisionmakers, http://water.epa.gov/polwaste/green/bbfs.cfm . U.S. Environmental Protection Agency, Green Infrastructure Permitting and Enforcement Series , six factsheets plus four supplemental materials on integrating green infrastructure concepts into permitting, enforcement, and water quality standards actions, at http://www.epa.gov/infrastructure/greeninfrastructure/gi_regulatory.cfm . U.S. Environmental Protection Agency, Reducing Stormwater Costs through Low Impact Development (LID) Strategies and Practices , EPA 841-F-07-006, December 2007, 30 p. U.S. Environmental Protection Agency, Managing Wet Weather with Green Infrastructure Municipal Handbooks, including Funding Options , September 2008, 14 p., Green Infrastructure Retrofit Policies , December 2008, 23 p., Green Streets , December 2008, 17 p., Rainwater Harvesting Policies , December 2008, 14 p., and Incentive Mechanisms , June 2009, 33 p. U.S. Environmental Protection Agency, Green Infrastructure Strategic Agenda 2013 , 7 p. U.S. Environmental Protection Agency, Greening CSO Plans: Planning and Modeling Green Infrastructure for Combined Sewer Overflow (CSO) Control , EPA 832-R-14-001, March 2014, 38 p. Benjamin Grumbles, Assistant Administrator, EPA Office of Water, memorandum, "Using Green Infrastructure to Protect Water Quality in Stormwater, CSO, Nonpoint Source and other Water Programs," March 5, 2007, 2 p. Linda Boornazian, Director, EPA Water Permits Division, and Mark Pollins, Director, EPA Water Enforcement Division, memorandum, "Use of Green Infrastructure in NPDES Permits and Enforcement," August 16, 2007, 2 p. Nancy Stoner, Acting Assistant Administrator, EPA Office of Water, and Cynthia Giles, Assistant Administrator, EPA Office of Enforcement and Compliance, memorandum, "Protecting Water Quality with Green Infrastructure in Water Permitting and Enforcement Programs," April 20, 2011, 5 p. Additional EPA and other resources on green infrastructure can be found at http://water.epa.gov/infrastructure/greeninfrastructure/index.cfm#tabs-6 .

For decades, stormwater, or runoff, was considered largely a problem of excess rainwater or snowmelt impacting communities. Prevailing engineering practices were to move stormwater away from cities as rapidly as possible to avoid potential damages from flooding. More recently, these practices have evolved and come to recognize stormwater as a resource that, managed properly within communities, has multiple benefits. Stormwater problems occur because rainwater that once soaked into the ground now runs off hard surfaces like rooftops, parking lots, and streets in excessive amounts. It flows into storm drains and ultimately into lakes and streams, carrying pollutants that are harmful to aquatic life and public health. Traditional approaches to managing urban stormwater have utilized so-called "gray infrastructure," including pipes, gutters, ditches, and storm sewers. More recently, interest has grown in "green infrastructure" technologies and practices in place of or in combination with gray infrastructure. Green infrastructure systems use or mimic natural processes to infiltrate, evapotranspire, or reuse stormwater runoff on the site where it is generated. These practices keep rainwater out of the sewer system, thus preventing sewer overflows and also reducing the amount of untreated runoff discharged to surface waters. Cities' adoption of green technologies and practices has increased, motivated by several factors. One motivation is environmental and resource benefits. Advocates, including environmental groups, landscape architects, and urban planners, have drawn attention to these practices. But an equally important motivation is cost-saving opportunities for cities that face enormous costs of stormwater infrastructure projects to meet requirements of the Clean Water Act. Other potential benefits include reduced flood damages, improved air quality, and improved urban aesthetics. However, barriers to implementing green infrastructure include lack of information on performance and cost-effectiveness and uncertainty whether the practices will contribute to achieving water quality improvements. Another key barrier is lack of funding. At the federal level, there is no single source of dedicated federal funding to design and implement green infrastructure solutions. Without assistance, communities take several approaches to financing wastewater and stormwater projects; the most frequently used tool is issuance of municipal bonds. As a dedicated funding source for projects, the number of local stormwater utilities that charge fees has grown in recent years. Many municipalities try to encourage homeowners and developers to incorporate green infrastructure practices by offering incentives. The most common types of local incentive mechanisms are stormwater fee discounts or credits, development incentives, rebates or financing for installation of specific practices, and award and recognition programs. The Environmental Protection Agency's (EPA's) support for green infrastructure has grown since the 1990s. The agency has provided technical assistance and information and developed policies to facilitate and encourage green infrastructure solutions and incorporate green infrastructure practices in Clean Water Act permits. EPA also has awarded grants to communities in 23 states for projects to identify green infrastructure opportunities and steps needed to overcome implementation barriers. Congress has shown some interest in these issues. In the 114th Congress, legislation has been introduced to support research and implementation of green/innovative stormwater infrastructure (H.R. 1775/S. 896 and in provisions in H.R. 2893 and S. 1837). Two other bills, S. 2768 and S. 2848, include provisions calling for EPA to promote green infrastructure. Overall, many in Congress remain concerned about how municipalities will pay for needed investments in water infrastructure projects generally—not limited to green infrastructure—and what role the federal government can and should play in those efforts.

Wireless communications devices—including mobile telephones, personal digital assistants (PDAs), pagers, and automobile-based services such as OnStar—are ubiquitous. Many of the services provided by these devices require data on the user's location, whether it is to connect a phone call or dispatch emergency services when an airbag deploys. Consumers and privacy rights advocates are increasingly concerned about the privacy implications of these wireless location-based services. If a company providing a wireless service knows the user's location, with whom can that data be shared? How long can the data be retained? Will the data be used to create individual profiles that will be sold to marketing companies or used for other purposes unknown to the user or contrary to his or her preference? Will consumers be deluged with messages on their communications devices advertising sales at nearby stores or restaurants not unlike the "spam" in their e-mail inboxes? The precision with which wireless service providers can determine a subscriber's exact location is improving with the implementation of Enhanced 911 (E911) capabilities for mobile telephones and other wireless devices, wherein wireless carriers are required to provide Public Safety Answering Points (PSAPs) with the location of wireless callers who dial 911 within 50-300 meters (150-900 feet). While this serves the laudable goal of ensuring mobile telephone users immediate access to emergency services, many worry about what other uses will be made of such location information. Once the technical ability exists to provide a user's precise coordinates, some privacy advocates worry that more and more devices will incorporate it, making location information widely available without proper privacy safeguards. The debate over wireless privacy in many ways parallels the debate over Internet privacy and Internet spam. Indeed, since wireless Internet access devices are on the market, the issues intersect. One particular similarity is that the policy debate focuses on whether legislation is needed, or if industry can be relied upon to self-regulate. Four laws, each discussed later in this report, address some of the issues—the Telephone Consumer Protection Act ( P.L. 102-243 ), the Wireless Communications and Public Safety Act ( P.L. 106-81 ), the Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM, P.L. 108-187 ), and the Undertaking Spam, Spyware, and Fraud Enforcement With Enforcers beyond Borders Act (US SAFE WEB, P.L. 109-455 )—however, other concerns remain. Some consumers and privacy rights groups, including the Center for Democracy and Technology (CDT) and the Electronic Privacy Information Center (EPIC), worry that the ability to identify a wireless customer's location could lead to further erosion of individual privacy. Although the E911 requirements apply only to calls made from mobile telephones seeking emergency assistance, once that capability is available, many worry that such information will be collected and sold for other purposes, such as marketing. Some observers point out that wireless carriers may be motivated to sell such customer data to recoup the costs of deploying wireless E911. Users of wireless devices such as pagers, personal digital assistants, or automobile-based services such as OnStar, might be affected along with mobile telephone customers. A major concern is that if location information is available to commercial entities, a wireless customer walking or driving along the street may be deluged with unsolicited advertisements from nearby restaurants or stores alerting them to merchandise available in their establishments. Supporters of unsolicited advertising insist that consumers benefit from directed advertisements because they are more likely to offer products in which the consumer is interested. They also argue that advertising is protected by the First Amendment. One aspect of this concern is that companies could build profiles of consumers using data collected over a period of time. In that context, one question is whether limits should be set on the length of time location information can be retained. Some argue that once a 911 call has been completed, or after a subscriber to a location-based service received the desired information (such as directions to the nearest restaurant), that the location information should be deleted. Wireless spam was addressed by Congress in the CAN-SPAM Act (discussed below), although it does not focus specifically on the location aspects of the issue. Another aspect of the wireless privacy debate concerns the rights of subscribers to have, or not have, their numbers listed in a "wireless 411" cell phone directory. Such a directory does not currently exist, but CTIA—The Wireless Association, began developing one in 2004 for six of the seven largest mobile service providers. One estimate is that a wireless directory could generate as much as $3 billion a year for the wireless industry by 2009 in fees and additional minutes. Qsent is the "aggregator" for the directory service. In early 2005, some of the companies backing the directory project announced changes in their plans. Sprint and ALLTEL were the first to indicate that they would delay offering such a service until the regulatory climate stabilized. Some cited a new California law that requires carriers to obtain separate authorization from subscribers before including them in the directory as an example of the evolving regulatory climate. A number of other states are considering similar legislation. By the end of April 2005, T-Mobile reportedly was the only major carrier still planning to offer directory services, pledging to do so on an opt-in basis. A key difference between wireless and wireline phones is that subscribers must pay for incoming as well as outgoing calls. Thus, some argue that subscribers need to be assured that they will not receive unwanted calls, not only because of a nuisance factor, but for cost reasons. Consumers may list their cell phone numbers on the National Do Not Call Registry, but concerns persist about unwanted calls from telemarketers or others. (In December 2004, an e-mail was widely circulated on the Internet warning consumers that they must list their cell phone numbers on the Do Not Call list before the end of 2004, but that is incorrect. Phone numbers may be added to the Do Not Call list at any time.) Questions that are arising include whether subscribers should be able to decline to have their numbers published without paying a fee (as wireline customers must do if they want an unlisted number). Proponents of the directory insist that customers will have to consent to having their numbers listed. Opponents counter that many subscribers do not realize that they already have given consent through the contract they sign with their service provider. Other critics point out that wireless subscribers pay for every call, and view their cell phones as distinctly private. From the beginning, one of the largest mobile service providers, Verizon Wireless, decided not to participate in the directory. The company's President and CEO, Denny Strigl, argues against the notion of an "opt-in" directory, where subscribers would have to give their express prior authorization to being listed, saying that "Customers see opt-in as a disingenuous foot-in-the-door—leading to 'opt-out' clauses and fees for not publishing a number. Nor does opt-in allow customers any degree of control over how and to whom their information is revealed—they either keep full privacy or face full exposure, with nothing in-between." ("Opt-in" and "Opt-out" are explained below.) Consumers Union established a website to encourage individuals to contact their Members of Congress in support of wireless directory legislation. In September 2004, hearings were held by the Senate Commerce, Science, and Transportation Committee, and by the House Energy and Commerce Committee's Subcommittee on Telecommunications and the Internet. At the 2004 Senate hearing, CTIA testified that there is no need for legislation because the directory does not yet exist so it is premature to pass legislation now, the wireless industry has a proven track record in protecting consumer privacy, and subscribers would not be forced to participate in the directory nor charged a fee for opting-out. Mr. Strigl from Verizon Wireless repeated his strong opposition to the directory, but agreed that legislation is not necessary. Some opponents of the legislation point to Verizon Wireless's decision not to participate in the directory as indicative of a market-based solution to the problem, since subscribers wishing not to be listed could switch to Verizon Wireless. Advocates of the legislation at the 2004 House hearing countered that, for example, the wireless industry's track record is less than perfect. According to Communications Daily , Representative Pitts, who sponsored one of the 108 th Congress bills, stated that when he first discussed a wireless directory with industry representatives two years earlier, they insisted that opt-in was impossible, and they would need to charge for the service. Yet now, he noted, the industry is asserting that the system would be opt-in and free. Representative Markey commented that the fact that the carriers informed consumers that their numbers might become listed in a wireless directory only in the fine print of their service contracts made some observers suspicious of their intentions. Senator Boxer testified at the House hearing, noting that cell phones are quite different from home phones because people take them wherever they go, so unwanted calls are even more intrusive. She emphasized the need to allow parents to control whether their children's numbers are listed, and the need to act quickly, before the directory comes into existence. Witnesses from EPIC and the AARP testified in favor of the legislation at the Senate hearing. Legislation has been reintroduced in the 109 th Congress, as discussed later in this report. Concern is mounting about the public availability of cell phone records, which may include detailed information on calls to and from a particular number, such as the number dialed, the duration, and the location of the cell phone. Some of these records, along with records from other telephone and voice communications, may become available for sale over the Internet from "data brokers" who collect and sell the information. Attention is focused on how the data brokers obtain the information, and whether telecommunications companies are adequately protecting the so-called Customer Proprietary Network Information (CPNI) as required by law. For more discussion of CPNI, see " The Wireless Communications and Public Safety Act (the "911 Act") " below. From a legislative standpoint, a fundamental issue is whether existing laws—the Federal Trade Commission (FTC) Act (15 U.S.C. §§ 41-51), which bans unfair and deceptive practices that might be employed by pretexters, and the 1996 Telecommunications Act, which requires telecommunications carriers to protect CPNI—are adequate, or if new laws are needed to criminalize specifically the fraudulent acquisition and sale of cell phone (or all telephone) records. Generally, privacy rights groups want additional legislation. One telecommunications association, CTIA, supports new legislation to criminalize obtaining phone records by fraudulent means. Another, USTelecom, wants improved enforcement of existing laws instead of new laws. The FCC supports three potential legislative actions: making the commercial availability of consumers' phone records illegal, overturning a 1999 court ruling that limited the FCC's ability to implement more stringent protections of consumer phone record information, and strengthening the FCC's enforcement tools. The FTC has not endorsed new laws, but recommends a multi-faceted approach that includes coordinated law enforcement by government agencies and telephone carriers, outreach to educate consumers and industry, and improved security measures by record holders. In July 2005, EPIC filed a complaint with the FTC regarding the sale of cell phone records by a company named Intelligent e-Commerce, Inc. (IEI), which operates the bestpeoplesearch.com website. Among the charges was that IEI was violating section 222 of the 1996 Telecommunications Act (47 U.S.C. §222) by selling information about cell phone calls made by subscribers, including billing records and other data defined as CPNI. Current law requires telecommunications carriers to protect the confidentiality of CPNI. EPIC later expanded its request to the FTC, asking for an industry-wide investigation. An IEI spokesman described the company as a customer-service and billing agency for licensed private investigators and was not aware that it was breaking any laws. EPIC's original complaint focused on the actions of IEI in obtaining the records, asserting that it only could have done so through unfair and deceptive practices, which are under the FTC's jurisdiction. Subsequently, EPIC filed a petition with the Federal Communications Commission (FCC) as to whether telecommunications carriers are adequately safeguarding those records as required by law. According to the January 17, 2006 edition of TR Daily , in November 2005, Representative Markey asked the FCC and the FTC to act to stop the sale of cell phone subscribers' records. TR Daily reported that in a December 13, 2005 letter to Mr. Markey, FTC Chairman Deborah Platt Majoras declined to discuss ongoing investigations, but noted that the FTC has the authority to bring a law enforcement action against a "pretexter" if it believes the pretexter's activities constitute unfair or deceptive practices as defined in the FTC Act. (Pretexters obtain consumer data by impersonating customers, employees, regulators, or others with a legitimate reason to access to the information.) TR Daily further reported that in a January 13, 2006 letter, FCC Chairman Kevin Martin told Mr. Markey that the FCC's Enforcement Bureau is investigating the issue. On January 17, 2006, FCC commissioners Adelstein and Copps issued separate statements applauding the investigation. On January 30, 2006, the Enforcement Bureau issued Notices of Apparent Liability for Forfeiture (NALs) to AT&T Wireless and Alltel for failing to certify that they have protected CPNI. The Enforcement Bureau recommended $100,000 fines for each company. The FCC also issued subpoenas to several prominent data brokers seeking details on how they obtain the telephone records and asked about the sale of those records. Mr. Martin testified to the House Energy and Commerce Committee on February 1, 2006 that the data brokers did not reply adequately to the request, and that the FCC issued letters of citation to the companies and referred the inadequate responses to the Justice Department for enforcement of the subpoenas. He added that the FCC subsequently issued subpoenas to an additional 30 data brokers, and, as of February 1, was awaiting their responses. He also reported that the FCC made undercover purchases of phone records from various data brokers to assist in the investigation. IEI president Noah Webster reportedly defended his company's practices by saying that cell phone records have been obtained by private investigators for a long time, and the issue is only being raised now because of privacy groups, which "often have their own agenda." Mr. Webster reportedly said that subscribers could protect themselves by asking their phone company to remove call details from their bills: "I have done this personally, so I know it works. No one will be able to get your detailed phone records, because they won't exist." According to the Associated Press , in January 2006, 40 websites were offering cell phone numbers, unlisted numbers, and calling records for sale. The AP story reported that operators of such websites insist they are not doing anything illegal because there is no specific prohibition against pretexting to obtain another person's data unless it involves financial data (the latter would violate the Gramm-Leach-Bliley Act). Subsequently, following an FTC sweep of these sites, about 20 reportedly discontinued offering cell phone records. Four major wireless service providers (Verizon Wireless, Cingular Wireless, Sprint Nextel, and T-Mobile) have taken legal actions to stop companies that allegedly fraudulently obtain or sell their customers' cell phone records. Representatives of two major telecommunications associations—USTelecom and CTIA—testified at House and Senate hearings in 2006, as summarized below. As noted already, CTIA supports legislation to criminalize obtaining cell phone records fraudulently, while USTelecom does not support new legislation, but wants better enforcement of existing laws instead. Several bills have been introduced in the House and Senate. Each is briefly summarized at the end of the report. The House Energy and Commere Committee held a hearing on February 1, 2006, and the Senate Commerce, Science, and Transportation Subcommittee on Consumer Affairs, Product Safety, and Insurance, held a hearing on February 8, 2006. A number of organizations were represented at both hearings: FCC, FTC, CTIA, EPIC, and PrivacyToday.com. Witnesses from the FCC and FTC indicated that the two agencies are working collaboratively on the issue. In his prepared statement (cited previously) to the House Energy and Commerce Committee, after summarizing the actions already taken by the FCC, FCC Chairman Martin pledged to take strong action against companies that do not comply with the CPNI protection requirements. He said that EPIC's petition to open a proceeding on this matter will be acted upon formally by the FCC by February 10, 2006. Finally, he listed three actions Congress could take: make illegal the commercial availability of consumer's phone records, overturn a 1999 ruling by the 10 th Circuit Court that limited the FCC's ability to implement more stringent protection of CPNI, and strengthen the FCC's enforcement tools. FTC Commissioner Jon Leibowitz's prepared statement to the House Energy and Commerce Committee reviewed FTC's actions against pretexters, particularly in the context of enforcing the Gramm-Leach-Bliley Act that prohibits obtaining financial data through pretexting. He also recounted the FTC's actions against data brokers who do not adequately safeguard data, noting that the FTC reached a settlement with data broker ChoicePoint the previous week in which ChoicePoint will pay $10 million in civil penalties and $5 million in consumer redress. That case did not involve cell phone records, however, but he explained that the FTC may bring a law enforcement action against a pretexter who obtains telephone records as an unfair and deceptive practice. Mr. Leibowitz did not make recommendations on actions Congress might take. Other witnesses before the House committee included CTIA President Steve Largent, Robert Douglas from PrivacyToday.com, and Marc Rotenberg from EPIC. Mr. Largent and Mr. Douglas supported legislation to criminalize obtaining phone records by fraudulent means. In addition, Mr. Larson stressed that such legislation may not entirely solve the problem, while Mr. Douglas argued that the legislation should not be limited to telephone records, and that the FTC should not be given primary authority for enforcement. Mr. Rotenberg summarized his organization's efforts at raising awareness of this issue through the filings with the FCC and FTC (discussed above). He explained that telephone carriers opposed the use of enhanced security requirements for the data they collect, arguing that bringing lawsuits against pretexters would be sufficient. He insisted that enforcement alone would only drive the practice underground, and that "simple security enhancements, such as sending a wireless phone user a text message in advance of releasing records, could tip off a victim ...." Similar sentiments were offered by those witnesses or other representatives of their organizations at the Senate hearing on February 8. In addition, the House committee heard from the Attorney General of Illinois, who asked that state laws not be preempted if federal legislation is enacted, and from a representative of the U.S. Telecom Association, who argued in favor of enforcement of existing laws and increased penalties, and against new security mandates. The Senate subcommittee also heard from Ms. Cindy Southworth representing the National Network to End Domestic Violence. She testified about the potential impact of the availability of stolen cell phone records and other personal information on victims of domestic violence Other wireless privacy concerns exist, but are outside the scope of this report to discuss in depth. Briefly, some are concerned about whether law enforcement authorities might require wireless carriers to provide location information. CDT's James Dempsey notes that government access to data stored on a third party network is not subject to Fourth Amendment protections that require probable cause before conducting searches. CDT's Alan Davidson was quoted in Computerworld about other ominous implications. "'The first time somebody steals location information on the whereabouts of a kid and he goes missing, there will be a backlash and lawsuits,' he added. Or a phone company employee could have a crush on a woman with a cell phone and use the purloined data to follow her around, he said." It should be noted that privacy concerns often are tempered by consumers' desires for new services and low prices. The extent to which consumers would choose one wireless carrier over another purely because one promised better privacy safeguards is unclear. Much of the wireless privacy controversy parallels the debate over Internet privacy (see CRS Report RL31408, Internet Privacy: Overview and Legislation in the 109 th Congress, 1 st Session , by [author name scrubbed]) and spam (see CRS Report RL31953, " Spam " : An Overview of Issues Concerning Commercial Electronic Mail , by [author name scrubbed]). In that context, questions have arisen over whether wireless carriers should be required to follow "fair information practices" with regard to collection, use, or dissemination of call location information. The FTC has identified four "fair information practices" for operators of commercial websites: providing notice to users of their information practices before collecting personal information, allowing users choice as to whether and how personal information is used, allowing users access to data collected and the ability to contest its accuracy, and ensuring security of the information from unauthorized use. Enforcement is sometimes included as a fifth practice. "Choice" is often described as "opt-in" or "opt-out." To opt-in, consumers must give their affirmative consent to a website's information practices. To opt-out, consumers are assumed to have given consent unless they indicate otherwise. Some argue that similar practices should be observed by wireless carriers or providers of location-based information and services. A major issue is whether Congress should pass a law requiring them to do so, or if industry self-regulation is sufficient. Several industry segments are involved in the wireless privacy debate: the wireless telecommunications carriers; companies offering location-based information and services; and websites that can be accessed over wireless devices. The optimism surrounding the business potential of wireless devices is exemplified by the emergence of the terms M-Commerce (mobile commerce) and L-Commerce (location commerce) and the creation of industry associations to promote them. The Mobile Marketing Association developed a code of conduct that was adopted by MMA's Board of Directors in November 2003. It combines opt-in and opt-out approaches. In September 2004, MMA established a wireless anti-spam committee in what it called the second phase of its efforts to ensure wireless applications are spam-free (the release of the code of conduct was the first phase). TRUSTe, a company that offers privacy "seals" to websites that follow certain privacy guidelines, released what it called the "first wireless privacy standards" on February 18, 2004. The "Wireless Privacy and Principles and Implementation Guidelines" call for— wireless service providers to give notice to their customers prior to or during the collection of personally identifiable information (PII), or upon first use of a service; wireless service providers to disclose customers' PII to third parties only if the customer has opted-in, and the customer should be able to change that preference at any time; and wireless service providers may only use location information for services other than those related to placing or receiving calls if the customer has opted-in, and wireless service providers should disclose the fact that they retain location information beyond the time reasonably needed to provide the requested service. The MMA's code of conduct includes a requirement to "align" with the TRUSTe principles. The FTC held a workshop on wireless Web privacy issues in December 2000. According to a media account, participants conceded that many companies developing wireless applications are too busy implementing their services to focus on privacy issues, and that since these companies are not certain of what future applications may emerge, "they tend to collect far more data than they need right now ... and even more collection is likely once there's ready buyer [sic] for information." Some participants noted the importance of determining privacy requirements early in the development of wireless and location-based services so systems and equipment need not be retrofitted in the future. In November 2000, CTIA asked the FCC to initiate a rulemaking, separate from its rulemaking on Customer Proprietary Network Information (CPNI, see discussion of the 911 Act, below), on implementation of the wireless location information amendments made by P.L. 106-81 . CTIA argued that location privacy information is uniquely a wireless concern, and such an FCC rulemaking would attract commenters who would not be interested in the general CPNI rulemaking. CTIA asked that the FCC adopt privacy principles to assure that mobile services users would be informed of the location information collection and use practices of their service providers before the information is disclosed or used. Specifically, CTIA wanted the FCC to adopt technology neutral (i.e., for either handset- or network-based systems) rules requiring notice, choice, and "security and integrity." The latter phrase was described as meaning that location information should be protected from unauthorized use and disclosure to third parties, and third parties must adhere to the provider's location information practices. The FCC issued a Public Notice on March 16, 2001 requesting comments on CTIA's request. After receiving comments and deliberating on the request, the FCC announced in July 2002 that it would not commence such a proceeding. The FCC concluded that the "statute imposes clear legal obligations and protections for consumers" and "we do not wish to artificially constrain the still-developing market for location-based services..." The FCC added that it would closely monitor the issues and initiate a rulemaking proceeding "only when the need to do so has been clearly demonstrated." Wireless privacy issues have expanded beyond the initial concerns about privacy principles and fair information practices. As discussed earlier, a major issue today is the sale of cell phone records, and four of the major wireless service providers have brought legal actions against companies that allegedly fraudulently obtain or sell their customers' cell phone records. CTIA applauded the introduction of legislation in the Senate in January 2006, but also said that prosecutors could act under existing law. At the House Energy and Commerce Committee hearing on February 1, 2006, CTIA President Steve Largent again said his organization supports the need for legislation, but cautioned that it might not entirely solve the problem (discussed earlier). Verizon Wireless and T-Mobile are supporting Senator Schumer's bill. Three existing laws directly address some aspects of the wireless privacy and spam debate: TCPA, the "911 Act," and the CAN-SPAM Act. They are summarized in this section. The privacy of cell phone records, an issue which has arisen quite recently, is not addressed by any of these three laws. Instead, the Federal Trade Commission Act (FTC Act) and the 1996 Telecommunications Act contain provisions relevant to that debate. They are discussed earlier in this report (see " Selling Cell Phone Records " ), so that information is not repeated here. The 1991 Telephone Consumer Protection Act (TCPA, P.L. 102-243 ), inter alia , prohibits the use of autodialers or prerecorded voice messages to call cellular phones, pagers, or other services for which the person would be charged for the call, unless the person has given prior consent. In 2003, the FCC ruled that TCPA applies to any call that uses an automatic dialing system or artificial or recorded message to a wireless phone number, including both voice messages and text messages, such as Short Message Service (SMS). Since 1996, the FCC has issued a series of orders to ensure that users of wireless phones and certain other mobile devices can reach emergency services personnel by dialing the numbers 911. The FCC rules, referred to as "Enhanced 911" or E911, apply to all cellular and Personal Communications Services (PCS) licensees, and to certain Specialized Mobile Radio licensees. This report addresses only the privacy implications of the availability of the call location information that will enable wireless E911 to work. Other E911 issues, including implementation, are discussed in CRS Report RL32939, An Emergency Communications Safety Net: Integrating 911 and Other Services , by [author name scrubbed]. Because the technologies needed to implement E911 enable wireless telecommunications carriers to track, with considerable precision, a user's location any time the device is activated, some worry that information on an individual's daily habits—such as eating, working, and shopping—will become a commodity for sale to advertising companies, for example. In 1999, Congress passed the Wireless Communications and Public Safety Act ( P.L. 106-81 ), often called "the 911 Act." In addition to making 911 the universal emergency assistance number in the United States, the 911 Act also amended section 222 of the Communications Act of 1934 (47 U.S.C. §222), which establishes privacy protections for customer proprietary network information (CPNI) held by telecommunications carriers. Inter alia , the 911 Act added "location" to the definition of CPNI. Under section 222(h), as amended, CPNI is defined as: (A) information that relates to the quantity, technical configuration, type, destination, location, and amount of use of a telecommunications service subscribed to by any customer of a telecommunications carrier, and that is made available to the carrier by the customer solely by virtue of the carrier-customer relationship; and (b) information contained in the bills pertaining to telephone exchange service or telephone toll service received by a customer of a carrier, except that such term does not include subscriber list information. Section 222 required the FCC to establish rules regarding how telecommunications carriers treat CPNI. The FCC adopted its Third Report and Order on CPNI on July 16, 2002, setting forth a dual approach in which "opt-in" is required in some circumstances, and "opt-out" is permitted in others. In addition to adding location to the definition of CPNI, the 911 Act amended section 222(d)(4) regarding authorized uses of CPNI. As amended, the law determines those circumstances under which wireless carriers need to obtain a customer's prior consent to use wireless location information, and when prior consent is not required. A customer's prior consent is not required (section 222 (d))— to provide call location information to a PSAP or to emergency service and law enforcement officials in order to respond to the user's call for emergency services; to inform the user's legal guardian or members of the user's immediate family of the user's location in an emergency situation that involves the risk of death or serious physical harm; or to information or database management services providers solely for purposes of assistance in the delivery of emergency services in response to an emergency. In a newly created section 222(f), the 911 Act states that, except in the circumstances listed above, without express prior authorization , customers shall not be considered to have approved the use or disclosure of or access to (1) call location information, or (2) automatic crash notification information to anyone other than for use in an automatic crash notification system. The phrase "express prior authorization" is not further defined in the law, however, nor the measures telecommunications carriers must take to obtain it. H.R. 83 (see " Previous Legislative Action: 109 th Congress , " below) would set such requirements. In 2003, Congress passed a broad anti-spam bill, the CAN-SPAM Act ( P.L. 108-187 ), which is addressed in more detail in CRS Report RL31953, " Spam " : An Overview of Issues Concerning Commercial Electronic Mail , by [author name scrubbed]. The original version of the bill, S. 877 , and the version passed by the Senate on October 22, 2003, did not address spam on wireless devices. The House, however, added such a provision (Sec. 14) in the version it passed on November 21, 2003. The Senate amended several provisions of S. 877 , including the section on wireless spam, when it concurred with the House version on November 25, 2003. The House adopted the Senate version on December 8. The bill was signed into law by President Bush on December 16, 2003. The law required the FCC, in consultation with the FTC, to promulgate rules within 270 days of enactment to protect consumers from unwanted " mobile service commercial messages " ( MSCMs ). That term is defined in the law as a commercial e-mail message "that is transmitted directly to a wireless device that is utilized by a subscriber of commercial mobile service" as defined in the 1934 Communications Act. (In this report, an MSCM is referred to as a wireless commercial e-mail message.) The FCC announced a Notice of Proposed Rulemaking on March 11, 2004. According to Communications Daily , during the comment period, several wireless carriers and the CTIA urged that they be exempted from the requirement to obtain express prior authorization before sending commercial messages to their customers if the customers are not charged for them, arguing that those are carrier-customer relationship issues and are protected by the First Amendment. CTIA reportedly agreed with the FCC's preliminary interpretation that the CAN-SPAM Act applies only to messages sent to an e-mail address consisting of two parts, a unique user name or mailbox and a reference to an Internet domain (e.g., janedoe@wirelesscarrier.com), and therefore should not apply to SMS, short code or other text messages sent using other address formats. The FCC adopted the new rules on August 4, 2004; they were released on August 12. Most went into effect on October 18, 2004, although several that deal with information collection requirements must obtain approval of the Office of Management and Budget. The FCC took the following actions: Prohibited sending wireless commercial e-mail messages unless the individual addressee has given the sender express prior authorization ("opt-in"), which may be given orally or in writing, including electronically. Requests for such authorization may not be sent to a wireless subscriber's wireless device because of the potential costs to the subscriber for receiving, accessing, reviewing and discarding such mail. Authorization provided to a particular sender does not entitle that sender to send wireless commercial e-mail messages on behalf of third parties, including affiliated entities and marketing partners. The request for authorization must contain specified information, such as the fact that the recipient may be charged by their wireless service provider for receiving the message, and subscribers may revoke their authorization at any time. The rules do not apply to— messages that are forwarded by a subscriber to his or her own wireless device (although they do apply to any person who receives consideration or inducement to forward the message to someone else's wireless device), or phone-to-phone SMS messages if they are not autodialed (Internet-to-phone SMS messages are covered by the rules since they involve a domain name address). Announced that it would create a publicly available FCC wireless domain names list with the domain names used for mobile service messaging so that senders of commercial mail can determine which addresses are directed at mobile services, and— Prohibited sending any commercial message to addresses that have been on the list for at least 30 days, or at any time prior to 30 days if the sender otherwise knows that the message is addressed to a wireless device, and Required all wireless service providers to supply the FCC with the names of all Internet domains on which they offer mobile service messaging services. Determined that all autodialed calls, including SMS, are already covered by the TCPA. Interpreted the definition of wireless commercial e-mail message to include any commercial message sent to an e-mail address provided by a wireless service provider (formally called a "commercial mobile radio service," or CMRS) specifically for delivery to the subscriber's wireless device. Provided guidance on the definition of "commercial," but noted that the Federal Trade Commission is ultimately responsible for determining the criteria for "commercial" and "transactional or relationship" messages. As noted, some wireless service providers sought an exemption from the requirement to obtain express prior authorization for them to communicate with their own subscribers, as long as the subscribers did not incur additional costs. The FCC did not grant such as exemption, in part because it concluded that the existing exemption in the CAN-SPAM Act for transactional or relationship messages is sufficient to cover many types of communication needed between a provider and a subscriber. Furthermore, the Commission concluded that the CAN-SPAM Act required it to protect consumers from unwanted commercial messages, not only those that involve additional costs. The Undertaking Spam, Spyware, and Fraud Enforcement With Enforcers beyond Borders Act (U.S. SAFE WEB Act, P.L. 109-455 ) is primarily concerned with "traditional" forms of spam via email. However, the law also covers wireless spam. Specifically, the act permits the FTC and parallel foreign law enforcement agencies to share information while investigating allegations of "unfair and deceptive practices" that involve foreign commerce. The 110 th Congress will likely continue to consider whether additional legislation is needed to protect wireless subscribers. H.R. 83 (Frelinghuysen) , the Wireless Privacy Protection Act , is identical to H.R. 71 from the 108 th Congress. The bill would amend the Communications Act of 1934 to require informed customer prior written consent to the provision of wireless call location and crash information to a third party. The bill was referred to the House Energy and Commerce Committee. S. 2130 (Schumer) , would amend 18 U.S.C. § 2510(8) to include (1) within the definition of "contents" of any interception of wire, electronic, and oral communications to include contemporaneous, real-time, or prospective information regarding the physical location of a cellular telephone; and (2) within the definition of "tracking device," a cellular telephone for which the government seeks contemporaneous, real-time, or prospective information regarding its location. The bill was referred to the Committee on the Judiciary. H.R. 1139 (Pitts) , the Wireless 411 Privacy Act , is identical to H.R. 3558 from the 108 th Congress. This bill would enable wireless subscribers to keep their wireless telephone numbers unlisted, for free, if a directory assistance database for wireless subscribers were to be created. The legislation requires commercial mobile service providers to obtain express prior authorization ("opt-in") from each current subscriber, separate from any authorization obtained to provide the subscriber with mobile service or any associated calling plan or other service, to include the subscriber's wireless phone number in the database. For new subscribers, mobile service providers may include a subscriber's number in a 411 directory only if they provide a separate notice at the time a new subscriber signs up for service, and at least once a year thereafter, informing the subscriber of the right not to be listed, and providing a convenient mechanism for the subscriber to decline or refuse to be listed ("opt-out"). Call forwarding from a directory assistance operator to a subscriber would be permitted only if the operator first informs the subscriber of who is calling and the subscriber may accept or reject the incoming call on a per-call basis, and the subscriber's phone number may not be disclosed to the calling party. Call forwarding would not be permitted to subscribers whose numbers are unlisted. The bill also prohibits commercial mobile service providers from publishing, in print, electronic, or other form, the contents of any wireless directory assistance database. No fees may be charged to subscribers for keeping their phone numbers private. The bill was referred to the Subcommittee on Telecommunications and the Internet of the Committee on Energy and Commerce. S. 1350 (Specter) has the same title as H.R. 1139 , but the provisions are somewhat different. It does not differentiate between current and new subscribers, for example. In H.R. 1139 , the opt-in requirement is only for current subscribers; new subscribers would be given the opportunity to opt-out. In S. 1350 , opt-in consent is required from all subscribers. Also, in S. 1350 , if a subscriber's number is listed in a 411 directory, and the subscriber wants it removed, the mobile service provider must do so without any cost to the subscriber. S. 1350 contains language similar to the call forwarding provisions of H.R. 1139 under the heading "wireless accessibility." Whereas H.R. 1139 prohibits commercial mobile service providers from publishing the contents of a wireless 411 directory, S. 1350 allows such publication if opt-in consent is obtained. Like H.R. 1139 , S. 1350 specifies that no fees may be charged to subscribers for keeping their phone numbers private. S. 1350 also would preempt state and local laws that are inconsistent with the requirements in the bill; H.R. 1139 does not address that issue. S. 1350 was referred to the Senate Commerce, Science, and Transportation Committee. S. 2389 (Allen) , the Protecting Consumer Phone Records Act (also discussed below) ( S.Rept. 109-253 ), would prohibit a provider of commercial mobile services from including the wireless telephone number of any subscriber in any wireless directory assistance database, or publishing such a directory, without first (1) providing a clear notice to the subscriber of the right not to be listed; and (2) obtaining express prior authorization from such subscriber for such listing. The bill would also require cost-free delisting for subscribers and prohibit provider from charging a fee to the subscriber for the exercise of such privacy rights. The bill was placed on the Senate Legislative Calendar under General Orders (Calendar No. 425). S. 2177 (Durbin) , the Phone Records Protection Act , prohibits the sale, fraudulent transfer or use of telephone records. The bill covers telecommunications carriers as defined in section 3 of the Communications Act of 1934, including any form of wireless telephone services such as cell phones, broadband Personal Communications Service (PCS), Specialized Mobile Radio (SMR) service, and successors to those services. The bill creates criminal penalties, including fines and up to 10 years in prison. Exceptions are provided for law enforcement agencies. The bill was referred to the Senate Judiciary Committee. S. 2178 (Schumer) , the Consumer Telephone Records Protection Act , would make it a criminal violation to obtain, or attempt to obtain, confidential phone records without authorization from the customer to whom those records relate by knowingly and intentionally making false or fraudulent statements or representations to an employee or customer of covered entities, providing false documentation to a covered entity knowing it was false, or accessing customer accounts via the Internet. The bill covers telecommunications carriers as defined in Section 3 of the Communications Act of 1934, and any provider of IP-enabled voice service. (IP means Internet Protocol.) The bill also prohibits any person, including employees of telephone companies or data brokers, from knowingly and intentionally selling such records without authorization from the customer. Violators would be fined, imprisoned for no more than five years, or both. Exceptions are provided for law enforcement agencies. The bill creates enhanced penalties if the violation is committed while violating another law or as part of a pattern of illegal activity involving more than $100,000 or more than 50 customers in a 12-month period. The enhanced penalty would double the fine and allow imprisonment for up to 10 years. The bill was placed on Senate Legislative Calendar under General Orders (Calendar No. 368). S. 2264 (Pryor) , the Consumer Phone Record Security Act , would make it unlawful for a person to: (1) obtain, or attempt to obtain, through fraud an individual's CPNI, or cause, or attempt to cause, an individual's CPNI to be disclosed to another person without authorization; (2) sell, or offer for sale, a person's CPNI without their authorization; or (3) request another person to obtain a person's CPNI from a telecommunications carrier without proper authorization (with an exception authorizing a law enforcement official to obtain a person's CPNI provided certain conditions are met). The bill would assign enforcement of the requirements of the bill to the Federal Trade Commission (FTC), the Federal Communications Commission (FCC), and the states, and authorize a person whose CPNI has been obtained, used, or sold to file an action for civil relief against the violator. Finally, the bill would amend the Communications Act of 1934 to require telecommunications carriers to implement certain measures to protect a person's CPNI. The bill was referred to the Senate Committee on Commerce, Science, and Transportation. S. 2389 (Allen) , the Protecting Consumer Phone Records Act , would make it unlawful for a person to: (1) acquire or use a an individual's CPNI without written consent; (2) misrepresent that another person has consented to the acquisition of CPNI in order to obtain such information; (3) obtain unauthorized access to data processing systems or records in order to obtain such information; (4) sell, or offer to sell, CPNI; or (5) request that another person obtain CPNI from a telecommunications carrier or Internet Protocol-enabled voice service provider, knowing that the other person will obtain such information in an unlawful manner. The bill does provide for some exceptions while also providing for both civil and criminal penalties for violations. The bill would require enforcement by the FTC, the FCC, and the states, and preempt contrary state law. It would also require the FTC and FCC to conduct a public awareness campaign about protecting CPNI. This bill was placed on Senate Legislative Calendar under General Orders (Calendar No. 425). H.R. 4657 (Lipinski) , the Secure Telephone Operations Act , would make it a crime to knowingly sell CPNI. Violators would be subject to fines or imprisonment for up to 10 years, or both. It was referred to the House Judiciary Committee Subcommittee on Crime, Terrorism, and Homeland Security. H.R. 4662 (Blackburn) , the Consumer Telephone Records Protection Act , has the same title as S. 2178 , but is different. Section 3 would make it unlawful for any person to obtain or cause to be disclosed (or attempt to do so) CPNI by making false, fictitious or fraudulent statements or representations to an officer, employee, or agent of a telecommunications carrier; or by providing by any means, including the Internet, any document or information to an officer, employee, or agent of a telecommunications carrier knowing it was forged, counterfeit, lost, stolen, obtained fraudulently or without the customer's consent, or contained a false, fictitious or fraudulent statement or representation. It also would be unlawful to request someone to obtain CPNI knowing it would be obtained in that manner, or to sell CPNI knowing that it was obtained by such means. Exceptions are provided for law enforcement agencies. Section 4 would require telecommunications carriers to notify customers if their CPNI was disclosed in violation of the act (that topic is not addressed in S. 2178 .) The FTC would enforce Section 3. The bill sets the same criminal penalties and enhanced penalties as S. 2178 . It was referred to the House Energy and Commerce Committee Subcommittee on Telecommunications and the Internet. H.R. 4678 (Schakowsky) , the Stop Attempted Fraud Against Everyone ' s Cell and Land Line (SAFE CALL) Act , is similar to H.R. 4662 , except that it does not set criminal penalties (it would be enforced by the FTC), and does not require customers to be notified if their CPNI is disclosed. It was referred to the House Energy and Commerce Committee Subcommittee on Commerce, Trade and Consumer Protection. H.R. 4709 (L. Smith), the Law Enforcement and Phone Privacy Protection Act ( H.Rept. 109-395 ) , would make it a crime knowingly and intentionally obtain, or attempt to obtain, confidential phone records information of a covered entity by making false or fraudulent statements or providing such documents, or accessing customer accounts via the Internet without prior authorization from the customer to whom the records relate. The term "confidential phone records information" is defined as information that relates to the quantity, technical configuration, type, destination, location, or amount of use of a service offered by a covered entity subscribed to by a customer of the covered entity, and is made available to a covered entity by a customer only because of the relationship between the covered entity and the customer. The term "covered entity" is defined as a telecommunications carrier (as defined in 47 U.S.C. 153) and includes any provider of IP-enabled voice service. (IP is Internet Protocol). This bill was presented to the President on December 22, 2006. H.R. 4714 (Boswell), the Phone Records Protection Act , is identical to S. 2177 . It was referred to the House Judiciary Committee.

Wireless communications devices such as cell phones and personal digital assistants (PDAs) are ubiquitous. Some consumers, already deluged with unwanted commercial messages, or "spam," via computers that access the Internet by traditional wireline connections, are concerned that such unsolicited advertising is expanding to wireless communications, further eroding their privacy. In particular, federal requirements under the Enhanced 911 (E911) initiative to ensure that mobile telephone users can obtain emergency services as easily as users of wireline telephones, are driving wireless telecommunications carriers to implement technologies that can locate a caller with significant precision. Wireless telecommunications carriers then will have the ability to track a user's location any time a wireless telephone, for example, is activated. Therefore some worry that information on an individual's daily habits—such as eating, working, and shopping—will become a commodity for sale to advertising companies. As consumers walk or drive past restaurants and other businesses, they may receive calls advertising sales or otherwise soliciting their patronage. While some may find this helpful, others may find it a nuisance, particularly if they incur usage charges. As with the parallel debates over Internet privacy and spam, the wireless privacy discussion focuses on whether industry can be relied upon to self-regulate, or if legislation is needed. Three laws already address wireless privacy and spam concerns. The 1991 Telephone Consumer Protection Act (TCPA, P.L. 102-243) prohibits the use of autodialers or prerecorded voice messages to call wireless devices if the recipient would be charged for the call, unless the recipient has given prior consent. The 1999 Wireless Communications and Public Safety Act (the "911 Act," P.L. 106-81) expanded on privacy protections for Customer Proprietary Network Information (CPNI) held by telecommunications carriers by adding "location" to the definition of CPNI, and set forth circumstances under which that information could be used with or without the customer's express prior consent. The 2003 Controlling the Assault of Non-Solicited Pornography and Marketing Act (the CAN-SPAM Act, P.L. 108-187) required the Federal Communications Commission (FCC) to issue rules to protect wireless subscribers from unwanted mobile service commercial messages (they were issued in August 2004). Consumers also may list their cell phone numbers on the National Do Not Call Registry. Most recently, the 109th Congress passed the Undertaking Spam, Spyware, and Fraud Enforcement With Enforcers beyond Borders Act of 2005 (U.S. SAFE WEB Act); the bill was signed into law on December 22, 2006 (P.L. 109-455). The bill would allow the FTC and parallel foreign law enforcement agencies to share information while investigating allegations of "unfair and deceptive practices" that involve foreign commerce. Congress continues to debate how to protect the privacy of wireless subscribers, primarily in the areas of CPNI, wireless location data, and proposed wireless directory assistance services.

On February 11, 2013, NASA launched Landsat 8, a remote sensing satellite jointly operated by the U.S. Geological Survey and NASA. Landsat 8 is the latest in a series of Earth-observing satellites that began on July 23, 1972, with the launch of Landsat 1. Landsat has been used in a wide variety of applications, including land use planning, agriculture, forestry, natural resources management, public safety, homeland security, climate research, and natural disaster management, among others. In the current partnership, NASA develops the satellite and the instruments, launches the spacecraft, and checks its performance. Then the U.S. Geological Survey (USGS) takes over satellite operations, and manages and distributes the data. All Landsat data held in USGS archives are available for download with no charge and no restrictions. (See text box below for more details about the satellites and remote sensing instruments.) Landsat satellites have collected remotely sensed imagery of the Earth's surface at moderate resolution for over 40 years. ( Table 1 shows a comparison of the spatial resolution for high, moderate, and low resolution land imaging satellites.) At present two satellites, Landsat 7 (launched in 1999) and Landsat 8, are in orbit and supplying images and data for many users. Landsat 5—launched in 1984—was also operating until late 2011; however, in November 2011 USGS announced that it had stopped acquiring data from Landsat 5 because of deteriorating electronic components. The Landsat Data Continuity Mission (LDCM, now called Landsat 8) was initially planned for launch in July 2011 and would have filled the data gap in Landsat coverage after USGS stopped collecting data from Landsat 5, but because of schedule delays it was not placed in orbit until February 2013, when it was renamed Landsat 8. On May 30, 2013, data from Landsat 8 became available. Users of Landsat imagery and data cover a broad spectrum. A 2011 survey and analysis determined that the predominant sector using Landsat was academia (33%), followed by private business (18%), federal government (17%), state government (16%), local government (10%), nonprofit institutions (4%), and tribes or nations (less than 1%). Within this user community as determined by the study, the majority of survey respondents used Landsat imagery to answer questions and solve problems (91%), processed the imagery for themselves or others (62%), and made decisions based on the imagery (57%). Of the respondents, 19% used Landsat imagery to develop algorithms, 12% provided or sold imagery or value-added products, and 2% developed commercial software. With the 2013 launch of Landsat 8, a question that arises for Congress is whether there should be a Landsat 9. More generally, should Congress support the development of another moderate resolution land-imaging satellite, and what are the alternatives? This report describes aspects of Landsat's history and discusses potential alternatives to a fully federally supported satellite system, such as commercialization, privatization, and other possible arrangements that would provide continuity beyond the 42-year record of Landsat remote imaging. These other arrangements could include alternative sources of multispectral and thermal imaging, such as partnerships, or procurement of data from other, foreign, moderate resolution satellite systems. A key part of any future congressional debate on Landsat is the satellite's use and value. These issues are discussed below in the context of the 2014 White House National Plan for Civil Earth Observations and an ongoing NASA/USGS Sustainable Land Imaging Architecture Study Team project. Some congressional views on a future U.S. land imaging program are also explored. Most proponents agree that Landsat 8's 30-meter resolution—its ability to capture images with its Operational Land Imager (OLI) instrument at the scale of about a baseball diamond—renders it a valuable tool for characterizing human-scale processes such as urban growth, agricultural irrigation, and deforestation. They also note that the consistent and continuous collection of imagery from the succession of Landsat satellites since 1972 makes it possible to document land changes because images are comparable. This comparability is possible despite changes in the satellites and the onboard instruments over 42 years. Some also argue that the current policy of making all Landsat imagery available at no cost is a prime value of the program. The current no-cost policy, however, does not reflect the varied history of the program and earlier attempts to commercialize Landsat. During previous deliberations, Congress considered commercializing the Landsat system until passage of Land Remote Sensing Policy Act of 1992 ( P.L. 102-555 ). The attributes just discussed—imagery at a 30-meter scale, continuous and comparable imagery and data of the Earth's surface for 42 years, and the no-cost policy for Landsat data—all could factor in a future discussion about whether Landsat would be amenable to commercialization now, over 20 years since Congress last debated a commercialization option. The following discussion traces earlier efforts to commercialize Landsat and may provide some context for congressional discussion about Landsat's future. Almost since the beginning of satellite launches, including both land imaging and weather satellites, privatization of satellite systems has been discussed. Efforts to privatize Landsat began during the Carter Administration and accelerated during the Reagan Administration. The Carter Administration decided that Landsat was mature enough to move from a research land remote sensing system under NASA to an operational system under the National Oceanic and Atmospheric Administration (NOAA), which had successfully managed geostationary and polar orbiting weather satellites. The Carter Administration also asserted that under NOAA management, the user base for Landsat data would eventually grow. Private companies would assume responsibility for their own remote sensing systems, and would provide data for government and private customers. In a policy shift to more rapid privatization of operational satellite systems, the Reagan Administration in March 1983 proposed to shift both Landsat and weather satellite system operations, as well as future ocean-observing satellite systems, from the federal government to the private sector. Congress raised concerns that the Reagan Administration was moving too quickly toward privatizing weather satellites without congressional involvement. The opposition from Congress and other stakeholders to privatizing NOAA weather satellites led to Congress enacting language prohibiting their sale in the FY1984 appropriations act funding the Department of Commerce ( P.L. 98-166 ). In deliberations leading up to that prohibition, the House Science and Technology Committee suggested that pursuing the sale of the weather satellites distracted from the more important issue—maintaining global leadership in land remote sensing (i.e., Landsat). In fact, the committee urged that the debate shift back to its original track—namely, how to best accomplish a transfer of land remote sensing capability to the U.S. private sector. Ultimately, the issues of whether and how to privatize the system, which federal agency should be responsible, and how public and private funding and operations should be combined were resolved in the Land Remote Sensing Policy Act of 1992 ( P.L. 102-555 ). The act transferred Landsat program management from Commerce to NASA and the Department of the Interior (DOI). Differing views of the Landsat program's nature—namely, whether the satellites served public or private interests—shaped the outcome of the privatization effort. Evolving views over the public or private nature of the program were influenced by factors other than funding. One observer identified four factors: 1. Landsat data proved important in planning U.S. military operations in the 1992 Gulf War. 2. Other countries had launched similar land remote sensing satellites, and these spacecraft—particularly the French SPOT satellite—were perceived as possible challenges to the U.S. stake in the international market for remote sensing data. 3. Growing interest in global climate change and its effects on the Earth's surface led scientists to increasingly value time-series data from a consistent platform in space for identifying environmental changes. 4. The difficulties of commercializing the Landsat system became clear, and federal agencies perceived that private companies might not be able to provide equivalent data at the scale the agencies required. These and other factors led Congress to accept the idea of Landsat as a public good and to enact P.L. 102-555 . One other factor, for example, was the cost of Landsat images. P.L. 102-555 found that "the cost of Landsat data has impeded the use of such data for scientific purposes, such as for global environmental change research, as well as for other public sector applications." Consequently, the act established, with some restrictions, that unenhanced data from Landsat should be made available "at the cost of fulfilling user requests," or COFUR. USGS extended the COFUR policy to all Landsat data products in its Landsat Data Distribution Policy, which also stated that pricing would not be based on the recovery of capital costs of satellites, ground systems, or other capital assets previously paid for by the U.S. government. The current USGS policy is to make all Landsat imagery and data freely available for downloading. The Appendix provides further details about the efforts to privatize Landsat in the 1980s and early 1990s. Other types of remote sensing imagery and data, both public and commercial, are available from satellites that provide different spatial resolutions as well as different frequencies of coverage over the same location. (See Table 1 .) High-resolution, narrow-coverage imagery might be considered more marketable than moderate-resolution Landsat imagery. Arguably, data from low-resolution weather satellite images of cloud cover that can show the same location within one or two days might also be more marketable, although Congress decided against privatizing U.S. weather satellite data in the 1980s (see discussion above). Marketability issues aside, it may be useful for policy makers to consider some views of the value of Landsat imagery and data as a context for congressional deliberation on the future of the program. The National Plan for Civil Earth Observations is intended "to provide strategic guidance for a balanced portfolio of Earth observations and observing systems." The plan was developed following enactment of the NASA Authorization Act of 2010 ( P.L. 111-267 , Section 702), which tasked the Office of Science and Technology Policy (OSTP) with developing a mechanism to ensure greater coordination of research, operations, and activities for civilian Earth observations, including development of a strategic implementation plan. The statute requires that OSTP update the strategic implementation plan every three years. The National Plan stated that President Obama's FY2015 budget request provided support for federal agencies to "maintain a sustained, space-based, land-imaging program while ensuring the continuity of 42 years of multispectral information and 36 years of thermal-infrared land-surface information from space, which are unique sources of terrestrial data for understanding land coverage." Although the Landsat system was not specified by name, this seemed to refer to the Landsat observational record. The National Plan classified federal programs based on the duration of the federal commitment to making Earth observations. Programs could involve "sustained observations"—generally those measurements requiring a federal commitment of seven years or more—or "experimental observations"—measurements that are time-limited. The report placed a priority on sustained observations, and further subdivided and ranked the supporting action required by the federal government as (1) continuity of sustained observations for public services, and (2) continuity of sustained observations for Earth system research. The National Plan provided specific direction to the federal agencies to carry out sustained observations. It stated that NASA, together with the Secretary of the Interior, will implement a 25-year program of sustained land imaging for routine monitoring of land-cover characteristics, naturally occurring and human-induced land-cover change, and water resources, among other uses. The National Plan further directed the agencies to "ensure that future land-imaging data will be fully compatible with the 42-year record of Landsat observations." Moreover, the National Plan listed agency responsibilities, which match the currently described shared responsibilities between NASA and USGS. NASA would be responsible for satellite development, launch, and commissioning, and USGS would be responsible for user requirements, development and operation of ground systems, operational control once in orbit, and processing, archiving, and distributing data and products. It appears that the National Plan ranked the value of Landsat-type observations relatively high, and called for the continuation of similar types of space-based observations. The National Plan included a ranking of high-impact observation systems—based on a study called the Earth-Observation Assessment (EOA)—which placed Landsat as the third-highest-ranked observing system out of 145 ranked systems, behind only global positioning satellites (GPS) and Next Generation Weather Radar (NEXRAD). In a footnote to its stated requirement for the NASA and USGS to implement a 25-year program of sustained land imaging, the National Plan noted that a robust land-imaging program would also include other types of data to supplement the optical imagery that is collected by Landsat. The other types of data (not collected by Landsat) would include radar, LIDAR, and gravity measurements, as well as others that would be needed to measure changes in topography, biomass, ecosystem flux, soil moisture, land subsidence, water resources, and glaciers. The footnote suggests that the envisioned 25-year program might include a broader array of observations, from different instruments and platforms both space- and airborne, than the types of instruments currently aboard Landsats 7 and 8. The Administration is examining a future land imaging program that may depart from the current Landsat "model"—namely a dedicated satellite pair each with a moderate-resolution multispectral scanner and a thermal imager. NASA and USGS are crafting a post Landsat-8 strategy via the Sustainable Land Imaging Architecture Study Team (AST), which appears to be following the broad guidelines laid out in the National Plan, discussed above. Continuity of the data record is a key theme in the AST, but according to NASA "this does not necessarily mean the imagery per se, but the usable products that define the utility of the data record." Sustainability is another key theme, and according to NASA a sustainable program would provide data products for the "long haul, without extraordinary infusions of funds, within the budget guidance provided." NASA identifies reliability as a third key theme, and specifies that sustainable land imaging data sets "should be able to draw on equivalent or near equivalent deliverables from data sources to provide the data for the highest priority land imaging data products." Notably, NASA adds that reliability also means that loss of a single satellite or instrument should not "cripple the program or significantly impact users, and the program will exhibit graceful degradation." In previous discussions about pending gaps in Landsat coverage (when Landsat 5 was anticipated to fail before Landsat 8 could be placed in orbit), some Landsat product users suggested that moderate resolution optical imaging satellites of other nations might supply data to fill the Landsat gap. A 2007 report indicated that the global coverage of the Landsat orbiters and their ground-based receivers could not be duplicated by foreign moderate resolution satellites, but they could provide a partial, short-term fix to limit losses of some Landsat data and imagery. In 2005, a Landsat Data Gap Study team formed by USGS and NASA found that no international satellite program, current or planned, has the onboard recording capacity, the direct receiving station network, and the data production systems to routinely perform the full Landsat mission. The Data Gap Study team did conclude, however, that capturing and archiving data from comparable systems could reduce the impact of a data gap. The AST will likely revisit this option and reassess the foreign satellite alternative, given that nearly 10 years has passed and the availability of moderate resolution satellite data from non-U.S. sources has changed. In the current Landsat partnership, NASA develops the satellite and the instruments, launches the spacecraft, and checks its performance. Then USGS takes over satellite operations, and manages and distributes the data. In its FY2015 congressional budget justification, USGS states that Department of the Interior (DOI) bureaus rely on Landsat as a data source on wildfires, consumptive water use, land cover change, rangeland status, and wildlife habitat, as well as other departmental responsibilities. USGS proposes to increase funding for Landsat-related activities under its Climate and Land Use Change organizational division, and would allocate $1 million for land remote sensing and $500,000 for land change science. In addition to creating a set of Landsat-based products that would assist natural resource managers at DOI, the budget request states that funding for Landsat-related activities would help develop essential climate variables (ECVs) and climate data records (CDRs). CDRs are long-term time-series measurements that support a variety of ECVs such as surface temperatures, fire disturbance, snow cover, glaciers, ice caps, permafrost, surface water extent, land cover, and biomass. In the budget justification, USGS describes its participation in the NASA/USGS Sustainable Land Imaging Architecture Study Team, examining long-term operational alternatives to meet "Congressional and Administration directives to devise an aerospace architecture designed to ensure 20 years of sustained land imaging that will provide data compatible with the past 41 years of Landsat data." The AST architecture plan for agency responsibilities matches that described in the National Plan, namely that NASA would develop Landsat-compatible land-imaging capabilities, and USGS would continue to fund ground system development, post-launch operations, data processing, archiving, and distribution. USGS adds that the AST will consider new instruments and satellites, as well as international partnerships. Neither the Senate nor the House had acted upon the DOI appropriations legislation for USGS prior to September 30, 2014, the end of the fiscal year. The House Committee on Appropriations reported H.R. 5171 , the DOI appropriations bill, on July 23 together with an accompanying report. In the report, the committee supported the requested increases for USGS Landsat science products for climate and natural resources assessments, under the Climate and Land Use Change line item, as described above. In its FY2015 congressional budget justification, NASA states that Landsat is "the only satellite system that is designed and operated to observe repeatedly the global land surface at moderate resolution. Landsat data are available at no cost to those who work in agriculture, geology, forestry, regional planning, education, mapping, and global climate change research." As with USGS, NASA describes its participation in the AST, and states that its "near-term activities will focus on studies to define the scope, measurement approaches, cost, and risk of a viable long-term land imaging system that will achieve national objectives." According to both NASA and USGS budget justifications, the Administration would use the results of the AST study to craft a proposal for a system to follow Landsat 8. However, NASA is already committing funding for a satellite system to succeed Landsat 8. For FY2015, NASA proposed $64.1 million for Land Imaging, an increase from the FY2014 enacted amount of $30 million. If enacted, these funds would total nearly $100 million for NASA's first steps toward the successor to Landsat 8. Some of the complexity and challenges to a Landsat 8 follow-on mission were revealed in remarks by the NASA Earth Science Division director at a May 28, 2014, meeting, according to one report. One challenge for policy makers includes providing observational continuity with Landsat 8 and its predecessors, yet keeping costs low—lower than costs for Landsat 8. At the meeting, the NASA Earth Science Division director noted that the Administration wants NASA to explore all options to achieve this goal, including options like a hosted payload and international partnerships, as opposed to a stand-alone payload and launch vehicle and an entirely U.S.-based project. Another challenge is to reconcile the Administration directive with congressional perspectives, one of which is skeptical of both the hosted payload strategy and an international partnership. Congress's perspective is likely in agreement with the Administration about the need to keep costs low (discussed in the next section). Senate appropriators have been critical of the Administration's current approach to continuing a Landsat-type moderate-resolution Earth observing system. In its report accompanying S. 2437 , the Commerce, Justice, Science, and Related Agencies appropriations bill for FY2015, appropriators stated that "the Committee does not concur with various administration efforts to develop alternative 'out of the box' approaches to this data collection—whether they are dependent on commercial or independent partners." In the report, the committee emphasized its concerns over a potential data gap should Landsat 7 fail before a successor satellite was launched: such a failure would mean that instead of 8 days for continuous terrestrial coverage with two satellites, it would take 16 days with just Landsat 8. With these concerns, the committee stated that NASA "should proceed with an acquisition in fiscal year 2015 for a mission to launch a follow on to Landsat 8 by not later than 2020." However, the committee also stressed the need to keep costs low, specifically below $650 million, while at the same time noting that NASA was $100 million below what was needed—in a notional FY2016 budget—for a 2020 launch. In the report, appropriators noted that they expected NASA to present a FY2016 budget "to reflect resources necessary to meet that [2020] launch date." For FY2015, Senate appropriators recommended $68.1 million for Landsat Data Continuity, $4 million above the President's request. The committee's views in its FY2015 report echo remarks a year earlier in the report accompanying the Commerce, Justice, Science, and Related Agencies appropriations bill for FY2014. In that report, appropriators stated that they were "highly skeptical of either a hosted payload or international partner concept for Landsat 9." The committee noted that these alternate approaches have already been considered on multiple occasions over the past 40 years, and "have only distracted and delayed the inherently governmental role in preserving the continuity of Landsat data." In the FY2014 report language, appropriators chided NASA for unrealistic expectations that a Landsat 9 would cost $1 billion, and capped spending at $650 million, noting that the lower figure was substantially below that required for Landsat 8. Senate appropriators recommended $30 million for Land Imaging activities, matching the Administration's request for FY2014. In their FY2014 report accompanying H.R. 2787 , the Commerce, Justice, Science, and Related Agencies Appropriations Bill, 2014, House appropriators (majority) objected to NASA's budget request for new projects "that solely or primarily support the requirements of other agencies, including the United States Geological Survey." The report stated that such projects would have significant and undefined outyear costs and "crowd out long term investments in NASA's own scientific priorities." Accordingly, report language instructed that "no funds should be spent in pursuit of a new land imaging system for USGS." In the "Minority Views" section of the report, appropriators expressed disappointment in the elimination of "funding for several upcoming climate satellite programs, including: (1) NASA's Landsat, which provides valuable data in support of agriculture, forestry, and regional planning." In the FY2014 Omnibus Appropriations bill, enacted as P.L. 113-76 , the Senate view was adopted, and $30 million was provided for Land Imaging at NASA for the next Landsat-like mission after Landsat 8. House appropriators made no mention of Landsat or Land Imaging spending in the FY2015 appropriations bill ( H.R. 4660 ) that passed the House or in the accompanying report ( H.Rept. 113-448 ). Earlier objections—expressed in the FY2014 House appropriations bill report—to a Landsat-like land imaging satellite as not aligning with the NASA mission were not voiced in the FY2015 appropriations bill. That earlier objection was likely part of a debate regarding the mission focus of NASA, and whether it should be responsible for funding satellites that are turned over to other federal agencies to operate, such as Landsat (operated by USGS) and the nation's civilian weather satellites (operated by NOAA). Senate appropriators had also raised concerns about a joint satellite program—civilian weather satellites—between NASA and NOAA in the FY2013 budget process, but with the opposite recommendation from that of the House. As with the joint-agency Landsat program, NASA acquires the weather satellites and their instruments, launches them into orbit, and then hands over operations to another agency, in this case NOAA. In contrast with Landsat, however, Congress appropriates funds directly to NOAA for procuring the weather satellites; NOAA then transfers funds to NASA for satellite and instrument acquisition. In the report accompanying the FY2013 appropriations bill for Commerce and Justice, Science, and Related Agencies, Senate appropriators chose to transfer funding and responsibility for procuring NOAA's operational satellites to NASA. Their decision was not based on a debate over respective agency missions, which seemed to be the case for House majority appropriators in the FY2014 appropriations process, but was based on the view by Senate appropriators that NOAA was mismanaging the satellite procurement process and NASA could do a better job. The weather satellite procurement issue illustrates the different views held by House versus Senate appropriators over the role of NASA in satellite procurement for joint-agency satellite programs. These different views may be a subject of congressional debate when Administration budget requests for the next Landsat ramp up in the next few years. Although a congressional debate over the next phase of the Landsat legacy is in its early stages, the discussion above notes potentially divergent opinions among the Administration and Congress. Congress is likely to discuss a range of views regarding the future of satellite-based land imaging. Some in Congress may wish to revisit options of privatization or commercialization, which has a long and well-documented history (see discussion above). Others, such as some members of the Senate Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies, have consistently expressed the view that preserving data continuity from the Landsat satellites is an inherently governmental role. Some members of the House Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies have recently questioned if the multiagency Landsat program aligns within the fundamental mission of NASA, since NASA acquires and launches Landsat, but a different agency, USGS, assumes operational responsibility, and manages and distributes Landsat data. A common theme likely to be expressed by both the House and Senate majorities and minorities will be the need to keep costs under control and at least below the amount appropriated for Landsat 8. In addition to a unified admonition to keep the cost of a Landsat successor low, Congress may also exert pressure on the Administration to move forward on the next land imaging mission and reduce the chances of a data gap if Landsat 7 or 8 fails before the next satellite is placed in orbit. However, what a data gap actually means may be in question depending on the results of the AST study, and the resulting implementation strategy. If, for example, the Administration determines that data from non-U.S. satellites suffice to offset some or most of the data loss from a Landsat 7 or 8 failure, then Congress would likely revisit the needs, capabilities, and timeline for developing the next U.S. land-imaging satellite. The broad themes outlined by the AST of continuity , reliability , and sustainability will likely not face congressional opposition. However, Congress may debate what those themes actually mean in terms of more detailed program requirements, and particularly how much funding should be appropriated to meet those requirements. In contrast to its opposition to the privatization of NOAA weather satellites, Congress in 1983 did not oppose Reagan Administration efforts to transition Landsat to the private sector. The Carter Administration initiated the move toward privatization when it released Presidential Directive 54 in 1979, which recommended transfer of Landsat operations from NASA to NOAA to convert Landsat from a research to an operational program. The directive also recommended development of a plan for eventual transition of Landsat to a private-sector operation. It was recognized at the time that the market for Landsat products was small, and the customer base grew smaller each time the price of Landsat data rose. The price of a Landsat image rose 300% in 1981, when the Office of Management and Budget directed that operating costs would be recovered by data sales. Sales shrank again when NOAA took over full responsibility for the program in 1983, and raised prices for Landsat data to cover its costs and to prepare customers for commercial prices. Despite these indicators that the commercial market for Landsat data was not robust, Congress gave its support to privatization by passing the Land Remote Sensing Commercialization Act of 1984 ( P.L. 98-365 ). The law established the broad policy and financial requirements for the transfer, and authorized the Department of Commerce to license private remote sensing space systems that complied with provisions of the act. The law required that operators make unenhanced Landsat data available to all users on a nondiscriminatory basis; no preference could be given to one class of data buyers over another. Landsat proponents supported the move to privatization, in part because of fears that the Reagan Administration would cancel the program altogether. Proponents were also concerned that uncertainty over the program's future would forestall investment in hardware and software necessary to process Landsat data. Landsat supporters also argued that privatization would ensure continuity of the data—an important feature of time-series observational data from satellites generally, allowing data users to analyze changes over time. Supporters argued that privatization would eventually result in a lower price for Landsat data. The larger context for the future of Landsat was, in part, a dispute over whether the satellite served primarily public or private interests. Landsat provided the government with data for scientific research, managing federal lands, and carrying out other responsibilities. It also provided data with direct economic value for managing private lands, or for exploration for oil, gas, and minerals. The argument over Landsat's future concerned which use was more important. Government Subsidies and Problems on the Path to Privatization Because the market for remote sensing data was considered underdeveloped in 1984, the federal government decided to provide a $250 million subsidy to the Earth Observation Satellite Company (EOSAT), which was selected by NOAA to operate the Landsat system. The subsidy would be used by EOSAT in addition to its capital to develop two new spacecraft, Landsat 6 and Landsat 7, that would replace the then-operating Landsat 4 and Landsat 5. In addition to the $250 million subsidy, the federal government would also pay launch costs for the two new satellites, and would continue to cover operational costs for the Landsat program through the expected lifetimes of Landsats 4 and 5. The Reagan Administration decided not to fulfill the original funding obligation to EOSAT, and several years of dispute ensued between the Administration and Congress over Landsat funding. Ultimately, the contract was revised to require the development of only Landsat 6, despite earlier agreement that two satellites would be needed to ensure data continuity. The funding dispute led to further debates over the future of the Landsat program. Complicating the debate were different views about which launch vehicle should carry the next Landsats into orbit. EOSAT proposed that the satellite be designed for the space shuttle. However, the Reagan Administration disagreed, and NOAA instructed EOSAT to prepare the spacecraft for launch on an expendable rocket. Outcome The Land Remote Sensing Policy Act of 1992 ( P.L. 102-555 ) transferred Landsat program management from Commerce to NASA and the Department of the Interior (DOI), which effectively ended nearly a decade of debate over privatizing Landsat. Whereas weather satellites were quickly identified as a public good during the 1983 debate, Landsat proved more difficult to categorize. One distinction is that NOAA has had a clear mandate to provide satellite data for weather services. In contrast, NOAA was selected to manage the Landsat program because of the agency's success with operating the weather satellites, and as an interim step en route to privatizing Landsat. The relatively unclear mandate for collecting land surface remote sensing data at NOAA may also have eroded customer confidence in the Landsat system, and in the agency's commitment to developing infrastructure, training personnel, and making other investments that would have bolstered the market for Landsat products. Although the Land Remote Sensing Policy Act of 1992 reversed the privatization track for Landsat and returned the satellite system to the federal government, the act also authorized the Secretary of Commerce to license operators of private remote sensing space systems. It allowed the operators to use their data as they wish, including choosing their customers and offering their data at prices that vary by customer. Some analysts regard this licensing provision under Subtitle VI of the act as perhaps the most important provision for fostering commercial remote sensing prospects in the United States. Further, the development of technology to download, store, and distribute remotely sensed data contributed to the ability of commercial interests to add value to satellite data. The advent and rapid growth of geospatial information systems (GIS) has spurred an explosion of interest in the use of geospatial information, which typically includes land remote sensing data from space (e.g., Google Earth).

On February 11, 2013, NASA launched Landsat 8, a remote sensing satellite jointly operated by the U.S. Geological Survey and NASA. Landsat 8 is the latest in a series of Earth-observing satellites that began on July 23, 1972, with the launch of Landsat 1. Landsat has been used in a wide variety of applications, including land use planning, agriculture, forestry, natural resources management, public safety, homeland security, climate research, and natural disaster management, among others. A question for Congress is, should there be a Landsat 9? More generally, should Congress support the development of another moderate resolution land-imaging satellite, and what are the alternatives? Landsat 8's 30-meter resolution—its ability to capture images at the scale of about a baseball diamond—renders it a valuable tool for characterizing human-scale processes such as urban growth, agricultural irrigation, and deforestation. Landsat supporters also would contend that the consistent and continuous collection of imagery from the succession of Landsat satellites since 1972 makes it possible to document land changes, because images are comparable over that 42-year time period. In congressional deliberations about the future of Landsat, it is likely that the topics of privatization and commercialization will be revisited as one alternative to the current arrangement. Landsat's 30-meter resolution, the continuous and comparable 42-year record of data, and the current policy of making all Landsat data available for no cost would factor into a discussion about commercialization. Efforts to commercialize Landsat in the 1980s and early 1990s culminated with passage of the Land Remote Sensing Policy Act of 1992, which reversed the privatization track for Landsat and restored management of the satellite system back to the federal government. Although a congressional debate over the next phase of the Landsat legacy is in its early stages, there are potentially divergent opinions among the Administration and Congress. The Administration is examining a future land imaging program that may depart from what might be considered the current Landsat "model"—namely, a dedicated satellite pair, each with the same or similar instruments as those aboard Landsats 7 and 8, the two currently orbiting satellites. For example, the Administration is directing NASA to explore options like a hosted payload and international partnerships, as opposed to a stand-alone payload and launch vehicle and an entirely U.S. project. The Administration, through NASA and the U.S. Geological Survey, is crafting a post-Landsat 8 strategy via the Sustainable Land Imaging Architecture Study Team, which broadly follows guidelines laid out in the White House National Plan for Civil Earth Observations. Senate appropriators have been critical of the Administration's current approach to continuing a Landsat-type moderate-resolution Earth-observing system, namely one that may depart from the current Landsat model. In addition, the committee has emphasized its concerns over a potential data gap should Landsat 7 fail before a successor satellite was launched, leaving just one satellite—Landsat 8—operational. Some members of the House Appropriations Committee have recently questioned if the multiagency Landsat program aligns within the fundamental mission of NASA. A common theme likely to be expressed by both the House and Senate will be the need to keep costs under control and at least below the amount appropriated for Landsat 8. In addition, Congress will also likely exert pressure on the Administration to move forward on the next land imaging mission and reduce the chances of a data gap if Landsat 7 or 8 fails before the next satellite is placed in orbit. What a data gap actually means, however, may be in question, depending on the results of the Sustainable Land Imaging Architecture Study Team study and the resulting implementation strategy for the next land remote sensing satellite.

The legal framework for international civil aviation rights dates back to the 1919 Convention for the Regulation of Aerial Navigation (Paris Convention), which was a part of the Paris Peace Conference. The hallmark aviation principle recognized by the Paris Convention is that every nation has absolute and exclusive sovereignty over the airspace above its defined territory. This principle was reaffirmed in 1944 at the Chicago International Civil Aviation Conference, which produced the Chicago Convention. The Chicago Convention resulted in an international framework based largely on national interests, favoring bilateral air transport agreements over multilateral accords with respect to issues such as routes, frequency and capacity. The Chicago Convention's accomplishments included an agreement by the signatories to grant each other two of the so-called "five freedoms" of air transport, specifically, the right to fly across other states without landing and the right to land for nontraffic purposes. In addition, the Chicago Convention established the International Civil Aviation Organization (ICAO) to regulate the safety, communications, and technological aspects of international civil aviation. Since the Chicago Convention, international civil aviation rights have developed primarily through a series of bilateral agreements between the United States and foreign countries. Most of these agreements have been "executive agreements" rather than treaties, thereby avoiding the advice and consent requirement of the Constitution, and typically have contained language favorable to the United States. For example, prior agreements permitted the United States to designate both an unlimited number of gateway cities and an unlimited numbers of carriers. In addition, the agreements provided the air carriers the right to determine capacity with only the vaguest of guidelines. As the United States began to deregulate its domestic airline industry, administrations began to seek more liberal, free-market-based international agreements as well. Domestically, however, even as the United States began to adopt more liberal regulations for its aviation industry, several existing laws continue to have a strong impact on international civil aviation. Currently, air transportation and air commerce are governed by the Federal Aviation Act of 1958. Section 401(a)(1) of the Act states that "an air carrier may provide air transportation only if the air carrier holds a certificate issued under this chapter authorizing the air transportation." The statute authorizes the Secretary of Transportation to "issue a certificate of public convenience and necessity to a citizen of the United States ...." Before issuing a certificate, however, the Secretary "must find that the citizen is fit, willing, and able to provide the transportation to be authorized by the certificate and to comply with this part and the regulations of the Secretary." Stated another way, to operate in the United States as an air carrier, an entity must be a U.S. citizen and must be judged by the Secretary to comply with the statute and any other applicable regulations. In addition to the citizenship requirements, U.S. law also contains a general prohibition against cabotage activity. Generally speaking, the term cabotage is defined as "the right of a foreign airline to carry passengers and/or cargo between airports of the same country." The prohibition states that "aircraft may take on for compensation, at a place in the United States, passengers or cargo destined for another place in the United States only if—(1) specifically authorized under section 40109(g) of this title; or (2) under regulations the Secretary prescribes authorizing air carriers to provide otherwise authorized air transportation with foreign registered aircraft under lease or charter to them without crew." If neither of those situations exists, foreign aircraft are not permitted to perform cabotage within the United States. In addition, the Secretary of Transportation has general discretionary authority to waive other economic-related statutory provisions listed in section 40109(c) "when the Secretary decides that the exemption is consistent with the public interest." The cabotage prohibition, however, is not among the regulations listed in section 40109(c). Finally, U.S. law has created an incentive program exclusively available to domestic air carriers; namely, the Civil Reserve Air Fleet Program (CRAF). Under this program, domestic air carriers supply aircraft on a voluntary basis to increase the military's airlift capacity. The CRAF allows the U.S. military, in times of need, to demand access to a selected percentage of the civil aircraft fleet to deliver troops and equipment to the battlefield. In August of 1992, the Department of Transportation (DOT) announced its "Open Skies" initiative, which was intended to continue the trend of liberalizing international civil aviation. As defined by the DOT, "Open Skies" consists of the following 11 principles: 1) Open entry on all routes; 2) Unrestricted capacity and frequency on all routes; 3) The right to operate between any point in the U.S. and any point in the European Community without restriction, including service to intermediate and beyond points, and the right to transfer passengers to an unlimited number of smaller aircraft at the international gateway; 4) Flexibility in setting fares; 5) Liberal charter arrangements; 6) Liberal cargo arrangements; 7) The ability of carriers to convert earnings into hard currency and return those earnings to their homelands promptly and without restriction; 8) Open code-sharing opportunities; 9) The right of a carrier to perform its own ground handling in the other country; 10) The ability of carriers to freely enter into commercial transactions related to their flight operations; [and] 11) A commitment for nondiscriminatory operation of and access to computer reservation systems. The "Open Skies" initiative incorporated many elements of the previous bilateral agreements and was designed to be entered into with any country "willing to permit U.S. carriers essentially free access to their markets." However, because "Open Skies" is an executive branch initiative, policies that require legislative changes to U.S. law, such as foreign ownership and control, and cabotage are not included within its principles. Currently, the United States is a party to 74 "Open Skies" Agreements worldwide. In Europe, the first "Open Skies" Agreement was reached in October of 1992 with the Netherlands, and over the next several years, similar agreements were reached with other European countries, including Austria, Czech Republic, Belgium, Denmark, Finland, Germany, Luxembourg, Norway, Sweden, Switzerland, and Iceland. As a result of these agreements, the United States enjoys what can be characterized as quasi-cabotage rights within the European Union (EU). In other words, although U.S. carriers still cannot operate truly domestic routes (e.g., Paris to Marseille), they have created so-called "hub and spoke networks" within Europe; for example, a hub in Frankfurt, Germany, with spokes to Paris and Marseille. On the other hand, it should be noted that U.S. law currently prevents European carriers from enjoying any type of cabotage rights within the U.S. domestic market. The combination of the number of "Open Skies" Agreements between the United States and individual EU Members, and the growing dominance of U.S. air carriers throughout Europe, led the European Commission to seek a mandate to negotiate a bilateral aviation agreement between the United States and the EU. The Commission, however, was unable to obtain such a broad mandate and, in 2002, decided to bring legal action against those Member states that had independently negotiated and entered into "Open Skies" Agreements with the United States. While the European Court of Justice appeared to stop well short of invalidating the existing "Open Skies" Agreements, it did hold that certain specific provisions were discriminatory and therefore contrary to EU law. These included provisions relating to the allocation of airport slots and those governing pricing, fares, and rates of intra-European air services; agreements on computer reservation systems; and the "nationality clauses," which permit the United States to deny access to carriers whose home state has not signed an agreement. As a result of this decision, the legal status of the existing "Open Skies" Agreements has been questioned, and the EU Members have granted the Commission a mandate to negotiate a civil aviation agreement with the United States. Since the European Court of Justice ruling, the United States and the EU have committed to negotiations with respect to a comprehensive air transportation agreement often referred to as an "Open Aviation Area," or the "Transatlantic Common Aviation Area" (TCAA). Until recently, negotiations appeared to stall as the countries' differences on key issues prevented them from moving forward. In November 2005, however, the parties announced a negotiations breakthrough and the completion of text for a preliminary agreement. According to U.S. Transportation Secretary Norman Y. Mineta, the agreement "provides new opportunities for U.S. and European airlines, healthier competition for a growing travel market and greater connections between cities and towns on both sides of the Atlantic." Although a draft agreement is not yet publicly available, according to the State Department, the agreement, if implemented, would, inter alia, allow every EU and U.S. airline to fly between every city in the European Union and every city in the United States and would permit U.S. and EU airlines to determine the number of flights, their routes, and fares according to market demand. In addition, the agreement would allow carriers to freely enter into cooperative arrangements with other airlines, such as code-sharing and leasing. According to some commentators who appear to have seen a version of the text, as comprehensive as the draft agreement appears to be, there cannot be meaningful reform in the international aviation market until Congress repeals the so-called "citizenship test," which limits foreign ownership and control of U.S. air carriers. Based on the information currently available regarding the draft agreement, it does not appear that the proposed agreement addresses foreign ownership or control, thus it appears to be left to each party to determine its own rules and regulations independently. As previously mentioned, U.S. law requires that all air carriers be "citizens of the United States" before they are granted certificates to operate between domestic locations. The Federal Aviation Act specifically defines the phrase "Citizen of the United States" as the following: (A) an individual who is a citizen of the United States; (B) a partnership each of whose partners is an individual who is a citizen of the United States; or (C) a corporation or association organized under the laws of the United States or a State, the District of Columbia, or a territory or possession of the United States, of which the president and at least two-thirds of the board of directors and other managing officers are citizens of the United States, which is under the actual control of citizens of the United States and in which at least 75 percent of the voting interest is owned or controlled by persons that are citizens of the United States. This statutory language has existed in various forms since the Civil Aeronautics Act of 1938. In 2003, Congress amended the statute so as to codify the Department of Transportation's (DOT's) long-standing precedent with respect to requiring actual control of an air carrier for citizenship purposes. Developed primarily through its administrative decisions, the DOT and its predecessor, the Civil Aeronautics Board (CAB), have long interpreted the air carrier citizenship definition to include a requirement of "actual control" by U.S. citizens, even though the specific statutory language has only recently been added. One of the oldest and most frequently cited citizenship determinations occurred in 1940 when the CAB was asked to review Urbana, Medellin and Central Airways' application for a certificate of public convenience and necessity. This review was conducted pursuant to the Civil Aeronautics Act of 1938, which contained a citizenship requirement that was nearly identical in legislative language to the current statute. After reviewing the corporate structure of the airlines, who the various stock holders were, and the citizenship of the corporate officers, the CAB turned its attention to the phrase "two thirds or more of the Board of Directors and other managing officers" contained in the statutory requirement for citizenship. In its interpretation of this phrase, the CAB concluded that [t]he apparent general intent of the statute is to insure that air carriers receiving economic support from the United States and seeking certificates of public convenience and necessity, under section 401 of the Act shall be citizens of the United States in fact, in purpose, and in management. The shadow of substantial foreign influence may not exist. The CAB further stated that "... it may be permissible to look behind the form to the substance of the management to determine whether in fact, as well as in law, it is under the control of citizens of the United States. ..." This interpretation expanded the scope of the CAB's inquiry beyond an entity's apparent compliance with the language of the statute, and the agency announced its intention to conduct a close examination of the internal structure and operation of an airline seeking certification of U.S. citizenship to determine where actual control is vested. The CAB's holding and reading of the citizenship definition established a framework for future Board decisions. With respect to the concept of control by a foreign citizen, in 1971, the CAB was asked to determine whether Interamerican Airfreight qualified as a citizen of the United States pursuant to the Federal Aviation Act. Although Interamerican met the formal requirements of the statute, at issue in the proceeding was whether Wille Peter Daetwyler, a Swiss citizen, exercised sufficient control over the operations of the airline such that it would not qualify for U.S. citizenship. The CAB expanded on the statutory interpretation in Uraba, Medellin and Central Airways and, despite a close examination of the transaction, remained concerned that future corporations would attempt to mask foreign control by arranging corporate structures simply to meet the statutory requirements. In response, the CAB stated that in cases where an applicant has arranged its affairs so as to meet the bare minimum requirements set forth in the Act, it is the Board's view that the transaction must be closely scrutinized and that the applicant bears the burden of establishing that the substance of the transaction is such as to be in accordance with the policy, as well as the literal terms of the specific statutory requirements. In this case, the CAB determined that Mr. Daetwyler was in a position to exert a significant amount of control over the operations of Interamerican. The CAB found significant the fact that the company was created wholly at Mr. Daetwyler's insistence and that Mr. Daetwyler retained "25 percent stock ownership and represents one-third of the board of directors," the maximum amount of control allowed under the statute. In addition, the CAB concluded that foreign control existed because Interamerican was to continue to do business under the Daetwyler system of companies and there was evidence of close personal relationships between Mr. Daetwyler and the Interamerican stock holders. In 1989, the DOT was asked to review the merger between Northwest Airlines and Wings Holdings, Inc. Although both companies were U.S. controlled and operated, a citizenship issue existed because the merger's largest equity holder, with approximately $400 million or 56.74 percent, was KLM, Inc., a Dutch company and foreign air carrier. In addition, KLM's interest provided it with substantial power with respect to numerous stock-related decisions. In discussing the citizenship test, the DOT cited the Daetwyler decision favorably, stating that the control test "has traditionally been a complex matter in past cases." The DOT declined to enumerate specific factors to determine the existence of control, saying instead that the analysis with respect to control "has always necessarily been on a case-by-case basis, as there are a myriad potential avenues to control." The DOT pointed to three specific factors that led it to conclude that this merger resulted in a company that was not a U.S. citizen. First was the equity interest in the new company held by KLM. Although a majority of KLM's interest was held in nonvoting stock, the DOT concluded that it "represent[ed] a genuine ownership interest" and, therefore, significantly increased KLM's incentive to participate in Northwest's business decisions. Second, the corporate structure of the new company, according to DOT, would have allowed KLM to exert influence even without voting rights. Finally, the DOT pointed to the fact that KLM was an actual competitor with Northwest in various markets, and had stated an intention to become involved in the decisions of the new corporation. Taken together, these factors resulted in a finding that, as presented at the time, Wings Holdings, Inc., was not a U.S. citizen as defined by the Federal Aviation Act. Upon review of this decision, the DOT commented on an additional foreign control factor. With respect to equity/debt relationships, the DOT held that "absent a default, unless the loan agreement provides special rights to the debt holder that imply control, we do not anticipate treating debt as a foreign control issue." In sum, these precedents establish DOT's methodology of looking behind the corporate structure or transaction for the purpose of determining whether "actual control" is held by U.S. citizens. With respect to factors that can be utilized in determining actual control, the DOT has specifically considered equity ownership, business and personal relationships, control over the voting rights of stock, veto power, equity/debt agreements, competitive status, and other features of corporate transactions. Most recently, the issue of foreign ownership and control was considered in a case involving DHL Airways, also known as ASTAR Air Cargo. At issue in this case was whether the level of control exerted by DHL Worldwide Express, a foreign company owned in part by Deutsche Post, Germany's national postal service, was sufficient to consider ASTAR not a U.S. citizen. The specific mechanism through which it was alleged that DHL Worldwide exercised control was an agreement between ASTAR and DHL Worldwide Express known as an Aircraft, Crews, Maintenance, and Insurance Agreement (ACMI). Broadly defined, the ACMI agreement was a "wet lease," in which ASTAR agreed to provide DHL Worldwide Express with aircraft, crews, maintenance, and insurance for the purpose of allowing DHL Worldwide to legally transport air cargo within the United States. According to the challengers of ASTAR's citizenship status, the ACMI agreement provided for more than 90% of ASTAR's revenues, contained payment provisions that were integral to both ASTAR's financing and working capital, and shifted all of ASTAR's risks to DHL Worldwide. In addition, the ACMI agreement allegedly gave Deutsche Post/DHL Worldwide the power to veto changes in corporate control, limit third-party business, and audit ASTAR's financial records. The ASTAR case was decided by an Administrative Law Judge (ALJ) who concluded that "[f]rom the record taken as a whole ... ASTAR is a citizen of the United States." Specifically, with respect to the fact that the ACMI agreement produced approximately 90% of ASTAR's revenues, the ALJ provided a two-step analysis for determining if, in fact, such control exists. According to the ALJ, it must first be established that the predominant customer is in a position to control the carrier by threatening to withdraw their business and then that the carrier would believe the threat to be creditable. In ASTAR, the ALJ concluded that because the threats were only available in very limited circumstances and most were controlled by ASTAR, the second prong of the test, credibility of the threats, could not be satisfied; therefore, control by DHL Worldwide on the grounds that they are a predominate customer can not be established. Regarding whether ASTAR is a "captive supplier" because of the ACMI's restrictions on pursuing third-party business, the ALJ held that while the success of ASTAR's expansion of third-party business is not relevant to its citizenship, ASTAR's ability to pursue such business independent of its agreement with DHL Worldwide is crucial. The ALJ concluded that the agreement provided ASTAR with significant incentives to expand it business. For example, the ALJ cited the guaranteed payment of $15 million from DHL Worldwide to ASTAR, which arguably put ASTAR in a better position than if it were to do business elsewhere. Finally, with regard to DHL Worldwide's alleged veto power over administrative and operational functions, as well as the ability to perform audits with respect to reimbursable costs, the ALJ concluded that while there were administrative provisions in the ACMI, ASTAR retained control over all the carrier's essential decisions, as well as the day-to-day operations. On November 7, 2005, the DOT published a Notice of Proposed Rulemaking (NPRM) seeking comments on a proposal to clarify the policy with respect to when "actual control" rests with a citizen of the United States. The DOT has proposed that the "actual control" requirement be interpreted in two ways. The first interpretation involves cases where the foreign investor's home country provides U.S. citizens reciprocal investment access and U.S. air carriers full and fair market access, as evidenced by having entered into an "Open Skies" Agreement with the United States, or where it is necessary for compliance with U.S. international obligations. In these situations, air carriers seeking to be considered U.S. citizens will have to demonstrate that U.S. citizens exercise "actual control" only with respect to (1) organizational documentation, including such things as incorporation charters, corporate by-laws, stockholder agreements and other documents of a similar nature; (2) Civil Reserve Air Fleet (CRAF) commitments; (3) transportation security requirements as implemented by the Transportation Security Administration; and (4) safety requirements as implemented by the Federal Aviation Administration. The second scenario involves situations where the foreign investor's home county refuses to extend reciprocal investment and/or market access rights to U.S. citizens and carriers and there are no other relevant international obligations. In these cases, the traditional case-by-case actual control analysis as determined by DOT precedent would control the citizenship inquiry. In asserting a justification for its new interpretation of the "actual control" requirements, the DOT relies primarily on nonlegal or policy grounds. For example, the DOT asserts that the present interpretation of the actual control requirement "has failed to keep pace with changes in the global economy and evolving financial and operational realities in the airline industry itself, to the determent of U.S. carriers." As a result of these changing global economic demands, "U.S. air carriers seeking to enter the market should similarly be able to obtain the financial capital necessary to launch their businesses. We tentatively do not believe that 'actual control' should be interpreted in a way that needlessly restricts the commercial opportunities of U.S. air carriers and their ability to compete." Legally, it appears that the DOT recognizes that Congress has established objective statutory requirements that an air carrier must satisfy to be considered a U.S. citizen; however, they assert that nothing in this NPRM would alter or in any way circumvent those statutory requirements. Given DOT's assertion that this new interpretation of the actual control requirement is a legitimate exercise of its legal authority, it would appear that should a challenge be brought against this proposal becoming a final rule, a reviewing court would likely address the issue pursuant to the standards delineated by the Supreme Court in Chevron U.S.A. Inc. v. Natural Resources Defense Council ( Chevron ). In Chevron , the Supreme Court established a two-part test for judicial review of agency statutory interpretations. First, a reviewing court must determine "whether Congress has directly spoken to the precise question at issue." If a court finds that there has been an express congressional statement, the inquiry is concluded, as the court "must give effect to the unambiguously expressed intent of Congress." In the event that Congress has not unequivocally addressed the issue, a reviewing court must respect an agency's interpretation, so long as it is permissible. The Court further stated that [i]f Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to that agency to elucidate a specific provision of the statute by regulation....Sometimes the legislative delegation to an agency on a particular question is implicit rather than explicit. In such a case, a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency. The Court went on to note that "[j]udges are not experts in the [technical] field, and are not part of either political branch of the Government," while agencies, as part of the executive branch, appropriately make "policy choices—resolving the competing interests which Congress itself either inadvertently did not resolve, or intentionally left to be resolved by the agency charged with the administration of the statute in light of everyday realities." Thus, the rationale for this deference is predicated on the notion that it is not the role of the judiciary to "assess the wisdom" of policy choices and resolve the "struggle between competing views of the public interest," as well as an agency's greater expertise regarding the subject matter of the regulations. The DOT received numerous comments to its NPRM, representing almost every segment of the aviation industry. Many of the comments have focused specifically on the DOT's legal authority to reinterpret the "actual control" requirement. Supporters of the DOT's action generally assert that the phrase "actual control," though it appears in the statute, is vague and undefined. As a result, the language is arguably ambiguous and, therefore, subject to departmental interpretation. Thus, pursuant to Chevron , the DOT has wide latitude and is entitled to substantial deference when rendering an interpretation, provided that it does so reasonably and in a manner that is consistent with the plain meaning of the statute. Conversely, opponents of the NPRM assert that when Congress specifically added the phrase "actual control" to the statute, they were in effect codifying the DOT's long-standing precedent and not granting any additional authority over the interpretation of the phrase than previously existed. In addition, opponents of the NPRM assert that the DOT's interpretation is contrary to the express language of the statute. Specifically, they argue that unlike the four narrow areas of control defined by the DOT, actual control of an air carrier rests with the entity that makes the fundamental economic decisions that determine the nature of the airlines' operations. These decisions include, but are not limited to, the types of airplane flown, markets to be served, flight schedules, fares, and aircraft maintenance and other services. Thus, according to opponents of the NPRM, relinquishing control over these elements of an air carrier renders any other statutory requirements "pointless." Finally, opponents of the proposed NPRM cite the military's continued reliance on the Civil Reserve Air Fleet Program (CRAF). Under this program, domestic air carriers supply aircraft on a voluntary basis to increase the military's airlift capacity. CRAF allows the U.S. military, in times of need, to demand access to a selected percentage of the civil aircraft fleet to deliver troops and equipment to the battlefield. Concern with respect to CRAF is not new; prior to the NPRM, several commentators had noted that changes to the U.S. civil aviation ownership and control requirements could substantially hinder or even destroy CRAF, as aircraft that move from domestic to foreign ownership would not be under any legal obligation to remain available to the program. The NPRM specifically states that for an air carrier to be considered a U.S. citizen, decisions with respect to CRAF are to remain under the control of U.S. citizens; however, at least one commentator has questioned how the DOT will ensure that U.S. citizens are not pressured by their foreign partners to either modify or eliminate their participation in this voluntary program. In addition, both Continental Airlines and Delta Airlines noted that new foreign owners might, as a result of their control over other commercial aspects of an airline, divest the use, upkeep, and maintenance of "long-haul" aircraft that are useful to the CRAF. Divestitures of this type would, argued the commentators, render those airlines of no effective use to CRAF and, therefore, could potentially result in a diminished air fleet from which DOD could call upon. In response to the numerous comments on the NPRM and to the spate of legislative responses from Members of Congress discussed below, on May 5, 2006, the DOT issued a "Supplemental Notice of Proposed Rulemaking" (SNPR) that attempts to clarify the Department's position on several of the major issues raised by the initial NPRM. In light of the fact that several critical comments revolved around the influence that foreign investors may have, the DOT clarified its proposed interpretation by stating that it "would be requiring all delegations to foreign interests ultimately to be revocable by the board of directors or the voting shareholders." According to the DOT, requiring that any delegations of authority to foreign investors be revokable ensures that "actual control" is retained by U.S. citizens, as the Federal Aviation Act requires that both the board of directors and the voting shareholders be controlled by super-majorities of U.S. citizens (⅔ of the board and/or 75% of the shareholders must be U.S. citizens). The DOT also responded at length to the legal arguments presented by the commentators, especially with respect to the agency's legal authority to adopt such an interpretation of the underlying statute. The DOT, in making its arguments, appears to rely on well-established principles of administrative law, especially with respect to its ability to effectively interpret and administer the statute. DOT argues that they have often interpreted the citizenship statute and, in fact, developed the "actual control" test prior to its inclusion in the statute by Congress. In addition, DOT asserts that Congress, in adopting the "actual control" language into the statute, recognized the need for continued agency interpretation and "did not direct us to follow the past interpretations." DOT's position appears to be that the amendment to the Federal Aviation Act, which inserted the phrase "actual control," did not in any way amend or alter the agency's discretionary authority to modify its interpretation as appropriate. In support of its position, the DOT extensively cites the amendment's legislative sponsor and floor manager, who, at the time the Vision—100 legislation was being considered, stated that the amendment "leaves the interpretation of effective control up to DOT, but the department can draw upon its decades of precedents to reach these conclusions." Further, DOT cites to the floor manager's assertion that the amendment "was simply a reflection of existing law" and that the inclusion of the actual control language "will not in any way affect [the Department's] determination of what constitutes a citizen of the United States." In addition to addressing the numerous other legal and policy arguments made by opposition comments, the SNPR specifically addressed the concerns raised with respect to CRAF commitments. First, DOT clarifies and expands its proposal to require that not only CRAF commitments be actually controlled by U.S. citizens, but also that overall airline participation in "national defense airlift operations" be in the actual control of only U.S. citizens. According to the DOT, this requirement means that "the carrier could not allow foreign investors to make decisions that would make participation in CRAF or other national defense airlift operations impossible as a practical matter." Moreover, if there was suspicion that national defense airlift operations were precluded or impaired by decisions of the foreign investor(s), the SPNR indicates that DOT would investigate to determine if the requirements for the actual control test was being satisfied by the carrier. The DOT responds to the concerns about the proposal's potential negative impact on CRAF commitments by noting that participation in the CRAF is a voluntary commercial arraignment in which the airlines commit aircraft in return for access to U.S. government contracts. According to the DOT, because nothing in the NPRM changes or alters that dynamic "DOD can adjust the economic incentives of the program in order to better ensure sufficient military airlift capacity" and, thus, maintaining adequate participation levels. Finally, in direct response to some of the commentators concerns about fleet divestment, DOT argues that because domestic carriers make their fleet decisions based on what is best to ensure a successful commercial operation, foreign owners would "be motivated by the same commercial incentives" and, therefore, in DOT's opinion, there should be no significant changes to CRAF commitment levels. The DOT and DOD have entered into a Memorandum of Understanding (MOU) that appears to be intended to provide a procedural framework for DOD's participation in DOT's consideration of air carrier citizenship issues as they relate to CRAF commitments. This MOU will become effective on the date that the final actual control rule goes into effect. The MOU applies in situations that involve (1) citizenship issues in which the proposed actual control rules may apply and (2) airlines that have existing CRAF commitments or have aircraft that could be operated as part of the "Long-Range International Segment of the CRAF program." According to the MOU, DOT agrees to notify DOD of all air carrier fitness requests and, upon request from DOD, will share with DOD all documents relating to fitness reviews that implicate CRAF commitments. DOT further agrees to consult with DOD with respect to an ultimate disposition in those reviews where DOD has expressed an interest. In cases where DOT and DOD disagree, and DOD so requests, meetings can be arranged to discuss and solicit input prior to a final decision. Moreover, in situations where DOD can demonstrate "good cause," which, while not specifically defined, appears to include "a significant reduction or proposed significant reduction in a carrier's capability to meet its CRAF commitments," DOT agrees to "commence a review to determine the continuing fitness of an identified air carrier within the scope of this agreement...." In cases where DOD requests a continuing fitness review, it agrees to provide all information and documents, necessary to support its position, in a manner that can be provided to the air carrier so that it may properly respond. Finally, DOD agrees to "expeditiously provide any input to DOT so as not to delay DOT's processing of the case...." Several Members of Congress have taken an interest in this rulemaking and have even filed written comments with DOT expressing concerns with respect to CRAF commitments, airline employees, and consumer protection issues. In addition, companion House and Senate bills have been introduced in the 109 th Congress to address this issue. H.R. 4542 and S. 2135 both contain provisions that would prevent the DOT from issuing a decision on the NPRM for a period of one year after the date of enactment. The House and Senate bills both require that at least 180 days prior to issuing a final decision, the DOT shall submit to Congress a report assessing the impact of the proposed rule on various aspects of domestic and international aviation law. In addition, both the House and Senate attempted to address this issue by adopting language in their respective versions of the 2006 Emergency Supplemental Appropriations Bill. While the House of Representatives' version did not contain any legislative language with respect to the DOT rulemaking, the committee report made express mention of the issue. According to the committee's report, the committee considers airlines to be part of the United States' critical infrastructure and, as such, believes that it is "critical that any final rule regarding foreign control of U.S. airlines not only comply with current laws regarding foreign ownership, but also comply with statutes recently passed by the Congress which require that all U.S. airlines be under the 'actual control' of U.S. citizens." The committee, therefore, inserted language directing the Secretary of Transportation "to refrain from issuing a final rule for 120 days." While this suggestion is a clear expression of the views of the House Appropriations Committee, it would not have been legally binding on the DOT and, absent some other legislative action, would likely not have prevented the promulgation of a final rule with respect to foreign ownership. The Senate version, on the other hand, did contain explicit legislative language that would have effectively prevented the DOT from promulgating a final rule. Ultimately, however, neither version was included in the final bill. Subsequently, both the House of Representatives and the Senate have included the following identical language into the Transportation, Treasury, and Housing and Urban Development, the Judiciary, District of Columbia Appropriations Bill ( H.R. 5576 ): None of the funds made available in this Act may be used by the Department of Transportation to finalize or implement the policy proposed in the notice of proposed rulemaking published in the Federal Register on November 7, 2005 (70 Fed. Reg. 67389), or the supplemental notice of proposed rulemaking published in the Federal Register on May 5, 2006 (71 Fed. Reg. 26425), in Docket No. OST-2003-15759. This language, if included in the final appropriations measure, would appear to prohibit the DOT from promulgating the final rule using any funds made available for fiscal year (FY) 2007. In addition, if DOT were to issue a final rule prior to the enactment of this language, it would appear to prevent the use of any FY2007 funds from being used to implement the rule's provisions. While it is difficult to conceive of any statutory interpretation arguments that DOT could use to avoid the plain meaning of this language, it is important to note that the language does not contain any independent enforcement mechanism. As such, to ensure compliance, Congress would likely have to rely on its oversight functions or other general laws governing the use of appropriated funds, such as the Anti-Deficiency Act. Another major issue facing international civil aviation law is cabotage. As previously mentioned, cabotage is the right of a foreign airline to carry passengers and/or cargo between airports of the same country (e.g., from New York to Los Angeles). Currently, the Federal Aviation Act contains a general prohibition against cabotage activity by foreign air carriers. The prohibition states that "aircraft may take on for compensation, at a place in the United States, passengers or cargo destined for another place in the United States only if—(1) specifically authorized under section 40109(g) of this title; or (2) under regulations the Secretary prescribes authorizing air carriers to provide otherwise authorized air transportation with foreign registered aircraft under lease or charter to them without crew." If neither of those situations exists, foreign aircraft are not permitted to perform cabotage within the United States. In addition, the Secretary of Transportation has general discretionary authority to waive other economic-related statutory provisions listed in section 40109(c) "when the Secretary decides that the exemption is consistent with the public interest." The cabotage prohibition, however, is not among the regulations listed in section 40109(c). Congress last amended the cabotage laws as part of the Vision—100 Century of Aviation Authorization Act. The enacted changes permit "eligible cargo" to be removed from aircraft, including foreign aircraft, in Alaska and "not be deemed to have broken its international journey in, be taken on in, or be destined for Alaska." The statute defines "eligible cargo" as cargo "transported between Alaska and any other place in the United States on a foreign air carrier (having been transported from, or thereafter being transported to, a place outside the United States on a different air carrier or foreign air carrier) that is carried—(A) under the code of a United States air carrier providing air transportation to Alaska; (B) on an air carrier way bill of an air carrier providing air transportation to Alaska; (C) under a term arrangement or block space agreement with an air carrier; or (D) under the code of a United States air carrier for purposes of transportation within the United States." These provisions provide for a very limited statutory exception to the general prohibition against cabotage activities. While it does not appear that the current draft "Open Skies" Agreement with the European Union requires the granting of more cabotage rights to foreign-owned or controlled carriers, it appears to remain a major issue in international civil aviation. It appears, however, that statutory changes would be required before the executive branch can enter into any sort of agreement purporting to liberalize the cabotage rules. Although foreign aircraft are allowed to navigate within U.S. airspace, unless specifically authorized either by statute or DOT regulations, they are not permitted to perform any form of cabotage within the United States. While it is unclear what, if any, economic effect a more liberal cabotage policy would have on the domestic airline industry, only Congress has the legal authority to amend the Federal Aviation Act and permit foreign carriers to have cabotage rights.

Much of the law regarding civil aviation has been developed through a combination of domestic laws and international agreements between the United States and other nations. In 1992, the United States Department of Transportation (DOT) introduced the "Open Skies" initiative and began negotiating and entering into modern civil aviation agreements with foreign countries, as well as individual members of the European Union (EU). As a result of a 2002 European Court of Justice ruling that several portions of these "Open Skies" Agreements violated EU law, the United States and the EU have been negotiating a new Open Skies Agreement. A tentative agreement appears to exist between the parties that if enacted would, among other things, allow every EU and U.S. airline to fly between every city in the European Union and every city in the United States and would permit U.S. and EU airlines to determine the number of flights, their routes, and fares according to market demand. Despite this development, there appears to remain several areas of international civil aviation law that the tentative agreement does not address. Among them are the issues of foreign ownership and control, participation in the Civil Reserve Air Fleet Program, and cabotage. Presently, U.S. law requires that to operate as an air carrier in the United States, an entity must be a citizen of the United States. To be considered a citizen for civil aviation purposes, an entity must be owned either by an individual U.S. citizen, a partnership of persons who are each U.S. citizens, or a corporation (1) whose president and at least two-thirds of the board of directors and other managing officers are U.S. citizens, (2) that is under the actual control of U.S. citizens, and (3) has at least 75 percent of its stock owned or controlled by U.S. citizens. Recently, however, the DOT released a Notice of Proposed Rulemaking (NPRM) that would change its interpretation of what constitutes "actual control." If adopted, this new interpretation could have major implications for U.S. and international civil aviation. Several issues relating to this NPRM are currently being debated, including the consistency with the operative statutes and the viability of the Civil Reserve Air Fleet Program (CRAF), should more extensive foreign ownership be permitted. In addition, Members of Congress have taken a significant interest in this DOT rulemaking, both through direct participation in the rulemaking process and by introducing legislation ( H.R. 4542 and S. 2135 ) that would prohibit the adoption of a final rule for one year and require the DOT to submit reports and analysis on the impact of the new interpretation on the domestic industry and national security concerns. Furthermore, both the House and Senate have adopted amendments to the proposed Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia and Independent Agencies Appropriations Act of 2007 ( H.R. 5576 ) that would effectively forestall the DOT from adopting a final rule. U.S. law also contains a general restriction on cabotage, defined as the transportation of passengers or cargo by foreign air carriers from one point in the United States to another. This report provides background on U.S. civil aviation agreements, updates the current status of U.S. "Open Skies" negotiations with the EU, and addresses the legal debate concerning both the foreign ownership and control rules and the cabotage laws. It will be updated as events warrant.

The debate in Congress over whether and how to address possible future climate change is intensifying. Often, the role of the U.S. agriculture sector is invoked in this debate. Agriculture is a source of greenhouse gas (GHG) emissions, which many scientists agree are contributing to observed climate change. Agriculture is also a "sink" for sequestering carbon, which partly offsets these emissions. Carbon sequestration (the capture and storage of carbon) in agricultural soils can be an important component of a climate change mitigation strategy, limiting the release of carbon from the soil to the atmosphere. Congress is considering a range of climate change policy options, including GHG emission reduction programs that would either mandate or authorize a cap-and-trade program to reduce GHG emissions. In general, the current legislative proposals would not require emission reductions in the agriculture and forestry sectors. However, some of these proposals would allow farmers and landowners to generate offsets in support of a cap-and-trade program. Other proposals that Congress has considered would give farmers and landowners a share of available allowances (or credits) for sequestration and/or emission reduction activities. These offsets and allowances could be sold to facilities (e.g., power plants) covered by a cap-and-trade program. Some bills have also specified that the proceeds from auctioned allowances be used to promote certain activities, including farmland conservation and developing bio-energy technologies. This report is organized in three parts. First, it discusses the extent of GHG emissions associated with the U.S. agriculture sector, and cites current and potential estimates for U.S. agricultural soils to sequester carbon and partly offset national GHG emissions. Second, the report describes the types of land management and farm conservation practices that can reduce GHG emissions and/or sequester carbon in agricultural soils, highlighting those practices that are currently promoted under existing voluntary federal agricultural programs. The Appendix provides a summary primer of the key background information presented in these first two sections. Finally, the report provides a brief overview of legislative action within the ongoing energy and climate debate in Congress to enact changes to existing laws and regulations affecting primarily the energy-producing sectors and other sectors thought to be contributing to GHG concentrations. Many of these energy and climate bills include provisions that could involve farmers and landowners by allowing agriculture and forestry-based carbon offsets and allowances and/or by allowing for farm-based biofuels, biomass residues, and dedicated renewable energy crops. More detail on these bills is available in other CRS reports. This report also describes provisions enacted in the 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246 ) that could expand the scope of existing farm and forestry conservation programs in ways that could more broadly encompass certain aspects of these climate change initiatives. This farm bill provision is also invoked in most energy and climate bills in order to establish an advisory committee to oversee implementation of agricultural and forestry carbon offsets. The report concludes with a discussion of some of the types of questions that may be raised regarding the role of the U.S. agriculture sector in the broader climate change debate. This report does not address the potential effects of global climate change on U.S. agricultural production. Such effects may arise because of increased climate variability and incidence of global environmental hazards, such as drought and/or flooding, pests, weeds, and diseases, or temperature and precipitation changes that might cause locational shifts in where and how agricultural crops are produced. This report also does not address how ongoing or anticipated initiatives to promote U.S. bioenergy production may effect efforts to reduce GHG emissions and/or sequester carbon, such as by promoting more intensive feedstock production and by encouraging fewer crop rotations and planting area setbacks, which could both raise emissions and reduce carbon uptake. Agriculture is a both a source and a sink of greenhouse gases, generating emissions that enter the atmosphere and removing carbon dioxide (CO 2 ) from the atmosphere through photosynthesis and storing it in vegetation and soils (a process known as sequestration). Sequestration in farmland soils partially offsets agricultural emissions. Despite this offset, however, the U.S. agriculture sector remains a net source of GHG emissions. Estimates of GHG emissions and sinks for the U.S. agriculture sector presented in this report are the official U.S. estimates of national GHG emissions and carbon uptake, as published annually by the U.S. Environmental Protection Agency (EPA) in its Inventory of U.S. Greenhouse Gas Emissions and Sinks . EPA's Inventory data reflect annual national emissions by sector and fuel, including estimates for the agriculture and forestry sectors. EPA's estimates rely on data and information from the U.S. Department of Agriculture (USDA), the Department of Energy, the Department of Transportation, the Department of Defense, and other federal departments. The EPA-published data are rigorously and openly peer reviewed through formal interagency and public reviews involving federal, state, and local government agencies, as well as private and international organizations. For the agriculture and forestry sectors, USDA publishes a supplement to EPA's Inventory , which builds on much of the same data and information, but in some cases provides a more detailed breakout by individual states and sources. In this CRS report, emissions from agricultural activities are aggregated in terms of carbon dioxide or CO 2 -equivalents, and expressed as million metric tons (MMTCO 2 -Eq.). This aggregation is intended to illustrate agriculture's contribution to national GHG emissions and to contrast emissions against estimates of sequestered carbon. Total GHG emissions from U.S. agricultural activities have averaged 514 MMTCO 2 -Eq. in the past few years ( Table 1 ). As a share of total U.S. GHG emissions, the agriculture sector represents about 7% of all estimated annual emissions. Data dating back to 1990 indicate that emissions associated with the U.S. agriculture activities have been increasing, rising from estimated total emissions of 460 MMTCO 2 -Eq. in 1990. EPA's reported emissions are expressed in terms of CO 2 -equivalent units, and cover both estimated direct emissions and indirect emissions related to electricity use in the sector. These estimates do not cover other types of emissions associated with some agricultural activities, such as carbon monoxide, nitrogen oxides, and volatile organic compounds. Although the agriculture sector is a leading economic sector contributing to national GHG emissions, its share of total emissions is a distant second compared to that of the energy sector. Fossil fuel combustion is the leading source of GHG emissions in the United States (about 80%), with the energy sector generating 85% of annual emissions across all sectors. The types of direct GHG emissions associated with agricultural activities are methane (CH 4 ) and nitrous oxide (N 2 O), which are among the key gases that contribute to GHG emissions. These gases are significant contributors to atmospheric warming and have a greater effect warming than the same mass of CO 2. Agricultural sources of CH 4 emissions mostly occur as part of the natural digestive process of animals and manure management in U.S. livestock operations. Sources of N 2 O emissions are mostly associated with soil management and commercial fertilizer and manure use on U.S. croplands, as well as production of nitrogen-fixing crops. Emissions of N 2 O from agricultural sources account for about two-thirds of all reported agricultural emissions; emissions of CH 4 account for about one-third of all reported emissions. Across all economic sectors, the U.S. agriculture sector is the leading source of N 2 O emissions (about 70%) and a major source of CH 4 emissions (about 25%). These direct emissions account for the bulk (more than 90%) of estimated emissions associated with U.S. agriculture activities, totaling 530 MMTCO 2 -Eq. in 2007. Estimates dating back to 1990 indicate that direct emissions from the U.S. agriculture sector have increased steadily, up from about 430 MMTCO 2 -Eq. in 1990. These estimates do not include emissions associated with on-farm energy use and forestry activities. Sources of CH 4 and N 2 O emissions from agricultural activities are measured across five categories. Agriculture soil management: Nitrous oxide emissions from farmland soils are associated with cropping practices that disturb soils and increase oxidation, which can release emissions into the atmosphere. The types of practices that contribute to emissions releases are fertilization; irrigation; drainage; cultivation/tillage; shifts in land use; application and/or deposition of livestock manure and other organic materials on cropland, pastures, and rangelands; production of nitrogen-fixing crops and forages; retention of crop residues; and cultivation of soils with high organic content. Enteric fermentation: Methane emissions from livestock operations occur as part of the normal digestive process in ruminant animals and are produced by rumen fermentation in metabolism and digestion. The extent of such emissions is often associated with the nutritional content and efficiency of feed utilized by the animal. Higher feed effectiveness is associated with lower emissions. Manure management: Methane and nitrous oxide emissions associated with manure management occur when livestock or poultry manure is stored or treated in systems that promote anaerobic decomposition, such as lagoons, ponds, tanks, or pits. Rice cultivation: Methane emissions from rice fields occur when fields are flooded and aerobic decomposition of organic material gradually depletes the oxygen in the soil and floodwater, causing anaerobic conditions to develop in the soil, which releases methane. Agricultural residue burning: Methane and nitrous oxide emissions are released by burning residues or biomass. The share of GHG emissions for each of these categories is as follows: agriculture soil management (68% of emissions), enteric fermentation (21%), manure management (10%), rice cultivation (1%), and field burning of agricultural residues (less than 1%). Approximately 70% of agricultural emissions are associated with the crop sector and about 30% with the livestock sector ( Figure 1 ). The sector also emits CO 2 and other gases through its on-farm energy use, for example, through the use of tractors and other farm machinery. These emissions are generally aggregated along with other transportation and industrial emissions in the "energy" sources, where they constitute a very small share of the overall total emissions for the sector, estimated at 30 MMTCO 2 -Eq. ( Table 1 ). Estimates over the time period since 1990 indicate that emissions associated with electricity use in agriculture activities have been steady or decreasing. These estimates do not include emissions associated with food processing or distribution, which are generally aggregated with emissions for the transportation and industrial sectors. Land use and forestry activities account for less than 1% of total estimated GHG emissions in the United States ( Table 1 ). Emissions associated with forestry activities are estimated based on information about forest fires and also land use changes on croplands, wetlands, and peatlands, as well as land conversion and input limitations and management changes. Agricultural activities may also emit other indirect greenhouse gases, such as carbon monoxide, nitrogen oxides, and volatile organic compounds from field burning of agricultural residues. These emissions are not included in EPA's annual Inventory estimates because they contribute only indirectly to climate change by influencing tropospheric ozone, which is a greenhouse gas. Agricultural activities may also release other types of air emissions, some of which are regulated under the federal Clean Air Act, including ammonia, volatile organic compounds, hydrogen sulfide, and particulate matter. These types of emissions are typically not included in proposals to limit GHG emissions. EPA's estimates are based on annual USDA data on crop production, livestock inventories, and information on conservation and land management practices in the agriculture sector. Actual emissions will depend on site-specific factors, including location, climate, soil type, type of crop or vegetation, planting area, fertilizer and chemical application, tillage practices, crop rotations and cover crops, livestock type and average weight, feed mix and amount consumed, waste management practices (e.g., lagoon, slurry, pit, and drylot systems), and overall farm management. Emissions may vary from year to year depending on actual growing conditions. The EPA-reported data reflect the most recent data and historical updates, and reflect underlying methodological changes, in keeping with Intergovernmental Panel on Climate Change (IPCC) guidelines. More detailed information is in EPA's Inventory . There is potential to lower GHG emissions from U.S. agricultural facilities at both crop and livestock operations through further adoption of certain conservation and land management practices. In most cases, such practices may both reduce emissions and sequester carbon in agricultural soils. Options to reduce nitrous oxide emissions associated with crop production include improved soil management, more efficient fertilization, and implementing soil erosion controls and conservation practices. In the past 100 years, intensive agriculture has caused a soil carbon loss of 30%-50%, mostly through traditional tillage practices. In contrast, conservation tillage practices preserve soil carbon by maintaining a ground cover after planting and by reducing soil disturbance compared with traditional cultivation, thereby reducing soil loss and energy use while maintaining crop yields and quality. Practices include no-till and minimum, mulch, and ridge tillage. Such tillage practices reduce soil disturbance, which reduces oxidation and the release of carbon into the atmosphere. Therefore, conservation tillage practices reduce emissions from cultivation and also enhance carbon sequestration in soils (discussed later in this report). Nearly 40% of U.S. planted areas are under some type of conservation tillage practices. Methane emissions associated with livestock production can be reduced through improved manure and feed management. Improved manure management is mostly associated with installing certain manure management systems and technologies that trap emissions, such as an anaerobic digester or lagoon covers. Installing such systems generates other principal environmental benefits. Installing an anaerobic digester to capture emissions from livestock operations, for example, would also trap other types of air emissions, including air pollutants such as ammonia, volatile organic compounds, hydrogen sulfide, nitrogen oxides, and particulate matter that are regulated under the federal Clean Air Act. Other benefits include improved water quality through reduced nutrient runoff from farmlands, which may be regulated under the federal Clean Water Act. Many manure management systems also control flies, produce energy, increase the fertilizer value of any remaining biosolids, and destroy pathogens and weed seeds. Manure management systems, however, can be costly and difficult to maintain, given the typically high start-up costs and high annual operating costs. For example, the initial capital cost of an anaerobic digester with energy recovery is between $0.5 million and $1 million at a large-sized dairy operation, and annual operating costs are about $36,000. Initial capital costs for a digester at a larger hog operation is about $250,000, with similar operating costs. Upfront capital costs tend to be high because of site-specific conditions at an individual facility, requiring technical and engineering expertise. Costs will vary depending on site-specific conditions but may also vary by production region. Costs may be higher in areas with colder temperatures, where some types of digesters may not be appropriate or may require an additional heat source, insulation, or energy requirements to maintain constant, elevated temperatures. Energy requirements to keep a digester heated are likely be lower in warmer climates. Incentives are available to assist crop and livestock producers in implementing practices and installing systems that may reduce GHG emissions. Such incentives include cost-sharing and also low-interest financing, loan guarantees, and grants, as well as technical assistance with implementation. Funding for anaerobic digesters at U.S. livestock operations has been available to livestock producers under various farm bill programs. Despite the availability of federal and/or state-level cost-sharing and technical assistance, adoption of such systems remains low throughout the United States. There are currently about 100 digester systems in operation or planned at commercial dairy and hog farms, accounting for only 1% of operations nationwide ( Figure 2 ). Improved feed strategies may also lower methane emissions at livestock operations. Such strategies may involve adding supplements and nutrients to animal diets, substituting forage crops for purchased feed grains, or instituting multi-phase feeding to improve digestive efficiency. Other options involve engineering genetic improvements in animals. Purchasing feed supplements and more intensely managing animal nutrition and feeding practices may add additional costs and management requirements at the farm level. Agriculture can sequester carbon, which may offset GHG emissions by capturing and storing carbon in agricultural soils. On agricultural lands, carbon can enter the soil through roots, litter, harvest residues, and animal manure, and may be stored primarily as soil organic matter (SOM; see Figure 3 ). Soils can hold carbon both underground in the root structure and near the soil surface and in plant biomass. Loss of soil carbon may occur with shifts in land use, with conventional cultivation (which may increase oxidation), and through soil erosion. Carbon sequestration in agricultural soils can be an important component of a climate change mitigation strategy, since the capture and storage of carbon may limit the release of carbon from the soil to the atmosphere. Voluntary land retirement programs and programs that convert or restore grasslands and wetlands promote carbon capture and storage in agricultural soils. Related practices include afforestation (including the conversion of pastureland and cropland), reforestation, and agro-forestry practices. Conservation practices that raise biomass retention in soils and/or reduce soil disturbance, such as conservation tillage and/or installing windbreaks and buffers, also promote sequestration. More information is provided in the report section " Conservation Practices that Promote Mitigation ." CRS Report RS22964, Measuring and Monitoring Carbon in the Agricultural and Forestry Sectors , summarizes estimated sequestration rates for selected types of farm and forestry practices, based on the current literature as summarized by USDA and EPA. Total carbon sequestration from U.S. agricultural activities has averaged about 44 MMTCO 2 -Eq. during the 2003-2007 time period ( Table 1 ). Compared to total agriculture-based emissions, sequestration within the sector accounts for only a small share (less than 10%) of its annual emissions. Compared to total U.S. GHG emissions, agriculture-based sequestration accounts for less than 1% of emissions each year. Data dating back to 1990 indicate that carbon sequestration associated with U.S. agriculture activities has decreased significantly, from an estimated total storage of 96 MMTCO 2 -Eq. in 1990 to 45 MMTCO 2 -Eq. in 2007. Carbon sequestration in the U.S. agriculture sector currently offsets only about 5% of the carbon-equivalent of reported GHG emissions generated by the agriculture sector each year. Thus the sector remains a net source of GHG emissions. These estimates do not include estimates for the forestry sector, or sequestration activities on forested lands or open areas that may be affiliated with the agriculture sector. Forests and trees account for a majority (about 95%) of all estimated carbon uptake in the United States, mostly through forest restoration and tree-planting. As shown in Table 1 , land use and forestry practices account for a much larger share of annual carbon storage from land-based systems, and are estimated to have averaged 1,105 MMTCO 2 -Eq. during the past few years. Compared to total U.S. GHG emissions, sequestration from land use and forestry practices accounts for about 16% of emissions each year. Historical data show that carbon sequestration from land use and forestry activities has increased, rising from an estimated storage of 660 MMTCO 2 -Eq. in 1990 to 910 MMTCO 2 -Eq. in 2007. The agriculture and forestry sectors are only part of the overall carbon sequestration debate. Carbon sequestration by these sectors is usually referred to as indirect or biological sequestration. Biological sequestration is considered to have less potential for carbon sequestration than direct sequestration, also referred to as carbon capture and storage, and is typically associated with oil and gas production. EPA's Inventory estimates of carbon uptake in agricultural soils are based on annual data and information on cropland conversion to permanent pastures and grasslands, reduced summer fallow areas in semi-dry areas, increased conservation tillage, and increased organic fertilizer use (e.g, manure) on farmlands, as well as information on adoption rates and use of certain conservation and land management practices. However, actual carbon uptake in agricultural soils depends on several site-specific factors, including location, climate, land history, soil type, type of crop or vegetation, planting area, tillage practices, crop rotations and cover crops, and farm management in implementing certain conservation and land management practices. Estimates of the amount of carbon sequestered may vary depending on the amount of site-specific information included in the estimate, as well as on the accounting procedures and methodology used to make such calculations. In general, the effectiveness of adopting conservation and land management practices will depend on the type of practice, how well the practice is implemented, and also on the length of time a practice is undertaken. For example, time is needed for a certain conservation practice to take hold and for benefits to accrue, such as buildup of carbon in soils from implementing conservation tillage or other soil management techniques, and growing time for cover crops or vegetative buffers. The overall length of time the practice remains in place is critical, especially regarding the sequestration benefits that accrue over the time period in which land is retired. In addition, not all conservation and land management practices are equally effective or appropriate in all types of physical settings. For example, the use and effectiveness of conservation tillage practices will vary depending on soil type and moisture regime, which may discourage some farmers from adopting or continuing this practice in some areas. The potential impermanence of conservation and land management practices raises concerns about the effectiveness and limited storage value of the types of conservation practices that sequester carbon, given that the amount of carbon stored depends on the willingness of landowners to adopt or continue to implement a particular voluntary conservation practice. There are also concerns that the addition of other conservation practices may not significantly enhance the sequestration potential of practices that might already be in place. This raises questions about the cost-effectiveness of sequestering carbon on farmlands relative to other climate change mitigation strategies in other industry sectors. Finally, implementing conservation practices and installing new technologies may be contingent on continued cost-sharing and other financial incentives contained in the current farm bill; programs funded through this legislation help offset the cost to farmers for these practices and technologies, which some farmers may not be willing to do otherwise. USDA reports that the potential for carbon uptake in agricultural soils is much greater than current rates. USDA forecasts that the amount of carbon sequestered on U.S. agricultural lands will more than double from current levels by 2012, adding roughly an additional 40 MMTCO 2 -Eq. of sequestered carbon attributable to the sector. This additional uptake is expected through improved soil management (roughly 60%), improved manure and nutrient management (about 30%), and additional land-retirement sign-ups (about 10%). Longer-term estimates from USDA and EPA report that the potential for net increases in carbon sequestration in the agriculture sector could reach an estimated 590 to 990 MMTCO 2 -Eq. per year ( Table 2 ). An additional carbon uptake potential of 590 to 990 MMTCO 2 -Eq. per year would more than offset the agriculture sector's annual GHG emissions, or offset 8% to 14% of total current national emissions from all sources. Currently, carbon uptake in agricultural soils sequesters under 1% of total national GHG emissions annually ( Table 1 ). Many U.S. farm groups claim that the U.S. agriculture sector has the potential to store between 15% and 25% of total annual U.S. emissions, but it is unclear whether this cited potential also includes already substantial sequestration from current land use and forestry practices. An estimated 16% of all GHG emissions are currently sequestered annually, with the bulk through growth in forest stocks. Studies by both the USDA and EPA provide aggregate annual estimates of the additional carbon storage potential for various agricultural and forestry activities ( Table 2 ). These aggregate estimates are in addition to current estimated sequestration rates in these sectors ( Table 1 ). The USDA and EPA studies both account for current conditions, as well as expected direct costs and opportunity costs in modeling landowners' decision-making. These estimates are measured in terms of carbon storage over time (15 to 100 years) across a range of assumed carbon market prices (roughly $3 to $50/MT CO 2 -Eq.). These published results show a range of carbon prices by type of farming and forestry activity. The presumed relationship between carbon sequestration and price shows that as carbon prices rise, this will likely attract more investment and adoption of additional and differing types of mitigation activities. These estimates are reported as a national total and are also broken out by select U.S. regions. Table 2 shows the estimated carbon mitigation potential reported by EPA and USDA for two mitigation categories—afforestation and soil sequestration—across a range of assumed carbon prices. In general, the low end of this price range indicates that carbon sequestration potential is mostly associated with cropland management practices, whereas higher-end prices are mostly associated with land retirement and conversion, and a longer sequestration tenure. EPA's analysis includes estimates of other mitigation activities, including forest management on private lands. These estimates reflect the net reduction compared to baseline conditions, or current estimated sequestration ( Table 1 ). USDA reports that the potential for net increases in carbon sequestration through afforestation and in agricultural soils is estimated to range widely from 0 to 587 MMT CO 2 -Eq. per year, following the implementation of a 15-year program ( Table 2 ). Sequestration potential is estimated to be greatest at the high end of the assumed price range for carbon (about $30/MT CO 2 -Eq.). At this price level, USDA projects sequestration levels could increase by 587 MMT CO 2 -Eq. annually. Even at lower prices (about $3/MT CO 2 -Eq.), the projected mitigation potential is double the current estimated sequestration for these types of agricultural activities. Comparable EPA estimates (15-year period) project a higher sequestration potential for the U.S. agricultural sector across the range of assumed carbon prices, reported at 160 MMT CO 2 -Eq. per year at lower carbon prices to 990 MMTCO 2 -Eq. per year at the higher price levels. For information on USDA and EPA estimates and how these estimates were derived, see CRS Report RS22964, Measuring and Monitoring Carbon in the Agricultural and Forestry Sectors . Afforestation (creation of forested areas mostly through conversion of pastureland and cropland) reflects the majority of the estimated uptake potential, with agricultural soil carbon sequestration accounting for a smaller share at the high end of the estimated range. However, large projected gains in mitigation from afforestation could be overly optimistic, given that afforestation is highly dependent on land availability and may only come from available cropland or pastureland. However, as reported by the Congressional Budget Office (CBO), estimates of the future mitigation potential from afforestation and cropland soil sequestration often vary significantly across different studies. In March 2009, EPA indicated that it had updated its underlying model and subsequently its estimates of the carbon mitigation potential from farm and forestry practices. Underlying changes to EPA's simulation models are reflected in EPA's June 2009 analysis of the House-passed climate bill, H.R. 2454 , which includes an analysis of the estimated effects of the bill's carbon offset program for certain mitigation activities on agriculture and forest lands. EPA's current analysis predicts that the mitigation potential from agriculture soil carbon activities will be largely outweighed by other types of mitigation activities, including forest, manure, and crop management, which are now predicted to account for a greater share of overall mitigation potential compared to previous EPA estimates. For more information about EPA's model and estimates, see CRS Report R40236, Estimates of Carbon Mitigation Potential from Agricultural and Forestry Activities . There is potential to increase the amount of carbon captured and stored in U.S. agricultural lands by adopting certain conservation and land management practices. In most cases, such practices may both sequester carbon in farmland soils and reduce emissions from the source. Estimates of representative carbon sequestration rates for selected types of farm and forestry practices are provides in CRS Report RS22964, Measuring and Monitoring Carbon in the Agricultural and Forestry Sectors . The main carbon sinks in the agriculture sector are cropland conversion and soil management, including improved manure application . More than half of all carbon sequestered on U.S. agricultural lands is through voluntary land retirement programs and programs that convert or restore land (e.g., conversion to open land or grasslands, conversion to cropland, restoration of grasslands or wetlands, etc.). Undisturbed open lands, grasslands and wetlands can hold carbon in the soil both underground in the root structure and above ground in plant biomass. The amount of carbon sequestered will vary by the type of land management system. Afforestation and cropland conversion have the greatest potential to store the most carbon per acre annually, compared with other types of systems, such as tree plantings and wetlands conversion, or storage in croplands. Conservation tillage is another major source of sequestration on farmlands, accounting for about 40% of the carbon sequestered by the U.S. agriculture sector . Improved tillage practices improve biomass retention in soils and reduce soil disturbance, thereby decreasing oxidation. The amount of carbon sequestered will vary by the type of tillage system. Among conservation tillage practices, no-till stores about 30% more than the amount of carbon stored by reduced tillage but more than five times that stored on intensive tilled croplands. (Conservation tillage practices are explained in the section on " Potential for Additional Emission Reductions .") Mitigation strategies at U.S. livestock operations are not commonly associated with carbon uptake and are not included in EPA's carbon sink estimates. However, installing manure management systems, such as an anaerobic digester, captures and/or destroys methane emissions from livestock operations and may be regarded as avoided emissions or as a form of direct sequestration capturing emissions at the source. As a result, many carbon offset programs are promoting manure management systems as a means to capture and store methane at dairy operations, which may also be sold as carbon offset credits and as a renewable energy source . Given that there are currently few anaerobic digesters in operation, estimates of the actual or potential uptake may be difficult to estimate. (Manure management systems are further explained in the section on " Potential for Additional Emission Reductions .") Improved dietary and feed management strategies may also lower methane emissions by reducing intestinal methane in livestock. Research in this area is still ongoing. As already noted, such strategies may involve adding supplements and nutrients to animal diets, substituting forage crops for purchased feed grains, or instituting multiphase feeding to improve digestive efficiency. Some noted strategies include feeding cattle flaxseed, alfalfa, and grasses high in Omega-3 fatty acids, and managing animal nutrition and feeding practices. Genetic improvements in animals might also lower intestinal methane. Guidelines will likely vary depending on location, nutritional requirements, management strategy, and animal type. Existing conservation and farmland management programs administered at both the federal and state levels often encourage the types of agricultural practices that can reduce GHG emissions and/or sequester carbon. These include conservation, forestry, energy, and research programs within existing farm legislation. These programs were initiated predominantly for other production or environmental purposes, and few specifically address climate change concerns in the agriculture and forestry sectors. However, some USDA and state-level programs have started to place additional attention on the potential for emissions reduction and carbon storage under certain existing programs. Agricultural conservation and other farmland practices broadly include land management, vegetation, and structures that can also reduce GHG emissions and/or sequester carbon, such as: Land retirement, conversion, and restoration —conversion/restoration to grasslands, wetlands, or rangelands; and selected structural barriers, such as vegetative and riparian buffers, setbacks, windbreaks; Cropland tillage practices —reduced/medium- till, no-till, ridge/strip-till vs. conventional tillage; Soil management/conservation —soil supplements/amendments, soil erosion controls; precision agriculture practices, recognized best management practices; Cropping techniques —crop rotations, cover cropping, precision agriculture practices, efficient fertilizer/nutrient (including manure) and chemical application; Manure and feed management —improved manure storage (e.g., anaerobic digestion, methane recovery); and improved feed efficiency, dietary supplements; Grazing management —rotational grazing, improved forage practices; Bioenergy/biofuels substitution —on-farm use, replacing fossil fuels or deriving bioenergy from land-based feedstocks, renewable energy; and E nergy efficiency and energy conservation (on-farm). In general, conservation programs administered by USDA and state agencies encourage farmers to implement certain farming practices and often provide financial incentives and technical assistance to support adoption. Participation in these programs is voluntary, and farmers may choose to discontinue participating in these programs. The effectiveness of these practices depends on the type of practice, how well the practice is implemented, and also on the length of time a practice is undertaken. These programs are generally designed to address site-specific improvements based on a conservation plan developed with the assistance of USDA or state extension technical and field staff that considers the goals and land resource base for an individual farmer or landowner. Such a conservation plan is typically a necessary precursor to participating in USDA's conservation programs. Although not the focus of this report, forestry practices that reduce emissions and/or sequester carbon include afforestation and reforestation; forest management (such as harvest for long-term wood products, reduced-impact logging, certified sustainable forestry, thinning/release, and fertilization); pruning; and avoided deforestation and forest degradation. Conservation programs administered by USDA are designed to take land out of production and to improve land management practices on land in production, commonly referred to as "working lands" ( Table 3 ). These programs are provided for in Title II (Conservation) of the 2008 farm bill ( P.L. 110-246 , the Food, Conservation, and Energy Act of 2008). Land retirement/easement programs. Programs focused on land management, including programs that retire farmland from crop production and convert it back into forests, grasslands, or wetlands, including rental payments and cost-sharing to establish longer term conservation coverage. Major programs include the Conservation Reserve Program (CRP), the Wetlands Reserve Program (WRP), the Grasslands Reserve Program (GRP), the Farmland Protection Program (FPP). Working lands programs. Programs focused on improved land management and farm production practices, such as changing cropping systems or tillage management practices, are supported by cost-sharing and incentive payments, as well as technical assistance. Major programs include the Environmental Quality Incentives Program (EQIP), the Conservation Stewardship Program (CSP), the Agricultural Management Assistance (AMA) program, and the Wildlife Habitat Incentives Program (WHIP). Prior to the 2008 farm bill, few USDA conservation programs were specifically intended to address climate change concerns in the agriculture sector. One exception is USDA's Conservation Innovation Grants program, a subprogram under EQIP that provides for competitive awards, and is intended to accelerate technology transfer and adoption of innovative conservation technologies, mostly through pilot projects and field trials. Past grants have supported development of approaches to reduce ammonia emissions from poultry litter, promote conservation tillage and solar energy technologies, and develop private carbon sequestration trading credits. USDA has expanded some of its existing farmland conservation programs to further encourage emission reductions and carbon sequestration. Many of the practices encouraged under EQIP and CSP reduce net emissions. USDA has provided additional technical guidance to make GHG a priority resource concern in EQIP and CSP by giving greater weight to projects that promote anaerobic digestion, nutrient management plans, and other types of cropland practices, such as installing shelter belts and windbreaks, encouraging conservation tillage, and providing resources for biomass energy projects. Programs such as CTA, AMA, EQIP, and CSP list a reduction in emissions as a national priority for the program, which effects the funding and ranking of projects. Under CRP, USDA has modified how it scores and ranks offers to enroll land in CRP in order to place greater weight on installing vegetative covers that sequester carbon. USDA also has an initiative under CRP's continuous enrollment provision to plant up to 500,000 acres of bottomland hardwoods, which are among the most productive U.S. lands for sequestering carbon. As of April 2009, more than 45,000 acres have been enrolled in this initiative. In addition, USDA has recognized that marketable credits may be generated by these conservation programs and has removed any claim on these credits through recent changes to many of its conservation program rules. Not including funding increases authorized under the 2008 farm bill, actual funding for USDA's conservation programs has totaled more than $5 billion annually. Voluntary land retirement programs and programs that convert or restore land account for roughly 37% annually of all USDA conservation spending ( Figure 4 ). Programs that provide cost-sharing and technical assistance to farmers to implement certain practices, such as EQIP, CSP, and AMA, provide another 21% annually. USDA's conservation technical assistance and extension services account for about one-fourth of all funding. Other federal funding through other programs also generally promotes natural resource protection on U.S. farms. Generally, the decision on how and where this funding is ultimately used is made at the individual state level. The 2008 farm bill expanded mandatory funding for several existing conservation programs that contribute to increased carbon storage in soil and plants, reduced agriculture-based emissions associated with climate change, lowered energy consumption by farming operations, and increased production of renewable fuels and feedstocks, among other provisions. In particular, the 2008 farm bill increased funding for both EQIP and CSP, and expanded eligibility to include management practices on private forest lands and other natural resource areas. The farm bill also provided funding for the Conservation Innovation Grants program to address air quality concerns from agriculture operations, including greenhouse gas emissions. It also made changes to USDA's land retirement programs. Changes to CRP are expected to encourage the establishment of native vegetation cover on lands set aside or retired from agricultural production, and promote tree planting and management to improve habitat and encourage healthy forest growth and carbon uptake. Changes to FPP include expanded eligibility for forest lands, and changes to GRP include expanded grasslands enrollment and emphasis on long-term and permanent easement. The farm bill also included a new conservation provision intended to facilitate the participation of farmers and ranchers in emerging carbon and emissions trading markets by directing USDA to establish guidelines for standards, accounting procedures, reporting protocols, and verification processes for carbon storage and other types of environmental services markets. (This new provision is described in further detail in the section on " 2008 Farm Bill Provisions ") Aside from USDA's conservation programs, there are other farm bill programs that encourage the types of agricultural practices that can reduce GHG emissions and/or sequester carbon. These include programs in the farm bill's forestry, energy, and research titles. Renewable energy projects receive additional program funding across three farm bill titles: Title II (Conservation), Title IX (Energy), and Title VII (Research). In addition to cost-sharing provided under USDA's conservation programs, one energy title provision in the 2008 farm bill is the Rural Energy for America Program (Section 9007). This program provided mandatory funding for grants for energy audits, renewable energy development, and financial assistance to promote energy efficiency and renewable energy development for farmers and rural small businesses . In the past this program has provided funding to support construction of anaerobic digesters in the livestock sector. Other renewable energy funding is also available through other federal programs. The 2008 farm bill also created the Biomass Crop Assistance Program to assist in the development of renewable energy feedstocks, including cellulosic ethanol, and to provide incentives for producers to harvest, store, and transport biomass. The farm bill's Title VII (Research) also provided for research on renewable fuels, feedstocks, and energy efficiency and for competitive grants for on-farm research and extension projects. Forestry programs, administered by USDA's Forest Service, are provided for in Title VIII (Forestry) of the farm bill. Typically, there is often little overlap between the various agriculture and forestry programs administered by USDA, and few forestry programs provide support to agricultural enterprises. One program with an agroforestry component is the Healthy Forests Reserve Program, which was reauthorized in the 2008 farm bill. This program assists with restoring and enhancing forest ecosystems; however, funding for this program is usually limited to a few states. The 2008 farm bill also created new programs with possible agroforestry benefits, including (1) the Community Forest and Open Space Conservation Program, authorizing new cost-share grants for local governments, tribes, and non-profits to acquire lands threatened by conversion to non-forest uses; and (2) the Emergency Forest Restoration Program, providing for the rehabilitation of croplands, grasslands, and private non-industrial forests following natural disasters. The farm bill also expanded or created other programs to protect and restore privately owned forests, which could also contribute to retaining or increasing carbon storage capacity on forest lands. State-level agriculture conservation and land management programs are available to farmers in most states, and operate in much the same manner as federal conservation programs. These programs may also provide financial and technical assistance to farmers to implement certain practices, using additional state resources and in consultation with state agriculture agencies and extension staff. No single current compendium exists outlining the different types of agriculture conservation programs across all states; instead information is available through individual state government websites . Many states have cost-share programs that provide financial assistance to landowners to implement practices that benefit a state's forests, fish, and wildlife. Many of these programs provide technical assistance and up to 75% of the eligible costs of approved conservation projects to qualified landowners. Several states also provide low-interest financing to farmers and landowners to encourage conservation practices or to implement best management practices for the agriculture sector. Many states also have buffer strip programs, which may provide rental payments to landowners who agree to create or maintain vegetative buffer strips on croplands near rivers, streams, ponds, and wetlands. Typically states that have taxing authority for conservation purposes, such as Nebraska, Missouri, and Oregon, tend to have more stable funding and staffing to support conservation improvements. The Pew Center on Global Climate Change has identified several ongoing state programs and demonstration projects specifically intended to promote carbon storage and emissions reduction in the U.S. agriculture sector . For example, several states, including Oregon, Wisconsin, Vermont, and North Carolina, are promoting methane recovery and biofuels generation from livestock waste. A program in Iowa is providing support and funding to promote switchgrass as a biomass energy crop. In Maryland, state income tax credits are provided for the production and sale of electricity from certain biomass combustion. Georgia has a program that leases no-till equipment to farmers. In addition, several states, including Nebraska, Oklahoma, Wyoming, North Dakota, and Illinois, have formed advisory committees to investigate the potential for state carbon sequestration. In California, an accounting program is being developed to track possible future costs to mitigate GHG emissions in the U.S. agriculture sector. There are a number of state programs and initiatives geared toward climate change mitigation strategies across sectors including agriculture. For example, the Center for Climate Strategies has assisted public officials in several states to develop climate action plans. Most of these plans incorporate strategies for emissions reduction goals in selected economic sectors, including the agriculture and forestry sectors. Plans for states such as Maryland, Michigan, and Florida include farm and forestry management activities ranging from forest and land use management to soil carbon management, tree planting, farmland conservation, expanded use of biomass feedstocks, methane capture and utilization, nutrient efficiency, and on-farm energy efficiency, among other practices. California is actively developing programs to support the state's enacted emission reductions legislation. California's climate change statute requires state agencies to identify GHG emissions reduction strategies that can be pursued before most of the law takes effect in 2012. The state has identified several agriculture sector strategies that it plans to consider as early actions, including (1) adopting a manure digester protocol for calculating GHG mitigation; (2) establishing collaborative research on how to reduce GHG emissions from nitrogen land application; (3) replacing stationary diesel agricultural engines with electric motors; and (4) evaluating potential measures for enclosed dairy barns, modified feed management, and manure removal strategies to reduce methane emissions at dairies. These early action strategies would be in addition to funding for the state's manure digester cost-share program and other agriculture projects, including carbon sequestration projects involving rice straw utilization, energy and water conservation, biofuels support, soil management, and other types of renewable energy and manure management programs for dairies. Other regional climate initiatives include the Regional Greenhouse Gas Initiative (RGGI) and the Western Climate Initiative (WCI), among others. RGGI is a partnership of 10 northeastern and mid-Atlantic states that creates a cap-and-trade system aimed at limiting carbon dioxide emissions from power plants. Seven western states (and four Canadian provinces) have formed the WCI, which set an economy-wide GHG emissions target of 15% below 2005 levels by 2020. Both RGGI and WCI include agricultural programs among their list of eligible offset and allowance project categories for trading emissions as part of their programs, along with other non-agricultural projects. Under RGGI, eligible agricultural and forestry project categories include sequestration of carbon due to afforestation, and avoided methane emissions from agricultural manure management operations. Under WCI and California's climate statute, agriculture and forestry sector actions being considered for inclusion as offset and allowance projects cover forestry protocols, manure digester protocols, measures for enclosed dairy barns, modified feed management, manure removal strategies to reduce methane emissions at dairies, emission reductions from nitrogen land application, soil sequestration, and replacing stationary diesel agricultural engines with electric motors. The voluntary carbon offset market allows businesses, interest groups, and individuals the opportunity to purchase carbon credits generated from projects that either prevent or reduce an amount of carbon entering the atmosphere, or that capture carbon from the atmosphere. Companies and individuals purchase carbon credits for varied reasons. For example, some may purchase credits to reduce their "carbon footprint," using credits to offset all or part of a GHG-emitting activity (e.g., air travel, corporate events, or personal automobile use); others may purchase credits to bank the reductions in anticipation of a mandatory GHG reduction program . In the United States, the current offset framework operates on a voluntary basis since there is no federal requirement that GHG emissions be curtailed. Some states and/or regional GHG reduction initiatives may limit the use of carbon offsets. Several states have programs that support the voluntary carbon offset exchange, often involving U.S. farmers and private landowners. Farmer participation in voluntary carbon credit trading programs has been growing rapidly. As of mid-2009, participation involved an estimated roughly 10,000 farmers across about 35 states covering more than more than 10 million acres . One program, operated by the National Farmers Union (NFU), involves more than 4,000 producers in more than 30 states, with more than 5 million acres of farmland enrolled. Another program operated by the Iowa Farm Bureau involves 5,000 to 6,000 producers also in more than 30 states (mostly Iowa, Kansas, and Nebraska, but also Illinois, Ohio, Michigan, Wisconsin, Minnesota, South Dakota, Missouri, Indiana, and Kentucky), also with more than 5 million acres of farmland enrolled. The types of practices covered by this program include no-till crop management; conversion of cropland to grass; managed forests, grasslands, and rangelands; new tree plantings; anaerobic digesters and methane projects; wind, solar, or other renewable energy use; and forest restoration. Similar programs also have been initiated in Illinois (Illinois Conservation and Climate Initiative), Indiana (Environmental Credit Corporation), and the Northwest (Upper Columbia Resource Conservation and Development Council). Another, Terrapass, has among its projects two large-scale dairy farms that use anaerobic digesters and methane capture for energy production . These programs "aggregate" carbon credits across many farmers and landowners. These credits may later be sold on the Chicago Climate Exchange. Farmer participation in such programs may help offset farm costs to install emissions controls and/or practices that sequester carbon by providing a means for them to earn and sell carbon credits. Congress is currently considering a range of energy and climate policy options. In general, the current climate proposals would not require GHG emission reductions in the agriculture and forestry sectors. However, if enacted, provisions in these bills could potentially raise farm input costs for fossil fuels, fertilizers, energy, and other production inputs. These higher costs could potentially be offset by possible farm revenue increases should farmers participate in carbon offset and renewable energy provisions that are part of this legislation. For example, within cap-and-trade proposals being debated in Congress are provisions that could provide tradeable allowances to certain agricultural industries, and provisions that could establish a carbon offset program for domestic farm- and land-based carbon storage activities. In addition, the renewable energy provisions contained in these bills could potentially expand the market for farm-based biofuels, biomass residues, and dedicated energy crops. These and related bills and issues are currently being debated in Congress. More detailed information on these bills is provided in other CRS Reports. The omnibus 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246 ) included a new ecosystem services market provision that expanded the scope of existing farm and forestry conservation programs in ways that could more broadly encompass certain aspects of these climate change initiatives. The 2008 farm bill's so-called environmental services market provision seeks to facilitate the participation of farmers and landowners in environmental services markets, focusing first on carbon storage . This provision was also intended to help address some of the measurement and quantification issues surrounding agricultural and forestry carbon credits, as well as to expand existing voluntary conservation and other farm bill programs, providing incentives that could accelerate opportunities for agriculture and forestry to reduce emissions associated with climate change, adopt energy efficiency measures, and produce renewable energy feedstocks. The 2008 farm bill provision seeks to "establish technical guidelines that outline science-based methods to measure the environmental services benefits from conservation and land management activities in order to facilitate the participation of farmers, ranchers, and forest landowners in emerging environmental services markets." The intended purpose of these technical guidelines is to develop (1) a procedure to measure environmental services benefits; (2) a protocol to report these benefits; and (3) a registry to collect, record, and maintain the benefits measured. The provision also requires that USDA provide guidelines for establishing a verification process as part of the protocol for reporting environmental services, but it allows USDA to consider the role of third parties in conducting independent verification. In carrying out this directive, USDA is directed to work in consultation with other federal and state government agencies, non-governmental interests, and other interested persons as determined by USDA. However, the enacted bill did not specifically address funding for this provision. Nevertheless, the inclusion of this provision in the farm bill is expected to expand the scope of existing farm and forestry conservation programs in ways that will more broadly encompass certain aspects of the climate change debate. For more detailed background information, see CRS Report RL34042, Provisions Supporting Ecosystem Services Markets in U.S. Farm Bill Legislation . In addition, this farm bill provision is invoked within the current energy and climate legislation. For example, H.R. 2454 would expand this provision to establish an independent advisory committee to provide advice on establishing and implementing a carbon offset program for domestic agricultural and forestry practices. In December 2008, USDA announced it would create a federal government-wide "Conservation and Land Management Environmental Services Board" to assist USDA with the "development of new technical guidelines and science-based methods to assess environmental service benefits which will in turn promote markets for ecosystem services including carbon trading to mitigate climate change." A federally chartered public advisory committee will advise the board, and will include farmers, ranchers, forest landowners, and tribal representatives, as well as representatives from state natural resource and environmental agencies, agriculture departments, and conservation and environmental organizations. USDA's press release also announced that USDA was establishing a new Office of Ecosystem Services and Markets (OESM), which will provide administrative and technical assistance in developing the uniform guidelines and tools needed to create and expand markets for ecosystem services in the farming and forestry sectors. In March 2009, the House Agriculture Committee issued a climate change questionnaire, which was distributed to more than 400 organizations, to solicit input on proposals to reduce GHG emissions. The published survey responses are available on the committee's website and highlight some concerns, as well as the potential market opportunities issues for farmers and landowners. These and other issues were discussed at a House Agriculture Committee hearing in June 2009, and also at subsequent Senate Agriculture Committee hearings in July and September 2009 as part of the committees' review of pending climate legislation. Similar issues were raised at a 110 th Congress subcommittee hearing of the Senate Agriculture Committee in May 2008. Although the current legislative proposals do not specifically include agricultural operations among "covered entities" under a mandatory emissions cap, some interest groups continue to question whether certain types of agricultural operations could eventually be brought in under some proposals. Still others continue to argue that U.S. agriculture will be affected by anticipated climate legislation in terms of generally increasing energy and production input costs that will negatively impact the farming sector. The extent to which the agricultural and forestry sectors will participate in an offset and allowance program continues to be actively debated in Congress. The inclusion of provisions that allow for agriculture and forestry offsets and allowances as part of a cap-and-trade scheme has been generally supported by a broad-based industry coalition. This coalition consists of agricultural groups representing commodity crops, livestock and dairy, the American Farm Bureau Federation, the National Farmers Union, the American Farmland Trust, and other agriculture support and utility companies. Former Senators and Majority Leaders Bob Dole and Tom Daschle are also advocating on behalf of the Bipartisan Policy Center that farmers be fully integrated into any cap-and-trade program. Most groups, including many within the environmental community, generally support the inclusion of carbon offset projects within a cap-and-trade scheme since this is likely to help contain overall costs of a carbon reduction program. The inclusion of agriculture and forestry offsets with a carbon reduction program, however, has remained controversial since the Kyoto Protocol negotiations during the 1990s. During those negotiations, there was marked disagreement among countries and interest groups, arguing either for or against the inclusion of offsets from the agriculture and forestry sectors. The EU's GHG emission program, the Emission Trading System (ETS), which was established in 2005, does not provide for agricultural or forestry projects and activities. Among the reasons are (1) pragmatic concerns regarding measurement and verification, given the sheer number of farmers and landowners, and (2) ideological concerns about granting too much flexibility in how emission reductions are met, which could undermine overall program goals. Among the areas of concern regarding biological sequestration offsets are those highlighted in two previous sections of this report, " Uncertainty Estimating Emissions " and " Uncertainty Estimating Carbon Sinks ." In summary, primary areas of concern include Permanence/Duration , given that land uses can change over time (e.g., forest lands to urban development, other natural events such as fires or pests); Measurement/Accounting , given that biological sequestration measurement is difficult and estimates can vary, actual emission reduction or sequestration depends on site-specific factors (e.g., location, climate, soil type, crop/vegetation, tillage practices, farm management, etc.); Effectiveness , the success of the mitigation practice will depend on the type of practice, how well implemented and managed by the farmer or landowner, and the length of time the practice is undertaken; Additionality/Double Counting , given that some of the activities generating offsets would have occurred anyway under a pre-existing program or practice, and thus may not go beyond business as usual (BAU); and/or given that some reductions may be counted by another program (e.g., attributable to other environmental goals under various farm conservation programs) or toward more than one GHG reduction target; and Leakage , given that reductions in one place could result in additional emissions elsewhere. A more detailed discussion of some of these issues is available in various reports by CRS, the Government Accountability Office (GAO), and other groups. Following is a list of questions that may be raised as Congress continues to consider the role of the agriculture and forestry sectors as part of the broader climate change debate. Emissions reductions. Should carbon sequestration efforts be balanced by incentives to obtain additional emissions reductions in the agriculture sector through improved conservation and farm management practices, which could have a more immediate, direct, and lasting effect on overall GHG emissions? How might the existing regulatory framework for controlling air pollutants affect the climate change debate? What are the potential options for reducing GHG emissions at U.S. farming operations? How might cost concerns be addressed that limit broader adoption of manure management systems and also feed management strategies at U.S. livestock operations? Carbon sequestration. What are the upper limits of carbon capture and storage initiatives in the agriculture sector? For example, are such carbon sinks temporary or long-lasting, and what limits exist on their storage value? Do they rely appropriately on the willingness of landowners to adopt or continue to implement a particular conservation practice? Do they rely too heavily on the willingness of landowners to convert existing farmland to open space or prevent the conversion of existing farmland to non-farm uses? Are they cost-effective when compared to sinks in other sectors? How might concerns regarding uncertainty be addressed when measuring and estimating the amount of carbon sequestered in agricultural soils? Carbon offset or credit markets. What is the federal role in possibly expanding existing conservation programs in conjunction with efforts to create new market opportunities for farmers by developing a carbon credit trading system? How will USDA implement the new 2008 farm bill provision directing the Department to work with other agencies and organization to establish guidelines and standards for measuring agricultural and forestry environmental benefits, including carbon storage? What are the potential measurement, monitoring, enforcement, and administrative issues of implementing a carbon credit trading system involving the agriculture and forestry sectors? How would stored carbon be measured and verified; how much compensation would be available and for how long; what are required management practices; and which accounting methodologies should be used? Would such a system operate under a voluntary or a mandatory framework? Farm b ill Programs. Are there opportunities to expand existing federal conservation and land management programs to achieve greater emissions reduction and carbon sequestration in the agriculture sector? How might emissions reduction and carbon sequestration be integrated with the many other goals of conservation programs, such as improved soil quality and productivity, improved water and air quality, and wildlife habitat? Which programs or practices are the most beneficial and cost-effective? Are there ways to rank applications from farmers under existing programs to grant a higher weight to proposals to address climate change goals? Are there existing state programs that effectively address climate change and could be adopted at the federal level? Bioenergy promotion. How might ongoing or anticipated initiatives to promote U.S. bioenergy production, such as corn-based or cellulosic ethanol, affect the options for land management or conservation strategies that could increase carbon uptake on agricultural lands and in agricultural soils? Might broader climate change goals be affected by increased agricultural production in response to corn-based ethanol? For example, might previously retired land be brought back into corn production or might this result in more intensive corn production, including fewer crop rotations and planting area setbacks, which could raise emissions and reduce the amount of carbon sequestered? Are there other competing commercial crops that might be used as a feedstock for ethanol that could also affect emissions and carbon uptake potential? Energy efficiency. What are the opportunities for improved on-farm energy efficiency and conservation? How might these be integrated into the broader framework on climate change mitigation in the agriculture sector? Safeguarding U.S. agricultural production. Among the possible effects of global climate change on agricultural production are increased climate variability and increased incidence of global environmental hazards, such as drought and/or flooding, pests, weeds, and diseases, or location shifts in where agriculture is produced. Climate change in some locations increases the yields of some crops. Some U.S. production regions are likely to fare better than others. Are additional initiatives needed in the U.S. agriculture sector to prepare for the potentially effects of global climate change that might impact U.S. agricultural production and food security? Which regions and crops might be "winners" or "losers" and how can transitions be eased?

The agriculture sector is a source of greenhouse gas (GHG) emissions, which many scientists agree are contributing to observed climate change. Agriculture is also a "sink" for sequestering carbon, which might offset GHG emissions by capturing and storing carbon in agricultural soils. The two key types of GHG emissions associated with agricultural activities are methane (CH4) and nitrous oxide (N2O). Agricultural sources of CH4 emissions mostly occur as part of the natural digestive process of animals and manure management at livestock operations; sources of N2O emissions are associated with soil management and fertilizer use on croplands. This report describes these emissions on a carbon-equivalent basis to illustrate agriculture's contribution to total national GHG emissions and to contrast emissions against estimates of sequestered carbon. Emissions from agricultural activities account for 6%-8% of all GHG emissions in the United States. Carbon captured and stored in U.S. agricultural soils partially offsets these emissions, sequestering about one-tenth of the emissions generated by the agriculture sector, but less than 1% of all U.S. emissions annually. Emissions and sinks discussed in this report are those associated with agricultural production only. Emissions associated with on-farm energy use or with food processing or distribution, and carbon uptake on forested lands or open areas that might be affiliated with the farming sector, are outside the scope of this report. Most land management and farm conservation practices can help reduce GHG emissions and/or sequester carbon, including land retirement, conservation tillage, soil management, and manure and animal feed management, among other practices. Many of these practices are encouraged under most existing voluntary federal and state agricultural programs that provide cost-sharing and technical assistance to farmers, predominantly for other production or environmental purposes. However, uncertainties are associated with implementing these types of practices depending on site-specific conditions, the type of practice, how well it is implemented, the length of time a practice is undertaken, and available funding, among other factors. Despite these considerations, the potential to reduce emissions and sequester carbon on agricultural lands is reportedly much greater than current rates. Congress is currently considering a range of energy and climate policy options. In general, the current climate proposals would not require GHG emission reductions in the agriculture and forestry sectors. However, if enacted, provisions in these bills could potentially raise farm input costs for fossil fuels, fertilizers, energy, and other production inputs. These higher costs could potentially be offset by possible farm revenue increases should farmers participate in carbon offset and renewable energy provisions that are part of this legislation. For example, within cap-and-trade proposals being debated in Congress are provisions that could provide tradeable allowances to certain agricultural industries, and provisions that could establish a carbon offset program for domestic farm- and land-based carbon storage activities. In addition, the renewable energy provisions contained in these bills could potentially expand the market for farm-based biofuels, biomass residues, and dedicated energy crops. These and related bills and issues are currently being debated in Congress.

In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions. Collectively, these temporary tax provisions are often referred to as "tax extenders." Of the 33 temporary tax provisions that had expired at the end of 2016 and extended retroactively through 2017, three are individual income tax provisions. The three individual provisions that expired at the end of 2017 have been included in recent tax extenders packages. The above-the-line deduction for certain higher-education expenses, including qualified tuition and related expenses, was first added as a temporary provision in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ), but has regularly been extended since. The other two individual extender provisions are housing related. The provision allowing homeowners to deduct mortgage insurance premiums was first enacted in 2006 (effective for 2007). The provision allowing qualified canceled mortgage debt income associated with a primary residence to be excluded from income was first enacted in 2007. Both provisions were temporary when first enacted, but in recent years have been extended as part of the tax extenders. In recent years, Congress has chosen to extend most, if not all, recently expired or expiring provisions as part of "tax extender" legislation. The most recent tax extender package is the Bipartisan Budget Act of 2018 (BBA18; P.L. 115-123 ). Information on costs associated with extending individual income tax expired provisions is provided in Table 1 . The provisions that were extended in the BBA18 were extended for one year, retroactive for 2017. The estimated cost to make expired provisions permanent is reported by the Joint Committee on Taxation (JCT). The JCT reports estimated deficit effects of extending expired and expiring tax provisions through the 10-year budget window (2018–2027). Historically, when all or part of a taxpayer's mortgage debt has been forgiven, the amount canceled has been included in the taxpayer's gross income. This income is typically referred to as canceled mortgage debt income. Canceled (or forgiven) mortgage debt is common with a "short sale." In a short sale, a homeowner agrees to sell their house and transfer the proceeds to the lender in exchange for the lender relieving the homeowner from repaying any debt in excess of the sale proceeds. For example, in a short sale, a homeowner with a $300,000 mortgage may be able to sell their house for only $250,000. The lender would receive the $250,000 from the home sale and forgive the remaining $50,000 in mortgage debt. Lenders report the canceled debt to the Internal Revenue Service (IRS) using Form 1099-C. A copy of the 1099-C is also sent to the borrower, who in general must include the amount listed in his or her gross income in the year of discharge. It may be helpful to explain why forgiven debt is viewed as income from an economic perspective in order to understand why it has historically been taxable. Income is a measure of the increase in an individual's purchasing power over a designated period of time. When individuals experience a reduction in their debts, their purchasing power has increased (because they no longer have to make payments). Effectively, their disposable income has increased. From an economic standpoint, it is irrelevant whether a person's debt was reduced via a direct transfer of money to the borrower (e.g., wage income) that was then used to pay down the debt, or whether it was reduced because the lender forgave a portion of the outstanding balance. Both have the same effect, and thus both are subject to taxation. The Mortgage Forgiveness Debt Relief Act of 2007 ( P.L. 110-142 ), signed into law on December 20, 2007, temporarily excluded qualified canceled mortgage debt income that is associated with a primary residence from taxation. Thus, the act allowed taxpayers who did not qualify for one of several existing exceptions to exclude canceled mortgage debt from gross income. The provision was originally effective for debt discharged before January 1, 2010. The Emergency Economic Stabilization Act of 2008 (Division A of P.L. 110-343 ) extended the exclusion of qualified mortgage debt for debt discharged before January 1, 2013. The American Taxpayer Relief Act of 2012 ( P.L. 112-240 ) subsequently extended the exclusion through the end of 2013. The Tax Increase Prevention Act of 2014 (Division A of P.L. 113-295 ) extended the exclusion through the end of 2014. The Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) extended the exclusion through the end of 2016. The act also allowed for debt discharged after 2016 to be excluded from income if the taxpayer had entered into a binding written agreement to sell his or her house before January 1, 2017. Most recently, the BBA18 ( P.L. 115-123 ) extended the exclusion through the end of 2017. The rationales for extending the exclusion are to minimize hardship for households in distress and lessen the risk that nontax homeowner retention efforts are thwarted by tax policy. It may also be argued that extending the exclusion would continue to assist the recoveries of the housing market and overall economy. Opponents of the exclusion may argue that extending the provision would make debt forgiveness more attractive for homeowners, which could encourage homeowners to be less responsible about fulfilling debt obligations. The exclusion may also be viewed by some as unfair, as its benefits depend on whether a homeowner is able to negotiate a debt cancelation, the income tax bracket of the taxpayer, and whether the taxpayer retains ownership of the house following the debt cancellation. The JCT estimated the one-year extension included in the BBA18 would result in a 10-year revenue loss of $2.4 billion (see Table 1 ). Traditionally, homeowners have been able to deduct the interest paid on their mortgage, as well as any property taxes they pay as long as they itemize their tax deductions. Beginning in 2007, homeowners could also deduct qualifying mortgage insurance premiums as a result of the Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ). Specifically, homeowners could effectively treat qualifying mortgage insurance premiums as mortgage interest, thus making the premiums deductible if the homeowner itemized, and if the homeowner's adjusted gross income was below a certain threshold ($55,000 for single, and $110,000 for married filing jointly). Originally, the deduction was only to be available for 2007, but it was extended through 2010 by the Mortgage Forgiveness Debt Relief Act of 2007 ( P.L. 110-142 ). The deduction was extended again through 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ), through the end of 2013 by the American Taxpayer Relief Act of 2012 ( P.L. 112-240 ), and through the end of 2014 by the Tax Increase Prevention Act of 2014 (Division A of P.L. 113-295 ). The Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), extended the deduction through the end of 2016. Most recently, the BBA18 ( P.L. 115-123 ) extended the exclusion through the end of 2017. A justification for allowing the deduction of mortgage insurance premiums is the promotion of homeownership and, relatedly, the recovery of the housing market following the Great Recession (the Great Recession began in December 2007 and lasted to June 2009). Homeownership is often argued to bestow certain benefits to society as a whole, such as higher property values, lower crime, and higher civic participation, among others. Homeownership may also promote a more even distribution of income and wealth, as well as establish greater individual financial security. Last, homeownership may have a positive effect on living conditions, which can lead to a healthier population. With regard to the first justification, it is not clear that the deduction for mortgage insurance premiums has an effect on the homeownership rate. Economists have identified the high transaction costs associated with a home purchase—mostly resulting from the downpayment requirement, but also closing costs—as the primary barrier to homeownership. The ability to deduct insurance premiums does not lower this barrier—most lenders will require mortgage insurance if the borrower's downpayment is less than 20% regardless of whether the premiums are deductible. The deduction may allow buyers to borrow more, however, because they can deduct the higher associated premiums and therefore afford a higher housing payment. Concerning the second justification, it is also not clear that the deduction for mortgage insurance premiums is still needed to assist in the recovery of the housing market. Based on the S&P CoreLogic Case-Shiller U.S. National Composite Index, home prices have generally increased since the bottom of the market following the Great Recession. In addition, the available housing inventory is now slightly below its historical level. Both of these indicators suggest that the market as a whole is stronger than when the provision was enacted, and that it may no longer be warranted. Economists have noted that owner-occupied housing is already heavily subsidized via tax and nontax programs. To the degree that owner-occupied housing is oversubsidized, extending the deduction for mortgage insurance premiums would lead to a greater misallocation of resources that are directed toward the housing industry. The JCT estimated the one-year extension included in the BBA18 would result in a 10-year revenue loss of $1.1 billion (see Table 1 ). The BBA18 extended the above-the-line deduction for qualified tuition and related expenses through the 2017 tax year. This provision allows taxpayers to deduct up to $4,000 of qualified tuition and related expenses for postsecondary education (both undergraduate and graduate) from their gross income. Expenses that qualify for this deduction include tuition payments and any fees required for enrollment at an eligible education institution. Other expenses, including room and board expenses, are generally not qualifying expenses for this deduction. The deduction is "above-the-line," that is, it is not restricted to itemizers. Individuals who could be claimed as dependents, married persons filing separately, and nonresident aliens who do not elect to be treated as resident aliens do not qualify for the deduction, in part to avoid multiple claims on a single set of expenses. The deduction is reduced by any grants, scholarships, Pell Grants, employer-provided educational assistance, and veterans' educational assistance. The maximum deduction taxpayers can claim depends on their income level. Taxpayers can deduct up to $4,000 if their income is $65,000 or less ($130,000 or less if married filing jointly); or $2,000 if their income is between $65,000 and $80,000 ($130,000 and $160,000 if married filing jointly). Taxpayers with income above $80,000 ($160,000 for married joint filers) are ineligible for the deduction. These income limits are not adjusted for inflation. One criticism of education tax benefits is that the taxpayer is faced with a confusing choice of deductions and credits and tax-favored education savings plans, and that these benefits should be consolidated. Tax reform proposals have consolidated these benefits into a single education credit in some cases. Taxpayers may use this deduction instead of education tax credits for the same student. These credits include permanent tax credits: the Hope Credit and Lifetime Learning Credit. The Hope Credit has been expanded into the American Opportunity Tax Credit, a formerly temporary provision that was made permanent by the PATH Act. The American Opportunity Tax Credit and the Hope Credit are directed at undergraduate education and have a limited number of years of coverage (two for the Hope Credit and four for the American Opportunity Tax Credit). The Lifetime Learning Credit (20% of up to $10,000) is not limited in years of coverage. These credits are generally more advantageous than the deduction, except for higher-income taxpayers, in part because the credits are phased out at lower levels of income than the deduction. For example, for single taxpayers, the Lifetime Learning Credit begins phasing out at $56,000 for 2017. The deduction benefits taxpayers according to their marginal tax rate. Students usually have relatively low incomes, but they may be part of families in higher tax brackets. The maximum amount of deductible expenses limits the tax benefit's impact on individuals attending schools with comparatively high tuitions and fees. Because the income limits are not adjusted for inflation, the deduction might be available to fewer taxpayers over time if extended in its current form. The distribution of the deduction in Table 2 indicates that some of the benefit is concentrated in the income range where the Lifetime Learning Credit has phased out, but also significant deductions are claimed at lower income levels. Because the Lifetime Learning Credit is preferable to the deduction at lower income levels, it seems likely that confusion about the education benefits may have caused taxpayers not to choose the optimal education benefit. The JCT estimated the one-year extension included in the PATH Act would result in a 10-year revenue loss of $0.4 billion (see Table 1 ). Table A-1 provides information on key policy staff available to answer questions with respect to specific provisions or policy areas.

Three individual temporary tax provisions expired in 2017. In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions. Collectively, these temporary tax provisions are often referred to as "tax extenders." Most recently, Congress addressed tax extenders in the Bipartisan Budget Act of 2018 (BBA18; P.L. 115-123). Three of the four individual income tax provisions that had expired at the end of 2016 were extended in the BBA18, retroactive to 2017. These include the Tax Exclusion for Canceled Mortgage Debt, Mortgage Insurance Premium Deductibility, and Above-the-Line Deduction for Qualified Tuition and Related Expenses. Brief background information on these provisions is provided in this report. The other individual income tax provision that expired at the end of 2016, the medical expense deduction adjusted gross income (AGI) floor of 7.5% for individuals aged 65 and over, was expanded to all taxpayers through 2017 and 2018 in the December 2017 tax legislation (P.L. 115-97). Options related to expired tax provisions in the 115th Congress include (1) extending all or some of the provisions that expired at the end of 2017 or (2) allowing expired provisions to remain expired. This report provides background information on individual income tax provisions that expired in 2017. For information on other tax provisions that expired at the end of 2016, see CRS Report R44677, Tax Provisions that Expired in 2016 ("Tax Extenders"), by [author name scrubbed]. See also CRS Report R44990, Energy Tax Provisions That Expired in 2017 ("Tax Extenders"), by [author name scrubbed], [author name scrubbed], and [author name scrubbed]; and CRS Report R44930, Business Tax Provisions that Expired in 2017 ("Tax Extenders"), coordinated by [author name scrubbed].

O n December 15, 2016, USDA published in the Federal Register a final rule, "Enhancing Retailer Standards in the Supplemental Nutrition Assistance Program (SNAP)." This final rule followed USDA-FNS's proposed rule earlier in the year: On February 17, 2016, the U.S. Department of Agriculture's (USDA's) Food and Nutrition Service (USDA-FNS) published the proposed rule. On April 5, 2016, USDA-FNS published a clarification of the proposed rule and extended the comment period to May 18, 2016 . SNAP, the largest of USDA's domestic food assistance programs, provides benefits to eligible participants; these benefits are redeemable for SNAP-eligible foods at SNAP-authorized retailers. SNAP-authorized retailers are stores and other food sellers that are allowed to accept SNAP benefits. In FY2015, SNAP had an average monthly participation of 45.8 million individuals, $74.0 billion was obligated for the program (most of the funding is for benefits themselves), and nearly 259,000 firms were authorized to accept benefits. The final rule implements provisions of the Agriculture Act of 2014 ("2014 farm bill," P.L. 113-79 ) that made changes to inventory requirements for SNAP-authorized retailers and also addressed other USDA-FNS policy objectives. The proposed rule had been controversial, particularly the provisions not explicitly required by the farm bill. Changes in retailer authorization policy can impact a range of SNAP program stakeholders—not only retailers, but also food manufacturers and program participants. Driving the debate over these changes has been the potential impact on smaller retailers. This report will present a brief background on SNAP retailer authorization and related administrative data, a summary of prior regulations, the statutory changes enacted in the 2014 farm bill, and the final rule's changes to the current regulations (including comparisons to the proposed rule). SNAP benefits may be redeemed only for eligible foods at authorized retailers. The SNAP program authorizes retailers based, in part, on the retailer's inventory or sales. In order to be authorized, a retailer is generally required to (1) apply for authorization , and (2) pass a USDA-FNS administered inspection and authorization process. A wide range of retailers are authorized to accept SNAP, including supermarkets, farmers' markets, and convenience stores. Inventory requirements for SNAP retailers are based on stock or sales of "staple foods," defined in statute as four categories: (1) meat, poultry, or fish; (2) bread or cereals; (3) vegetables or fruits; and (4) dairy products. Although SNAP participants can buy foods that are not in staple food categories, required staple food inventory or sales is one of the bases for authorizing a retailer to accept SNAP benefits. Though many different types of retailers are authorized to accept benefits, data show that the majority of SNAP benefits are redeemed at supermarkets and superstores. In FY2015, approximately 82% of benefits were redeemed in supermarkets and superstores. Although convenience stores make up over 41% of SNAP-authorized retailers, they redeemed approximately 5% of SNAP benefits in FY2015. Figure 1 displays the share of SNAP benefits redeemed by different categories of retailers, with further detail on authorizations and redemptions shown in Table 1 . Retailer data also indicate that smaller retailers (convenience stores, small grocery stores, medium grocery stores) received the bulk of sanctions from USDA-FNS in FY2015; sanctions include time-limited or permanent disqualifications from SNAP. This section summarizes standards for SNAP retailer authorization prior to the final rule ("prior regulations"). Under the prior regulations, a SNAP-eligible retailer had to meet one of two tests: criterion A (based on store inventory) or criterion B (based on store sales). These rules are displayed in Table 2 . Specialty stores, such as fruit and vegetable or seafood markets, tend to apply under criterion B because they carry a limited number of staple food categories. As noted above, SNAP's authorizing law defines "staple foods" as foods in the following categories: meat, poultry, or fish; bread or cereals; vegetables or fruits; and dairy products. The law further provides that staple foods "do not include accessory food items, such as coffee, tea, cocoa, carbonated and uncarbonated drinks, candy, condiments, and spices." Under prior regulations, foods with multiple ingredients were counted in a staple food group based on the "main ingredient" as determined by USDA-FNS. For example, a box of macaroni and cheese might be classified as a variety within a staple food category but in the bread or cereal category (despite containing dairy). Prior regulation also defined perishable staple food items as "items which are either frozen staple food items or fresh, unrefrigerated or refrigerated staple food items that will spoil or suffer significant deterioration in quality within 2-3 weeks." Regulation specified that a "variety" of qualifying foods in a particular category means different types of foods, not different brands, different nutrient values, different varieties of packaging, or different package sizes; the example was given that apples, cabbage, and tomatoes are varieties in the fruit or vegetable staple food category. Although retailers must offer these particular types of foods to qualify as a SNAP-eligible retailer, SNAP participants may redeem their benefits for generally any foods for home preparation and consumption whether they are staple foods or not. SNAP benefits may not be redeemed for alcohol; tobacco; or hot, prepared foods intended for immediate consumption (e.g., a rotisserie chicken). Prior regulations also made ineligible "firms that are considered to be restaurants, that is, firms that have more than 50 percent of their total gross retail sales in hot and/or cold prepared foods not intended for home preparation and consumption." Restaurants authorized to participate under certain states' restaurant option (an option to assist homeless, elderly, and disabled individuals who may have difficulty preparing food) are an exception to this 50% rule. The 2014 farm bill (enacted February 7, 2014) amended many different aspects of SNAP law, including changes to the authorization of SNAP retailers. Section 4002 of P.L. 113-79 required that retailers seeking authorization based on inventory (i.e., criterion A) will have to increase their variety of stock. Namely, the law was amended to require stores to stock at least seven varieties of staple foods in each of the four staple food categories and to stock perishable foods in at least three categories. Section 4002, which includes other requirements for retailers, also amended the authorizing law to require a review of retailer applications to consider "whether the [retailer] applicant is located in an area with significantly limited access to food." The law's conference report included further information on the decision to craft this policy change. In a March 2014 policy memorandum, USDA-FNS said that the 2014 farm bill changes to inventory requirements would require rulemaking to implement. This section summarizes the USDA-FNS final rule's changes to prior regulations and includes comparison to the proposed rule. This section has also been amended to reflect changes made by the FY2017 appropriations law, which limits some of the final rule's provisions. As a basis for rulemaking, in the February 2016 proposed rule, USDA-FNS explained that the proposed rule was "the result of two separate developments": (1) the 2014 farm bill's statutory changes, and (2) "the effort initiated by FNS in 2013 to look at enhancing the eligibility standards for SNAP retailers to better enforce the intent of the [Food and Nutrition Act of 2008] to permit low-income individuals to purchase more nutritious foods for home preparation and consumption." Related to the latter development, USDA-FNS cited findings from an August 2013 Request for Information (RFI) , which posed 14 questions to the public on SNAP retailer eligibility and authorization. USDA-FNS stated that they received from the RFI over 200 comments "from a diverse group, including retailers, academics, trade associations, policy advocates, professional associations, government entities, and the general public." The agency also cited related listening sessions. Before issuing the final rule, FNS reviewed 1,260 germane, nonduplicative comments on the proposed rule. About 72% of comments came from retail food store representatives, owners, managers, or employees, most of whom submitted template or form letters. Some Members of Congress and other stakeholders had voiced strong opposition to aspects of the proposed rule. As the proposed rule would have, the final rule made changes to 7 C.F.R. Part 271 and Part 278 in five areas of retailer authorization policy: (1) sales of hot, prepared foods; (2) definition of staple foods; (3) inventory and depth of stock; (4) access-related exceptions to the rules; and (5) disclosures of retailer information. The final rule's ultimate changes in some ways vary notably from those in the proposed rule. These areas are briefly discussed in the sections to follow. The final rule is presented "at-a-glance"—as compared to the proposed rule and the prior regulations—in Table 4 at the end of this section. Throughout the proposed and final rules, USDA-FNS expressed the objectives of improving access to healthy foods and preserving the integrity of the program. The statute as amended by the farm bill explicitly requires an increase in the minimum number of food varieties and perishable varieties for retailers authorized under criteria A (discussed further below in " Inventory "); and access-related exceptions to retailer authorization (discussed further below in " Access-Related Exceptions to the Rules "). USDA-FNS acknowledged throughout the final rule's preamble that the regulatory changes in other areas are discretionary. Subsequent to the promulgation of this final rule, Congress passed the FY2017 Consolidated Appropriations Act ( P.L. 115-31 , enacted May 5, 2017), which directed USDA to change substantially its implementation of the final rule, particularly variety and breadth of stock requirements. Section 765 of Title VII, the General Provisions for the Department of Agriculture appropriation, in P.L. 115-31 (referred to throughout the remainder of this report as Section 765) required USDA to change how "variety" is defined in the final rule and to implement the "acceptable varieties and breadth of stock" that were in place prior to enactment of the 2014 farm bill until such regulatory amendments are made. For the most current information on the implementation of retailer standards, see USDA-FNS's website, "Enhancing Retailer Standards in the Supplemental Nutrition Assistance Program (SNAP)," https://www.fns.usda.gov/snap/enhancing-retailer-standards-supplemental-nutrition-assistance-program-snap . As published, the effective date for the final rule was January 17, 2017, but most aspects of the rule were to take effect in subsequent months. Since enactment of P.L. 115-31 , USDA-FNS has changed some effective dates from those published in the final rule. The sections that follow note effective dates published on the USDA-FNS website (as of the date of this report). Hot, prepared foods are not eligible for purchase with SNAP benefits, and prior regulations required Criteria A and B retailers to have no more than 50% of their sales in hot or cold prepared foods. Ultimately, the final rule kept this 50% threshold in place but specified that it applies to "foods cooked or heated on-site by the retailer before or after purchase." Under prior regulations, there had been a loophole apparently exploited by some retailers who sell uncooked foods for SNAP purchase and then offer to heat or cook those foods for customers (for free or for a small fee). The final rule did not adopt the proposed rule's proposal to require that at least 85% of an authorized entity's total food sales must be for items that are not cooked or heated on site before or after purchase . (In other words, the proposed rule would have required that no more than 15% of total food sales may be from these foods cooked or heated on-site.) In the final rule's preamble, USDA-FNS expressed particular concern that comments and data subsequently reviewed showed that the 85/15% threshold would make most convenience stores ineligible for SNAP authorization. The proposed rule also would have added measures aimed at preventing one business from splitting into two to circumvent these restaurant-related SNAP rules. In the final rule, USDA-FNS clarified that it will consider separate businesses to be one if the colocated businesses share ownership, sale of similar or same food products, and inventory. Implementation of the final rule's hot, prepared foods provisions will take effect for all retailers beginning on October 16, 2017. Section 765 did not otherwise change the implementation of this policy. The final rule changed the regulatory definition of staple foods in several respects. Under prior regulation, accessory foods were not counted as staple foods. This is maintained and expanded in the final rule. Prior regulations had been interpreted by USDA-FNS to define "accessory foods" as the specific foods listed in the statute: "coffee, tea, cocoa, carbonated and un-carbonated drinks, candy, condiments, and spices." The final rule expanded this regulatory definition, but in a way that is more narrowly tailored than the proposed rule's approach. The final rule expanded the list of accessory food items as follows: Accessory food items include foods that are generally considered snacks or desserts such as, but not limited to, chips, ice cream, crackers, cupcakes, cookies, popcorn, pastries, and candy, and food items that complement or supplement meals such as, but not limited to, coffee, tea, cocoa, carbonated and uncarbonated drinks, condiments, spices, salt, and sugar. The final rule also established that "[i]tems shall not be classified as accessory food exclusively based on packaging size," and "[a] food product containing an accessory food item as its main ingredient shall be considered an accessory food item." In addition, the final rule's preamble, as guidance, included a list of accessory food items, beyond the list above. Section 765 did not change the implementation of this policy. Per the USDA-FNS website, the accessory food changes will take effect for all stores on January 17, 2018. Under prior regulation, foods with multiple ingredients were only counted in one staple food category based on the item's main ingredient. For example, as mentioned above, a box of macaroni and cheese, with pasta as the main ingredient, would be counted as "bread or cereal" for retailer authorization purposes. In the final rule, USDA-FNS maintained this multiple ingredient policy, taking into account many related comments on the proposed rule. The final rule rejected the proposed rule's policy that commercially processed foods and prepared mixtures would not have been counted in any staple food category for retailer authorization. For example, inventory of TV dinners, macaroni and cheese, and canned soups would not have counted toward a store's inventory (or sales) requirements for authorization under the proposed rule. (Such foods would have remained eligible for SNAP purchase.) However, due to changes in the definition of accessory foods in the final rule, if the first ingredient of a multi-ingredient food is an accessory food, the food will not be considered a staple food in the retailer authorization process. Section 765 did not change the implementation of the final rule's multi-ingredient policy, and, per the USDA-FNS website, will take effect for all stores on January 17, 2018. Criterion A authorization is based, in part, on a retailer's stocking a certain number of varieties in each staple food category. The 2014 farm bill required an increase in varieties offered (implementation discussed in " Inventory "). The final rule included increased flexibility to help stock the required number of varieties. In particular, the regulations were amended to count plant-based sources as varieties for the "meat, poultry, or fish" and "dairy products" staple food groups. For instance, nuts, seeds, and beans can now be varieties of "meat, poultry, and fish." In addition, the final rule's preamble, as guidance, includes a list of examples of varieties in each staple food category. Due to the requirements of Section 765, USDA-FNS will not implement the final rule's broader variety definition (e.g., inclusion of plant-based proteins). Section 765 impacted implementation of the farm bill's inventory provisions, but not the depth of stock changes proposed. The final rule codified in the regulations the 2014 farm bill's mandatory changes for retailers applying for authorization under criterion A (inventory-based) by increasing the required minimum variety of foods in each staple food category from three to seven varieties, and increasing the perishable foods requirement from two staple food categories to three staple food categories. The final rule also added specifications on the depth of stock; that is, how many of each item are for sale. Under prior regulations, a retailer could be authorized with a minimum stock of at least 12 food items (one item each of three varieties in each of the four staple food categories, including perishable requirements); proposed and final rules sought to change that. Incorporating the requirements of Section 765, at this time USDA-FNS is neither requiring retailers to increase the number of varieties in each staple food category nor requiring them to increase the categories of perishable foods. The final rule not only implemented the farm bill's staple food changes to 28 varieties (seven varieties in each of the four categories, including perishable requirements), but it added a numeric depth of stock requirement of three stocking units per variety. Under this requirement, a store is required to keep in stock a minimum of 84 staple food items. In the final rule, USDA-FNS halved the proposed rule's depth of stock policy, which would have required six-item depth of stock, requiring a minimum of 168 items. The final rule also added some language to specify that documentation may be provided in cases where it is not clear that the sufficient stocking requirement has been met. While Section 765 required USDA-FNS to maintain three varieties per staple food category, the USDA-FNS rule's change to three stocking units per variety stands. Table 3 summarizes the inventory requirements for criterion A retailers under prior, proposed, and final regulations and implementation under the requirements of Section 765. Prior to the 2014 farm bill, a community's access to a SNAP-authorized retailer was not a consideration in granting or denying a retailer's application for authorization. Implementing the 2014 farm bill language, the proposed rule, as described in its preamble, would have allowed USDA-FNS to consider need for access "when a retailer does not meet all of the requirements for SNAP authorization." USDA-FNS proposed a list of factors that they may consider in making this access determination. The final rule implemented the access-related exceptions with some additional details. It included a more inclusive list of factors to be considered: "access factors such as, but not limited to, the distance from the applicant firm to the nearest currently SNAP authorized firm and transportation options ... FNS will also consider factors such as, but not limited to, the extent of the applicant firm's stocking deficiencies in meeting Criterion A and Criterion B and whether the store furthers the purposes of the Program." The final rule also clarified that FNS's considerations will occur during the application process. Section 765 of P.L. 115-31 did not change the implementation of this policy; it will go into effect starting January 17, 2018. The final rule allowed USDA-FNS to disclose to the public specific information about retailers that have been disqualified or otherwise sanctioned for SNAP violations. The agency argued, in the proposed rule, that this information would assist in the agency's efforts "to combat SNAP fraud by providing an additional deterrent" and would "provide the public with valuable information about the integrity of these businesses and individuals for future dealings." The final rule clarifies that disclosure of these sanctions will only be for the duration of the sanction. This policy took effect on January 17, 2017. As with the proposed rule, within the final rule's preamble, USDA-FNS included a summary of its Regulatory Impact Analysis (RIA). The RIA included qualitative benefits of the final rule such as improving SNAP recipients' access to a variety of healthy food options and authorizing retailers in a way that is consistent with the purposes of SNAP. The analysis estimated that the total cost to the federal government for the agency's increased store inspections would be approximately $3.7 million in FY2018 and $15 million over five years. Under the agency's Regulatory Flexibility Act (RFA) analysis, also referenced in the RIA, USDA-FNS focused on the impacts for small businesses. As USDA-FNS acknowledged in the final rule's preamble, some of the opposition to the proposed rule criticized the agency's analysis, arguing that the analysis had underestimated the financial impact on small retailers. The final rule's RIA and RFA analysis reflect a revised methodology (that now includes opportunity costs and administrative costs) and the final rule's differing policy. The analysis estimated that the inventory changes in the final rule would impact approximately 187,000 smaller retailers (this is 70% of all SNAP-authorized retailers in July 2016). Based on a sample of small SNAP retailers' inventory checklists, USDA-FNS estimated an average cost per retailer of $245 in the first year and about $620 over five years. The analysis estimated that over 87% of the currently participating small retailers would not meet the increased variety requirements, but that most would meet the new perishable requirements. (Under the requirements of Section 765, retailers do not currently face this full burden.) With the final rule's December 2016 publication, implementation of the 2014 farm bill provisions appeared imminent. However, following the May 2017 enactment of the appropriations law policy provision, implementation of new variety and breadth of stock requirements may see further rulemaking. During the 115 th Congress, SNAP retailers will be implementing some new requirements while waiting for others to be proposed and implemented. Because the variety-related requirements originate from a 2014 change in authorizing law, Congress may have an interest in changing the statute again, and related issues may come up in the formulation of the next farm bill.

The Supplemental Nutrition Assistance Program (SNAP), the largest of the U.S Department of Agriculture's (USDA's) domestic food assistance programs, provides benefits to eligible participants; these benefits are redeemable for SNAP-eligible foods at SNAP-authorized retailers. SNAP-authorized retailers are stores and other food sellers that are allowed to accept SNAP benefits. In FY2015, the vast majority of benefits were redeemed at "super stores" and supermarkets. On December 15, 2016, USDA's Food and Nutrition Service (FNS) published in the Federal Register a final rule, "Enhancing Retailer Standards in the Supplemental Nutrition Assistance Program (SNAP)." The final rule implements provisions of the Agriculture Act of 2014 ("2014 farm bill," P.L. 113-79) that increase inventory requirements for SNAP-authorized retailers. In addition, the rule addresses other USDA-FNS policy objectives. Like the proposed rule, the final rule makes changes to 7 C.F.R. Part 271 and Part 278 in five areas of retailer authorization policy: (1) sales of hot, prepared foods; (2) definition of staple foods; (3) inventory and depth of stock; (4) access-related exceptions to the rules; and (5) disclosures of retailer information. The effective date for the final rule is January 17, 2017, but most aspects of the rule take effect on subsequent dates. The final rule responds to many of the comments and concerns raised about the proposed rule. The proposed rule had been controversial, particularly due to the provisions not explicitly required by the farm bill and due to the potential impact of changed inventory requirements on smaller retailers. This report focuses on the final rule as published December 15, 2016. However, a number of the changes in the rule will not go into effect due to provisions in the FY2017 appropriations law (P.L. 115-31, enacted May 5, 2017), which directed USDA to change substantially its implementation of the final rule, particularly retailer inventory requirements. This report currently reflects USDA-FNS plans to implement the final rule as of August 4, 2017. However, the report may not reflect policy developments that have occurred since then. For the most current information on the implementation of retailer standards, see USDA-FNS's website, "Enhancing Retailer Standards in the Supplemental Nutrition Assistance Program (SNAP)," https://www.fns.usda.gov/snap/enhancing-retailer-standards-supplemental-nutrition-assistance-program-snap.

In March 2014, a regional director of the National Labor Relations Board (NLRB or Board) ruled that scholarship football players at Northwestern University are employees for purposes of the National Labor Relations Act (NLRA), and ordered an election to determine support for the College Athletes Players Association (CAPA), a newly created labor organization. Although the full five-member NLRB agreed to review the regional director's decision, an election was held on April 25, 2014, with the ballots impounded until after a final decision is issued in the case. If the decision is upheld and a majority of players have voted to be represented by CAPA, the players are expected to negotiate with the university over various terms and conditions of employment. This report provides an overview of the NLRA, and reviews the decision by the NLRB's regional director. The report also examines the concerns raised by Northwestern and CAPA. The report ends with a brief discussion of other developments that could affect unionization efforts by athletes at private colleges and universities. The NLRA, as amended, establishes the basic framework governing labor-management relations in the private sector. The act provides workers the right to join or form a labor union and to bargain collectively over wages, hours, and other conditions of employment. Under the act, workers also have the right to not join a union. The act requires an employer to bargain in good faith with a union chosen by a majority of employees. To protect the rights of employers and workers, the act identifies certain activities as unfair labor practices. The NLRA covers most, but not all, private sector workers in the United States. It does not cover agricultural workers, family domestic workers, supervisors, or independent contractors. The act does not apply to railroad or airline employees, who are covered by the Railway Labor Act (RLA). The NLRA does not cover federal, state, or local government employees. Most federal employees are covered by the Federal Service Labor-Management Relations Statute (FSLMRS). Employees of state and local governments, including employees of public colleges and universities, are covered by state or local laws. In a majority of states, public employees have the right to engage in some form of collective bargaining. This right may be limited, however, to only some employees (e.g., to public safety workers). The NLRA is administered and enforced by the NLRB, an independent federal agency that consists of a five-member Board and a General Counsel. The Board resolves objections and challenges to secret ballot elections, decides questions about the composition of bargaining units, and hears appeals of unfair labor practices. The General Counsel's office conducts secret ballot elections, investigates complaints of unfair labor practices, issues unfair labor practice charges, and supervises the NLRB's regional and other field offices. The Board and General Counsel are appointed by the President and confirmed by the Senate. Traditionally, the Board is comprised of two Democrats, two Republicans, and a fifth member who belongs to the same party as the President. The NLRA states that a union may be "designated or selected for the purposes of collective bargaining by the majority of the employees in a unit appropriate for such purposes.... " A union that is selected by a majority of employees in an election conducted by the NLRB is certified as the bargaining representative of employees in the bargaining unit. An employer may also voluntarily recognize a union if a majority of employees in a bargaining unit have signed authorization cards. The NLRB conducts a secret ballot election when a petition is filed requesting one. A petition can be filed by a union, worker, or employer. Workers or a union may request an election if at least 30% of workers have signed authorization cards (i.e., cards authorizing a union to represent them). After a petition is filed with the NLRB requesting an election, the employer and union may agree on the time and place for the election and on the composition of the bargaining unit. If an agreement is not reached between the employer and union, a hearing may be held in the relevant regional office of the NLRB. The regional director may then direct the holding of an election. Under specified circumstances, the regional director's decision may be appealed to the full Board. A union is certified by the NLRB as the exclusive bargaining representative of the employees if a majority of employees who vote (i.e., not a majority of employees in the bargaining unit) choose to be represented by a union. Under the so-called "election bar," if the NLRB conducts an election and a majority of employees do not choose to be represented by a union, another representation election cannot be held for at least 12 months. The NLRB also conducts elections to decertify a union that has previously been certified or recognized. A decertification petition may be filed by employees or a union acting on behalf of employees. A decertification petition must be signed by at least 30% of the employees in the bargaining unit represented by the union. Under the so-called "certification bar," a union that is certified after winning a secret ballot election is protected for a year from a decertification petition and from an election petition filed by another union. A secret ballot election is required for decertification. If a union wins an NLRB election, the employer is required to bargain in good faith for a year. The NLRA does not require the parties to reach an agreement on a contract. After one year, if an employer and a certified union have not reached a contract agreement, the employer may withdraw recognition of the union if both parties have engaged in good faith bargaining and the employer doubts, on the basis of objective information (e.g., a petition signed by a majority of employees and given to the employer), that a majority of employees continue to support the union. If a union has been voluntarily recognized by an employer and no agreement has been reached after a reasonable period of time, an employer may withdraw recognition if the employer doubts, on the basis of objective information, that a majority of employees support the union. The NLRB and courts have divided bargaining subjects into three categories: mandatory, permissive, and illegal subjects. Mandatory subjects of bargaining include "wages, hours, and other terms and conditions of employment." At the request of either the employer or union, both parties must bargain over mandatory subjects. Both the employer and the union must bargain in good faith with respect to wages, hours, and other working conditions. "Wages" include basic pay, overtime pay, merit pay increases, bonuses that are compensation for services provided, profit-sharing plans, and paid vacations and holidays. Mandatory bargaining subjects also include certain benefits, such as group health insurance and pension benefits for current employees. The term "hours" has been interpreted to include daily and weekly work schedules. "Other conditions of employment" include changes in work assignments, procedures for layoffs and recalls, rules to discipline or discharge employees, policies for promotions and seniority, grievance procedures and arbitration, and no-strike or no-lockout clauses. An employer code of ethics is a mandatory subject of bargaining if a violation of the code subjects an employee to discipline. Drug or alcohol testing of current employees is also a mandatory subject of bargaining. Permissive subjects of bargaining are those that either party may propose to be included in a collective bargaining agreement. One party may request bargaining on a permissive subject, but the other party is not required to bargain. Permissive subjects include the definition of a bargaining unit, the selection of bargaining representatives, and the parties involved in collective bargaining. Pre-employment drug or alcohol testing of job applicants is a permissive subject. An employer and union cannot bargain over illegal subjects. If the parties should reach an agreement on an illegal subject, the agreement is not enforceable. Examples of illegal subjects of bargaining include clauses that would treat employees differently because of race or gender, a provision giving preferences to union members in hiring, or a clause that would allow an employer to discharge an employee for union activity. The NLRA identifies certain activities as unfair labor practices that are prohibited. For example, employers have the right to campaign against unionization, but they cannot interfere with, restrain, or coerce employees in their right to form or join a union. An employer cannot threaten employees with the loss of their jobs or benefits if they vote for a union or join a union. An employer cannot threaten to close a plant should employees choose to be represented by a union. An employer cannot raise wages to discourage workers from joining or forming a union. An employer cannot discriminate against employees with respect to their conditions of employment (e.g., fire, demote, or give unfavorable work assignments) because of union activities. Employees have the right to organize and bargain collectively. However, a union cannot restrain or coerce employees to join or not join a union. A union cannot threaten employees with the loss of their jobs if they do not support unionization. A union cannot cause an employer to discriminate against employees with respect to their conditions of employment. A union is also prohibited from boycotting or striking an employer that is a customer of or supplier to an employer that the union is trying to organize. An unfair labor practice charge may be filed by an employee, employer, labor union, or any other person. After a charge is filed, a regional office of the NLRB investigates to determine whether there is reason to believe that the law has been violated. If no violation is found, the charge is dismissed or withdrawn. If a charge has merit, the regional director first seeks a voluntary settlement. If this effort fails, the case is heard by an NLRB administrative law judge. Decisions by administrative law judges can be appealed to the Board. When a union and employer cannot reach an agreement on a collective bargaining agreement, the dispute is called an impasse. An impasse may lead to a strike by workers or a lockout of employees by the employer. Instead of resorting to a strike or lockout, a union and employer may use a neutral third party to help them reach a contract agreement, whether the agreement is on an initial contract or a successor contract. The consequences of a bargaining impasse depend on the type of bargaining subject at issue. If an employer and union cannot reach an agreement over a mandatory bargaining subject, the union may strike or the employer may lock out employees. A union cannot strike and an employer cannot lock out employees if the parties cannot agree on a permissive bargaining subject. Neither an employer nor a union can make a change in a mandatory subject without the consent of the other party. Instead, the employer or union must first notify the other party of the proposed change. Both parties must then bargain over the change. If an agreement cannot be reached, the parties may go to impasse. If the parties reach an agreement on a permissive subject and include it in the collective bargaining agreement, the agreement is binding on both parties. Once a contract has expired, either party may make a unilateral change in an agreement on a permissive subject, without notifying the other party. The purpose of the NLRA is not to punish employers, unions, or individuals, but to remedy violations of the law. The Board can issue orders in representation cases and unfair labor practice cases, but it does not have the authority to compel compliance with such orders. If an employer or union does not comply with an order, the Board can seek enforcement by a U.S. court of appeals. Judicial review of Board decisions in representation cases is generally limited. In unfair labor practice cases, however, a Board decision can be appealed to a U.S. court of appeals, with review by the U.S. Supreme Court available. A U.S. appeals court could potentially review a Board decision in a representation case if an employer refuses to bargain with a union and challenges the union's certification in an unfair labor practice case brought against the employer. Only final orders of the Board may be subject to judicial review. Thus, a decision by the NLRB's General Counsel to not issue an unfair labor practice complaint may not be reviewed. If the Board finds that an unfair labor practice has been committed, it can order the party to cease and desist from the unfair labor practice. The Board can also order the reinstatement of fired employees, with or without back pay. Finally, the President may take emergency action if a strike or lockout that affects an industry, or a substantial part of it, could endanger national health or safety. In late January 2014, a group of students who play football for Northwestern University filed a representation petition with the NLRB. The students are seeking to be represented by CAPA, which contends that college football and basketball players, particularly those who compete in Division I of the National Collegiate Athletic Association (NCAA), are essentially employees given the amount of time they commit to athletics, the revenue they generate for their schools, and their receipt of compensation in the form of scholarships. It has been reported that the organizing effort is supported by a majority of Northwestern's football players. The NCAA has maintained, however, that the players are "student-athletes" and not employees, and that their participation in college sports is voluntary. Whether the Northwestern players may be considered employees for purposes of the NLRA is a threshold question that will likely determine their collective bargaining rights. In general, the NLRB has been guided by common law principles to evaluate an individual's employment status. The Board has considered, for example, the degree of control exercised by an employer over an alleged employee. The NLRB has also examined the economic realities of a situation, that is, the degree to which an alleged employee is dependent on an employer. In 2004, the Board also considered congressional intent to determine whether graduate student assistants should be considered employees for purposes of the NLRA. In Brown University , the Board noted that "[t]he issue of employee status under the Act turns on whether Congress intended to cover the individual in question. The issue is not to be decided purely on the basis of older common law concepts." Ultimately, the NLRB concluded that "it simply does not effectuate the national labor policy" to recognize collective bargaining rights for graduate student assistants because they are primarily students. Northwestern cited the NLRB's decision in Brown University to support its position that the football players are not employees. On March 26, 2014, however, the regional director of the NLRB's Region 13 in Chicago concluded that the players are employees for purposes of the NLRA. Citing the common law definition for the term employee, the regional director maintained that an individual is an employee if he "performs services for another under a contract for hire, subject to the other's control or right of control, and in return for payment." After reviewing how the Northwestern players were recruited and treated by the school and its coaches, the regional director found that the players met the common law definition. In this case, the "tender" that must be signed by the players before each scholarship period was found to serve as an employment contract, providing "detailed information concerning the duration and conditions under which the compensation will be provided to [the players]." With regard to the control exercised by the school and its coaches, the regional director cited the daily itineraries that are provided to the players "which set forth, hour by hour, what football related activities the players are to engage in from as early as 5:45 a.m. until 10:30 p.m., when they are expected to be in bed." As for payment, the regional director stated simply: "[I]t is clear that the scholarships that players receive are in exchange for the athletic services being performed." The regional director declined to view the Northwestern players as similar to the graduate assistants in Brown University . The regional director explained that the players' football-related duties "are unrelated to their academic studies unlike the graduate assistants whose teaching and research duties were inextricably related to their graduate degree requirements [.]" On April 9, 2014, Northwestern requested a review of the regional director's decision. Northwestern argued that the decision should be reviewed because the players' petition presents a unique and novel issue, because the regional director misapplied and departed from Board precedent, and because the regional director's findings on substantial factual issues are clearly erroneous on the record and prejudicially affect the university's rights. On April 24, 2014, the Board agreed to review the regional director's decision. If CAPA becomes the players' exclusive representative, the union has indicated that it will bargain over health and safety issues, additional financial support for the players, and health insurance. CAPA has said that it will bargain with the university within the existing NCAA rules and will not bargain for terms that are prohibited by the NCAA. CAPA has also said that it will "speak for the Players as the NCAA landscape continues to evolve." Northwestern believes that CAPA would bargain over pay and other economic benefits, if it is certified as the players' exclusive representative. If CAPA does attempt such negotiations, and the university declines to bargain over these mandatory subjects of bargaining, it could be subject to an unfair labor practice charge. At the same time, however, the negotiation of economic benefits could lead to possible NCAA sanctions. Northwestern has explained that it cannot offer scholarships greater than the amount allowed by the NCAA. According to the university, if it did, the NCAA could prevent it from playing football. The university also argues that, because they are subject to NCAA rules, it could not bargain over the sale by players of their images or likenesses, the types of leases allowed for players living off-campus, the types of outside employment, or random player drug testing. If the Board and federal courts determine that Northwestern University football players are employees for purposes of collective bargaining, other developments may affect unionization efforts by athletes at private colleges and universities. Under NCAA rules, a Division I student-athlete cannot receive financial aid that exceeds the cost of attendance at an institution. A student-athlete may receive financial aid up to a full "grant-in-aid." Except for possible changes described below, a full grant-in-aid at Division I schools covers the institution's cost of tuition and fees, room and board, and the cost of required books. The cost of attendance may, however, include other costs that are not included in a full grant-in-aid (e.g., the cost of supplies, transportation, or other expenses). Thus, the cost of attendance is generally greater than a full grant-in-aid. In addition to a full grant-in-aid, a student-athlete might receive other financial assistance up to the cost of attendance. Pursuant to a federal district court decision issued on August 8, 2014, the NCAA Division I Football Bowl Subdivision (FBS) and Division I basketball schools can use revenue from the use of player's names, images, or likenesses to provide financial aid up to the cost of attendance. These schools may also provide up to $5,000 annually to current, former, and prospective players for the licensing or use of their names, images, or likenesses. The latter amounts would be paid when the players leave school or when their eligibility for athletic aid expires. The decision applies to student-athletes at both private and public colleges and universities. The NCAA has said that it will appeal the ruling. Also, on August 7, 2014, the NCAA Division I Board of Directors adopted a new governing structure for Division I colleges and universities. Among other changes, five conferences—consisting of 65 private and public colleges and universities—will be allowed to adopt new rules affecting student athletes. The five conferences are the Atlantic Coast Conference (ACC), Big Ten, Big 12, Pac-12, and Southeastern Conference (SEC). (Northwestern University is a member of the Big Ten Conference.) Under new authority, the conferences will be allowed to increase the maximum grant-in-aid up to the full cost of attendance. The conferences will also be allowed to provide student-athletes with multi-year scholarships, offer health insurance coverage, pay for disability insurance, cover the cost of transportation for high school students and their parents to visit campus, change the limits on the amount of time devoted to sports, increase the amount of academic support, or allow athletes to earn money from activities not related to sports. To vote for a rule change, each of the 65 schools will have one vote. In addition, 15 student-athlete representatives—three from each of the five conferences—will be able to cast votes. The first votes on rule changes could be held in January 2015. The NCAA could reconsider the rule changes if at least 75 Division I schools request a vote to override the changes. The rule changes could be suspended if at least 125 schools request a vote on the changes. Schools must request a vote within 60 days of the date that the rule changes were adopted by the Board of Directors. College sports teams that bring in more in revenues than it costs to run the program, the "revenue sports" teams, help support "non-revenue sports," such as golf, tennis, swimming, baseball, softball, and others. The principal revenue sports are football and men's basketball. Division I football is divided into two subdivisions. The Football Bowl Subdivision (FBS) has 128 teams; the Football Championship Subdivision (FCS) has 126 teams. Northwestern University is one of 17 private, four-year colleges and universities in the FBS. Another 46 private colleges and universities participate in the FCS. Both the FBS and FCS are further divided into different conferences, leagues, or associations. Division I men's basketball has 346 teams. 115 schools that compete in Division I men's basketball are private four-year colleges or universities. The 128 FBS schools must support at least 16 varsity sports teams. The schools can award financial aid to as many as 85 football players, with each player able to receive up to a full scholarship. The 126 FCS schools must sponsor at least 14 varsity sports teams and can award up to the equivalent of 63 full football scholarships, divided among no more than 85 players. FBS schools participate in bowl games, while the FCS uses a playoff system to determine a champion. Table A-1 lists the 17 FBS football schools that are private four-year schools; the 46 FCS football schools that are private; and the 115 Division I men's basketball schools that are private.

In late January 2014, a group of students who play football for Northwestern University filed a representation petition with the National Labor Relations Board (NLRB). The students are seeking to be represented by the College Athletes Players Association (CAPA), a newly created labor organization. CAPA contends that college football and basketball players, particularly those who compete in Division I of the National Collegiate Athletic Association (NCAA), are essentially employees given the amount of time they commit to athletics, the revenue they generate for their schools, and their receipt of compensation in the form of scholarships. If the Northwestern players are found to be employees for purposes of the National Labor Relations Act (NLRA), they will be permitted to engage in collective bargaining over the terms and conditions of their employment. This report provides an overview of the NLRA, and reviews the March 2014 decision by the NLRB's regional director, which concluded that the Northwestern players are employees under the act. The report examines the concerns raised by both the university and CAPA. The report also discusses other developments that could affect unionization efforts by athletes at private colleges and universities. In August 2014, the NCAA Division I Board of Directors gave new authority to five conferences—consisting of 65 public and private colleges and universities—to provide greater financial support to student-athletes. Also, an August 2014 U.S. District Court decision will allow NCAA Division I Football Bowl Subdivision (FBS) and basketball schools to use revenue from the use of players' names, images, or likenesses to provide greater financial support to athletes.

Obesity is a condition that has been deemed an epidemic in the United States. Results of a survey by the National Center for Health Statistics found that in the years 2003 to 2004, an estimated 66% of U.S. adults were either overweight or obese. The American Obesity Association estimates that approximately 127 million adults in the United States are overweight, 60 million obese, and 9 million severely obese. It has been argued that obese individuals have been the targets of discrimination. There is no federal law that specifically prohibits obesity discrimination. However, some obese individuals have argued that their weight can be considered a disability for purposes of the Americans with Disabilities Act (ADA) or the Rehabilitation Act of 1973 and, therefore, they have legal protection against weight discrimination. Courts have evaluated numerous claims of obesity discrimination brought under the ADA and the Rehabilitation Act. Congress enacted the ADA in 1990 to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities. The ADA prohibits discrimination based on disability in the areas of employment, public services, public accommodations, and services operated by private entities, transportation, and telecommunications. In order to prevail in a discrimination case, the plaintiff must prove, among other things, that he or she has a disability within the meaning of the ADA. The ADA defines "disability" with respect to an individual as "(A) a physical or mental impairment that substantially limits one or more of the major life activities of such individual [such as walking, or working]; (B) a record of such an impairment; or (C) being regarded as having such an impairment." The Equal Employment Opportunity Commission (EEOC) has promulgated ADA regulations that give insight as to what constitutes an impairment within the meaning of the term "disability," as well as what is considered to be "substantially limit[ing] a major life activity." The ADA regulations have been used by the courts in determining the validity of obesity discrimination claims. Obesity discrimination cases have also been brought under the Rehabilitation Act of 1973. Section 504 of the Rehabilitation Act states that "no otherwise qualified individual ... shall, solely by reason of her or his disability, ... be subjected to discrimination under any program or activity receiving Federal financial assistance." Courts have often applied the same standard when deciding cases arising under the ADA or Section 504 of the Rehabilitation Act. Also, the standards for determining employment discrimination under the Rehabilitation Act are identical to those used in title I of the ADA. The ADA regulations address whether obesity can be an impairment that qualifies as a disability under the ADA. In general, the regulations suggest that the ADA offers limited protection to obese individuals. The ADA regulations state that temporary, non-chronic impairments of short duration, with little or no long term or permanent impact, are usually not disabilities. Such impairments may include, but are not limited to, broken limbs, sprained joints [and] concussions.... Similarly, except in rare circumstances, obesity is not considered a disabling impairment. The EEOC has expounded on how obesity is to be covered under the ADA. In its ADA compliance manual, the EEOC states that being overweight, in and of itself, generally is not an impairment. On the other hand, severe obesity, which has been defined as body weight more than 100% over the norm is clearly an impairment. In addition, a person with obesity may have an underlying or resultant physiological disorder, such as hypertension or a thyroid disorder. A physiological disorder is an impairment. Based on the ADA regulations and EEOC guidance, it may be difficult for an obese plaintiff to successfully bring a discrimination claim. Still, courts have found some plaintiffs entitled to protection under the ADA. Both state and federal courts have considered whether the ADA or Section 504 applies to obesity and have used varying (and sometimes conflicting) lines of reasoning and conclusions. Courts have disagreed on issues such as (1) whether a plaintiff must have a physiological disorder in order for the plaintiff's morbid obesity to be covered under the ADA and (2) whether a plainitiff's obesity can cause a "substantial limitation of a major life activity." The following cases include some of the different arguments that courts have used in finding that a plaintiff is eligible or non-eligible for ADA or Section 504 protection. One of the first appellate decisions to address weight discrimination as a disability was Cook , which established that an obese plaintiff can be considered disabled. In Cook , the plaintiff applied for a position she had previously held as an institutional attendant. At the time Cook applied, she was five feet two inches tall and weighed 320 pounds. The institution refused to rehire Cook, claiming that Cook's weight compromised her ability to evacuate patients in an emergency situation and increased her chances of developing aliments that could lead to Cook to be out of work or claim workers' compensation. Cook brought a claim under Section 504 of the Rehabilitation Act of 1973, as well as certain state statutes, claiming that the failure to hire her was based on an unlawful perceived disability—although she was fully able to perform the job, the institution considered her physically impaired. The First Circuit Court of Appeals agreed with Cook. However, the court acknowledged that Cook could also prevail because she had an actual physical impairment. The court pointed to the fact that Cook had admitted that she was morbidly obese, and had presented expert testimony that morbid obesity is a physiological disorder, a dysfunction of the metabolic system. The institution argued that Cook's claims failed because her weight was a condition that was both "mutable" and "voluntary." The court rejected the institution's arguments and noted that nowhere in the Rehabilitation Act, nor in the regulations implementing the act, was there a mention of either characteristic disqualifying a claim. The court also discussed whether Cook's weight "substantially limited one or more [of Cook's] major life activities." The court pointed to evidence introduced by the institution demonstrating that Cook was not hired because the institution believed that her morbid obesity interfered with her ability to undertake physical activities such as walking, lifting, or bending. On this basis alone, the court stated, a jury could find that the institution perceived the plaintiff's impairment to interfere with a major life activity. In addition, the court explained that the plaintiff could be found substantially limited, without having to seek out other jobs that she was qualified to perform. The court stated that "denying an applicant ... a job that requires no unique physical skills, due solely to the perception that the applicant suffers from a physical limitations that would keep her from qualifying for a broad spectrum of jobs, can constitute treating an applicant as if her condition substantially limited a major life activity, viz., working." The First Circuit also concluded that there was no evidence that Cook could not perform the job, and it upheld the district court's decision for Cook. The Second Circuit in Francis also examined claims of obesity discrimination under disability law. In this case, the City of Meriden disciplined Francis, a firefighter employed by the city, after he failed to meet certain weight guidelines. Francis claimed that this discipline was discrimination based on a perceived disability in violation of the ADA and the Rehabilitation Act. The court found that Francis' claims failed because Francis only alleged that the city disciplined him for not meeting a weight standard, not because he suffered from an impairment within the meaning of the disability statutes. In its analysis, the court discussed the applicability of the ADA and the Rehabilitation Act to obesity. The Second Circuit stated that Francis's claim failed because "obesity, except in special cases where obesity relates to a physiological disorder, is not an impairment within the meaning of [the ADA or the Rehabilitation Act]." The court also pointed out, in dicta, that a cause of action may exist against an employer who discriminates against an employee based on the perception that the employee is morbidly obese. Still, the court concluded that simply failing to meet weight guidelines was insufficient for ADA protection. In 2006, the Sixth Circuit took up the issue of obesity discrimination in EEOC v. Watkins . In Watkins , the EEOC claimed that the defendant company violated the ADA when it discharged a morbidly obese employee after the employee sustained an injury on the job. The employee, whose weight fluctuated between 340 and 450 pounds during his employment, was injured during a routine job activity. The employee claimed he was unaware of any physiological or psychological cause for his heavy weight. After taking a leave of absence following his injury, the employee's personal doctor cleared him to work. However, a company doctor found that the employee weighed more than 400 pounds, had a limited range of motion, and shortness of breath after a few steps. The doctor determined that even though the employee met the Department of Transportation's standards for truck drivers, the employee could not safely perform the requirements of his job. The employee was terminated as a result. The EEOC argued under a "regarded as" theory, claiming that although the employee had an actual impairment, the impairment was erroneously regarded as an inability to perform his job. In its analysis, however, the Sixth Circuit did not focus on how the company regarded the employee, but instead on whether morbid obesity qualified as an ADA impairment. The court cited the ADA regulations stating that an impairment is defined in relevant part as "any physiological disorder or condition." The court interpreted this definition to require evidence of a physiological cause of morbid obesity in order for an impairment to exist under the ADA. Because the EEOC did not produce any evidence that the employee suffered from a physiological condition, the Sixth Circuit affirmed summary judgment for Watkins. It is likely that courts will continue to look at obesity discrimination under the ADA. Based on the various ways in which courts have interpreted the act and its supporting regulations, the outcome of these cases will remain an open question.

The Americans with Disabilities Act (ADA) provides broad nondiscrimination protection for individuals with disabilities. However, to be covered under the statute, an individual must first meet the definition of an individual with a disability. Questions have been raised as to whether and to what extent obesity is a disability under the ADA and whether the ADA protects obese individuals from discrimination. This report provides background regarding how obesity is covered under the ADA and its supporting regulations. It also discusses some of the ways in which courts have applied the ADA to obesity discrimination claims.

The ability of unauthorized aliens to claim federal refundable tax credits has received considerable scrutiny. In a July 2011 study, the Treasury Inspector General for Tax Administration (TIGTA) reported that individuals who were not authorized to work in the United States received $4.2 billion by claiming the refundable portion of the child tax credit—the additional child tax credit (ACTC). The ACTC is available to working families with children under age 17. This issue is complicated by the differences in legal classifications of foreign nationals/aliens (e.g., "employment-authorized alien," "legal permanent resident," "resident alien," and "qualified alien") across the federal immigration, tax, and welfare laws. The TIGTA audit was based upon analysis of tax returns filed by persons with Individual Taxpayer Identification Numbers (ITINs). The Internal Revenue Service (IRS) issues ITINs to individuals who are required to have a taxpayer identification number for tax purposes but are not eligible to obtain a Social Security number (SSN) because they are not authorized to work in the United States. The number of tax forms filed with ITINs has increased from 1.55 million in 2005 to 3.02 million in 2010. It is unclear how many of these individuals who filed with ITINs were unauthorized aliens or part of mixed-status families that included U.S. citizens or legally present aliens as well as unauthorized aliens. This report opens with an explanation of refundable tax credits and follows with an overview of unauthorized resident aliens. The report proceeds to analyze the federal tax status of unauthorized aliens and their eligibility for refundable tax credits, including a legal analysis of whether refundable tax credits are "federal public benefits" under Section 401 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). The report concludes with a discussion of selected policy options. Tax credits allow taxpayers to reduce their tax liability dollar-for-dollar up to the value of the credit. Credits are either nonrefundable or refundable. By definition, the value of nonrefundable tax credits cannot exceed a taxpayer's income tax liability. In contrast, refundable tax credits can be larger than a taxpayer's income tax liability, with the taxpayer receiving the difference (or part of the difference in the case of partially refundable tax credits) as a cash payment from the IRS. As a result of this distinction, refundable tax credits can be claimed by taxpayers with little or no income tax liability, which includes many low-income tax filers. The existing refundable tax credits include the earned income tax credit (EITC); the additional child tax credit (ACTC), which is the refundable portion of the child tax credit; the American opportunity tax credit, which is a partially refundable credit for tuition and related expenses; the health coverage tax credit, which provides a credit for health insurance costs of qualifying individuals who receive trade adjustment assistance (TAA) or pension benefits under a plan taken over by the Pension Benefit Guaranty Corporation (PBGC); the credit for tax withheld on wages; the credit for tax withheld at source for nonresident aliens and foreign corporations; the credit for fuel excise taxes paid on fuel used for nontaxable uses; and the credit for overpayment of tax. Additionally, a premium assistance credit, provided under the Patient Protection and Affordable Care Act ( P.L. 111-148 ), will go into effect in 2014. There are also several refundable credits that have recently expired. These are the first-time homebuyer credit, the "recovery rebate" credit in the Economic Stimulus Act of 2008 (2008 stimulus credit), the Making Work Pay credit available in 2009 and 2010, and the adoption expenses credit, which was refundable for 2010 and 2011. Selected credits are summarized in Appendix A . The credits listed in the last four bulleted points above are essentially methods by which taxpayers receive refunds for overpayment of taxes. The other refundable credits can be broadly categorized into those whose value depends on the taxpayer's earnings and those whose value is based on the taxpayer's expenditures for a particular action or good, such as higher education or homeownership. Currently, the two largest refundable tax credits—the EITC and ACTC—fall into the former category and comprise an estimated 95% of the total amount of refundable credits claimed in 2009. These credits effectively subsidize low-wage work, providing additional money for each dollar of wages. In addition, both credits help mitigate the federal taxes that low-income workers pay. In many cases, these workers may not have sufficient income to incur an income tax liability, but they do pay payroll taxes (i.e., the taxes on wages that fund Social Security benefits under the Old-Age, Survivors, and Disability Insurance (OASDI) program and the Medicare hospital insurance (HI) program). For extremely low-wage workers, these credits may result in a net increase in income. For example, in 2011 (when the two-percentage point payroll tax reduction was in effect), taxpayers were directly subject to a payroll tax rate of 5.65%. If a taxpayer had $20,000 of earnings and one child, the taxpayer would owe $1,130 of payroll taxes and $410 of federal income taxes, for a total federal tax liability of $1,540, as illustrated in Figure 1 . This same taxpayer would be eligible for a $1,000 refund from the ACTC and a $2,565 refund from the EITC. Hence, in this example, the taxpayer would receive $2,025 as a refund. Figure 1 also highlights that while taxpayers begin paying payroll taxes on the first dollar they earn, the total amount of refundable credits they receive is greater than their total federal tax liability (net the non-refundable portion of the child tax credit) until taxpayers earn approximately $26,000. Hence, in this example, taxpayers making under approximately $26,000 actually see a net increase in their income as a result of these credits. For reference, in 2011 the poverty level for an adult under 65 with one child was $15,504. The migration and family patterns of unauthorized aliens residing in the United States are central to the question of their ability to claim refundable tax credits. Through the Immigration and Nationality Act (INA), foreign nationals enter the United States in two main categories: as legal permanent residents (LPRs) and temporary nonimmigrants. Unauthorized resident aliens are foreign nationals who overstay their nonimmigrant visas, foreign nationals who enter the country surreptitiously, or foreign nationals who are admitted on the basis of fraudulent documents. In all three instances, these unauthorized aliens are in violation of the INA and subject to removal. The actual number of unauthorized aliens in the United States is not known, as locating and enumerating people who are residing in the United States without permission poses many methodological problems. Estimates derived from the March Supplement of the U.S. Census Bureau's Current Population Survey (CPS) indicate that the unauthorized resident alien population was 11.2 million in 2010. The Pew Hispanic Center reported that 35% of unauthorized adults have resided in the United States for 15 years or more and that 28% have resided for 10 to 14 years. The report also found that the proportion of unauthorized aliens who have been in the country at least 15 years has more than doubled since 2000. Pew researchers have also found that unauthorized aliens tend to be younger than the U.S. population overall and more likely to be in the child-bearing and child-rearing years. As a consequence, nearly half—an estimated 46%—of unauthorized adults are parents of minor children. A significant portion of the households headed by unauthorized aliens may have U.S. citizen children, as well as spouses who may be legal permanent residents (LPRs). Researchers at the Pew Hispanic Center estimated that at least 9 million people were in "mixed-status" families that included at least one unauthorized adult alien and at least one U.S.-born child in 2010. Along with the approximately 1 million unauthorized aliens who are minor children, Pew researchers estimated that 4.5 million minor children were born in the United States to a family in which at least one parent was an unauthorized alien. As Figure 2 shows, the number of U.S.-citizen children with at least one unauthorized parent has more than doubled since 2000. The implications of these demographics for the refundable tax credits heighten the complexity of the debate to restrict such tax credits to those persons legally authorized to work in the United States. In a widely cited 2002 study of federal benefits that may have gone to households headed by unauthorized aliens, Steven Camarota concluded, "[M]any of the costs associated with illegals are due to their American-born children, who are awarded U.S. citizenship at birth ... greater efforts at barring illegals from federal programs will not reduce costs because their citizen children can continue to access them." Whether an unauthorized alien who is head of household is permitted to be the payee of a federal benefit for U.S. citizen children varies across programs. Another group of foreign nationals that adds a level of complexity are the "quasi-legal" migrants. More precisely, not all unauthorized aliens lack legal documents giving them permission to work in the United States, which leads many observers to characterize these documented aliens as "quasi-legal" migrants. There are certain circumstances in which the Department of Homeland Security issues temporary employment authorization documents (EADs) to aliens who are not otherwise considered authorized to reside in the United States. Foreign nationals with EADs, in turn, may legally obtain Social Security cards. These "quasi-legal" unauthorized aliens fall in several categories: The government has given them temporary humanitarian relief from removal, such as Temporary Protected Status (TPS). They have sought asylum in the United States and their cases have been pending for at least 180 days. They are immediate family or fiancées of legal permanent residents (LPRs) who are awaiting in the United States for their legal permanent residency cases to be processed. They have overstayed their nonimmigrant visas and have petitions pending to adjust status as employment-based LPRs. None of the aliens described above have been formally approved to remain in the United States permanently, and are not necessarily considered lawfully present. Many with pending cases who are ultimately denied LPR status may have legally obtained SSNs for the temporary periods they were permitted to work in the United States. In addition, some may also be part of mixed-status families who include persons with ITINs. The Internal Revenue Code (IRC) does not have a special classification for individuals who are not lawfully present in the United States. An unauthorized alien is, like all other foreign nationals, classified for tax purposes as a resident or nonresident alien. Resident and nonresident aliens are both subject to U.S. taxes—resident aliens are generally taxed in the same manner as U.S. citizens, while nonresident aliens are subject to special rules. In general, an individual is a nonresident alien unless he or she is a lawful permanent resident or is present in the United States for a sufficient number of days during the current and previous two years ("substantial presence test"). Thus, an unauthorized alien who has been in the United States long enough to meet the substantial presence test is classified as a resident alien; otherwise, he or she is generally classified as a nonresident alien. This classification is for tax purposes only and does not affect the individual's immigration status. For further information on classes of noncitizens eligible to work and possibly qualify as a resident alien, see Appendix B and Appendix C . Since aliens, including unauthorized aliens, are subject to federal taxes, they need a taxpayer identification number. A taxpayer identification number is a unique number that identifies an individual for tax administration purposes. For most individuals, their taxpayer identification number is their Social Security number (SSN). Under current law, SSNs may be issued to lawful permanent residents, aliens who are authorized to work in the United States, and other aliens who are required by federal or state law to have an SSN in order to receive certain public benefits. In FY2011, the Social Security Administration (SSA) issued 5.4 million new SSNs. Of those, 1.3 million were issued to noncitizens allowed to work in the United States and 28,622 were issued to legally present aliens who were not authorized to work. Prior to 1996, unauthorized aliens generally obtained SSNs for nonwork (tax administration) purposes from the SSA or were assigned temporary taxpayer identification numbers by the IRS. In 1996, due to inefficiencies with the temporary numbers and plans by the SSA to tighten the rules under which aliens could obtain nonwork SSNs, the IRS began issuing permanent individual taxpayer identification numbers (ITINs) to alien taxpayers who are not legally able to obtain SSNs. Thus, individuals who are ineligible for SSNs are supposed to file their federal tax returns using ITINs as their identifying numbers. For a discussion of trend data on SSNs issued to noncitizens, see Appendix D . As Figure 3 shows, the number of taxpayers filing with ITINs has increased over the past decade. A 2009 TIGTA audit reported, "(T)here has been a significant increase in the use of ITINs since the IRS began issuing them in Tax Year 1996." This audit specifically found a 246% increase from 530,000 in 2001 to more than 1.8 million in 2007. The 2011 TIGTA audit reported further increases in tax returns filed with ITINs. The initial rise in ITIN filings coincides with provisions in the various comprehensive immigration reform bills of the 2000s that would have required unauthorized aliens to demonstrate that they had paid taxes if they sought earned legalization or "amnesty." As Figure 3 shows, the 2011 audit captured a larger number of ITIN filers for 2007 than the 2009 audit did for 2007. The TIGTA offered this explanation that may account, in part, for the difference: Another reason for the increase is that a significant number of individuals are filing multiple claims to obtain the ACTC [Additional Child Tax Credit] for prior year tax returns (e.g., filing Tax Years 2007, 2008, and 2009 returns at the same time). In Processing Year 2010, approximately 238,000 ITIN filers submitted more than 608,000 tax returns for multiple years at the same time and claimed just more than a billion dollars in ACTCs on those returns. The ACTC claims for these individuals for the combined tax periods can be substantial. However, not all of these claims were refunded because of the statute of limitations rules that apply. These figures may not capture all tax payments by unauthorized aliens. Notably, unauthorized aliens who entered the country legally and had work authorization but who overstayed the terms of their admittance may have a valid SSN that was assigned to them. In addition, the Social Security Actuary estimates that 75% of unauthorized aliens who are working are paying the Federal Insurance Contributions Act (FICA) tax, and thus are using—either their own, someone else's, or a fraudulent—SSN. As a result, some unauthorized aliens appear to be paying federal income taxes using an SSN rather than an ITIN. In determining whether unauthorized aliens may claim the refundable tax credits, two questions arise. The first is whether these individuals are able to claim the credits under the federal tax laws found in the Internal Revenue Code (IRC). The second is whether any refundable tax credits are "Federal public benefits" under Section 401 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). If so, it could then be argued that the credit should be disallowed to any unauthorized alien even if the IRC does not contain any restriction. As illustrated in Table 1 , there are two ways in which the Internal Revenue Code restricts the eligibility of aliens to claim certain refundable tax credits. First, for some credits, Congress has expressly provided in the applicable IRC statute that nonresident aliens are prohibited from claiming that particular credit. Second, Congress has included express statutory requirements in the IRC that taxpayers provide their SSNs when claiming certain credits. For these credits, any alien—whether resident or nonresident—without an SSN would be ineligible to claim the credit. As shown in Table 1 , only the EITC currently requires that taxpayers provide their SSNs, along with those of their spouses (if filing a joint return), and any qualifying children. The SSNs must have been issued for work purposes. The 2008 stimulus credit and the Making Work Pay credit, both of which have now expired, contained a similar requirement, although they did not specify that the SSN be issued for work purposes. As discussed above, individuals who enter the United States illegally may not lawfully obtain SSNs, and therefore they would not be able to claim a credit with an SSN requirement. However, some resident aliens who are currently in the country without proper immigration documents were once lawfully admitted, but have overstayed their visas. These individuals may have lawfully received SSNs while they were authorized to be in the country, and could attempt to use the SSN to claim a credit. The statutes for the EITC, 2008 stimulus credit, and Making Work Pay credit do not make explicit reference to the SSN's current validity, although it appears Congress intended to restrict the credits to taxpayers with valid SSNs. Regardless, at this point in time, the IRS does not determine an individual's immigration status or whether a taxpayer with a facially valid SSN has overstayed his or her visa. The extent to which residents of the United States who are not U.S. citizens should be eligible for federally funded public aid has been a contentious issue since the 1990s. Title IV of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 ( P.L. 104-193 ) established comprehensive restrictions on the eligibility of all noncitizens for means-tested public assistance, with exceptions for legal permanent residents (LPRs) with a substantial U.S. work history or military connection. The 1996 welfare law divided noncitizens into two general categories for purposes of benefit eligibility. The least restrictive category is that of qualified aliens , legal permanent residents, refugees, aliens paroled into the United States for at least one year, and aliens granted asylum or related relief. The 1996 immigration law added certain abused spouses and children as another class, and P.L. 105-33 added Cuban-Haitian entrants. The other, more restrictive, category is that of non-qualified aliens . It consists of other noncitizens, including unauthorized aliens, nonimmigrants (i.e., aliens admitted for a temporary purpose, such as education or employment), short-term parolees, asylum applicants, and various classes of aliens granted temporary permission to remain. Regarding unauthorized aliens in particular, Section 401 of PRWORA barred them from any federal public benefit except the emergency services and programs expressly listed in Section 401(b). This overarching bar to unauthorized aliens hinges on how broadly the phrase "federal public benefit" is construed. The law defines this phrase to be (A) any grant, contract, loan, professional license, or commercial license provided by an agency of the United States or by appropriated funds of the United States; and (B) any retirement, welfare, health, disability, public or assisted housing, postsecondary education, food assistance, unemployment benefit, or any other similar benefit for which payments or assistance are provided to an individual, household, or family eligibility unit by an agency of the United States or by appropriated funds of the United States. So defined, this bar covers many programs whose enabling statutes do not individually make citizenship or immigration status a criterion for participation. Thus, unauthorized aliens are statutorily barred from receiving benefits that previously were not individually restricted—Social Services Block Grants and migrant health center services, for example—unless they fall within the 1996 welfare act's limited exceptions. PRWORA also amended the IRC to impose an SSN requirement for claiming the EITC. The provision is aimed at preventing unauthorized aliens from claiming the credit by requiring EITC recipients (and spouses) to file their taxes with SSNs that are valid for employment in the United States. The question has been raised whether any of the refundable tax credits are federal public benefits under PRWORA Section 401. If so, then the argument could be made that unauthorized aliens should be ineligible to receive them, regardless of whether the Internal Revenue Code restricts their eligibility. There is no indication that the IRS considers any refundable tax credits to be subject to PRWORA Section 401. It does not appear the agency has issued any regulations, rulings, or other guidance on this issue. If the IRS were to permit unauthorized aliens to claim any refundable credit that does not include a statutory SSN requirement, as appears to be the case currently, then there is a serious question as to whether that position could be challenged in court. Judicial review of such interpretation would be possible only if challenged by a person with sufficient standing. So long as no taxpayer is denied a credit, it seems unlikely anyone would have standing to sue since it appears doubtful that anyone would be personally injured (a necessary prerequisite for standing) by the IRS's decision to allow the credit. Further, taxpayers generally do not have standing to bring suit by alleging that they, as taxpayers, were harmed by the government's payment of funds from the public fisc in violation of law. Therefore, if the IRS does not interpret Section 401 to apply to refundable tax credits, it is unlikely that this interpretation could be challenged in court. If, however, the IRS were to deny a refundable tax credit to an unauthorized alien due to PRWORA Section 401, then that individual would theoretically have standing to challenge the denial in court. Assuming an unauthorized alien were willing to challenge the denial, a key question would likely be whether the IRS took such a position through a regulation promulgated through notice-and-comment rulemaking or by some other method (e.g., through issuance of a revenue ruling or internal agency memorandum). This is important because courts grant varying levels of deference to agency interpretations of statutes when examining questions such as whether an agency's rulemaking is in excess of its delegated statutory authority or whether the agency interpreted a statute correctly when promulgating a rule. When a statute is open to differing interpretations, as some may argue is the case with PRWORA Section 401 (as discussed below), the level of deference given to the agency's interpretation often plays a pivotal role in determining whether a reviewing court upholds it. The highest level of deference that a court may afford to an agency interpretation is known as Chevron deference, after the case in which the Supreme Court first articulated the standard. It applies when an agency's interpretation is the product of a formal agency process, such as notice-and-comment rulemaking, through which Congress has authorized the agency "to speak with the force of law." A court conducting a Chevron analysis first looks at whether Congress has "directly spoken to the precise question at issue." If the court determines that Congress has done so, then that is the end of the matter because the "law must be given effect." But if the statute does not directly address the issue, then "the court does not simply impose its own construction of the statute," but rather determines whether the agency interpretation is a permissible construction of the statute. If so, the court will generally defer to the agency's position, regardless of whether "it is the only possible interpretation or even the one a court might think best." A court would likely give a lower level of deference to an IRS interpretation of PRWORA's applicability to refundable tax credits if done through some other means, such as issuance of a revenue ruling or other guidance. Courts generally give a lower level of deference to less formal agency interpretations, largely because they are typically not subject to a notice-and-comment period. The level of deference given agency interpretations such as revenue rulings varies, depending on such things as "the degree of the agency's care, its consistency, formality, and relative expertness, and … the persuasiveness of [its] position." Looking at these factors, revenue rulings, which are official interpretations of the tax law by the IRS, are generally provided some deference. However, a court that found a ruling's reasoning unpersuasive would not be bound by it. An IRS position expressed in other types of documents might receive even less deference. A court faced with the issue of whether refundable tax credits are federal public benefits under PRWORA Section 401 would likely begin by examining the statutory language at issue. The Supreme Court often recites the "plain meaning rule," that, if the language of the statute is clear, there is no need to look outside the statute to its legislative history in order to ascertain the statute's meaning. Generally, statutory text is the ending point as well as the starting point for interpretation. Looking at the statutory language of Section 401, the definition of "federal public benefit" lists several types of payments or benefits (e.g., grants, contracts, and loans), but does not expressly include any refundable tax credits or other tax benefits. Thus, the question here seems to be whether refundable tax credits are included in any of the items expressly listed—specifically, whether they would be considered to be a "grant" provided by a federal agency under Section 401(c)(1)(A) or a "benefit" that is "provided to an individual, household, or family eligibility unit" by a federal agency under Section 401(c)(1)(B). When the meaning of specific statutory language is at issue, courts often need to consider the meaning of particular words or phrases. If the word or phrase is defined in the statute or elsewhere in the U.S. Code, then that definition governs if applicable in the context used. If not, courts typically look to see if the term has an accepted meaning in the area of law addressed by the statute, was borrowed from another statute where it had an accepted meaning, or had an accepted and specialized meaning at common law. In each of these situations, the accepted meaning governs and the word or phrase is considered a technical term or "term of art." Here, there appears to be no statutory definition applicable to the law's use of "grant" described in Section 401(c)(1)(A) or "benefit" described in Section 401(c)(1)(B). None of the key terms are defined in PRWORA, and they do not appear to be terms of art. Furthermore, while language similar to Section 401 is found in several other statutes, it does not appear any court has examined whether those statutes apply to refundable tax credits. Under the principles of statutory interpretation, words and phrases that are not terms of art or defined by statute are customarily given their ordinary meanings, often derived from the dictionary. Assuming that a court does not find "grant" or "benefit" to be terms of art, the court may be inclined to give them their ordinary and customary definitions. The Oxford Dictionaries, for example, define the term "grant" as "a sum of money given by an organization, especially a government, for a particular purpose." The language used in Section 401(c)(1)(B) is similarly defined (e.g., the Oxford Dictionaries define "benefit" as "a payment made by the state or an insurance scheme to someone entitled to receive it" and "assistance" as "the provision of money, resources, or information to help someone"). Looking at these definitions, it seems likely a court would find that at least some of the refundable tax credits would not be treated as federal public benefits. To the extent that the definitions of the key terms in PRWORA Section 401 evoke the concept of the government providing some type of assistance, it seems unlikely they would be interpreted to include the refundable credits in IRC Sections 31, 33, 34, and 37. This is because the taxpayers claiming these credits have essentially paid more tax than required, and the credits are merely the means by which the government gives the taxpayer his or her money back. Thus, they seem fundamentally different from the types of payments or benefits listed in Section 401, and it seems unlikely they would be treated as "grants" or "benefits." Furthermore, the government's refusal to pay over the refunds might be challenged as a violation of the Fifth Amendment of the U.S. Constitution, which could also influence a court's reading of Section 401 since courts generally try to interpret statutes to avoid constitutional issues. For the other refundable tax credits, it might be argued that their refundable nature could justify their falling within the plain language meaning of "grant" or "benefit." In such case, it seems that a court, having concluded that a refundable credit is a "grant" under Section 401(c)(1)(A), could then determine that the provision's other criteria are met (i.e., that the payment was "provided by" a federal agency since it came from the Treasury Department). Similarly, a court concluding that a refundable credit is a "benefit" under Section 401(c)(1)(B) might find that the provision's other criteria are met, including that it be "provided to an individual, household, or family eligibility unit by" a federal agency. Furthermore, it seems possible that a court could find that at least some refundable credits could be classified as a type of listed benefit (e.g., welfare, health, or postsecondary education). A court might find support for such a conclusion in case law where courts have looked at whether refundable tax credits are welfare-type benefits for purposes of other laws. For example, some courts have found the EITC to be public assistance for purposes of state law because of its refundable nature and purpose of assisting low-income families. However, other courts have held that the child tax credit is not such a benefit since, unlike the EITC, it is not limited to assisting low-income families. As these cases illustrate, a court might not reach the same conclusion with respect to each credit, finding that some would meet the criteria while others would not. On the other hand, it is possible a court could determine that no refundable tax credits are federal public benefits under Section 401 based on the fact that the provision does not explicitly include refundable tax credits, and, as discussed below, there is no clear evidence in the legislative history that Congress intended such credits to be treated as federal public benefits. This could lead a court to conclude that Congress did not include them in the list of named federal public benefits because it understood them to be excluded (i.e., that the express inclusion of specific types of benefits or payments on the list means Congress intended to exclude anything not listed). Furthermore, one could argue that refundable tax credits are not federal public benefits because tax benefits are not traditionally thought of as the types of "grants" or qualifying "benefits" referred to in Section 401. Additional support for the argument that the credits are not federal public benefits could be found in PRWORA Section 432(a), which directs the Attorney General to consult with the Secretary of Health and Human Services when promulgating regulations for verifying the immigration status of applicants for federal benefits. Because the section does not require consultation with the Treasury Department, it could be evidence that Congress did not intend any tax provisions to be considered federal public benefits. Finally, additional support might be found in other congressional action, specifically the fact that Congress included in PRWORA an SSN requirement for the ETIC and subsequently enacted legislation to impose an SSN requirement for the 2008 stimulus credit and Making Work Pay credit. It might be argued that these actions would be unnecessary had Congress believed that the PRWORA Section 401 applied to refundable tax credits. To the extent that a court reaches the conclusion that any refundable tax credits are not federal public benefits under PRWORA Section 401, then it would appear that unauthorized aliens would be able to claim such credits absent a provision in the Internal Revenue Code explicitly requiring an SSN or disallowing the credit to those individuals (e.g., the IRC expressly disallows some credits to nonresident aliens). In light of the statutory silence, it is possible, although not guaranteed, that a court might look to the provision's legislative history for evidence of congressional intent. PRWORA's legislative history does not clarify whether refundable credits are federal public benefits. The report language describing the law as it existed prior to PRWORA refers to one refundable credit—the EITC: Current law limits alien eligibility for most major Federal assistance programs, including restrictions on, among other programs, Supplemental Security Income, Aid to Families with Dependent Children, housing assistance, and Food Stamps programs. Current law is silent on alienage under, among other programs, school lunch and nutrition, the Special Supplemental Food Program for Women, Infants, and Children (WIC), Head Start, migrant health centers, and the earned income credit [emphasis added]. This statement shows that Congress was aware of the EITC's existence, but does not offer solid evidence of congressional intent to treat it as a federal public benefit, particularly since the statute has been interpreted not to include some of the other programs listed (e.g., Head Start) as benefits under Section 401. It does not appear that there are any other references to the EITC in the legislative history of Section 401. Section 451 of PRWORA intends to disallow the credit to unauthorized resident aliens by amending the IRC to require that EITC claimants provide the SSNs of themselves, their spouse (if filing a joint return), and qualifying children. Thus, Section 451 explicitly addresses the issue seemingly raised by the above report language concerning the eligibility of unauthorized aliens to claim the EITC. This is arguably not responsive to the question of whether the EITC is a federal public benefit under Section 401. On the one hand, it may be unclear why Congress would have felt the need to include Section 451 if Section 401 had already precluded receipt of the EITC by unauthorized aliens. On the other hand, it is possible to interpret Section 451 as an enforcement mechanism—that is, Congress intended for Section 401 to cover the EITC and enacted Section 451 as a way to prevent unauthorized aliens from claiming the credit. The legislative history is silent on this matter. In light of the legislative history's silence, it is uncertain the extent to which a court would find the history to be useful in addressing the issue at hand. This might be especially true in light of the modern view of statutory interpretation that focuses on the language of the statute itself, which would appear to marginalize whatever insight legislative history or other extrinsic aids might provide. Thus, a court might be hesitant to place any significance on the statute's minimal and ambiguous legislative history, particularly since it does not clearly evidence congressional intent one way or the other. In conclusion, until the IRS or a court addresses this issue, it is not possible to say whether any refundable tax credits are federal public benefits under PRWORA Section 401. Thus, at this time, the only clear restriction on the ability of unauthorized resident aliens to claim any refundable credits is the one provided in the IRC for the EITC since it includes a SSN requirement (the now-expired Making Work Pay and 2008 stimulus credits contained a similar requirement). Unauthorized nonresident aliens, meanwhile, are also expressly prohibited in the IRC from claiming those three credits, as well as several others (e.g., the American opportunity tax credit). If there are concerns with the implementation of current law, there are a variety of policy options that could address them. These options could range from clarifying that unauthorized aliens are permitted to claim refundable tax credits to enacting a categorical bar preventing unauthorized aliens from obtaining refundable tax credits. Potential policy options include the following: Amending the IRC to require SSNs of all filers claiming refundable tax credits. A related option would be to amend the IRC to require SSNs of all filers claiming tax credits, not just those that are refundable. This may be particularly relevant to tax credits, like the child tax credit and the American Opportunity Tax Credit, that have both refundable and non-refundable components. In either case, the scope of the SSN requirement (i.e., who would be required to provide the SSN—the taxpayer, the spouse if married filing jointly, and/or the qualifying dependents, if applicable) could impact the ability of some families—especially mixed status families where certain members have SSNs and others do not—to claim the credits. Amending the IRC to absolutely bar unauthorized aliens from claiming refundable credits (similar to the existing IRC provisions that deny eligibility for certain refundable tax credits to nonresident aliens). Amending the IRC to enable mixed immigration status families to obtain a partial amount of refundable tax credits for those members of the filing household who are legally authorized to reside and work in the United States. For example, the value of the credit could be prorated for the proportion of taxpayers who meet the specified criteria (e.g., if three of the four individuals claimed on a tax return have SSNs, the taxpayers would be eligible for 75% of the total value of the credit). Amending Section 401 of PRWORA to clarify that refundable tax credits are not "federal public benefits" and therefore the only bar to unauthorized aliens claiming such credits would be those found in the IRC. Amending Section 401 of PRWORA to expressly include refundable tax credits among the listed "federal public benefits" so that unauthorized aliens would be ineligible to claim the credits even if the IRC were silent on the matter. Authorizing and appropriating funds to the IRS and DHS to facilitate the cross-checking of data on immigration status and tax returns to identify unauthorized aliens claiming credits for which they may not be eligible. When considering these policy options, it should be noted that the existing refundable tax credits are not monolithic and serve different purposes. There may be policy or other reasons to distinguish among them with respect to the eligibility of unauthorized aliens to claim them. In particular, the refundable credits which are effectively refunds of overpayment of taxes would probably have to be treated differently than the others since denying them could raise constitutional concerns. Appendix A. Overview of Selected Refundable Tax Credits Appendix B. Classes of Noncitizens and Their Eligibility to Obtain Social Security Numbers and to Qualify as a Resident Alien Appendix C. Selected Categories of Nonimmigrants Who Are Permitted to Work There are categories of foreign nationals who are not LPRs but who may be working and residing in the United States for periods of time sufficient to qualify under the Internal Revenue Code's "substantial presence" test (and thus are classified for tax purposes as resident aliens , unless there are specific treaty agreements between the United States and their country of citizenship). The classes of nonimmigrants who are expressly permitted to work in the United States include the following: E treaty traders and investors; H temporary workers; NAFTA temporary workers; Certain F foreign students who have obtained permission; J and Q cultural exchange visitors; L intracompany transfers; K fiancés of U.S. citizens; O and P extraordinary athletes, entertainers, and performers; R religious workers; T trafficking victims; U crime victims; and V family members waiting for more than three years. Spouses and minor children of the qualifying nonimmigrant may accompany the alien on a related visa, but in most instances are not given permission to work. Appendix D. Social Security Numbers (SSNs) Issued to Noncitizens As Figure D -1 shows, in FY2011 there were 1.3 million original SSNs issued to noncitizens. The total number of original SSNs issued to noncitizens peaked at 1.8 million in FY1996. In the previous decade, the number of SSNs issued to noncitizens ranged from a peak of 1.5 million in FY2001 to a low of slightly less than 1.2 million in FY2005. Over time, there has been a substantial change in composition of the noncitizen population receiving SSNs. For example, in FY1992, SSA issued SSNs to 200,136 aliens who had permanent work authorization (e.g., LPRs) comprising 12% of the total number of SSNs issued to noncitizens. In FY2011, there were 619,577 aliens with permanent work authorization who received SSNs, which accounted for 49% of all SSNs issued to noncitizens. In addition, as discussed previously, in FY1996 and FY2001, SSA tightened the rules under which aliens could obtain nonwork SSNs. Corresponding with these changes, large declines in the number of nonwork SSNs issued can be seen between FY1996 and FY1997 (325,629 to 141,472), and between FY2001 and FY2002 (72,224 to 25,169). In FY2011, SSA issued 28,622 nonwork SSNs.

In 2011, the Treasury Inspector General for Tax Administration (TIGTA) reported that individuals who were not authorized to work in the United States received $4.2 billion by claiming the refundable portion of the child tax credit—the additional child tax credit (ACTC). The ACTC is available to working families with children under age 17. The report sparked considerable concern that unauthorized aliens were obtaining refundable tax credits. The TIGTA audit was based upon an analysis of tax returns filed by persons with Individual Taxpayer Identification Numbers (ITINs). The Internal Revenue Service (IRS) issues ITINs to individuals who are required to have a taxpayer identification number for tax purposes but are not eligible to obtain a Social Security number (SSN) because they are not authorized to work in the United States. All aliens, including those who are in the country illegally, are generally subject to federal taxes under the Internal Revenue Code (IRC), and even income illegally obtained is subject to taxation. A refundable tax credit is one where the taxpayer may receive a payment from the IRS that exceeds his or her tax liability. Examples include the earned income tax credit (EITC), the additional child tax credit, the American opportunity tax credit, and the health coverage tax credit. While the EITC requires SSNs of all recipients, the other existing credits, including the ACTC, do not. Similarly, several now-expired credits included an SSN requirement, while others did not. Apart from any SSN requirement, the IRC also expressly prohibits nonresident aliens from claiming some refundable credits. In addition to the specific provisions of the IRC, the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 (P.L. 104-193) bars unauthorized aliens from any federal public benefit except certain emergency services and programs. So defined, this bar covers many programs whose enabling statutes do not individually make citizenship or immigration status a criterion for participation. The legal question arises as to whether any refundable tax credits are federal public benefits, which under PRWORA unauthorized aliens should be barred from receiving. There is no indication that the IRS considers any refundable tax credits to be subject to PRWORA Section 401. Looking to the statutory text, it is arguably unclear whether refundable credits should be treated as federal public benefits, although there is a strong argument that at least some should not (e.g., the credit for taxes withheld). It does not appear that any court has examined this issue or that the IRS has issued guidance on it. The EITC and ACTC are the largest refundable tax credits—in 2009 taxpayers claimed $53.0 billion and $27.5 billion of each credit, respectively—and primarily benefit working families with children. Estimates derived from the March Supplement of the U.S. Census Bureau's Current Population Survey (CPS) indicate that the unauthorized resident alien population was 11.2 million in 2010. The Pew Hispanic Center reported that two-thirds of the unauthorized resident alien population have resided in the United States for 10 or more years. The report also found that the proportion of unauthorized aliens who have been in the country at least 15 years has more than doubled since 2000. Pew researchers have also found that unauthorized aliens tend to be younger than the U.S. population overall and more likely to be in the child-bearing and child-rearing years. As a consequence, an estimated 46% of unauthorized adults are parents of minor children.

This is a comparison of the law of the United States (U.S.) and United Kingdom (UK) relating to the authority to investigate terrorism. It focuses primarily upon the procedures for conducting searches and seizures including the interception of communications, arresting and detaining suspected terrorists, and control orders restricting the activities of suspected terrorists. The most obvious difference between the laws of the two countries is that in the UK approval of extraordinary authority including the issuance of warrants often remains an executive function and in the United States the task more often falls to the courts. In addition, authority in the United States only roughly approximates at best the power of UK officials to arrest and detain suspected terrorists and to subject them to control orders. On the other hand, U.S. officials appear to enjoy greater flexibility in the use of intercepted communications for evidentiary purposes. Many of the differences can be understood in light of the reach of the Fourth Amendment to the United States Constitution. The Fourth Amendment condemns unreasonable governmental searches and seizures. It applies where there is a justifiable expectation of privacy and does not apply there is not. It does not apply to consensual searches nor to the overseas search of the property of foreign nationals with no substantial connection to the United States. The Amendment begins with the presumption that a search or seizure is unreasonable unless conducted pursuant to a warrant issued by a neutral magistrate and upon a showing of probable cause to believe a crime has been committed. There are many circumstances, however, in which a search or seizure will be considered reasonable notwithstanding the absence of a warrant or of probable cause or of both. Thus, border inspections require neither warrant nor suspicion, nor does a procedure which allows officers to stop and search parolees. Incident to a valid arrest, law enforcement officers may search a suspect without probable cause to believe the suspect possesses evidence or a weapon. They may arrest a suspect without a warrant when they have probable cause to believe he has committed a felony, and may conduct a brief investigative stop with less than probable cause when, given all of the circumstances, they have "a particularized and objective basis for suspecting"an individual is engaged in or about to engage in criminal activity. When acting in the interests of certain special needs, such as highway safety or student health and safety, government officials may engage in warrantless, suspicionless searches. When acting solely in the name of national security, government officials may not engage in warrantless searches and seizures relating to a suspected domestic terrorist. Whether and to what extent they enjoy greater latitude when focused on the activities of foreign powers and their agents is less clear. The statutory basis for stop and searches by the police in the UK is contained in the Police and Criminal Evidence Act 1984, which provides the police can stop and search and individual if they have reasonable suspicion that a crime has been, is being, or is about to be committed. Statistics show that under the provisions of this Act the police stopped black people six times more frequently than white people and Asian people two times more frequently. The police were provided with broader authority to stop and search people under the Terrorism Act 2000 that permits officers, with authorization from a senior officer, to stop and search anyone to prevent terrorism. Statistically, Asian and black people are respectively four and five times more likely to be stopped than white people under this Act. These statistics, combined with the Code issued under the Police and Criminal Evidence Act and the Home Office Stop and Search Interim Guidelines provide that while the police must "not discriminate against members of minority ethnic groups when they exercise these powers ... [t]here may be circumstances where it is appropriate for officers to take account of a person's ethnic background when they decide who to stop in response to a specific terrorist threat (for example, some international terrorist groups are associated with particular ethnic groups, such as Muslims)." This Code of Practice has given rise to the claim that the British police use ethnic and religious profiling in their policing, a claim that both the government and the police have actively worked to dismiss. The government has noted that the enactment of the recent anti-terrorism laws led to "a palpable increase in stopping and searching of people of Asian origin in particular." The government expressed concern that tensions with the Muslim community in particular are not exacerbated, because it is believed that the isolation and the stigmatization, perceived, or otherwise, contributes towards the disenfranchising of Muslims, providing extremists with the opportunity to recruit these individuals. An expert witness in a panel reviewing the use of anti-terrorism stop and search powers has noted "one of the biggest dangers of counter-terrorism policing must be that it will grow the very terrorism which it seeks to defeat." Against this background, in the wake of the London bombing in July 2005, the Chief Constable of British Transport Police (BTP) publicly stated: "We should not waste time searching old white ladies. [Searches are] going to be disproportionate. It is going to be young men, not exclusively, but it may be disproportionate when it comes to ethnic groups." The government quickly distanced itself from this remark noting that intelligence-led stop and searches should be utilized rather than stereotyping ethnic minorities because "tackling terrorism is absolutely dependent on the confidence of these communities to feel that they can come forward, give information and be part of the fight against this threat." In the United States as noted earlier, the Fourth Amendment permits parolees to be stopped and searched without warrant or suspicion. And law enforcement officers may conduct a brief investigative stop when given the circumstances they have "a particularized and objective basis for suspecting" that criminal activity is afoot. Nevertheless invidious racial, ethnic, or religious discrimination in law enforcement is unlawful, and the consideration of such factors standing alone "and sometimes even in tandem with other factors, does not generate reasonable suspicion for a stop." Police powers in the UK under the Terrorism Act 2000 are wide-ranging and there are concerns over opportunities for abuse. The Act permits investigations into the resources of proscribed organizations and the commission, preparation, or instigation of acts that are offenses under the Act. Police can arrest individuals without a warrant based on a reasonable suspicion that they have been involved in the preparation, instigation, or commission of acts of terrorism, regardless of whether police believe the suspect is committing or has committed a crime. The government justified this "pre-emptive power of arrest" by stating that the delay in collecting sufficient information for an arrest warrant would, in some cases, be too late to prevent the terrorist act. There are no federal statutory provisions in the United States comparable to the British authority to arrest suspected terrorists. Under the Fourth Amendment, the hallmarks of a reasonable arrest are probable cause and a warrant issued by a neutral magistrate. The Amendment does allow warrantless arrests based on probable cause under some circumstances and permits brief investigative stops and border inspections without a warrant and less than probable cause, but there is nothing the equivalent of a "pre-emptive power of arrest." The government in the UK has faced the difficult task of balancing the rights of individuals, which now have extensive statutory protection under the Human Rights Act 1998, with the security of the state. The incorporation of the European Convention on Human Rights [the ECHR] into the domestic law of the UK by the Human Rights Act 1998 altered the legal climate of the UK and resulted in the specific prohibition of detention for the sole purpose of preventing a crime being specifically prohibited, save in certain circumstances prescribed by law. While the ECHR is not a new doctrine of law, but merely sets out the rights that individuals in Britain have long enjoyed under the common law, the impact of the ECHR on the domestic laws of the UK is evident. Cases challenging British laws are noticeable and ever increasing in number. The UK has had lengthy experience in indefinitely detaining those suspected to be terrorists without trial in Northern Ireland. Under the Prevention of Terrorism (Temporary Provisions) Act 1984 (PTA), the Secretary of State could authorize the detention of a person for up to seven days. In 1988 the European Court of Human Rights ruled that this was a breach of article 5(3) of the ECHR unless it was judicially authorized, resulting in the government derogating from that article in order to lawfully retain this provision of the PTA. The use of these powers was controversial and in response to increasing violence. The result of the internment of almost 2,000 predominantly Catholic men was greater civil disturbances and a "diminished respect for the rule of law in Northern Ireland." It was widely reported that the use of internment was "among the best recruiting tools the IRA ever had." It was against this background and experience that the government had to decide the most effective, least controversial, and least likely to succumb to legal challenges in which to address individuals whom the government suspects to be international terrorists or threats to national security, but whom it cannot deport. This issue was tackled during the drafting of the TA, when alternative options to derogation from the ECHR were considered. It was finally decided that individuals could be detained for up to forty-eight hours after arrest without charge. Critics of the TA regarded this provision as providing for "incommunicado detention" and unnecessary because previously individuals detained under similar provisions were rarely charged with a terrorist offense. Despite this criticism the period of detention permitted under the TA has been extended by successive acts—from forty-eight hours to fourteen days by the Criminal Justice Act 2003 and from fourteen days to twenty-eight days by a highly contentious provision in the Terrorism Act 2006. The detention under this provision, for an initial period of forty-eight hours, is then reviewed by a judicial authority and is then renewable for seven day periods up to a maximum of twenty-eight days, with a senior judge considering applications for detainment for the final fourteen days. In order to continue the period of detention the judicial authority must be satisfied that it is necessary either to obtain or preserve relevant evidence or permit completion of an examination or analysis of any relevant matter with a view to obtaining evidence. The investigation connected with the detention must also be conducted diligently and expeditiously. Other areas of controversy under the detention powers are that police superintendents can impose a delay on the detained person without notifying others of the person's detention or allowing them to consult with a solicitor if there are reasonable grounds to believe that it would interfere with other investigations. In the United States, authorities must advise an individual in custody of his right to have attorney present during interrogation and to have one appointed if he is unable to afford one. A person in custody may waive his right to the presence of counsel, but questioning must stop if the individual asks to speak to an attorney before continuing. As to the detention of suspected terrorists, American law affords no counterpart, but the operation of the material witness statute may have the same effect in some instances. Federal law permits authorities to arrest a suspected terrorist with or without a warrant if they have probable cause to believe that he has committed a federal felony. It also permits the issuance of an arrest warrant if there is probable cause to believe that a person is a material witness to a federal offense and will not be available when needed to testify either before the grand jury, at a trial, or in any other criminal proceeding. Although an individual's proximity to a crime may make him both a legitimate witness and a legitimate suspect, the courts have said that a material witness warrant may not be used as a substitute for a criminal arrest warrant. Those arrested under federal authority must be taken before a magistrate "without unreasonable delay." A delay of longer than 48 hours of an individual arrested without a warrant is presumptively unreasonable as a matter of constitutional law, and a delay of a period as short as two hours may be considered unreasonable if the delay is attributable to criminal investigation rather than processing of an arrestee. Both those arrested on criminal charges and those arrested as material witnesses are eligible for release under federal bail laws. Under the bail laws an individual arrested will either be: released on personal recognizance; released subject to certain conditions including the execution of a bail bond; temporarily detained pending parole revocation, deportation or exclusion; or detained pending trial. An individual charged with one or more of the terrorist offenses listed in 18 U.S.C. 2332b(g)(5)(B) and punishable by a maximum term of imprisonment of 10 years or more may be held for a hearing to determine whether any combination of conditions will be sufficient to assure public safety and his appearance at later proceedings. In such cases, there is a rebuttable presumption that no combination of conditions will reasonably assure public safety or the later appearance of an individual arrested for various terrorist offenses. Although the terrorist presumption only applies to those charged with terrorist offenses, material witnesses may nonetheless be detained if the court determines no combination of conditions will assure public safety and the later appearance of the witness. Various approaches to solve the problem of balancing the human rights of the individuals with the need to protect the public and national security were investigated. After acknowledging the limits of the laws in which it could act, the government considered various options to replace the preventive detention scheme, including permitting the entry in court of intercepted or wiretapped evidence or entering into Memorandums of Understanding between the UK and certain governments to ensure that, if the detainees were deported to their home countries, they would not be subject to the death penalty or torture upon their arrival. The government ultimately decided that certain aspects of the preventive detention scheme could be achieved through control orders that would apply to both foreign and British nationals and be supplemented by Memoranda of Understanding with monitoring bodies, ensuring these countries compliance with the terms of these agreements. In arriving at this decision, the Secretary of State reasoned that: There are cases in which we remain unable to prosecute. However, that does not mean that we should do nothing to forestall suspected terrorists or to prevent them from planning, assisting or otherwise supporting those willing to carry out attacks. The Government have therefore decided to replace the part 4 powers [of the ATCSA] with a new system of control orders. We intend that such orders be capable of general application to any suspected terrorist irrespective of nationality or, for most controls, of the nature of the terrorist activity [whether international or domestic] and that they should enable us to impose conditions constraining the ability of those subject to the orders to engage in terrorist-related activities. Control orders would be used only in serious cases. The controls imposed would be proportionate to the threat that each individual posed. Such orders would be preventive and designed to disrupt those seeking to carry out attacks [whether here or elsewhere] or who are planning or otherwise supporting such activities. They would be designed to address directly two of the Law Lords' concerns: discrimination and proportionality. Control Orders were implemented through the Prevention of Terrorism Act 2005, with the aim of protecting the public from the risk of terrorism by preventing individuals named in such orders from becoming involved in, or assisting, a terrorism-related activity when prosecution of the individual for that activity, or a criminal offense is not possible. The orders are preventive in nature and designed to disrupt the activity of individuals where intelligence shows them to be a threat by imposing "obligations on individuals suspected of being involved in terrorism-related activity [whether domestic or international] ... [to] restrict or prevent the further involvement by individuals in such activity." The 2005 Act provides for two types of orders: those that do not derogate from the UK's obligations under the ECHR [hereinafter "non-derogating orders"] and those that do derogate from the ECHR through imposing obligations that are incompatible with an individuals right to liberty [hereinafter "derogating orders"]. To create the most restrictive form of order, which requires derogation from the UK's obligations under the ECHR, the Secretary of State must file an application with the High Court. Upon receipt of the application, the High Court must hold a preliminary hearing, which may occur without notifying the named individual or allowing him to make representations before the court, to determine whether there is a prima facie case to grant the order. The court has authority to grant an order at this stage if a number of criteria are met, including that there is material present that can be relied upon to establish the individual is or has been involved in terrorism related activity and it is reasonable to impose obligations on the individual to protect the public from the risk of terrorism. If the court makes the derogating order in preliminary hearing, it is then required to hold a full inter partes hearing to either confirm, revoke or modify the obligations of the order. These orders can be made for up to twelve months at a time, and remade after that time period by the Secretary of State, provided the derogation from the ECHR continues. The orders are tailored to the particular risk imposed by each individual upon the advice of the Security Service and can be modified to adjust to the changing risks that the individual might pose and subject suspected terrorists to conditions similar to bail or probation, such as electronic tagging, curfews, restrictions on communications or the use of certain facilities such as the Internet, and from associating with other individuals. The obligations that can be imposed in the orders are not restricted solely to the activities that caused the original suspicion that the person was or had been involved in terrorism-related activity, but can be any obligation aimed to prevent involvement in any terrorism-related activity. There are many instances in which the courts hear cases without the presence of the individual named in the order, or his legal representative. If the individual subject to an order contravenes any obligations imposed by the order, he can be arrested without a warrant and, if found guilty of an offense, may be imprisoned for a period of up to five years and/or fined upon conviction on indictment. The introduction of Control Orders was inevitably subject to considerable criticism, notably that it was the biggest threat to the civil liberty of British citizens and extension of the state's executive powers in over 300 years because, in certain circumstances, a citizen may be deprived of their liberty without knowledge of the evidence presented against them. Individuals criticized the structure of the British legal system, and questioned why the government did not remove the legal constraints that prevent the prosecution of individuals for existing criminal and terrorist offenses in the courts in the first instance, such as restrictions on the use of intercept evidence in the courts. The Labour government responded to these suggestions by stating that an extensive review had concluded that the use of intercepted evidence would only produce a "modest" increase in the number of prosecutions for serious criminal offenses but none for terrorists and argued that: There is a widespread misconception that if we could only adduce intercept as evidence, we would be able to prosecute those detained. However, the review of intercept as evidence found no evidence to support this ... [the] Government do not intend to change the existing arrangements. Intercept provides only part of the intelligence against individuals ... it does not stand alone. Some of the material that we have in these cases is inadmissible, and other material, while technically admissible, could not be adduced without compromising national security, damaging relationships with foreign powers or intelligence agencies, or putting the lives of sources at risk. Due to the highly political and sensitive nature of the subject matter of the 2005 Act, as well as the circumstances in which the bill was pushed through Parliament, a sunset clause was inserted that the provisions within the 2005 Act governing control orders will expire twelve months after the bill was passed. The Secretary of State may, after consulting with the person appointed to review the Act, the Intelligence Services Commissioner and the Director-General or the Security Service, lay an order before Parliament that must be approved by a resolution of each House of Parliament to revive the Act for an additional period of 12 months. To ensure that the 2005 Act is not subject to abuse, nor contravenes individual human rights without check, the Secretary of State is required to prepare a report every three months concerning his use of control orders and appoint an individual to review the operation of the Act. The report is also to cover the implications on the Act of any proposals put forth by the Secretary of State for any law relating to terrorism, as well as the extent of the Secretary of State's use of non-derogating control orders in urgent cases without the permission of the court. The system of Control Orders has already been subject to an adverse ruling by the High Court, with the judge stating that the orders are "an affront to justice" and "conspicuously unfair." The government is appealing this decision and has stated "the ruling will not limit the operation of the act ... [and] we will not be revoking either the control order which was the subject of this review, nor any of the other control orders currently in force on the back of this judgement ... Nor will the judgment prevent the secretary of state from making control orders on suspected terrorists where he considers it necessary to do so in the interests of national security in future." As of May 2006 there have been twenty one control orders issued, and twelve remain in force. The government continues to face the unenviable and difficult task of balancing the rights of individuals and maintaining democracy whilst protecting it. Inevitably, any legislation aimed at preventing individuals from engaging in a terrorist act rather than punishing individuals for committing such an act will be subject to considerable criticism. It is not within the realm of "traditional justice" to punish an individual for an act not yet committed overtly. The government has maintained that the threat it is facing is not a traditional threat, and its use of preventive measures is necessary to maintain order and national security from an amorphous threat. The London Times has criticized the UK's use of these provisions by drawing a parallel with: Totalitarian states [that] have traditionally resorted to house detention as a way to silence dissent without the bad publicity of criminal proceedings, so creating a form of extralegal limbo that indicates guilt on the part of a suspect without having to go to the trouble of obtaining a conviction ... Charles Clarke has argued that house arrest is preferable to detention in Belmarsh, but that is only a difference of circumstance, not of essence. The Home Secretary has continued to reiterate the paradoxical challenge that the current situation creates and has stated that he is striving to: Protect national security and ensure the safety and security of this country. In doing so, I need to consider how we balance the rights of individuals against those of society; how we ensure safety and security within a democracy without undermining the values that are at the very heart of it. The United States does not appear to recognize a procedure comparable to the UK's control orders. The procedure is reminiscent of the conditions that may be imposed either under federal bail laws or the laws governing federal probation. Control orders, however, are available when there is insufficient evidence upon which to base a prosecution, while bail is predicated upon arrest based on a determination that there is probable cause to believe that the person has committed a crime and probation is predicated upon conviction. Law enforcement and the Security Services in the UK have a broad variety of methods at their disposal to investigate crimes. These methods include the interception of communications, electronic data, and various forms of surveillance. The use of these methods are subject to a lengthy and complex legislative regime contained in the Regulation of Investigatory Powers Act 2000 (RIPA), the Police Act 1997, and the Intelligence Services Act 1994; and supplemented by the protections in the European Convention on Human Rights. Additional provisions are supplied in the Covert Surveillance Code of Practice and the Interception of Communications Code of Practice, which the Secretary of State is required to publish under the RIPA. The RIPA regulates most forms of surveillance and the interception of communications in the UK. It was enacted to update the laws on the interception of communications and brings them into line with technological advances. The RIPA was also enacted in anticipation of the effects of the Human Rights Act 1998, which granted individuals an enforceable right to family life and privacy and in response to a number of adverse rulings from the European Court of Human Rights. The European Court of Human Rights found that the lack of regulation of surveillance activities was in breach of article 8 of the European Convention on Human Rights (ECHR), because the interference with the complainants' right to private life had not occurred with a procedure prescribed by law. Despite concerns over the lack of judicial involvement during the drafting of these laws, the issuance of warrants in the UK remains an executive act; with the government previously "explicitly reject[ing] the suggestion that the issue of a warrant should be a judicial act." In the United States, law enforcement and intelligence agencies enjoy broad authority to investigate individuals and activities. That authority, however, is limited by court rule, and by statutory and constitutional safeguards designed to prevent unwarranted intrusions and abuse. The authority includes the power to conduct searches and seizures; to intercept wire, oral and electronic communications; to demand access to stored communications and communications records; to install and use pen registers and trap and trace devices; and to issue administrative subpoenas including those in the form of "national security letters." While law enforcement and intelligence investigators may work cooperatively, neither Foreign Intelligence Surveillance Act's (FISA) interception nor its physical search authority may be invoked solely for the purpose of a criminal investigation unrelated to a foreign intelligence offense. The UK's RIPA provides a system of authorizations for three different types of surveillance: directed, intrusive, and covert human surveillance. All these forms of surveillance involve an aspect of covertness, defined in the RIPA as when the surveillance is "carried out in a manner that is calculated to ensure that persons who are subject to the surveillance are unaware that it is or may be taking place." Intrusive surveillance is defined in the RIPA as covert surveillance that is conducted either by a device or a person, in relation to events occurring inside private property or private vehicles and is the type of surveillance subject to the most stringent controls under the RIPA. Covert human intelligence occurs when a source establishes or maintains any form of relationship with a person to obtain or access information or to disclose such information covertly, when the subject of surveillance is unaware it is occurring. Directed surveillance occurs when the surveillance is covert, but not intrusive, and undertaken for a specific investigation or operation to obtain private information about a person. Specifically, such surveillance involves monitoring a person's "movements, habits or activities by various means in order to obtain specific information about an individual or build a profile of their character or lifestyle" without entering onto the person's property. The RIPA does not impose a requirement that public authorities obtain an authorization under its provisions when they wishes to conduct surveillance. However, the Code of Practice on Covert Surveillance points to the obligations that the state has under the European Convention on Human Rights to respect family and private life, strongly recommending that an authorization be obtained. The Code notes that where there is "no other source of lawful authority, the consequence of not obtaining an authorization under the RIPA may be that the action is unlawful by virtue of the Human Rights Act." Due to the unique and involved nature of directed and covert human surveillance, specific requirements must be met before an authorization will be granted. For covert human surveillance, the requirements aim to ensure the source's security and welfare, as well as to provide independent oversight; that proper records are kept on the sources; and that the identity of the source is only disclosed on a "need to know" basis. A person designated under the RIPA, which encompasses a broad variety of persons from senior members of the security services to officials from local authorities, can authorize directed and covert human surveillance if he believe that it is proportionate and necessary: in the interests of national security; for the purpose of preventing or detecting crime or preventing disorder; in the interests of the economic well-being of the UK; in the interest of public safety; for the purpose of protecting public health; to collect impositions, contributions or charges payable to a government department; or for any purpose as specified in an order made by the Secretary of State laid before Parliament and approved by a resolution in each House. Warrants for covert human surveillance continue for an initial period of twelve months, and three months for authorizations for directed surveillance. As noted above, there is no requirement for public authorities to obtain an authorization under the RIPA prior to conducting surveillance activities. The Home Office has issued non-statutory guidelines that provide only Chief Constables or Assistant Chief Constables are entitled to authorize the use of certain equipment in police surveillance operations. The Guidelines provide that authorizations should only occur when all of the following criteria are met: the investigation concerns serious crime; normal methods of investigation must have been tried and failed, or must from the nature of things, be unlikely to succeed if tried; there is good reason to think that the use of the equipment is likely to lead to an arrest and a conviction, or where appropriate, to the prevention of acts of terrorism; the use of equipment is operationally feasible; and the degree of intrusion into the privacy of those affected by the surveillance is commensurate with the seriousness of the offense. The use of video surveillance by public authorities in public places has been subject to considerable debate amongst privacy scholars who consider that the installation of the extensive closed circuit television cameras (CCTV) in public places across the UK has eroded individual privacy and is leading to a 'big brother' state. There are currently no statutory regulations on the use of CCTV cameras, although the Home Office has produced a Code of Practice on their operation. The use of CCTV, and the images they record is subject to Article 8 of the ECHR. The European Court of Human Rights has noted that the "recording of the data and the systematic or permanent nature of the record may give rise to [privacy] considerations ... [and] the compilation of data by security services on particular individuals even without the use of covert surveillance methods constitutes an interference with the applicants' private lives." When determining whether video surveillance has breached Article 8, the courts consider whether the complaining individual had a 'reasonable expectation of privacy' as an indicating factor whether the surveillance breached their human rights; for example, did the actions occur in a public place or was the information processed at a level high enough to constitute interference with the individual's private life or the material published in a manner greater than could be reasonably foreseen. The courts have noted that even though certain acts may occur in public, there is a "zone of interaction ... in a public context, which may fall within the scope of 'private life.'" U.S. law treats covert human surveillance (confidential informants), directed surveillance (consensual interception of communications and lawful unplanned surveillance), and video surveillance a bit differently: no special authorization is statutorily or constitutionally required under most circumstances. The interception of wire, oral or electronic communications with the consent of one party to the communication constitutes one of the exceptions to the general statutory and constitutional prohibitions against warrantless interceptions. There is no statutory restriction on government surveillance within a public place. The limitations of Fourth Amendment's proscription on unreasonable searches and seizures only come into play when there is a justifiable expectation of privacy associated with government's surveillance in the form of a visual or photographic seizure in a public place. The First Amendment's restrictions on governmental actions which have a prohibited chilling effect on the exercise of First Amendment rights are not offended when the government's information gathering "is nothing more than a good newspaper reporter would be able to gather by attendance at public meetings and the clipping of articles from publications available on any newsstand." Due to its inherent invasiveness, the Home Office claims that this form of surveillance is only used to "catch offenders suspected of serious crimes." Authorizations for intrusive surveillance can only be granted by the Secretary of State or senior officials designated under the RIPA. The list of individuals under this provision is narrower than those designated to authorize covert or directed surveillance and includes chief constables of the police forces; designated members of the Security Service; the Provost Marshall of the Royal Air Force Police; designated customs officers; and more recently, officers of the Northern Ireland Prison Service. The circumstances under which this form of surveillance can be authorized are necessarily narrower than the other types of surveillance. A warrant can be authorized if the authorizing official believes the surveillance is: proportionate to what it is seeking to achieve; and necessary in the interests of national security and for the purpose of preventing or detecting serious crime or in the interests of the economic well being of the UK; and the information cannot reasonably be obtained by other means. The Secretary of State may also authorize intrusive surveillance upon application from a member of any of the security services; an official of the Ministry of Defence; a member of Her Majesty's Forces; or an individual holding a position within a public authority that has been designated under the RIPA. The Secretary of State must believe that the surveillance is necessary in the interests of national security and for the purposes of preventing or detecting serious crime. The Secret Intelligence Service and GCHQ can also obtain a warrant under these provisions for directed and intrusive surveillance relating to property in the British Isles, provided that the investigation is carried out in the interests of national security or the economic well-being of the UK. The Security Service may act on behalf of Secret Intelligence Service and GCHQ to obtain an authorization for a warrant in connection with a function of one of the above services provided that the activity does relate to the support of the prevention or detection of serious crime. These authorizations are effective for renewable periods of six months. As a matter of U.S. law, intrusive surveillance (the surreptitious capture of activities in a private place or vehicle by person or device) is likely to implicate the Fourth Amendment unless the search or seizure involves the property of one who has no justifiable expectation of privacy. Thus for example, without a warrant the government may not use a thermal imager to monitor activity within a home. Applications for authorizations under RIPA by members of the police force, members of the Serious Organised Crime Agency (SOCA, formerly the National Criminal Intelligence Service (NCIS)), or a customs officer for directed or intrusive surveillance or the use of covert human intelligence sources must also be approved by a surveillance commissioner. Written notice of this authorization be provided to the person who granted the authorization. Authorizations issued upon the application of members of the police force, the SOCA or customs officers can be quashed by a Surveillance Commissioner if he is are satisfied that, "at the time the authorization was granted or at any time when it was renewed," there were no reasonable grounds for believing that the statutory criteria were met. A Surveillance Commissioner can also cancel authorizations if he believes that the statutory criteria are no longer met. If the Surveillance Commissioner decides to quash the authorization, he has the authority to order that any records relating to information obtained by the surveillance after the statutory requirements were no longer met be destroyed. This does not apply if the records are needed for pending criminal or civil proceedings. Authorizing officers have a right of appeal to the Chief Surveillance Commissioner within seven days of the decision by the Surveillance Commissioner to: refuse to approve an authorization for intrusive surveillance; quash or cancel an authorization for intrusive surveillance; or order the destruction of records. The Chief Surveillance Commissioner can modify, quash or affirm the Commissioner's decision. During 2005-2006 only one appeal was lodged, based on quashing of an authorization to use an invisible marking dye to covertly mark the property of a suspect. The Commissioner quashed the appeal on the basis that it was speculative whether the suspect would commit a serious offense within the meaning of the law; his decision was in turn appealed; and that appeal subsequently dismissed. There is no comparable American procedure. The procedure in the UK, however, serves the same purposes of the U.S. requirement that warrants be issued by a neutral magistrate—a safeguard against abuse of executive power. The RIPA provides a system of authorizations in which communications can be intercepted. A warrant is required for the lawful interception of communications in most circumstances in the UK. Circumstances in which communications can be intercepted without a warrant include those in which: one party to the communication has consented to the intercept; the provider of a postal or telecommunications service intercepts the communication; a person conducting a business, government department, or public authority intercepts communications on their entity's own telecommunications lines to prevent or detect crime, ascertain facts, investigate unauthorized use of the system, and monitor communications to determine whether they are business or personal; the intercepted communications are those in hospitals with high security psychiatric services, under regulations made by the Secretary of State for interceptions in the course of lawful business practice, under prison rules, or in state hospitals in Scotland; or the interception of communication occurs on a public telecommunications system outside the UK and the person providing the telecommunications service is required by the law of that country to facilitate the interception. In the United States, a court order is required for the lawful interception of communications in most circumstances and can be obtained either under the Electronic Communications Act (Title III) or the Foreign Intelligence Surveillance Act (FISA). The circumstances in which communications can be intercepted without an order under Title III include those in which: one party to the communication has consented to the interception; the service provider intercepts the communication incident to rendering service, or in order to protect the provider's property; the interception occurs through the use of telephone equipment used in the ordinary course of the interceptor's business; there is no justifiable expectation of privacy in the intercepted oral communication; an emergency exists and approval of an application is anticipated; or the interception of communication occurs outside of the United States and in compliance with the laws of the place where it occurs. The circumstances in which communications can be intercepted without an order under FISA include those in which: the President has approved interception for up to 15 days during a time war declared by Congress; the President has approved interception for up to 1 year when the communications are between foreign powers (not including terrorist groups) and the communications of a U.S. person are not likely to be intercepted; an emergency exists and an application is anticipated; there is no justifiable expectation of privacy in the intercepted oral communication; or the interception of communication occurs outside of the United States and in compliance with the laws of the place where it occurs. The UK authorization process to obtain a warrant to intercept communications differs from the process to obtain surveillance warrants. Under the RIPA the Secretary of State personally issues warrants to intercept communications upon receipt of an application from the Director General of any of the Intelligence Services, the SOCA, the Chief of Defence Intelligence, Police Commissioners, Chief Constables of the Police Service in Northern Ireland, Chief Constables of Scottish Police forces, the Commissioner of Customs and Excise, or a person that is the competent authority of a country or territory outside the UK under a mutual assistance agreement. Police Chief Constables in England and Wales may make applications for warrants through the SOCA. With the exception of authorizations under international mutual assistance agreements, these people all hold office under the Crown. Except for warrants issued in response to requests under mutual assistance agreement, or in urgent cases, the Secretary of State must personally sign the warrant. In urgent cases, a senior official designated by the RIPA can sign a warrant, although the Secretary of State must still personally authorize the warrant. In cases of warrants issued for mutual assistance agreements, the senior official must be satisfied that the interception subject is outside the UK or the interception is to occur in relation only to premises outside the UK. In cases in which a warrant is required, to ensure that the right to privacy is not arbitrarily or unduly interfered with, the issuing authority must believe that the interception is necessary on one of the statutory grounds and is proportionate to the aim of the surveillance, as is required under the European Convention on Human Rights. The Code of Practice describes the test of proportionality as "balancing the intrusiveness of the interference, against the need for it in operational terms ... it will not be proportionate if it is excessive in the circumstances of the case or if the information which is sought could reasonably be obtained by other means." This test must be met in every case where an authorization for a warrant is requested. The authorization process to obtain an order to intercept communications under either U.S. federal statute differs from the process to obtain a traditional search warrant. Under Title III, a United States District Court issues an order to intercept communications upon receipt of an application approved by a senior Justice Department official. Under FISA, federal judges designated to act as judges of the special Foreign Intelligence Surveillance Court issue orders to intercept communications upon receipt of an application approved by the Attorney General. In urgent cases, senior Justice Department officials may authorize emergency interception pending court approval of Title III application. The Attorney General enjoys similar authority under FISA. The interception orders must identify the location and nature of the facilities targeted for interception unless the efforts to thwart identification are anticipated or, in the case of intercepted oral communications, circumstances render identification impractical. Before the Secretary of State in the UK can authorize a warrant to intercept communications, he must believe that the conduct requested by the warrant is proportionate and necessary on the grounds of being: in the interests of national security; for the purposes of preventing or detecting serious crime; for the purpose of safeguarding the economic well being of the UK from the acts or intentions of individuals outside the British Isles; or to give effect to an international mutual assistance agreement whose purpose is equivalent to that of preventing or detecting serious crime. Before the U.S. court can authorize a Title III order to intercept communications, it must conclude that: there is probable cause to believe that an individual has committed, is committing, or will commit one of the serious federal crimes with respect to which an order may be authorized; there is probable cause to believe that communications relating to the crime will be obtained through the interception; that alternative procedures have proved or are likely to prove futile or too dangerous; and unless thwarting efforts or impractical circumstances are anticipated, there is probable cause to believe that the targeted facilities or location are being or will be used in connection with commission of the offense, or are leased to or commonly used by the targeted individual. Before the court can authorize a FISA order to intercept communications, it must conclude that: the President has authorized the Attorney General to approve applications; the Attorney General has approved the application submitted by a federal officer; there is probable cause to believe that the target is a foreign power or agent of a foreign power (foreign powers include international terrorist groups and agents of foreign powers include international terrorists)(except that no U.S. person may be considered based solely First Amendment protected activities); there is probable cause to believe that the targeted facilities or locations are or are about to be used by a foreign power or agent of foreign power; adequate acquisition, retention and dissemination minimization procedures will be followed; and application requirements have been met. The warrant in the UK can apply to either one person or one premises and continues for a period of three months. For warrants issued on the grounds of the prevention and detection of serious crime, this period can be renewed for an additional three months; warrants issued on the grounds of national security or economic well being of the UK can be renewed for an additional six months. Warrants issued in urgent circumstances by a senior official are valid for five working days from the date of issue, and may be renewed by the Secretary of State. With the exception of warrants issued in urgent cases, modifications to the warrant do not affect the expiry date. The modification of warrants issued in urgent circumstances has the effect of restarting the five day period for which the warrant is valid. In the United States, Title III orders expire no later than 30 days after issuance, subject to 30 day extensions. The tenure of FISA orders varies according to the character of the target, ranging from 90 days to one year, with possible extensions of like duration. There is no requirement under the RIPA that the subject of the interception be notified of its occurrence after the fact, with the Home Secretary noting that: Disclosure of the fact of an interception warrant to anyone being intercepted would fundamentally undermine its effectiveness ... Secrecy enables law enforcement agencies and the intelligence agencies to best ensure protection of the public in a wide range of cases. However, the issue and execution of interception warrants is overseen by the independent Interception of Communications Commissioner. Upon expiration of the order in the United States, Title III of federal law requires notification of individuals named in an interception order and anyone else the court finds appropriate. FISA requires notification of an individual whose communications have been intercepted only when the government intends to enter the results of the interception into evidence in a judicial or administrative proceeding. There are no specific prohibitions on intercepting material of a confidential nature, such as those subject to legal privilege, confidential personal information, or confidential journalistic material. The Code of Practice on the Interception of Communications details additional safeguards which provide that extra consideration should be given when an interception might involve materials of a confidential nature and that applications for surveillance that are likely to result in the acquisition of legally privileged materials should only be made in exceptional and compelling circumstances. Neither U.S. statute, Title III nor FISA, contains a specific prohibition upon the interception of privileged or otherwise confidential communications. Both state that privileged communications do not lose their privileged status by virtue of interception. A number of provisions in the RIPA aim to act as safeguards to ensure that any information obtained is not abused or misused. Material intercepted under the above provisions is only to be used, disclosed, and distributed as minimally as necessary for the purposes for which it was authorized. In practice, this means that the information can be shared across, and used by, law enforcement and intelligence agencies both in the UK and overseas through the cooperative intelligence and information approach in the UK, which the Home Office claims has led to "uniquely close cooperation between our law enforcement and intelligence agencies. No other country in the world even gets close to this level of inter-agency co-operation." The disclosure of the information is limited to those who have the required security clearance; and the need to know principle that requires "intercepted material must not be disclosed to any person unless that person's duties, which must relate to one of the authorized purposes, are such that he needs to know about the material to carry out those duties." Once the material is no longer needed for the authorized purposes, it must be securely destroyed. In the case of Title III interceptions in the United States, law enforcement officers may use information obtained through an interception in the performance of any of their duties rather than merely those associated with the investigation for which the interception was authorized. Moreover the information may be shared with other law enforcement officers—and in the case of foreign intelligence information, with intelligence, protective, immigration, national defense and national security officials officers—for use in their official duties. Disclosure of information secured through a FISA interception is more circumspect, but information that is not foreign intelligence information may be shared with law enforcement officials for use in their official duties. The UK's RIPA also requires that the Prime Minister appoint an Intelligence Services Commissioner to review how the Secretary of State issues warrants for surveillance and how the Secretary of State exercises and performs the powers and duties granted by the RIPA in relation to the Service. Information obtained under these procedures are also subject to the protections and requirements of the Data Protection Act 1998. There is no exact replica of the UK safeguard under U.S. law, but similar benefits may follow as a consequence of the various required reports to the public and Congress on the use of the authority under Title III and FISA. The police, the Royal Navy Regulating Branch, the Royal Military Police and the Royal Air Force Police, customs officers, and members of the SOCA have a separate series of legislation, augmented by the RIPA, for entry or interference with property in relation to wireless telegraphy contained in the Police Act 1997. This provides that a Chief Constable or other authority specified in the Police Act 1997 may issue an authorization permitting "such action ... in respect of [property or] wireless telegraphy" as the authorizing officer specifies and enables the authorizing officers to require the maintenance or retrieval of equipment or devices whose uses or placement has been authorized by the Police Act or the surveillance provisions of the RIPA. The authorizing officer must believe that the action is necessary for the purposes of preventing or detecting serious crime; and cannot reasonably be achieved by other means. Authorizing officers are Chief Constables of police force in England, Wales or Scotland; a Chief Constable or Deputy Chief Constable of the Police Service of Northern Ireland; the Commissioner or Assistant Commissioner of the Police of the Metropolis; the Commission of Police for the City of London; the Chief Constable of the Ministry of Defence Policy; the Provost Marshall of the Royal Navy Regulating Branch, the Royal Military Police, or the Royal Airforce Police; the Chief Constable of the British Transport Police; the Director General of the SOCA; and any customs officer designated by the Commissioners of Customs and Excise. Authorizations continue for an initial period of three months and can be renewed for an additional period of three months. The Police Act provides that matters subject to legal privilege, confidential information and confidential journalistic information can be subject to an authorization that permits the police to interfere with property or wireless telegraphy. Except in cases of urgency, the authorization to interfere with property that is used as a dwelling or as office premises, or interceptions of communications that are likely to result in the knowledge of material subject to legal, journalistic or confidential personal privilege must have the written approval of a Surveillance Commissioner. The Surveillance Commissioner may only approve the authorization if he believes that there are reasonable grounds that the statutory grounds for authorizing a warrant have been met. Members of the public who believe their property or wireless telegraphy has been interfered with by the police or other authorized bodies may file a complaint with the Investigatory Powers Tribunal who may conduct an investigation on their behalf. As noted earlier, Title III governs the interception of wire, oral and electronic communications in the United States. It provides a procedure for court approved interceptions for law enforcement purposes during the course of investigations of a list of specifically designated federal and state crimes. Here too interception orders are good for no more than ninety days, but are subject to ninety day extensions. Individuals named in an interception order and others the court considers appropriate are notified following the expiration of the order. The Intelligence Service Act 1994 (ISA) granted the Secretary of State additional powers to authorize entry on and interference with property or with wireless telegraphy upon application from any of the three Intelligence Services. The property that can be interfered with "covers all forms of property, including residential premises, private vehicles and personal possessions." Due to the important role that the Intelligence Services play in safeguarding the national security of the UK, the requirements for an authorization under the ISA are much broader than under the RIPA. The Secretary of State must believe that: the conduct is necessary on the ground that it is likely to be of substantial value in assisting the Security Service, Intelligence Service, or GCHQ in carrying out any of its statutory functions, although, with the exception of the Security Service, a warrant cannot be granted in support of the prevention or detection of serious crime in relation to property in the British Islands; the information sought cannot reasonably be achieved by other means; and the Director General of the Service has safeguards in place, as required under the 1989 Act, which provide that only information required for the Service to carry out its functions is obtained, and that the information obtained is only disclosed as necessary or for the purpose of preventing or detecting serious crime. Warrants issued by the Secretary of State under these provisions continue for a period of six months, unless issued by a senior official in urgent circumstances, in which case the warrant expires on the second working day after it was issued. Warrants issued by the Prime Minister for the Intelligence Services or GCHQ may be reviewed by a Commissioner appointed by the Prime Minister. The Commissioner must hold, or have held, high judicial office and must also provide an annual report on the use of his functions to the Prime Minister, which is laid before Parliament with "matter ... prejudicial to the continued discharge of the functions of" the Security Services removed. Members of the public who believe their property or wireless telegraphy has been interfered with by the Intelligence Services may file a complaint with the Investigatory Powers Tribunal who may conduct an investigation on their behalf. In the United States, FISA permits the Attorney General to approve applications for a FISA court order authorizing interceptions for certain foreign intelligence purposes, as noted earlier. The tenure of such orders ranges from ninety days to one year depending upon the target and they may be extended for equal intervals. Those whose communications are intercepted pursuant to a FISA order are notified of that fact when the government decides to use the intercepted communications as evidence in a judicial or administrative proceeding. Prior to the enactment of the Security Service Act 1996, the Service could not obtain authorization to conduct activities in connection with supporting the police forces and law enforcement agencies in the prevention and detection of serious crime if the action related to property in the British Islands. This restriction was removed by the Security Service Act 1996, which granted the Service the authority to apply to the Secretary of State to obtain a warrant to interfere with property or wireless telegraphy on the British Isles under the same criteria as above if: the purpose is to prevent or detect serious crime; in support of law enforcement agencies; and the acts investigated constitutes an offense and involves the use of violence; or results in substantial financial gain; or are conducted by a large number of persons in pursuit of a common purpose; or the offense is one which a person over the age of twenty one with no prior convictions could be sentenced to imprisonment for three or more years for. The Secretary of State must also be satisfied that the Director General of the Security Services has arrangements in place for the coordination of the activities of the security services with the police and other law enforcement agencies. Warrants issued by the Secretary of State under these provisions continue for a period of six months, unless issued by a senior official in urgent circumstances, in which case, the warrant expires on the second working day after it was issued. The Security Service can also obtain a warrant to interfere with property or wireless telegraphy if it is acting on behalf of the Intelligence Service or GCHQ and the action proposed is to be "undertaken otherwise than in support of the prevention or detection of serious crime." The Security Service Act 1996 was disturbing to many individuals and civil rights organizations as it essentially granted the Service, an agency considered to have a lack of oversight, transparency, and democratic accountability, powers that were traditionally the responsibility of the police. Lord Justice Browne-Wilkinson believed that the 1996 Act essentially granted executive warrants and stated: I am not for the carrying over of powers, which are unhappily necessary in the context of national security, into a policing function enabling a member of the Executive to sanction entry onto private property without prior judicial warrant. We are not just legislating for this Government or the next ... we are actually impairing the constitutional freedoms of the individuals of this country. Human rights organizations further criticized the Security Services Act, notably with regard to the apparent lack of judicial oversight in the authorization process, stating that "a member of the executive lacks the necessary independence to authorize interception by a state agency and that it offends against the concept of the separation of powers; a senior judge would be a more appropriate arbiter of the balance between the rights of the individual and the interests of the state." Experience in the United States was similar, but restrictions on the involvement of the intelligence officials in purely domestic law enforcement investigations remains. Before passage of the USA PATRIOT Act, FISA's interception and physical search authority could only be invoked upon certification that the acquisition of foreign intelligence information was "the purpose" for the request. After enactment of the USA PATRIOT Act, such acquisition need only be a "significant purpose" for the request, and the Act makes it clear that cooperation between intelligence and law enforcement officers does not preclude certification. FISA authority may not be used, however, solely for the purpose of investigating or aiding in the investigation of criminal offenses unrelated to foreign intelligence activities. Despite the expansive laws relating to the interception of communications, information obtained in such a manner is not usable as evidence in a court of law, even if every legal requirement has been met. This restriction has recently been reviewed and, despite severe criticism, notably that from the opposition government that the use of such evidence may allow the prosecution of suspected international terrorists, the government decided to maintain this prohibition. The government stated that the disclosure of intercepted communications could undermine the intercept capabilities and lead to their methods becoming public knowledge and thus ineffective. The Home Office asserts that the main use of the findings of intercepted communications is to help "intelligence agencies and law enforcement decide how best and where to deploy the techniques they use to get evidence for courts such as surveillance, eavesdropping and the use of informants." A law professor in the UK has been strongly critical over the government's decision to maintain the ban on the use of intercept evidence in the courts, opining: The disadvantage of the exclusionary rule ... is that a number of bad and dangerous people cannot be tried for their crimes, although cogent and irrefutable evidence exists against them—a ... problem that the Home Secretary wants to solve not by abolishing the ban, but by abolishing the need for trials, and giving himself the legal power to put them under house arrest without one. The former Director General of the Security Service (MI5) has publicly announced his reluctant support over the continued prohibition on the use of intercept evidence in court stating: I have reluctantly come to the conclusion that due to the changing nature of telephone technology and the importance, during a period of change, of not sensitising terrorists and serious criminals to particular capabilities that will be important for the future, there are indeed good reasons not to remove the bar on the use of intercept in our courts. The government responded to suggestions that the ban on the use of intercept evidence be removed by stating that the extensive review has concluded the use of intercepted evidence would only produce a 'modest' increase in the number of prosecutions for serious criminal offenses but none for terrorists. Despite the restrictions, there are some limited circumstances in which intercept evidence can be used as evidence. Section 18(4) of the RIPA permits the use of intercepted communication as evidence if one party consented to the intercept. The courts have interpreted the prohibition on using intercept evidence narrowly, holding that it only applies to communications intercepted in the UK, permitting the admittance of intercepted communications obtained legally abroad. Moreover, the evidentiary restrictions do not appear to extend to information obtained through electronic bugging. The police have continued to obtain information through electronic surveillance devices without proper authorization. In several instances, evidence obtained from this police 'bugging' has been permitted as evidence in court despite judges in each cases specifically saying that the evidence was obtained in probable or direct breach of the ECHR. In one case, evidence from two co-accused obtained through an electronic surveillance device placed in their police holding cell was permitted to be used in court, despite the fact that the co-accused had exercised their right to silence. The European Court of Human Rights has provided that intelligence obtained in breach of Article 8 of the ECHR through the unlawful installation of a listening device in a person's home or covert listening devices in police stations is admissible as evidence as "any breach of Article 8 is subsumed by the Article 6 duty to ensure a fair trial." In contrast to the law in the United Kingdom, in the United States, evidence lawfully secured pursuant to either a Title III or a FISA interception order does not become inadmissible in judicial proceedings solely by virtue of that fact. Yet as noted earlier, lawful interception does not strip privileged communications of any of the privileged status they otherwise enjoy. The warrant process for the interception of communications is overseen by an independent Interception of Communications Commissioner (ICC). The ICC is responsible for ensuring that "authorised agencies have proper processes in place, and have considered the human rights of individuals before interception takes place;" and review the exercise and performance by the Secretary of State of the powers granted upon him regarding authorizing the interception of communications under the RIPA. The 2004 Annual Report on the use of the Regulatory Powers Act to intercept communications prepared by the ICC noted that the personnel conducting intercepts have: ... a detailed understanding of the legislation and strive assiduously to comply with the statutory criteria ... in my view, there is very little, if any, danger that an application which is defective in substance will be placed before the Secretary of State ... [the agencies] welcome the oversight of the Commissioner, both from the point of view of seeking his advice, which they do quite frequently, and as a reassurance to the general public that their activities are overseen by an independent person who has held high judicial office. Interference with property by the Intelligence Services is subject to oversight by the Intelligence Services Commissioner (ISC), currently the Right Honourable Sir Peter Gibson. Both these Commissioners are appointed by, and report to, the Prime Minister. The Office of Surveillance Commissioners further oversees any interference with property by the Police under Part III of the Police Act 1997 as well as "surveillance and the use of Covert Human Intelligence by all organizations bound by RIPA, with the exception of the Intelligence Services" which, as noted above are overseen by the Intelligence Services Commissioner. The OSC has a budget of over one million pounds (approximately $1.8 million) and reviews authorizations under RIPA by the Police, SOCA and Her Majesty's Customs that involves entry on, or interference with the property or wireless telegraphy without the consent of the owner. Surveillance Commissioners are appointed by the Prime Minister for a term of three years, although they may be removed earlier by a resolution from each House of Parliament that has been approved by the Scottish Parliament. The Surveillance Commissioners must either hold, or have held, a high judicial office, whilst Assistant Surveillance Commissioners either hold, or have held, office as a Crown Court or Circuit Judge; Sheriffs in Scotland or County Court Judges in Northern Ireland. There is no exact replica of the UK safeguard under U.S. law, but similar benefits may follow as a consequence of the issuing court's continued authority over interception orders it issues and of the various required reports to the public and Congress on the use of the authority under Title III and FISA. There is no statutory requirement for any body that has the authority to intercept communications through a warrant to disclose these activities to any person subject to the intercept. Despite the lack of requirements to notify subjects of the intercept, a body was established to address complaints by members of the public over any acts the person believes are "inappropriate interception activities by any of the intelligence services, and in some circumstances, by public authorities." The complaints are investigated by an Investigatory Powers Tribunal (IPT), established under Part IV of the Regulation of Investigatory Powers Act 2000, and governed by the Investigatory Powers Tribunal Rules 2000. In 2004, the IPT received ninety new applications and completed investigations into forty nine applications, at no time concluding that there had been a contravention of RIPA or the Human Rights Act 1998. Members of the IPT are appointed by letters patent by the Queen for five year terms with no restriction on re-appointment and must be senior members of the legal profession, with the president and vice president either holding or previously holding high judicial office. There are currently eight members on the IPT. The RIPA further regulates: "who may be appointed a member of the Tribunal; the jurisdiction of the Tribunal; the obligations of organizations and individuals in providing information to the Tribunal; the right of the Secretary of State to make Rules regarding the Tribunal; and the disclosure of information aspects of any hearings deemed necessary by the Tribunal notification to the complainant." The IPT's role is not to inform complainants whether their telephones have been tapped or whether they have been subject to other forms of surveillance activity. Its role is to determine whether the relevant legislation has been complied with and whether the organizations with authority under the legislation have acted reasonably. If complaints are upheld, the IPT does have discretion to disclose the details of any conduct undertaken to the complainant; however, for those not upheld, no information is disclosed regarding whether or not the complainant has been subject to any interception or surveillance activities. The IPT investigates allegations by members of the public who believe that action has been taken against themselves, their property or communications by an organization that has been granted authorization to conduct such activities by the Regulation of Investigatory Powers Act. In reality, this is the only forum in which the activities of the Security Services can be questioned by members of the public and, as such, it has a broad remit regarding the scope of conduct it can investigate. In cases where members of the public suspect that their communications have been intercepted or that they have been subject to surveillance by certain bodies, the IPT can investigate whether the requirements and conditions for the issuance of a warrant to intercept communications have been met; and whether that the proper authorization has been sought and approved throughout the interception process. Under the RIPA, the organizations responsible for issuing authorizations are required to provide the IPT with information relating to the complainant. Additionally, the IPT can "demand clarification or explanation of any information provided, order an individual to give evidence in person, inspect an organization's files, or take any other action it sees fit." No charge is made to complainants for the investigation of their allegations, with the IPT's resources being provided for by the government. If evidence from the IPT's investigation leads to a determination, based on the principles of judicial review, that the RIPA has been contravened and that the organization has not acted reasonably it can uphold the complaint and has the discretion take "remedial measures such as the quashing of any warrants, destruction of any records held or financial compensation, may be imposed at the Tribunal's discretion." If the IPT does not find that the legislation has been contravened or finds that the organization has acted reasonably, it will not uphold a complaint. The IPT states that not upholding a complaint may mean that "any conduct has been properly authorised and guidelines complied with, or that the Tribunal are satisfied that the conduct complained of has not taken place." In the United States, Title III requires that individuals named in an interception order be notified after the order has expired. Unlawful interception may result in suppression of any resulting evidence and unlawful interceptions may expose offenders to criminal, civil and administrative sanctions. The RIPA provides for the lawful acquisition and disclosure of communications data in specified circumstances. The definition of communications data was subject to a great deal of Parliamentary debate as the requirements to obtain authorization, and the list of those who can request an authorization, are not as stringent as for surveillance or the interception of communications. Communications data does not include the content of the communication, but the information that relates to the use of a communication service, such as telephone records (including the number called, duration of the call); Internet records (including sites visited, the sender, recipient, date and time of email messages); and information on the individual using the service held by the operator, such as subscriber information. An authorization to obtain communications data can only be obtained if it is necessary: in the interests of national security or the economic well being of the UK; for the purposes of preventing or detecting crime or preventing disorder; in the interests of public safety; for assessing or collecting of any tax, duty, levy or other imposition; or to protect public health or, in an emergency, to prevent the death, injury or damage to an individual's physical or mental health, or mitigate such damage. The class of officials who can grant authorization to obtain communications data is much broader than in the other areas of surveillance, and authorization can be "granted internally by an official in the relevant public authority [with] no limitation on those who may apply for authorization." A controversial aspect of the RIPA is the requirement that providers of public communications services must maintain the capability to intercept communications and retain communications data. Communications providers, particularly Internet Service Providers, considered that maintaining such a capability would be costly and infringe upon the privacy of their customers. The RIPA does place a duty on the Secretary of State to make contributions, where appropriate, to the costs incurred by postal and telecommunications operators when complying with an order to retain or disclose communications data. The ATCSA further expanded these duties, requiring communications service providers to retain communications data after the period necessary for business purposes for national security and crime prevention so that it can be accessed under the Regulation of Investigatory Powers Act when necessary. The provision has been criticized as giving police the ability to obtain a "complete dossier on private life." These requirements appear to soon become standard and more stringent with the passage of an EU Directive, spearheaded by the UK, which mandates communications providers not just provide the ability to retain but actually retain communications data for up to two years as a law enforcement aid. The comparable provisions under the laws of the United States permit law enforcement and intelligence access to such communications data—and in some instances to stored communications content—under several schemes. The procedural requirements for law enforcement access to stored wire or electronic communications and transactional records deal with two kinds of information—often in the custody of the telephone company or some other service provider rather than of any of the parties to the communication—communications records and the content of electronic or wire communications. Law enforcement officials are entitled to access: with the consent of the one of the parties; on the basis of a court order or similar process under the procedures established in Title III/ECPA; in certain emergency situations; or under one of the other statutory exceptions to the ban on service provider disclosure. Section 2703, which affords law enforcement access to the content of stored wire and electronic communications, distinguishes between recent communications and those that have been in electronic storage for more than six months. Government officials may gain access to wire or electronic communications in electronic storage for less than 6 months under a search warrant issued upon probable cause to believe a crime has been committed and the search will produce evidence of the offense. The government must use the same procedure to acquire older communications or those stored in remote computer storage if access is to be afforded without notice to the subscriber or customer. If government officials are willing to afford the subscriber or customer notice or at least delayed notice, access may be granted under a court order showing that the information sought is relevant and material to a criminal investigation or under an administrative subpoena, a grand jury subpoena, a trial subpoena, or court order. Under the court order procedure, the court may authorize delayed notification in ninety day increments in cases where contemporaneous notice might have an adverse impact. Government supervisory officials may certify the need for delayed notification in the case of a subpoena. Traditional exigent circumstances and a general inconvenience justification form the grounds for delayed notification, i.e.: danger to life or physical safety of an individual; flight from prosecution; destruction of or tampering with evidence; intimidation of potential witnesses; or seriously jeopardizing an investigation. Comparable, if less demanding, procedures apply when the government seeks other customer information from a service provider (other than the content of a customer's communications). The information can be secured: with a warrant; with a court order; with customer consent; with a written request in telemarketing fraud cases; or with a subpoena in some instances. Most customer identification, use, and billing information can be secured simply with a subpoena and without customer notification. Intelligence investigators have access to customer communications data under two procedures. First, there is the FISA business record or tangible item authority. Prior to the USA PATRIOT Act senior FBI officials could approve an application to a FISA judge or magistrate for an order authorizing common carriers, or public accommodation, storage facility, or vehicle rental establishments to release their business records based upon certification of a reason to believe that the records pertained to a foreign power or the agent of a foreign power. The USA PATRIOT Act and later the USA PATRIOT Improvement and Reauthorization Act temporarily rewrote the procedure. In its temporary form, it requires rather than authorizes access; it is predicated upon relevancy rather than probable cause; it applies to all tangible property (not merely records); and it applies to the tangible property of both individuals or organizations, commercial and otherwise. It is limited, however, to investigations conducted to secure foreign intelligence information or to protect against international terrorism or clandestine intelligence activities. Recipients are prohibited from disclosing the existence of the order, but are expressly authorized to consult an attorney with respect to their rights and obligations under the order. They enjoy immunity from civil liability for good faith compliance. They may challenge the legality of the order and/or ask that its disclosure restrictions be lifted or modified. The grounds for lifting the secrecy requirements are closely defined, but petitions for reconsideration may be filed annually. The decision to set aside, modify or let stand either the disclosure restrictions of an order or the underlying order itself is subject to appellate review. As addition safeguards, Congress: insisted upon the promulgation of minimization standards; established use restrictions; required the approval of senior officials in order to seek orders covering the records of libraries and certain other types of records; confirmed and reenforced reporting requirements; and directed the Justice Department's Inspector General to conduct an audit of the use of the FISA tangible item authority. The second, and perhaps more likely, avenue affords access to communications records through a "national security letter." The national security letter procedure allows senior Federal Bureau of Investigation (FBI) officials and the heads of FBI field offices to request service providers to supply the name, address, length of service, and local and long distance toll billing records of a person or entity upon certification that the information is relevant to an investigation to protect against international terrorism or espionage. The letter may include a ban on disclosure of the fact the information has been requested, and the letter's demands are judicially enforceable and reviewable. Addition safeguards include periodic reports to Congress and an audit by the Department of Justice's Inspector General.

This is a comparison of the laws of the United Kingdom and of the United States that govern criminal and intelligence investigations of terrorist activities. Both systems rely upon a series of statutory authorizations: in the case of the United States primarily the Foreign Intelligence Surveillance Act and the Electronic Communications Privacy Act; in the case of the United Kingdom, the Regulation of Investigatory Powers Act, the Police Act, the Intelligence Services Act. Among other differences, the U.S. procedures rely more heavily upon judicial involvement and supervision, while those of the UK employ other safeguards. The UK procedures afford greater latitude to arrest, detain and supervise suspected terrorists than those available in the United States.

Congress first mandated that the former Immigration and Naturalization Service (INS) implement an automated entry and exit data system that would track the arrival and departure of every alien in §110 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA; P.L. 104-208 ). The objective for an automated entry and exit data system was, in part, to develop a mechanism that would be able to track nonimmigrants who overstayed their visas as part of a broader emphasis on immigration control. Following the September 11, 2001 terrorist attacks there was a marked shift in priority for implementing an automated entry and exit data system. While the tracking of nonimmigrants who overstayed their visas remained an important goal of the system, border security has become the paramount concern with respect to implementing the system. This report provides a summary of the statutory history of the automated entry and exit data system, which was renamed the U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) Program by the Bush Administration. It also discusses other laws that affect the implementation of the system and provides an analysis of the documentary requirements under current law. The report also discusses efforts to implement the program and selected issues associated with its development and implementation. This report will not discuss two related programs—National Security Entry-Exit Registration System (NSEERS) program and the Student and Exchange Visitor Information System (SEVIS) program, —which reportedly will be incorporated into the automated entry and exit data system. Tracking the entry and exit of most foreign nationals at U.S. ports of entry is not a small undertaking. In FY2005, there were over 428 million inspections conducted at U.S. ports of entry, with the majority of the inspections conducted on foreign nationals. Most observers contend that implementing an automated entry and exit data system at the nation's ports of entry poses a variety of logistical problems, as discussed below. There are 280 air, land, and sea ports of entry in the United States. The majority of travelers enter the United States at a land port of entry. Land borders are unique because traffic at these crossings could consist in varying combinations of cars, pedestrians, bicycles, trucks, buses, and rail. Moreover, land ports of entry pose various challenges to the creation of an automated alien tracking system due to their location, infrastructure, geography and traffic volume, which can vary extensively among ports of entry. Air and sea ports are faced with some of the same challenges present at land ports. However, the impact is not as intense as it is at land ports of entry. While land ports of entry have heavy traffic volume that could make fully implementing such a program difficult, some air port officials and observers express concern that implementing the system could also disrupt the flow of traffic at air ports of entry. Airports have tried to delay the implementation of an automated entry and exit data system (and reportedly they were effective in pushing back the implementation date of the Administration's first increment of the program to January 5, 2004), primarily due to concerns of the potential slow down in the flow of traffic at the nation's air ports of entry. In addition to possible congestion at the nation's air ports of entry, some fear that the exit process may not be fully developed due to inadequate space. Sea ports also pose challenges to the implementation of an automated entry and exit data system. Similar to other ports, sea ports do not have the necessary infrastructure. Moreover, some sea ports of entry are not staffed full-time with immigration or customs inspectors. For many years, the former INS had recorded nonimmigrant arrivals at airports on Form I-94, the Arrival/Departure Record, which is a paper-based system that contains information that is later keyed into the Nonimmigrant Information System (NIIS). Form I-94 is a perforated numbered card and is composed of an arrival portion collected upon entry and a departure portion that is returned to the alien passenger. Upon departure, the reverse-side of the departure portion is completed by the departure carrier and submitted to the Department of Homeland Security (DHS) at the port of departure. Under current regulations, the outbound carrier has 48 hours to submit the departure Form I-94 to DHS. Due to the cumbersome nature of this process and its unreliability, Congress required that commercial carriers transporting passengers to or from the U.S. deliver arrival and departure manifest information electronically to DHS no later than January 1, 2003. These reports are to be integrated with data systems maintained by the Department of Justice (DOJ) and the Department of State (DOS) at ports of entry or at consular offices. The I-94 Arrival/Departure Record is routinely collected from applicable foreign nationals at air and sea ports. Reportedly, it is rarely collected from applicable foreign nationals exiting at land ports. According to many, implementing the exit process of an automated entry and exit data system at most ports of entry will entail expanding the infrastructure, which may be challenging at some ports (see discussion in " Selected Issues " section). The Administration is currently in the third phase of implementation of the system, and reportedly the exit process is operable at selected ports of entry. The full implementation of the exit process will be one of the challenges to the successful development of an automated entry and exit data system (see discussion in Implementation of US-VISIT). There are five principal laws that extend and refine §110 of IIRIRA to require the development and implementation of an integrated entry and exit data system: The INS Data Management Improvement Act (DMIA; P.L. 106-215 ); The Visa Waiver Permanent Program Act (VWPPA; P.L. 106-396 ); The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act; P.L. 107-56 ); The Enhanced Border Security and Visa Entry Reform Act (Border Security Act; P.L. 107-173 ); and The Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ). Following the terrorist attacks, several provisions in the USA PATRIOT Act, the Border Security Act and the Intelligence Reform and Terrorism Prevention Act of 2004, however, required the immediate implementation of an automated entry and exit data system and called for enhancements in its development. The provisions in these Acts have several common elements: encouraged a more expeditious development of the automated entry and exit data system; required that biometric identifiers be used in all visas and other travel documents; and required that the system be interoperable with other law enforcement and national security databases. Accordingly, implementation of the relevant provisions in these six laws together are intended to result in an integrated, automated entry and exit data system that now includes the use of biometric identifiers. Section 110 of IIRIRA required the Attorney General to develop an automated data system that would record the entry and exit of every alien arriving in and departing from the United States by September 30, 1998. Under this initial authorization, the Attorney General was required to develop an automated entry and exit control system not later than two years after the enactment of IIRIRA in 1996. The automated entry and exit data system would have created a record for every alien arriving in the U.S. and paired it with the record for the alien departing the United States. The automated entry and exit data system was also supposed to enable the Attorney General to identify, through online searching procedures, lawfully admitted nonimmigrants who remained in the United States beyond the period authorized by the Attorney General. The act also mandated that the Attorney General report to Congress annually after the development of an automated entry and exit data system on the following: the number of recorded departures by country of nationality; the number of recorded departures matching recorded arrivals of nonimmigrants by country of nationality; and the number of aliens who arrived as nonimmigrants or visitors under the visa waiver program and have overstayed their visas. Congress amended §110 of IIRIRA in P.L. 105-259 to require the implementation of the system before October 15, 1998. Congress further amended §110 in the FY1999 Omnibus Consolidated and Emergency Supplemental Appropriations Act ( P.L. 105-277 ) by extending the deadline for the implementation of the automated entry and exit data system to March 30, 2001, for land border ports of entry and sea ports of entry (but otherwise leaving the October 15, 1998 deadline for air ports of entry); and prohibiting significant disruption of trade, tourism or other legitimate cross-border traffic once the automated entry and exit data system was in place. In June of 2000, Congress substantially amended §110 of IIRIRA in the Immigration and Naturalization Service Data Management Improvement Act of 2000. This act renamed the automated entry and exit data system the "Integrated Entry and Exit Data System" and included provisions that (1) rewrote IIRIRA §110 to require the development of a system using data currently collected with no new documentary requirements; (2) set staggered deadlines for the implementation of the system at air, sea, and land border ports of entry; (3) established a task force to evaluate the implementation of the system and other measures to improve legitimate cross-border traffic; and (4) expressed a sense of Congress that federal departments charged with border management should consult with foreign governments to improve cooperation. While statutorily distinct from §110, the Visa Waiver Permanent Program Act of 2000 also mandated the development and implementation of a "fully automated entry and exit control system" covering all aliens who enter the United States under the Visa Waiver Program (VWP) at airports and seaports. Under the VWP, nationals from certain countries are allowed to enter the United States as temporary visitors (nonimmigrants) for business or pleasure for up to 90 days without first obtaining a visa from a U.S. consulate abroad. The Visa Waiver Permanent Program Act included many provisions designed to strengthen documentary and reporting requirements. Most notably, the VWPPA included a provision that mandated that by October 1, 2007, all entrants under the VWP must have machine-readable passports. It has been stipulated by DHS that the VWP arrival/departure information has effectively been incorporated into the broader entry-exit system component mandated by the DMIA. In late 2001 and 2002, Congress passed two additional laws affecting the development of the automated entry and exit data system, particularly with respect to the use of use biometric identifiers: the USA PATRIOT Act ( P.L. 107-56 ) and the Border Security Act ( P.L. 107-173 ). In the USA PATRIOT Act, Congress required the Attorney General and the Secretary of State to jointly develop and certify a technology standard with the capacity to verify the identity of persons applying for a U.S. visa or such persons seeking to enter the United States pursuant to a visa. The USA PATRIOT Act also encouraged the full implementation of the integrated, automated entry and exit data system "with all deliberate speed and as expeditiously as practicable" and called for the immediate establishment of the Integrated Entry and Exit Data System Task Force, as described in §3 of the DMIA. The act also directed the Attorney General and Secretary of State to focus on the utilization of biometric technology and tamper resistant documents in the development of the integrated, automated entry and exit data system. The Border Security Act further advanced requirements set forth in IIRIRA by requiring the Attorney General to implement an integrated entry and exit data system. In developing the entry and exit data system, the act required: (1) the Attorney General and the Secretary of State to implement a technology standard in compliance with the USA PATRIOT Act at U.S. ports of entry and at consular posts abroad; (2) the establishment of a database containing the arrival and departure data from machine-readable visas, passports and other alien travel documents; (3) the integration of all INS databases and data systems that process or contain information on aliens; and (4) the development and implementation of an interoperable electronic data system that provides real time access to federal law enforcement agencies and the intelligence community databases in order to obtain relevant information to make visa and admissibility determinations. More recently, Congress passed the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ). See discussion below, in the " Legislation in the 108 th Congress " section. The Border Security Act required the Attorney General and the Secretary of State to issue machine-readable, tamper-resistant visas and travel documents that will utilize biometric identifiers by October 26, 2004. The act required all U.S. ports of entry to have equipment and software installed by October 26, 2004 that will allow biometric comparison and the authentication of all visas and other travel and entry documents issued to aliens. The act also required by the same date that all VWP countries have a program in place to issue tamper-resistant, machine-readable, biometric passports that comply with the biometric and document identifying standards established by the International Civil Aviation Organization (ICAO). P.L. 108-299 , however, extended the deadline to October 26, 2005. In essence, on or after October 26, 2005, any alien applying for admission under the VWP must present a passport that is tamper-resistant, machine-readable, and uses ICAO-compliant biometric identifiers (unless the unexpired passport was issued prior to that date). With respect to Laser Visas (previously referred to as Mexican Border Crossing Cards), the act extended until September 30, 2002, the deadline for such visas to contain a biometric identifier that matches the biometric characteristic of the card holder. As previously mentioned, the Border Security Act required the automated entry and exit data system be interoperable with other federal law enforcement agencies and the intelligence community data systems. The act required the interoperable data system to have the capacity to compensate for disparate name formats among the various databases and be able to search names that are linguistically sensitive. It required linguistically sensitive algorithms to be implemented for at least four languages designated as high priorities by the Secretary of State. The act required the President to establish a commission by October 26, 2002, to oversee the development and progress of the interoperable data system. The Border Security Act required airline carriers to provide the Attorney General with electronic passenger manifests before arriving in or departing from the United States and repealed a provision that required airport inspections to be completed within 45 minutes of arrival. Congress first mandated biometrics in travel documents in IIRIRA by requiring Border Crossing Cards (BCCs, now referred to as Laser Visas) for Mexican nationals to have a biometric identifier that is machine readable. The act required that the biometric identifier match the biometric characteristic of the card holder in order for the alien to enter the United States. In addition to IIRIRA, the USA PATRIOT Act and the Border Security Act both required the use of biometrics in travel documents. The USA PATRIOT Act required the Attorney General and the Secretary of State, through the National Institute of Standards and Technology (NIST), to develop and certify a technology standard, such as fingerprints and facial photographs, that can be used to verify the identity of persons seeking a visa to enter the United States. With respect to developing and certifying a technology standard, the act also required the Attorney General and the Secretary of State to consult with the Secretary of the Treasury and other relevant federal law enforcement and intelligence agencies. The act required the technology standard to be a "cross-agency, cross-platform electronic system" that is fully integrated with other federal law enforcement and intelligence agencies' databases. It also required the technology standard to be accessible to all consular officers who are responsible for issuing visas, all federal inspection agents at U.S. ports of entry, and all law enforcement and intelligence officers who are determined by regulations to be responsible for investigating or identifying aliens admitted to the United States through a visa. The Border Security Act, in advancing requirements set forth in IIRIRA, authorized the funding and implementation of a technology standard (e.g., biometrics). The act required the Attorney General and the Secretary of State to issue machine-readable, tamper-resistant visas and travel documents that have biometric identifiers by October 26, 2004. On January 5, 2004, DHS promulgated an interim final rule that amended portions of 8 C.F.R. §§214.1, 215.8, and 235.1 to include language for the biometric requirements of US-VISIT (see Appendix A for a discussion on the authority and implementation of the biometric identifier requirements). The Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) contains a provision that requires every person traveling to the United States to possess documentation. The act, however, does not explicitly require that the travel documents contain biometrics. The act requires the Secretary of Homeland Security, in consultation with the Secretary of State, to develop and implement a plan that requires persons traveling to the United States, including U.S. citizens and other persons for whom documentation requirements have previously been waived, to have a passport or other combination of documents by January 1, 2008. The US-VISIT program was established to respond to several congressional mandates that required DHS to create an integrated, automated entry and exit data system that (1) uses available data to produce reports on alien arrivals and departures; (2) deploys equipment at all ports of entry to allow for the verification of aliens' identities and the authentication of their travel documents through the comparison of biometric identifiers; and (3) records alien arrival and departure information from biometrically authenticated documents. The program is reportedly going to be implemented in phases over the next several years in compliance with congressional mandates and include resources and services from a number of federal, state, local, and foreign entities to meet these requirements. The Administration announced plans to implement the program in four increments, with the first three increments constituting a temporary system. While details are not available, the US-VISIT Fact Sheet states the first three increments will include the interfacing, enhancement and deployment (at air, sea and land ports of entry) of existing system capabilities, which is in line with a Government Accountability Office (GAO) report. According to a GAO report, "DHS has preliminary plans showing that it intends to acquire and deploy a system that has functional and performance capabilities that satisfy the general scope of capabilities required under various laws ... [to include] the capability to (1) collect and match alien arrival and departure data electronically; (2) be accessible to the border management community ...; and (3) support machine readable, tamper-resistant documents with biometric identifiers at ports of entry." GAO observed, however, that the initial plan lacks sufficient information with respect to "... what specific capabilities and benefits [that] will be delivered, by when, and at what cost ...." On January 5, 2004, DHS implemented the first phase of US-VISIT by publishing an Interim Final Rule in the Federal Register authorizing DHS to require certain aliens to provide fingerprints, photographs, or other biometric identifiers upon arrival in or departure from the United States at air and sea ports of entry. The January 5 Interim Final Rule also authorized the Secretary of DHS to establish exit pilot programs at up to 15 air or sea ports of entry, to be identified by Notice in the Federal Register . A separate January 5, 2004, Federal Register Notice identified 115 airports and 14 sea ports of entry that would be implementing US-VISIT entry procedures, and two locations—Baltimore/Washington International Airport and Miami, Florida sea port—that would be implementing exit pilot programs. On August 3, 2004, DHS announced its plans to increase the exit pilot programs to 12 additional air ports and 1 additional sea port, expanding the US-VISIT exit program to its full authorization of 15 air or sea ports. A Notice issued on August 20, 2004, added six new ports of entry and eliminated two ports that were listed in the January 5, 2004, Notice, for ports processing arrivals , and exchanged two airports that were inadvertently included in the August 3, 2004, Notice for two others. On August 31, 2004, DHS implemented the second increment of US-VISIT by publishing an Interim Final Rule authorizing DHS to require certain aliens to provide fingerprints, photographs, or other biometric identifiers upon arrival in the United States at the 50 most trafficked land ports of entry . This Interim Rule also amended 8 C.F.R. §215.8(a)(1) to allow DHS to establish exit pilot programs at land border ports of entry. DHS staggered the implementation of US-VISIT at the land ports of entry to test the system and identify areas where the process for collection of biometric information may be improved. A November 9, 2004, Federal Register Notice listed the 50 most trafficked land ports of entry and provided estimated staggered implementation dates starting on November 15, 2004, and ending on December 27, 2004. As a further enhancement to the second stage of implementation, DHS published a Federal Register Notice on August 4, 2005, stating that it was intending to test exit and entry control through the use of passive radio frequency identification (RFID) technology at five U.S. land border locations. DHS implemented the third increment of US-VISIT on September 14, 2005, with the announcement that it was applying entry procedures at all other land border ports of entry by December 31, 2005 (for a total of 154 land ports of entry). DHS will announce, through a separate Notice in the Federal Register , the biometric data collection program for processing aliens upon departure from the United States at a limited number of sites. Under the US-VISIT program, the Secretary of Homeland Security or his delegate may require aliens to provide fingerprints, photographs or other biometric identifiers upon arrival in or departure from the United States. Initially, DHS plans to take a digital photograph and two fingerprints from each nonimmigrant alien who presents a visa at designated ports of entry. DHS reportedly chose to collect two fingerprints and a photograph of the alien's face, in part, because they are currently less intrusive than other forms of biometric collections and because of the effectiveness of such techniques. Moreover, NIST, in consultation with DOJ and DOS, has determined that two fingerprints and facial photographs are sufficient forms of biometrics for the purpose of the US-VISIT program. DHS has commented, however, that it will soon begin to collect 10 flat fingerprints. Upon arrival at a designated port of entry, inspectors will scan two fingerprints of the foreign national with an inkless device and will take a digital photograph of the person. Initially, the biometric information collected will be entered into an existing system called Automated Biometric Fingerprint Identification System (IDENT). The alien's fingerprint and photographs are compared against the biometric information already stored in IDENT to determine whether there is any information that would indicate the alien is inadmissible. For nonimmigrants subject to US-VISIT requirements entering the country through a land port of entry, this process is conducted in secondary inspection. For departures at designated air and sea ports, the foreign national traveler will go to a work station or kiosk to scan his travel documents, have his photograph compared, and provide his fingerprints on the same type of device used at entry. The departure information that a traveler provides will be verified and matched against any available information that he or she provided upon inspection and that was previously stored in the systems that comprise US-VISIT. Generally, all the information collected will be used to (1) identify persons who have overstayed their authorized periods of admission; (2) compile the overstay reports required by DMIA; and, (3) help DOS and DHS make determinations as to whether the person is eligible for future visas, admission, or other discretionary immigration benefits. Although the biometric requirements initially only apply to nonimmigrant visa-holders who travel through designated air and sea ports, DHS anticipates expanding the program, through separate rulemaking to include other groups of aliens and more ports, including land border ports of entry. As mentioned above, the Secretary has the authority under current regulations to establish exit pilot programs at up to 15 air or sea ports of entry and any number of land ports of entry. Under DHS' initial regulations, biometric identifiers are not required for U.S. citizens, lawful permanent residents of the United States or for travelers who seek to enter the United States through the VWP. Subsequent DHS regulations, however, now require VWP participants to submit to the requirements of the US-VISIT program. With respect to Canadian citizens who enter through the designated air and sea ports of entry, biometric identifiers will be required, unless the Canadian citizen is temporarily visiting the United States and does not apply for admission pursuant to a nonimmigrant visa. Nonimmigrant Mexican visa holders must also present biometric identifiers if they enter through the designated air and sea ports of entry, but not at land ports of entry along the southwest border. Current DHS regulations also exempt 18 other categories of individuals from providing biometric identifiers upon entry to or exit from the United States (see Appendix C ). An inspector retains the discretion, however, to collect an alien's biometric information in order to determine the exact age of the alien and whether he or she is exempt from the biometric requirements. One of the basic legislative mandates of US-VISIT is that the system integrate the available alien arrival and departure data that exist in any Department of Justice (now DHS) or DOS database system. This includes the systems that incorporate carrier manifest data on passengers and crew members who are entering or leaving the United States via air or sea—generally, the Advance Passenger Information System (APIS) for arrivals and the Arrival Departure Information System (ADIS) for departures. In addition to the information captured by the electronic manifests, APIS and ADIS include information gathered from VWP aliens and information on visa applications and recipients received through the DataShare program with DOS. The information provided by the APIS and ADIS databases are run against the Interagency Border Inspection System (IBIS) which contains "lookouts" on individuals submitted by more than 20 law enforcement and intelligence agencies. According to DHS, by the time a traveler gets to an air or sea port of entry, inspectors have identified the aliens that need to be scrutinized more closely or that may be inadmissible. Under current regulations, a commercial aircraft or vessel must electronically transmit arrival and departure manifests to DHS officials for passengers or crew members not currently exempt from the manifest requirements pursuant to 8 C.F.R. §231.1 or §231.2. These manifests must contain the data elements (e.g., name, passport number) specified in INA §231, as described in regulations 19 C.F.R. §4.7b (passengers and crew members onboard vessels) §122.49a (passengers onboard aircraft) and §122.49b (crew members onboard aircraft) (see Appendix B ). Arrival manifests must be submitted electronically to DHS prior to the arrival of the commercial aircraft or vessel. Electronic departure manifests, under 8 C.F.R. §231.2, must be submitted to DHS officials within 48 hours of departure . Under current regulations, arrival and departure manifest data are not required to be submitted by U.S. citizens, a returning lawful permanent resident alien of the United States, and new immigrants to the United States or aircraft and vessels arriving in the United States directly from Canada, or departing to Canada. The entry-exit system must also include the arrival and departure for any visitor who transits through the air and seaports and is admitted under the Visa Waiver Program. The VWP allows nationals from 27 countries to enter the United States as temporary visitors for business or pleasure without first obtaining a visa from a U.S. consulate abroad. The VWPPA states that no alien arriving by air or sea may be granted a visa waiver under INA §217, on or after October 1, 2002, unless the carrier is submitting passenger information electronically to the VWP entry-exit system, as required by the Secretary. According to 8 C.F.R. §217.7, carriers must electronically transmit arrival manifest data in accordance with the elements spelled out in 19 C.F.R. §4.7b or 19 C.F.R. §122.49a for every applicant for admission under the VWP that the carrier transports by air or sea to a U.S. port of entry. Carriers are only required to transmit departure passenger information for those departing VWP passengers who were admitted to the United States under the VWP after arriving at a port of entry. As of September 30, 2004, travelers entering the United States pursuant to the VWP are enrolled in US-VISIT. The National Commission on Terrorist Attacks Upon the United States (9/11 Commission) was created to investigate "facts and circumstances relating to the terrorist attacks of September 11, 2001." The 9/11 Commission published its report in July 2004. In its report, the 9/11 Commission noted the following with respect to the US-VISIT system: Since September 11, the United States has built the first phase of a biometric screening program, called US VISIT... So far, however, only visitors who acquire visas to travel to the United States are covered. While visitors from "visa waiver" Countries will be added to the program, beginning this year, covered travelers will still constitute only about 12 percent of all noncitizens crossing the U.S. borders... While the 9/11 Commission called for the expeditious implementation of the US-VISIT program, it noted the following with respect to biometrics: "biometrics have been introduced into an antiquated computer environment" and that "replacement of these systems and improved biometric systems will be required." The 9/11 Commission also recommended the consolidation of the various border screening systems with the US-VISIT system, including frequent traveler programs such as NEXUS and the Secure Electronic Network for Travelers' Rapid Inspections (SENTRI). As stated above, the 9/11 Commission called for the expeditious implementation of the US-VISIT program. It also called for the replacement of the "antiquated computer environment" in which biometrics have been introduced. The 9/11 Commission recommended the consolidation of the various border screening systems with the US-VISIT system, including frequent traveler programs. In an effort to implement the 9/11 Commission's recommendations, Congress passed " The Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) " as discussed below. The Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) called for the Secretary of DHS (Secretary) to develop a plan to accelerate the full implementation of an automated biometric entry and exit data system and submit a report to Congress on the plan by July 17, 2005. The act required the plan to describe the functionality of the entry and exit data system that includes the following: a listing of ports of entry and other DHS and DOS locations with biometric entry data systems in use and whether the systems are located at primary or secondary inspections areas; a listing of ports of entry and other DHS and DOS locations with biometric exit data systems in use; a listing of databases and data systems that are interoperable with the entry and exit data system; a description of identified deficiencies with respect to the accuracy or integrity of the information contained in the entry and exit data system; a description of identified deficiencies with respect to the technology used to process individuals through the system; a description of programs and policies to correct such deficiencies; and an assessment of the effectiveness of the system in fulfilling its intended purposes. The act also required the plan to describe factors that are relevant to the accelerated implementation of the system, including the earliest estimated date for full implementation of the program, among other things. The plan must also describe the following: (1) any improvements needed with respect to the technology used to process individuals through the system; (2) improved or added interoperability with other databases or data systems; and (3) the manner in which the US-VISIT program meets the goals of a comprehensive entry and exit screening system and how the program fulfills its statutory obligations. As specified in previously enacted legislation, the act required the entry and exit data system to collect "biometric exit data for all categories of individuals who are required to provide biometric entry data." The act also required the integration of all databases and data systems that process or contain information on aliens by December 2006. In doing so, the act specified the following agencies to comply with the mandate: DHS' U.S. Immigration and Customs Enforcement; DHS' U.S. Customs and Border Protection; DHS' U.S. Citizenship and Immigration Services; DOJ's Executive Office for Immigration Review; and DOS' Bureau of Consular Affairs. The act required the integrated data system to be an interoperable component of the entry and exit data system. The act further required the Secretary to fully implement the interoperable electronic data system as specified in the Border Security Act. The act also required the Secretary and heads of other agencies that have databases or data systems that are linked to the entry and exit data system to establish policies and procedures for maintaining the entry and exit data system's accuracy and integrity and establish guidelines for collecting and removing data, among other things. The act also required the training of front line personnel with respect to the integrated system (as well as to the goals of the system). In addition to the integration of the entry and exit data system with other databases and data systems, the act required the Secretary to develop and implement a plan to expedite the processing of registered travelers through a single registered traveler program that can be integrated into the broader automated biometric entry and exit data system. With respect to maintaining accuracy and integrity of the system, the act required the following: (1) the establishment of policies and procedures for maintaining the entry and exit data system's accuracy and integrity; (2) the establishment of guidelines for collecting and removing data; (3) the training of training of personnel who are authorized to access information maintained in the databases and data system; and (4) the establishment of a clearinghouse within DHS to streamline the process through which one can seek corrections to inaccurate information. In addition to the plan mentioned above, the act required the Secretary to submit several reports to Congress, including a report on the status of implementing the integrated databases and data systems as defined under current law; an individual and joint (with other relevant agency heads) status report on compliance with the act; and a report that describes DHS' progress and implementation of a single registered traveler program. The act authorized such sums as necessary for each fiscal year, FY2005 through FY2009, to carry out the provisions. While the Administration has seemingly gone to great lengths to clarify the processes involved with the US-VISIT program, many concerns have surfaced. Some have questioned the integration of US-VISIT with the VWP, while others have found the existence of too many potential exceptions problematic. Some observers have suggested that the program may not be in compliance with congressional mandates. Generally, the specific requirements and procedures that a traveler must abide by to enter the United States through the US-VISIT program are detailed in agency regulations. The VWP, while statutorily distinct, is linked to US-VISIT's components and implementation in many respects. For example, VWP regulations for manifest requirements have now been merged with the electronic manifest requirements for all passengers arriving on commercial aircraft from foreign countries. With respect to biometrics, travelers entering the United States pursuant to the VWP are enrolled in US-VISIT starting September 30, 2004. Moreover, foreign nationals who participate in the VWP will not be admitted under the program on or after October 26, 2005, without a machine-readable, tamper-resistant passport that meets ICAO biometric standards for photographs, unless the passport has not expired and was issued prior to that date. As previously discussed, the Administration in 2004 began to require VWP foreign nationals who enter the United States to enroll in US-VISIT due to the lack of biometrics in the participating countries' passports. It is not clear that if once the VWP participating countries meet the biometrics requirement whether the U.S. government will continue to require the foreign nationals to enroll in US-VISIT. Some have expressed concerns with respect to this, primarily due to the different type of technology that will be in the passports. According to DHS' Inspector General, "...the technology embedded in passports will be different from technology employed by US-VISIT. Until the two technologies for verifying a traveler's identity and admissibility are integrated, VWP countries should remain enrolled in US-VISIT." The scope of §110 of IIRIRA as amended is much narrower than originally enacted since it does not require the development of a system that would record the entry and exit of every alien arriving and departing from the United States. Instead, §110 of IIRIRA as amended by the DMIA, requires that a system be developed to record alien arrivals and departures, without establishing additional documentary requirements. Nothing in the amended §110 of IIRIRA should be interpreted as requiring the Attorney General or the Secretary of State to collect new types of documents or data from aliens, particularly aliens who have had document requirements waived under §212(d)(4)(B) of the INA by the Attorney General and the Secretary of State acting jointly on the basis of reciprocity with respect to foreign contiguous territories or adjacent islands. Nonetheless, IIRIRA §110 does not "reduce or curtail any authority of the Secretary of Homeland Security or the Secretary of State under any other provision of law" to require new documentary or data collection information. Thus, while §110 of IIRIRA restricts the Attorney General and the Secretary of State from imposing new documentary or data collection requirements upon aliens under §110 of IIRIRA, it does not reduce the authority of the Attorney General or the Secretary of State from developing new documentary or data collection requirements from other provisions of law. DHS claims there is no conflict between the requirement for biometric identifiers and DMIA's prohibition on new documentary or data collection requirements. DHS supports its conclusion with the "no reduction in authority" clause of the DMIA, claiming the biometric requirements found in the Interim Final Rule are supported by statutory authority "outside the four corners of DMIA." For example, DHS cites §403(c) and §414 of the USA PATRIOT Act and §§ 302-303 of the Border Security Act, as laws passed after the DMIA that encourage and require DHS to develop and utilize a biometric technology for the implementation of the automated entry and exit data system. While these provisions do not appear to give the Secretary of DHS or DOS the explicit authority to promulgate new data collection or documentary requirements under §110 per se , the broad grant of authority in these provisions to implement an integrated entry-exit system that utilizes biometric technology, combined with the generous discretion that is often afforded agencies implementing congressionally mandated programs by courts, seemingly provides strong support for the use of biometric identifiers. Other authority cited by DHS, includes INA §§ 214, 215 and 235. Of particular importance is INA §215 which allows the President to promulgate regulations for alien departure and arrival. The President pursuant to Executive Order 13323 delegated his authority to promulgate these regulations to the Secretary of DHS. This delegation, and its result—the Secretary's new authority to promulgate regulations for the entry and exit of aliens—would likely correct any apparent deficiency in the authority cited by DHS. Still, the fact that DHS claims that it may collect additional biometric data as the deployment of more comprehensive technologies becomes feasible may raise questions as to whether these new requirements are truly consistent with §110's mandate that no new documentary or data collection requirements be imposed. Under some circumstances not all the information required by US-VISIT must be submitted. For example, visa information may be omitted in the event a passenger is traveling pursuant to the VWP (though the VWP has its own requirements). Visa and/or passport requirements may be waived upon the joint determination of the Attorney General and the Secretary of State under 22 C.F.R. §41.2. Individuals from certain countries may also be exempt from providing a passport or visa under 8 C.F.R. 212.1. With respect to biometrics, seventeen categories of individuals are exempt from providing this kind of information. Determining an exemption may become a highly complicated task for a potentially under-manned and untrained staff. While no particular nation is completely exempted from biometrics, there may be one exception that could provide the avenue for exempting very large numbers of aliens. Under 8 C.F.R. §235.1(d)(iv)(C), the Secretary of Homeland Security and the Secretary of State may jointly determine that a "class of aliens" are exempted from the biometric requirements. Though it is unclear from the regulations how broadly a "class of aliens" may be defined, case law demonstrates that the phrase has been accepted to include all aliens from certain nations. Moreover, this exception could potentially lead to a listing of persons similar to the listed individuals who are already exempted from the visa and passport requirements under 22 C.F.R §41.2 and 8 C.F.R. 212.1. Notwithstanding US-VISIT's formal regulations and guidelines, applicants may be processed in a manner different than anticipated due to a number of reasons, some of which may include national security concerns, emergencies, and travel delays. For example, DHS reserves the right to require identifying information from any individual whom it has reason to believe may not be who he or she claims or feels is not entitled to enter. In addition, certain aliens whose presence in the United States warrants monitoring for national security reasons remain subject to the NSEERS special registration procedures. Mitigation strategies—to speed-up the screening process—have also been developed by DHS in the event immigration and customs processing are hampered by significant delays. The mitigation strategies have caused some controversy as some believe that if used, they could be a loophole for some foreign nationals to enter the United States. The Canadian government has expressed strong opposition to implementation of an automated entry and exit data system at northern ports of entry. Notwithstanding, Canadian citizens are exempt from some of the US-VISIT program requirements. For example, Canadian nationals and some Canadian landed immigrants are not required to present a passport, and are often not required to obtain a visa. Moreover, Canadian nationals are generally not required to obtain an I-94 form if they are entering the United States temporarily for business or pleasure. Canadians who enter the United States for purposes other than business or pleasure (e.g., employment, trade and diplomatic activities, etc.) are issued an I-94 form but may be able to omit their passport number and visa information from the I-94 pursuant to 8 C.F.R. §212.1, if they have not visited outside the Western Hemisphere. Upon departure, the Canadian government collects the I-94 departure records for U.S. immigration officials. With respect to biometrics, Canadians arriving at the designated air or sea port of entry must, in general, comply with the biometric requirements. However, those Canadian citizens who travel on temporary visits to the United States and who do not apply for admission pursuant to nonimmigrant visas do not have to supply the biometric information currently required by law. Finally, manifests are not required from aircraft or vessels arriving directly from Canada. Accordingly, a Canadian citizen who is exempt from the passport and visa requirements under 8 C.F.R. §212.1, has arrived in the United States on an aircraft originating in Canada (i.e., no manifest required by vessel), and intends to travel temporarily in the United States without applying for admission pursuant to nonimmigrant visas (i.e., no biometrics required) is exempted from the documentation requirements of the US-VISIT program; however, such an individual would still be subject to routine inspection by federal officials at the border. It is not clear, however, what documents would be examined to verify Canadian citizenship. The Mexican government and some observers have long complained about the difference in treatment of its nationals at the border when compared to Canadian nationals. Mexican nationals applying for admission to the United States as visitors are required to obtain a visa or hold a Mexican Border Crossing Card, now referred to as the Mexican "laser visa" (for a comparison of the Mexican Laser Visa requirements with Canadian documentary requirements see Appendix D ). The laser visa is used by citizens of Mexico to gain short-term entry (up to six months) for business or tourism into the United States. It may be used for multiple entries and is good for 10 years. Mexican citizens can get a laser visa from the Department of State (DOS) Bureau of Consular Affairs if they are otherwise admissible as B-1 (business) or B-2 (tourism) nonimmigrants. Under existing regulations, a biometric characteristic of a bearer of a laser visa must be matched against the biometric on the laser visa before the bearer may be admitted. This requirement applies at all ports of entry, including land borders. If the individual intends to go 25 miles or further inland or stay longer than 30 days, they are also required to obtain a Form I-94. Upon departure, Mexican nationals who had to complete an I-94 form are to deposit them into boxes at ports of entry. According to DHS regulations, Mexican nationals who present a laser visa at time of admission, who will stay within 25 miles of the border (75 miles if admitted in Arizona) and whose stay will be shorter than 30 days, are temporarily not subject to US-VISIT biometric data collection requirements. The Secretaries of DHS and State, pursuant to their regulatory authority in 8 C.F.R. parts 215.8(a)(2)(iii) and 235(d)(1)(iv)C) to jointly exempt classes of aliens from the biometric requirements of US-VISIT, have decided to temporarily exempt such short-term Mexican laser visa travelers. The Secretaries have determined that this class of aliens should be exempt because their biometric data has already been captured by DOS at the issuance of the laser visa and the photograph of the traveler can be compared to the facial appearance of the traveler upon admission. Those Mexican travelers who present a laser visa that intend to travel beyond the geographic restrictions or remain beyond the time limitations will be subject to US-VISIT biometric requirements if they apply for admission at a designated air, sea, or land port of entry. In its most basic form US-VISIT is an automated entry and exit data system that tracks the arrival and departure of most foreign nationals to and from the United States. The 2001 terrorist attacks, however, have led many to view US-VISIT as more than a tracking system. Although not formally described as the following, some have pegged US-VISIT as a travel log, a mechanism to collect data, a risk assessment tool, a mechanism to reduce document fraud, and a terrorist and criminal watch list. Many observers have expressed concern with the implementation of US-VISIT. Observers fear that the full implementation of US-VISIT will cause massive delays at U.S. ports of entry, primarily at land ports of entry. Some believe that the cost of implementing such a system would outweigh the benefits. Others expressed concern about the inadequacy of current infrastructure, and the lack of consensus with respect to the type of biometric technology that should be used in travel documents. Many continue to question the purpose of such a system. Some argue that resources should be directed at immigration interior enforcement, rather than on an expensive system whose capability is not fully known. Some may also argue that the implementation of US-VISIT is not in compliance with its statutory deadlines. For example, while the entry system appears to be in place at all ports of entry, the exit process is not fully developed. Some might argue that the lack of an exit system at all ports of entry is contrary to the program's authorizing language, which requires the Secretary of DHS to "fully implement the integrated entry and exit data system" by December 31, 2005 [emphasis added]. Others, however, might contend that the language is ambiguous and that full implementation of exit features at some ports of entry is sufficient to meet the statute's mandate. A number of issues may complicate this issue and the actual time line for implementation, including the use of pilot programs, new or varying technologies between ports, and funding levels. Many maintain that the successful development of an automated entry and exit data system may require the United States and quite possibly its neighbors (Canada and Mexico) to expand infrastructure at land border crossings. The current infrastructure at most U.S. ports of entry reportedly is not sufficient to accommodate the demands of an automated entry and exit data system. For example, according to some observers, at many land ports of entry additional lanes may be necessary to accommodate the number of individuals seeking entry into the United States who will need to be processed through the system. Moreover, in order to record the departure of every alien leaving the United States through a land port entry, there needs to be a "port of exit" that has sufficient lanes, staff and resources. Additionally, the sending or receiving countries (i.e., Canada and Mexico) may not have the same number of lanes or the necessary infrastructure to create additional lanes that would accommodate the amount of traffic entering and leaving the country via a United States port of entry. Some contend that this could lead to significant delays as travelers try to make their way through ports of entry. Others assert that the cost of expanding the infrastructure would be great. With respect to air and sea ports of entry, concerns similar to those about land ports of entry have been expressed. For example, securing adequate space and facilities may prove challenging at many air and sea ports of entry, particularly for the exit process. Moreover, in many instances passengers are inspected on board vessels because of inadequate or nonexistent inspection areas at sea ports of entry. With respect to the northern border, many businesses as well as the Canadian government fear that the implementation of such a system would clog the border. There have been reports that the Canadian government may introduce a plan that would have Canadian Customs officials collect exit information on non-citizens and pass it on to United States officials. Such a plan could further aid the United States in identifying non-citizens who may enter the country. Moreover, as the United States begins to implement the US-VISIT program, the demand for improved infrastructure may be critical for its development. It is unclear if Canada will facilitate such a system by extending its infrastructure at the relevant border crossings. One of the purposes of the US-VISIT program is to track nonimmigrants who overstay the terms of their visas. It is not clear if the Bureau of Immigration and Customs Enforcement (ICE) will have adequate resources to track down those who overstay their visas once the US-VISIT program is implemented. Many have argued that enforcement of immigration law within the interior of the country has lacked sufficient resources. Prior to the September 11, 2001 terrorist attacks, the Immigration and Nationalization Service (INS) had less than 2,000 immigration agents to enforce immigration laws within the United States; and during a 2002 hearing, the former INS Commissioner, James Ziglar, testified that the terrorist attacks prompted the INS to reassign many investigators to work on terrorism investigations. Although that number has not changed since the terrorist attacks, the merging of the interior enforcement function of the former INS and the investigative arm of the U.S. Customs Service (Customs) within the Bureau of Immigration and Customs Enforcement (ICE) under the Directorate of Border and Transportation Security in the Department of Homeland Security (DHS) has brought the number of agents to over 5,500. Although the number of interior enforcement agents has doubled since the consolidation of the former INS and Customs, many continue to express concerns that the number is insufficient to adequately enforce immigration laws. Moreover, although the consolidation increased the number of interior enforcement agents, Customs needs to continue to carry out its interior enforcement missions of stemming the flow of illicit drugs and deterring money laundering, among other things. These critics argue that if the intent of the entry and exit system is to document nonimmigrants who overstay their visas, then more resources should be directed at interior enforcement and integrating existing immigration databases rather than on developing and implementing a new system. The US-VISIT Program's Increment I Privacy Impact Assessment was made available to the public on December 18, 2003. Many observers stress the importance of having individual's privacy rights protected due to the potential for unauthorized use of personal information. While some observers maintain that current law requires a privacy impact assessment before developing and purchasing new technology that will collect or store personal information electronically, the Administration maintains that it is using existing databases during the first phase of the program's implementation. Some observers, however, view the introduction of biometrics as evidence that the Administration is using new technology. The Administration published a privacy impact assessment prior to the actual implementation of the program. And, according to the National Institutes of Standards and Technology (NIST) in its report to Congress: ... the biometric data that the U.S. government would collect from foreign nationals ... disclose a limited amount of personal information ... and do not raise significant privacy concerns. Specifically, the personal information disclosed by the biometric data relates to the identity.... Facial photographs do not disclose information that the person does not routinely disclose to the general public, and their use to verify identity obviously raises no serious privacy concerns. Moreover, fingerprints disclose very little other information about a person other than the person's identity. Accordingly, their use as a biometric does not raise the sorts of privacy concerns that might arise from the use of other biometrics that, in addition to verifying identity, could also conceivably disclose secondary (e.g., medical, health-related) information). The USA PATRIOT Act called for the automated entry and exit data system to interface with federal law enforcement databases. It also called for the integration of IDENT and the Federal Bureau of Investigation's (FBI) Integrated Automated Fingerprint Identification System (IAFIS). Additionally, the USA PATRIOT Act along with the Border Security Act required the former INS to integrate all of its databases. Several GAO studies criticized the former INS for having antiquated databases and failing to integrate its system. Reportedly, the Administration is currently using the IDENT system to capture two, flat fingerprints instead of 10 fingerprints. While the two fingerprint system is sufficient for identifying a person, some contend that two fingerprints may not be sufficient to return a match from the Federal Bureau of Investigation's ten fingerprint system. Critical to the success of border security is the ability to process information in real time quickly enough to accommodate the pace and volume of work. Without information obtained in real time, there is a potential for a backlog to occur. The issue of making real time information available to the immigration inspectors processing foreign nationals seeking entry at U.S. ports of entry is highlighted at many of the nation's sea ports of entry. As previously mentioned, many inspections of travelers seeking entry into the United States at a sea port of entry occurs on board the vessel. Immigration inspectors use the Portable Automated Lookout System (PALS), which is a laptop computer that contains a CD-ROM that is updated monthly and contains lookout information on individuals who are deemed inadmissible to the United States. Although some may view this method as problematic, primarily due to the potential for the information to be outdated, sea vessels like their air carrier counterparts, are required under law to submit passenger manifests in advance to their arrival at a U.S. port of entry. Submitting the passenger information in advance of arrival, allows the immigration inspector to query real time databases. While some observers question the ability of US-VISIT to carry out its mission, many agree that the program's usefulness will depend, in large part, on the quality and accuracy of the various watchlists that are integrated with the immigration databases that comprise US-VISIT. It is unclear, however, how many watchlists are included in US-VISIT and whether they are integrated. In addition to the first hand knowledge immigration inspectors must have, they also must be familiar with the numerous databases. Moreover, DOS and DHS use IDENT to store the biometrics for those foreign national travelers who are subject to the US-VISIT program requirements. Some contend that the IDENT database, which contains recidivism and lookout data on foreign nationals who have previously been apprehended, should not be used to store the biometrics of admissible foreign nationals. They argue that in addition to the number of databases that are accessed through the US-VISIT program, the inclusion of biometrics on inadmissible foreign nationals with those who are admissible in IDENT may confuse the inspector. Prior to the transfer of immigration and customs functions to DHS, the agencies (INS and the U.S. Customs Service) cross-trained their inspectors to perform primary inspections. Upon referral to secondary inspections, however, a more experienced inspector with the designated agency would perform the inspection (i.e., an immigration matter would be referred to an immigration inspector and a customs matter would be referred to a customs inspector). Some have expressed concern that the discretion given to immigration inspectors and the complexity of immigration law requires substantial training. Moreover, inspectors must have knowledge of the various documents and databases that are used to determine admissibility. Inspectors at U.S. ports of entry must make an immediate determination that an undocumented alien, or someone who has questionable documents, should be excluded or detained for further processing by an immigration court. Now that DHS has implemented its "one face at the border" initiative, some have questioned the adequacy of training that is provided to the non-immigration inspectors. Observers view the US-VISIT program as one more layer of technology that must be mastered by the immigration inspector. While some contend that the first increment of the program has not introduced new technology, others contend that inspectors who may not already be familiar with current immigration databases are now expected to be competent with the US-VISIT database. Many contend that programs such as NEXUS, the Secure Electronic Network for Travelers Rapid Inspection (SENTRI) and the Free and Secure Trade (FAST) program that facilitate the speedy passage of low risk, frequent travelers and commerce are essential. The number of travelers who took advantage of automated inspections has risen over the recent years, peaking to 2.6 million in FY2002. It is not clear how these programs will be incorporated into US-VISIT; and how participants of these programs will be vetted through the system. Many have questioned the feasibility of implementing the US-VISIT program. While many observers question the ability of the administration to meet the congressionally mandated time line, others question the financial burden of implementing such a system. Some contend that until the limits and capabilities of US-VISIT are determined, it will be difficult to assess its progress towards its mission. Proponents, however, point to the success stories that have been reported since the implementation of US-VISIT as providing proof that the program is achieving its mission. Appendix A. Summary of Authority for Biometric Identifiers in Travel Documents DHS maintains that the requirement that foreign nationals provide biometric identifiers when they seek admission to the United States is apparently supported by the Department's broad authority to inspect aliens contained in the Immigration and Nationality Act (INA) §235 (Inspection by Immigration Officers). DHS also claims various other provisions in the INA support the use of biometric identifiers, including §212 (grounds of inadmissibility); §217 (requirements for the VWP); §231 (the electronic passenger manifest requirements); §237 (grounds of removability); and §286(q) in combination with INA §235 and §404 of the Border Security Act (authority for alternative inspection services). DHS also cites INA §215 as a provision that can require foreign nationals to provide biometric identifiers when they seek admission to the U.S. Section 215(a) of the INA allows the President to regulate the arrival and departure of aliens. On January 2, 2004, however, President Bush signed an Executive Order titled Assignment of Functions Relating to Arrivals in the Departures From the United States, delegating his authority to promulgate regulations governing the departure of aliens to the Secretary of DHS. In essence, under §215 and with this new delegation of authority, the Secretary of Homeland Security, with the concurrence of the Secretary of State, has the authority to issue new rules and regulations which may require certain aliens to provide biometric identifiers. This delegation became increasingly significant in light of the Interim Final Rule promulgated by DHS on January 5, 2004, which allows the Secretary of DHS to require certain aliens to provide finger prints, photographs, or other biometric identifiers upon arrival in or departure from certain air and sea ports in the U.S. Initially, this rule only applies to nonimmigrant visa-holders who travel through the designated air and sea ports listed in DHS Regulations. In general, the Interim Final Rule amends portions of 8 C.F.R. §§ 214.1, 215.8, and 235.1 to include language for biometric requirements. For example, §235.1(d), which provides for the scope of the examination of persons applying for admission, was amended to provide the Secretary of DHS with the authority to now require finger prints, photographs or other biometric identifiers during the inspection process from nonimmigrant aliens seeking admission pursuant to nonimmigrant visas. In addition, under amended §235.1(d), the failure of an applicant for admission to comply with the biometric requirements may result in a determination of "inadmissibility" under INA 212(a)(7). Section 235.1 was also amended to exclude a number of categories of travelers. Section 235.1(f) was amended to clarify that all nonimmigrant aliens will be issued the Form I-94, Arrival Departure Record, regardless of whether they come through air, sea, or land ports of entry (unless otherwise exempted). Under amended §214.1(a), which addresses requirements for admission, extension, and maintenance of status, an alien's admission is now conditioned on compliance with the entry-exit examination process described by 8 C.F.R. §235.1, if applicable to the nonimmigrant alien. Furthermore, if the alien is required to provide biometrics and other information upon departure pursuant to 8 C.F.R. 215.8, the nonimmigrant alien's failure to comply may constitute a failure of the alien to maintain the terms of his or her immigration status. 8 C.F.R. §215.8 was created to provide the Secretary of Homeland Security the right to establish pilot programs at up to 15 air or sea ports of entry (to be designated through further notice in the Federal Register ), through which the Secretary may require aliens who are departing from the United States from those ports to provide fingerprints, photographs, or other biometric identifiers. DHS published a regulation on August 3, 2004, to extend the departure capability of US-VISIT to 15 air and seaports. Appendix B. Electronic Manifest Requirements Appendix C. Visa Holders That Are Exempt from the Fingerprinting and Photographing Requirements Under DHS Regulation 8 C.F.R. §235.1 Appendix D. Comparison of Current Law Deadlines and the Administration's Implementation Appendix E. Comparison of the Mexican Laser Visa Requirements with Canadian Documentary Requirements

Congress first mandated that the former Immigration and Naturalization Service (INS) implement an automated entry and exit data system that would track the arrival and departure of every alien in §110 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA). The objective was, in part, to develop a mechanism that would be able to track nonimmigrants who overstayed their visas as part of a broader emphasis on immigration control. Following the September 11, 2001 terrorist attacks there was a shift in priority for implementing the system. While the tracking of nonimmigrants who overstayed their visas remained an important goal, border security has become the paramount concern. Legislation enacted from 1997 to 2000 changed the scope and delayed implementation of §110 of IIRIRA. For example, the INS Data Management Improvement Act rewrote §110 to require the development of a system using data currently collected with no new documentary requirements. The Visa Waiver Permanent Program Act of 2000 required the development and implementation of a "fully automated entry and exit control system" covering all aliens who enter the United States under the Visa Waiver Program (VWP) at airports and seaports. Following the terrorist attacks, several provisions in the USA PATRIOT Act and the Border Security Act, however, required the immediate implementation of an automated entry and exit data system and called for enhancements in its development. More recently, the Intelligence Reform and Terrorism Prevention Act of 2004 implements the 9/11 Commission recommendations, including those recommendations that pertain to the integrated entry and exit data system and biometric identifiers in travel documents. Tracking the entry and exit of foreign nationals at U.S. ports of entry is not a small undertaking. In FY2005, there were over 428 million inspections conducted at U.S. ports of entry, with the majority of the inspections conducted on foreign nationals. Implementing the requirements of an automated entry and exit data system, however, is not without controversy. Some observers fear that the full implementation of US-VISIT will cause massive delays at U.S. ports of entry, primarily at land ports of entry. Some believe that the cost of implementing such a system would outweigh the benefits. Others express concern about the inadequacy of current infrastructure, and the lack of consensus with respect to the type of biometric technology that should be used in travel documents. Many continue to question the purpose of such a system. Some argue that resources should be directed at immigration interior enforcement, rather than on an expensive system whose capability is not fully known. The automated entry and exit data system was administratively renamed the United States Visitor and Immigrant Status Indicator Technology (US-VISIT). It is being implemented in phases over the next several years. This report will be updated to reflect new developments.

Waste discharges from municipal sewage treatment plants into rivers and streams, lakes, and estuaries and coastal waters are a significant source of water quality problems throughout the country. States report that municipal discharges are the second leading source of water quality impairment in all of the nation's waters. Pollutants associated with municipal discharges include nutrients (which can stimulate growth of algae that deplete dissolved oxygen, a process that harms aquatic ecosystems, since most fish and other aquatic organisms "breathe" oxygen dissolved in the water column), bacteria and other pathogens (which may impair drinking water supplies and recreation uses), and metals and toxic chemicals from industrial and commercial activities and households. The Clean Water Act (CWA) prescribes performance levels to be attained by municipal sewage treatment plants in order to prevent the discharge of harmful quantities of waste into surface waters, and to ensure that residual sewage sludge meets environmental quality standards. It requires secondary treatment of sewage (equivalent to removing 85% of raw wastes), or treatment more stringent than secondary where needed to achieve water quality standards necessary for recreational and other uses of a river, stream, or lake. In addition to prescribing municipal treatment requirements, the CWA authorizes the principal federal program to aid wastewater treatment plant construction. Congress established this program in the Federal Water Pollution Control Act Amendments of 1972 (P.L. 92-500), significantly enhancing what previously had been a modest grant program. Since then, Congress has appropriated more than $92 billion to assist cities in complying with the act and achieving the overall objectives of the act: restoring and maintaining the chemical, physical, and biological integrity of the nation's waters (see Table 1 ). Title II of P.L. 92-500 authorized grants to states for wastewater treatment plant construction under a program administered by the Environmental Protection Agency (EPA). Federal funds are provided through annual appropriations under a state-by-state allocation formula contained in the act; the formula (which has been modified several times since 1972) is based on states' financial needs for treatment plant construction and population. States used their allotments to make grants to cities to build or upgrade categories of wastewater treatment projects including treatment plants, related interceptor sewers, correction of infiltration/inflow of sewer lines, and sewer rehabilitation. Amendments enacted in 1987 ( P.L. 100-4 ) initiated a new program to support, or capitalize, State Water Pollution Control Revolving Funds (SRFs). States continue to receive federal grants, but now they provide a 20% match and use the combined funds to make loans to communities. Monies used for construction are repaid to states to create a "revolving" source of assistance for other communities. The SRF program replaced the previous Title II program in FY1991. Federal contributions to SRFs were intended to assist a transition to full state and local financing by FY1995; SRFs were to be sustained through repayment of loans made from the fund after that date. The intention was that states would have greater flexibility to set priorities and administer funding in exchange for an end to federal aid after 1994, when the original CWA authorizations expired. However, although most states believe that the SRF is working well today, early funding and administrative problems, plus remaining funding needs (discussed below), delayed the anticipated shift to full state responsibility. Congress has continued to appropriate funds to assist wastewater construction activities, as shown in Table 1 . (This table excludes appropriations for congressionally earmarked water infrastructure grants in individual communities and regions, which totaled $7.5 billion from FY1989 through FY2015.) When the SRF program was created, it represented a major shift in how the nation finances wastewater treatment needs. In contrast to the Title II construction grants program, which provided grants directly to localities, SRFs are loan programs. States use their SRFs to provide several types of loan assistance to communities, including project construction loans made at or below market rates, refinancing of local debt obligations, and providing loan guarantees or purchasing insurance. States also may provide additional subsidization of a loan (including forgiveness of principal and negative interest loans) in certain instances. Loans are to be repaid to the SRF within 30 years, beginning within one year after project completion, and the locality must dedicate a revenue stream (from user fees or other sources) to repay the loan to the state. States must agree to use SRF monies first to ensure that wastewater treatment facilities are in compliance with deadlines, goals, and requirements of the act. After meeting this "first use" requirement, states may also use the funds to support other types of water quality programs specified in the law, such as those dealing with nonpoint source pollution and protection of estuaries. The law identifies a number of types of projects as eligible for SRF assistance, including wastewater treatment plant construction, stormwater treatment and management, energy-efficiency improvements at treatment works, reuse and recycling of wastewater or stormwater, and security improvements at treatment works. States also must agree to ensure that communities meet several specifications (such as requiring that locally prevailing wages be paid for wastewater treatment plant construction, pursuant to the Davis-Bacon Act). In addition, SRF recipients must use American-made iron and steel products in their projects. As under the previous Title II program, decisions on which projects will receive assistance are made by states using a priority ranking system that typically considers the severity of local water pollution problems, among other factors. Financial considerations of the loan agreement (interest rate, repayment schedule, the recipient's dedicated source of repayment) are also evaluated by states under the SRF program. All states have established the legal and procedural mechanisms to administer the loan program and are eligible to receive SRF capitalization grants. Some with prior experience using similar financing programs moved quickly, while others had difficulty in making a transition from the previous grants program to one that requires greater financial management expertise for all concerned. More than half of the states currently leverage their funds by using federal capital grants and state matching funds as collateral to borrow in the public bond market for purposes of increasing the pool of available funds for project lending. Cumulatively since 1988, leveraged bonds have comprised about 48% of total SRF funds available for projects; loan repayments comprise about 20%. Small communities and states with large rural populations had the largest problems with the SRF program. Many small towns did not participate in the previous grants program and were more likely to require major projects to achieve compliance with the law. Yet many have limited financial, technical, and legal resources and encountered difficulties in qualifying for and repaying SRF loans. These communities often lack an industrial tax base and thus face the prospect of very high per capita user fees to repay a loan for the full capital cost of sewage treatment projects. Compared with larger cities, many are unable to benefit from economies of scale which can affect project costs. Still, small communities have been participating in the SRF program: since 1989, nationally, 67%% of all loans and other assistance (comprising 23% of total funds loaned) have gone to assist towns and cities with less than 10,000 population. While the Clean Water Act is the principal federal program of this type, some other assistance is available. For example, the Department of Agriculture (USDA) operates grant and loan programs for water supply and wastewater facilities in rural areas, defined as areas of not more than 10,000 persons. Funds available for these programs as a result of FY2015 appropriations for water and waste disposal grants and loans are $347 million. Two other programs are: The Community Development Block Grant (CDBG) program administered by the Department of Housing and Urban Development (HUD). For FY2015, Congress provided $3.0 billion for CDBG funds, of which approximately $900 million is available for smaller communities. Water and waste disposal projects compete with many other funded public activities and are estimated by HUD to account for less than 20% of CDBG obligations. The Economic Development Administration (EDA) of the Department of Commerce. EDA provides project grants for construction of public facilities, including but not limited to water and sewer systems, as part of approved overall economic development programs in areas of lagging economic growth. For FY2015, EDA's public works and economic development program is funded at $99 million. The federal government directly funds only a small portion of the nation's annual wastewater treatment capital investment. State and local governments provide the majority of needed funds. Local governments have primary responsibility for wastewater treatment; they own and operate 16,000 treatment plants and 24,000 collection systems nationwide. Construction of these facilities has historically been financed with revenues from federal grants, state grants to supplement federal aid, and broad-based local taxes (property tax, retail sales tax, or in some cases, local income tax). Where grants are unavailable—and especially since SRFs were established—local governments often seek financing by issuing bonds and then levy fees or charges on users of public services to repay the bonds in order to cover all or a portion of local capital costs. Almost all such projects are debt-financed (not financed on a pay-as-you-go basis from ongoing revenues to the utility). The principal financing tool that local governments use is issuance of tax-exempt municipal bonds—at least 70% of U.S. water utilities rely on municipal bonds and other debt to some degree to finance capital investments. Shifting the Clean Water Act aid program from categorical grants to the SRF loan program had the practical effect of making localities ultimately responsible for 100% of project costs, rather than less than 50% of costs. This has occurred concurrently with other financing challenges, including the need to fund other environmental services, such as drinking water and solid waste management; and increased operating costs (new facilities with more complex treatment processes are more costly to operate). Options that localities face, if intergovernmental aid is not available, include raising additional local funds (through bond issuance, increased user fees, developer charges, general or dedicated taxes), reallocating funds from other local programs, or failing to comply with federal standards. Each option carries with it certain practical, legal, and political problems. Over the past 40-plus years since the CWA was enacted, the nation has made considerable progress in controlling and reducing certain kinds of chemical pollution of rivers, lakes, and streams, much of it because of investments in wastewater treatment. Between 1968 and 1995, biological oxygen demand (BOD) pollutant loadings discharged from sewage treatment plants declined by 45%, despite increased industrial activity and a 35% growth in population. EPA and others argue that without continued infrastructure improvements, future population growth will erode many of the CWA achievements made to date in pollution reduction. The total population served by sewage treatment plants that provide a minimum of secondary treatment increased from 85 million in 1972 to 223 million in 2008, representing 72% of the U.S. population. However, about 3.8 million people are served by facilities that provide less than secondary treatment, which is the basic requirement of federal law. About 79 million people are served by on-site septic systems and not by centralized municipal treatment facilities. Despite improvements, other water quality problems related to municipalities remain to be addressed. A key concern is "wet weather" pollution: overflows from combined sewers (from sewers that carry sanitary and industrial wastewater, groundwater infiltration, and stormwater runoff which may discharge untreated wastes into streams) and separate stormwater sewers (sewers that carry only sanitary waste). Untreated discharges from these sewers, which typically occur during rainfall events, can cause serious public health and environmental problems, yet costs to control wet weather problems are high in many cases. In addition, toxic wastes discharged from industries and households to sewage treatment plants cause water quality impairments, operational upsets, and contamination of sewage sludge. Although more than $91 billion in CWA assistance has been provided since 1972, funding needs remain very high: an additional $298 billion, according to the most recent Needs Survey estimate by EPA and the states, released in 2010, a 17% increase above the estimate reported four years earlier. This current estimate includes $187.9 billion for wastewater treatment and collection systems ($26.7 billion more than the previous report), which represent more than 60% of all needs; $63.6 billion for combined sewer overflow corrections ($1.4 billion less than the previous estimate); $42.3 billion for stormwater management ($17 billion more than the previous estimate); and $4.4 billion to build systems to distribute recycled water ($700 million less than the previous estimate). These estimates do not include potential costs, largely unknown, to upgrade physical protection of wastewater facilities against possible terrorist attacks that could threaten water infrastructure systems, an issue of great interest since September 11, 2001. Needs for small communities represent about 8% of the total. The largest needs in small communities are for pipe repair and new sewer pipes, improved wastewater treatment, and correction of combined sewer overflows. Seven states accounted for 50% of the small community needs (Pennsylvania, New York, Iowa, Utah, Illinois, West Virginia, and Ohio). In 2002, EPA released a study called the Gap Analysis that assessed the difference between current spending for wastewater infrastructure and total funding needs (both capital and operation and maintenance). EPA estimated that, over the next two decades, the United States needs to spend nearly $390 billion to replace existing wastewater systems (including for some projects not eligible for CWA funding, such as system replacement) and to build new ones. According to the Gap Analysis, if there is no increase in investment, there will be about a $6 billion annual gap between current capital expenditures for wastewater treatment and projected spending needs. The study also estimated that, if wastewater spending increases by 3% annually, the gap would shrink by nearly 90%. Although that study is now more than a decade old, the analysis is still recognized as a strong indicator of the gap between water infrastructure investment and perceived needs. At issue has been what should the federal role be in assisting states and cities, especially in view of such high projected funding needs. Authorizations for SRF capitalization grants expired in FY1994, making this an issue of congressional interest. (Appropriations have continued, as shown in Table 1 .) In the 104 th Congress, the House passed a comprehensive reauthorization bill ( H.R. 961 ), which included SRF provisions to address problems that have arisen since 1987, including assistance for small and disadvantaged communities and expansion of projects and activities eligible for SRF assistance. However, no legislation was enacted, because of controversies over other parts of the bill. One recent focus has been on projects needed to control wet weather water pollution, overflows from combined and separate stormwater sewer systems. Funding needs for projects to address these types of projects are estimated to be nearly $106 billion. The 106 th Congress passed a bill authorizing $1.5 billion of CWA grant funding specifically for wet weather sewerage projects (in P.L. 106-554 ), because under the SRF program, "wet weather" projects compete with other types of eligible projects for available funds. However, authorization for these "wet weather" project grants expired in FY2003 and has not been renewed. No funds were appropriated. In several Congresses since the 107 th , House and Senate committees have approved bills to extend the act's SRF program and increase authorization of appropriations for SRF capitalization grants, but no legislation other than appropriations has been enacted until recently. Issues debated in connection with these bills included extending SRF assistance to help states and cities meet the estimated $298 billion in funding needs; modifying the program to assist small and economically disadvantaged communities; and enhancing the SRF program to address a number of water quality priorities beyond traditional treatment plant construction, particularly the management of wet weather pollutant runoff from numerous sources, which is the leading cause of stream and lake impairment nationally. Congress did enact certain changes to the SRF provisions of the CWA in 2014 ( P.L. 113-121 ). These amendments addressed several issues, including extending loan repayment terms from 20 years to 30 years, expanding the list of SRF-eligible projects to include energy- and water-efficiency, increasing assistance to Indian tribes, and imposing "Buy American" requirements on SRF recipients. However, the amendments did not address other long-standing or controversial issues, such as: authorization of appropriations for SRF capitalization grants, which expired in FY1994; state-by-state allocation of capitalization grants; and applicability of prevailing wage requirements under the Davis-Bacon Act, which currently apply to use of SRF monies. This legislation also includes provisions authorizing a five-year pilot program for a new type of financing, a Water Infrastructure Finance and Innovation Act (WIFIA) program, authorizing federal loans and loan guarantees for wastewater and public water supply projects. This new program is intended to assist large water infrastructure projects, especially projects of regional and national significance, and to supplement but not replace other types of financial assistance, such as SRFs. Congress has recently focused extensively on reducing federal spending, making it a challenge for legislators to provide federal assistance for water infrastructure programs. Although interest in meeting the nation's water infrastructure needs is strong and likely to continue, policy makers will balance proposals to assist local communities with policies to achieve greater fiscal discipline. Unclear for now is how infrastructure programs will fare in these debates.

The Clean Water Act prescribes performance levels to be attained by municipal sewage treatment plants in order to prevent the discharge of harmful wastes into surface waters. The act also provides financial assistance so that communities can construct treatment facilities to comply with the law. The availability of funding for this purpose continues to be a major concern of states and local governments. This report provides background on municipal wastewater treatment issues, federal treatment requirements and funding, and recent legislative activity. Meeting the nation's wastewater infrastructure needs efficiently and effectively is likely to remain an issue of considerable interest to policy makers.

The Office of Management and Budget traces its origin to 1921. Established as the Bureau of the Budget (BOB) within the Treasury Department by the Budget and Accounting Act, 1921 (42 Stat. 20), it functioned under the supervision of the President. Reorganization Plan No. 1 of 1939 (53 Stat. 1423) transferred the bureau to the newly created Executive Office of the President (EOP). Subsequently, BOB was designated as the Office of Management and Budget (OMB) by Reorganization Plan No. 2 of 1970 (84 Stat. 2085). Concern about OMB's accountability prompted Congress to make the director and deputy director subject to Senate confirmation in 1974 (88 Stat. 11). Congress also established four statutory offices within OMB to oversee several cross-cutting processes and management matters. The Office of Federal Procurement Policy Act (88 Stat. 796) established the Office of Federal Procurement Policy (OFPP) in 1974. The Paperwork Reduction Act of 1980 (94 Stat. 2812; later recodified as the Paperwork Reduction Act of 1995, 109 Stat. 163) established the Office of Information and Regulatory Affairs (OIRA). The Chief Financial Officers (CFO) Act of 1990 (104 Stat. 2838) established the Office of Federal Financial Management (OFFM). The E-Government Act of 2002 (116 Stat. 2899) established the Office of Electronic Government (E-Gov Office). The current profile of OMB's leadership and organizational structure is available on the agency's website. In addition to OMB's leadership and their support staff, OMB has three major types of offices: (1) resource management offices; (2) statutory offices; and (3) OMB-wide support offices. Each of OMB's four resource management offices (RMOs) focuses on a cluster of related agencies and issues (e.g., natural resource programs) to examine budget requests and make funding recommendations. In addition, RMOs are tasked with integrating management, budget, and policy perspectives in their work as a result of OMB's latest major reorganization in 1994. Politically appointed program associate directors (PADs) lead the RMOs. Below the PAD level, RMO staff are almost always career civil servants, and are organized into divisions and branches. Each RMO branch covers a cabinet department or collection of smaller agencies and is led by a career member of the Senior Executive Service (SES). OMB's program examiners staff each RMO branch. Three of the statutory offices focus on management areas: financial management (OFFM), procurement policy (OFPP), and information technology (E-Gov Office, shared with OIRA). The fourth office, OIRA, has a broad portfolio of responsibilities, including regulation, information policy and technology, paperwork reduction, statistical policy, and privacy. Analysts in the statutory offices develop policy, coordinate implementation, and work with the RMOs on agency-specific issues. OMB's seven support offices also play key roles. For example, the Budget Review Division (BRD) coordinates the process for preparing the President's annual budget proposal to Congress. The Legislative Reference Division (LRD) coordinates review of agencies' draft bills, congressional testimony, and correspondence to ensure compliance with the President's policy agenda. OMB's Economic Policy Office works with the President's Council of Economic Advisers (CEA) and the Treasury Department to develop economic assumptions. The other support offices are general counsel, legislative affairs, communications, and administration. OMB had 484 full-time equivalent (FTE) positions in FY2005 and estimated 500 for FY2006. OMB typically has a total of 20-25 political appointees and staff, while the rest are career civil servants. OMB's director, deputy director, and deputy director for management are presidentially appointed with Senate confirmation (PAS). The heads of OFPP, OFFM, and OIRA are also PAS officials. In contrast, the administrator of the E-Gov Office is presidentially appointed (PA). Figure 1 shows OMB's historical staffing. OMB's budget is driven mainly by personnel costs. Compensation and benefits were 88% of OMB's $67.8 million in total obligations for FY2005. The remainder chiefly covered contractual services (8%). Among OMB's offices, 51% of FY2005 funding went to the RMOs, 31% to the OMB-wide support offices (including the E-Gov Office), and 18% to the statutory offices. Figure 2 shows OMB's budget history. OMB's budget has fluctuated in recent years due to reallocations of funding, related to the "enterprise services program," among budget accounts in the EOP. For FY2003, Congress reallocated $8.3 million from OMB to the EOP's Office of Administration (OA) for central procurement of goods and services, reducing OMB's appropriation compared to the prior fiscal year. The President subsequently requested for both FY2004 and FY2005 that similar, though slightly reduced, funding be shifted back to OMB, but Congress continued a similar reallocation in both years. For FY2006, the President requested that the reallocation to OA continue, but Congress shifted $7 million, for rent and health unit costs, from OA back to OMB, and appropriated $76.2 million (after rescission) to OMB. For FY2007, the President proposed $68.8 million for OMB (9.7% lower than the FY2006 level) and $7.9 million (related to OMB's rent, health unit, transit subsidy, and flexible spending account costs) for OA. Including the $7.9 million proposed for OA that otherwise might be in OMB's budget, the FY2007 OMB proposal is a 0.6% increase in nominal dollars compared to FY2006, and a 1.7% decrease in constant dollars. As a primary support agency for the President, OMB has important and varied responsibilities. A 1986 study identified 95 statutes, 58 executive orders, five regulations, and 51 circulars that reflected OMB's operational authorities at the time. Most observers include as "major functions" of OMB those listed below. The Budget and Accounting Act, 1921, as amended and recodified, requires the President to submit each year a consolidated budget proposal for Congress's consideration. In this "formulation phase," OMB sends budget guidance to agencies via its Circular No. A-11 , which is updated each year to reflect the President's budget and management priorities. Agency heads then forward their formal budget requests to OMB, where the RMOs and E-Gov Office (for information technology initiatives) assemble options and analysis for decisions by OMB and the White House. After an opportunity for agency appeals, OMB's BRD coordinates production of the President's budget. When Congress completes action on appropriations bills and they are signed into law, the "execution phase" begins. The Antideficiency Act (which includes 31 U.S.C. §§ 1511-1514) requires OMB to "apportion" appropriated funds (usually quarterly) to prevent agencies from spending at a rate that would exhaust their appropriations before the end of the fiscal year. OMB plays a key role in coordinating the President's legislative activities. Under Circular No. A-19 , OMB's LRD coordinates executive branch review and clearance of congressional testimony and correspondence and agencies' draft bills to ensure compliance with the President's policy agenda, make known the Administration's views on legislation, and allow affected agencies to provide input during intra-executive branch policy development. For non-appropriations legislation, LRD plays a coordination role in preparing "Statements of Administration Policy" (SAPs) for Congress, and memoranda to advise the President on enrolled bills (e.g., recommending signature or veto, or contents for signing statements). BRD performs similar duties for appropriations legislation. OMB exercises considerable influence over agency regulations. Under Executive Order 12866, OIRA works with OMB's RMOs to review agency rules and cost-benefit analyses. In addition, other OIRA policy and oversight responsibilities include statistical policy; paperwork reduction; government use of personal information under the Privacy Act (5 U.S.C. § 552a); information technology investment under the Clinger-Cohen Act ( P.L. 104-106 , 110 Stat. 679); and information security. OIRA shares some responsibilities with the E-Gov Office. OMB has responsibility for overseeing management in the executive branch. OMB is responsible for clearing and approving proposed executive orders (EOs) and many proclamations. OMB's deputy director for management (DDM) is charged with overall responsibility for general management policies in the executive branch, including the domains of the statutory offices, plus human resources management. The statutory offices also develop policy and coordinate implementation in the areas of financial management (OFFM), procurement policy (OFPP), and information policy and technology (OIRA and E-Gov Office). OMB's RMOs are tasked with integrating budget, policy, and management issues for specific agencies in cooperation with the statutory offices. Observers disagree as to how well OMB has fulfilled these management responsibilities. Some have argued that the "M" in OMB is more mirage than real, because budget responsibilities crowd out attention to management issues, while others have argued that budget and management responsibilities cannot realistically be separated. OMB leads implementation of the George W. Bush Administration's Program Assessment Rating Tool (PART) and President's Management Agenda (PMA). The PART, which OMB uses to rate the "overall effectiveness" of programs, has been used to help justify the President's budget proposals. The PMA includes, among other things, five government-wide initiatives and quarterly evaluation of agencies on a "scorecard" with red, yellow, or green "stoplight scores" for each of the initiatives, based on published "standards for success." As an agency, OMB's scorecard ratings for December 31, 2005, were two yellow and three red for "status" and, for "progress," four green and one yellow.

The Office of Management and Budget (OMB) is located within the Executive Office of the President (EOP). As a staff agency to the President, OMB acts on the President's behalf in preparing the President's annual budget proposal, overseeing the executive branch, and helping steer the President's policy actions and agenda. In doing so, OMB interacts extensively with Congress in ways that are both visible and hidden from view. This report provides a concise overview of OMB and its major functions, and highlights a number of issues influenced by OMB in matters of policy, budget, management, and OMB's internal operations. This report will be updated annually.

The dollar amounts allocated to health care in the budget of the Department of Defense (DOD) have more than doubled since FY2001, growing from about $17 billion to over $44.8 billion in FY2009. DOD projections for health care indicate that even further growth can be realistically anticipated, perhaps reaching $64 billion in FY2015. In 1990, according to DOD estimates, health-care expenses constituted 4.5% of DOD's budget; by 2015 they could reach over 12%. This growth in health-care costs could have a substantial effect on spending for other defense programs. The Defense health system, which is open to some 9.3 million potential beneficiaries, is large and complicated, but, in brief, DOD provides varying kinds of care to different elements of the eligible population: (1) a complete medical-care benefit to active duty personnel and dependents; (2) a choice of several benefit programs to most retired military personnel and their dependents who are not eligible for Medicare; (3) a program for those retirees who are eligible for Medicare (and enrolled in Medicare Part B), known as Tricare for Life (TFL), that covers almost all costs that Medicare does not cover (and is funded with an accrual fund that is considered part of the defense budget); and (4) a premium-based health care benefit for reservists and their families known as Tricare Reserve Select. Military retirees aged 65 and above also remain eligible for treatment in military medical facilities on a space or service-available basis. As of 2007, 36% of Tricare beneficiaries were retirees under age 65 and their dependents, approximately 20% were TFL retirees (generally age 65 and older), and 44% were active duty personnel and their dependents. Care is delivered through one of four plans. The first is Tricare Prime, a health maintenance organization (HMO), which is required for active duty personnel and open to dependents and many retirees. Two other plans are Tricare Extra, a preferred provider option in which beneficiaries seek care from providers who have agreed to an established fee structure, and Tricare Standard (formerly CHAMPUS) in which beneficiaries can seek care from any licensed provider and obtain partial reimbursement. A fourth plan, TFL, serves as a supplemental payer to Medicare for care by licensed providers. Prescriptions are available from military pharmacies at no cost; they can also be obtained from civilian pharmacies linked to DOD or by mail order with relatively low co-payments (e.g., $3 for a generic prescription; $9 for a brand; $22 for a non-formulary prescription). Special versions of these plans for beneficiaries in overseas and remote areas are also available. Several factors associated with these plans have led to current and projected cost growth. First, increases in costs of delivering medical services and of prescriptions reflect trends in medical care delivery throughout the civilian economy. Pharmacy costs have seen the fastest rate of growth in DOD health care spending, with annual per beneficiary prescription drug costs increasing 11 percent from FY2006 to FY2008. Second, the establishment of TFL in the FY2001 Floyd D. Spence National Defense Authorization Act ( P.L. 106 - 398 ) greatly increased costs by extending a significant medical benefit to millions of Medicare-eligible retirees and their dependents. Third, expanded access to defense health care for non-active duty reservists was provided in the John Warner National Defense Authorization Act for FY2007 ( P.L. 109 - 364 ). In addition, co-payments in Tricare Prime have been eliminated and the catastrophic cap for retirees has been lowered from $7,500 to $3,000, increasing costs to DOD. Several additional factors have contributed to concerns about the costs of defense health care. In comparison to other plans, including those available to civil servants under the Federal Employees Health Benefits Plan (FEHBP), DOD provides a generous benefit with limited contributions and co-payments required of beneficiaries. Observers also point out that most defense health care is not directly related to treating combat injuries. In recent decades, the multi-billion dollar system has been directed towards care of dependents, especially in the areas of obstetrics and pediatrics, and to the care of retirees at stages of their lives when medical needs tend to increase. Even with the need to care for injuries resulting from the U.S. commitment to Operation Iraqi Freedom, the bulk of DOD medical care is currently provided to dependents and retirees—not to the operating forces. Tricare beneficiaries, both active duty and retired, tend to make greater use of professional care than other sectors of the population. In FY2004, according to one estimate, in Tricare Prime the outpatient utilization rate was 44% higher than in civilian HMOs; the inpatient utilization rate was 60% higher. Health-care analysts tend to ascribe this to lower out-of-pocket costs for DOD beneficiaries. Low cost to beneficiaries and increases in the quality and efficiency of Defense health care in recent years have reportedly led many retirees with civilian jobs to choose Tricare rather than plans available through their civilian employers. Special supplements by employers for Tricare beneficiaries are illegal (see 10 U.S.C. 1097c). In the FY2007 budget request, DOD first proposed changes to constrain the costs of health care by focusing on care for retirees and their dependents who are not Medicare-eligible. For these beneficiaries, DOD proposed charging, for the first time, annual enrollment fees for Tricare Standard, and also significantly increased annual enrollment fees for Tricare Prime. Annual deductibles would have also been increased. No initiatives were proposed that would affect active duty military and their dependents, nor were changes proposed for health-care benefits available to retirees eligible for Medicare (those aged 65 and over along with a much smaller number of disabled retirees) who are covered by TFL. The TFL-eligible beneficiaries have been required to make somewhat higher co-payments for some prescriptions. DOD strongly urged that, in the future, cost shares be adjusted annually for inflation. The fact that enrollment fees for Tricare Prime were set at $230 (for individuals) and $460 (for individuals and their dependents) in 1995 and not subsequently adjusted has been viewed as an important contributing factor to the current budgetary situation. The Bush Administration's FY2008 budget submission was based on the assumption of $1.8 billion in proposed assumed savings to be derived from unspecified benefit reforms. For the FY2009 budget submission, the Bush Administration endorsed the recommendations of the Task Force on the Future of Military Health Care mandated by the Defense Authorization Act for FY2007 ( P.L. 109 - 364 ) (see below) and assumed $1.2 billion in savings from the increased Tricare premiums and co-payments. In July, 2008, the presidentially directed 10 th Quadrennial Review of Military Compensation (QRMC) issued its report on deferred and noncash compensation for members of the uniformed services. The QRMC recommended that Tricare Prime premiums for single retirees under age 65 be set at 40% of Medicare Part B premiums (which vary by the enrollee's adjusted gross income). Tricare Standard/Extra premiums for single retirees would be set at 15% of Part B premiums. Family rates would be set at twice the single rate regardless of family size. Tricare deductibles would be linked to Medicare rates with copayments waived for preventive care and prescription drug payments limited to no more than two thirds of the average copayment faced by civilians at retail pharmacies. In addition, the QRMC recommended that health care for retirees under age 65 be financed through accrual accounting in order to illuminate how current staffing decisions will affect future costs. In January 2009, DOD issued a report in response to the recommendations of the Task Force on the Future of Military Health Care as well as those made by the QRMC. This report endorsed many but not all of these recommendations. Of particular interest, the report states that DOD "will continue to ask for congressional authority to change fees and co-pays in an effort to maintain both a generous health care benefit and a fair and reasonable cost-sharing arrangement between beneficiaries and DOD." The 2010 Budget submitted by the Obama Administration does not contain legislative proposals to increase Tricare fees and the funding levels requested for the Defense Health Program do not assume savings from such proposals. Secretary Gates recently expressed his concern about the impact of increasing Tricare costs on the rest of the DOD budget and was quoted as saying "Health care is eating the department alive. Part of the problem is, we cannot get any relief from the Congress in terms of increasing either co-pays or the premiums." The DOD FY2010 Budget Summary Justification offers a similar message: Military Healthcare: The Department remains concerned with the cost of providing healthcare to its military forces – active duty and retirees. Total healthcare funding included in the FY2010 Base budget request is $47.4 billion. Projections indicate that military healthcare costs will increase by 5 to 7 percent per year through FY2015 if no changes are made to the current healthcare program fee and benefit structure. This continued growth is largely due to: – Increasing use of the healthcare benefit by eligible beneficiaries who previously elected not to use it; – Healthcare inflation and higher utilization of healthcare services; and – Expanded benefits authorized by Congress, such as TRICARE for Reservists. As these costs increase, more of the Department's budget is likely to be spent on healthcare and less on warfighting capabilities and readiness. Other unnamed DOD officials have been reported as saying that DOD's strategy is to link weapons cuts to health care costs and a need for fee increases: Instead of proposing an increase, Pentagon officials plan to highlight the cancellation or delay of weapons systems and other large cuts in military spending and make an argument that the inability to hold down soaring health care costs is part of the reason for those cuts. The idea, defense officials said, is that Congress may decide on its own that it is time to increase Tricare fees, which have not changed since the Tricare system was introduced in the mid-1990s. It remains to be seen how Congress will respond to this strategy. The FY2007, FY2008, and FY2009 defense authorization acts prohibited DOD from increasing premiums, deductibles, co-payments, and other charges through September 30, 2009 (See section 704 and 708 of P.L. 109 - 364 , sections 701 and 702 of P.L. 110 - 181 , and sections 701 and 702 of P.L. 110 - 417 ). Provisions were also enacted in 2006 (see section 707 of P.L. 109 - 364 ) to prohibit most civilian employers (including state and local governments) from actively encouraging or offering incentives to employees who are retired servicemembers to rely on Tricare. The FY2007 national defense authorization (see section 711 of P.L. 109 - 364 ) also required the establishment of a DOD Task Force on the Future of Military Health Care, composed of military and civilian officials with experience in health-care budget issues, to examine and report on efforts to improve and sustain defense health care over the long term including the "beneficiary and Government cost sharing structure required to sustain military health benefits." Another provision of the same act (section 713) required the Government Accountability Office (GAO) in cooperation with the Congressional Budget Office (CBO) to prepare an audit of the costs of health care to both DOD and beneficiaries between 1995 and 2005. The Task Force on the Future of Military Health Care submitted its final report in December 2007 (available at http://www.dodfuturehealthcare.net/images/103-06-2-Home-Task_Force_FINAL_REPORT_122007.pdf ). It recommended phased-in changes in enrollment fees and deductibles that would restore cost-sharing relationships that existed when Tricare was created. For instance, this would mean that average enrollment fees for the average under-65 retiree family would gradually rise from $460 per year to $1,100 per year. GAO released its report, Military Health Care: TRICARE Cost-Sharing Proposals Would Help Offset Increasing Health Care Spending, but Projected Savings Are Likely Overestimated (GAO-07-647, available at http://www.gao.gov/new.items/d07647.pdf ) in May 2007. GAO concluded that DOD had overestimated savings that would result from higher cost-shares, however, DOD's proposed fee and deductible increases would save at least $2.3 billion over five years. As part of the FY2009 budget request DOD asked for authority to implement the recommendations of the Task Force on the Future of Military Health Care. DOD's budget submission assumed savings of $1.2 billion from the additional fees charged as well as reductions in use of services by military retirees. Although the Congress rejected the proposed fee increases for FY2009, it did address the cost containment issue in another way by enacting a number of preventive health measures intended to reduce usage at some point in the future. The preventive care measures included the following. Waiver of copayments for non-Medicare eligible Tricare beneficiaries for preventive services including cancer screening, annual physical examinations, and vaccinations (section 711 of P.L. 110-417 ). A three-year military health risk management demonstration project to evaluate the efficacy of providing incentives to encourage healthy behaviors (section 712). A smoking cessation program for non-Medicare eligible Tricare beneficiaries (section 713). A preventive health allowance demonstration project running through December 31, 2011, in which not more than 1,500 members each of the Army, Navy, Air Force, and Marine Corps annually would receive $500 if without dependents or $1,000 with dependents in order to increase the use of preventive health services (section 714). Additional authority for studies and demonstration projects relating to delivery of health and medical care (section 715). Reporting requirements were included and the results of these projects may be useful in informing future policy decisions. However, the Congressional Budget Office (CBO) cost estimate does not project any savings and suggests that if DOD were to carry out each of the programs authorized by section 712 alone, the cost would be about $50 million per year over a period of three years, based on costs for other demonstration projects. The fact that both armed services committees called for extensive outside reviews of military health-care financing suggests that Congress may revisit proposals for fee increases at some point as part of more comprehensive changes in defense health-care budgeting. Different approaches have already been suggested. One option mentioned by CBO, would provide an opportunity for retirees to forego defense health care until they turn 65 in exchange for a lump-sum payment. The size of the payment would be adjusted to a level that would be less costly to DOD over the longer term than current programs. The acceptability of this approach to retirees is uncertain; the number of retirees who would take such a payout is unknown and might be very limited given the attractiveness of Tricare. Another approach would be to offer beneficiaries a "cafeteria plan" under which they would receive an annual cash allowance for health care. Using this allowance they could then select a Tricare plan, a new option involving lower enrollment fees and higher co-payments and deductibles, or apply some of the funds against premiums for civilian health insurance. This could in effect allow retirees to establish health savings accounts (HSAs) for themselves and their dependents. CBO estimates that such an approach could reduce DOD's outlays by 25% not including the cost of the cash allowance. However, HSAs are controversial and making them available to military retirees could raise concerns among both beneficiaries and others with an interest in government health programs. Still another option would be to readjust budgetary categories to remove health-care spending for retirees—both for those not yet eligible for Medicare and the accrual fund for TFL—from defense appropriation acts. Some have argued that this approach would encourage more meaningful analyses of current defense issues by removing the need to consider trade-offs with retiree health care. Others have countered that such a maneuver would undermine analysis by obscuring the true costs of decisions affecting military manpower. The Obama Administration has chosen to not propose any Tricare user fee increases for FY2010. However, the FY2010 budget submission does propose to reduce spending for several high profile weapons acquisitions. To the extent that legislators wish to restore funding for those proposed cuts, it can be anticipated that cost savings in the Tricare program may be offered as a potential source for those funds. During the Bush Administration, the DOD maintained that there is a need to adjust fees to make up for frozen fee structures over the past decade and that the proposed rates are still much lower than the fee structures of civilian plans including those in the FEHBP. Retiree organizations have continued to argue that proposed raises in enrollment fees and co-payments are unfair, that the requirements of military service are unique and extraordinary and that health-care premiums have been paid in service and sacrifice. Some further argue that fee hikes are especially inappropriate for retiring servicemembers who have borne the costs of the fighting in Iraq and Afghanistan during the past several years. There are complex considerations with regard to any of the various approaches to dealing with the growth of military medical spending. In the case of retired servicemembers and their dependents, most recognize a special responsibility inasmuch as health care after retirement is viewed as an important incentive to follow a difficult and often dangerous career. Other observers argue that competing requirements for defense funds do exist and that funds for medical care should not be seen as unlimited. These issues have been present ever since DOD proposed fee increases in 2006 and are not expected to disappear in the near future.

The Obama Administration's Fiscal Year 2010 budget submission does not include any proposals to increase fees or copayments for Tricare beneficiaries. Previously, the FY2007, FY2008, and FY2009 budget submissions had proposed increases in Tricare enrollment fees, deductibles, and pharmacy co-payments for retired beneficiaries not yet eligible for Medicare. These actions were justified by DOD as necessary to constrain the growth of health care spending as an increasing proportion of the overall defense budget in the next decade. Congress passed legislation each year to prohibit the proposed fee increases. Defense health care spending remains a significant issue for the DOD. A DOD report published in January, 2009, stated that DOD "will continue to ask for congressional authority to change fees and copays in an effort to maintain both a generous health care benefit and a fair and reasonable cost-sharing arrangement between beneficiaries and DoD." However, DOD's strategy for FY2010 seems to highlight the cancellation or delay of weapons systems and other large cuts in military spending. These cuts, it may be argued, can be attributed to the growing percentage of the DOD budget devoted to medical care, an estimated 8.7%in FY2009. This cost growth, may in turn, be attributed in part to Tricare fee levels, which have not changed since the Tricare system was implemented in 1995.

The federal government supports adoption in two primary ways: federal grants to state governments and tax benefits for individual taxpayers that help offset the costs of adopting a child. This report focuses on federal adoption tax benefits, which consist of an adoption tax credit and an income tax exclusion for employer-provided adoption assistance. This report provides an in-depth overview of these tax benefits. It is structured to first provide a brief summary of adoption in the United States, including the number of adoptions and the average cost of adoption. The report then turns to a detailed description of the adoption tax credit and the exclusion for employer-provided adoption assistance, including a summary of administrative data on the adoption credit (similar data on the exclusion are unavailable). Next, the report summarizes the legislative history of these tax benefits. Finally, the report concludes with a discussion and analysis of potential policy options related to these benefits. Adoption is a social and legal process in which an adult is formally made the parent of another individual (usually a child). The legal process in adoption generally requires that a court terminate the parental rights and responsibilities of birth parents (or earlier adoptive parents) and subsequently grant those rights and responsibilities instead to the adoptive parents. For the purposes of understanding adoption tax benefits, adoption can be categorized in one of three ways: 1. Domestic public agency adoption: An adoption facilitated with the involvement of a state child welfare agency. (Note that most domestic public adoptions are special needs adoptions, discussed subsequently.) 2. Domestic private adoption: An adoption facilitated by a private agency, adoption facilitator, or attorney. 3. Intercountry or foreign adoption: An adoption of a noncitizen or nonresident child by families who are citizens or legal residents of the United States. Data on adoption indicate that approximately 120,000 children were adopted in the United States in 2012. Of these adoptions, 44% where domestic public agency adoptions, 49% were domestic private adoptions (including stepchild adoptions), and 7% were international adoptions. These same data indicate that 49 per 100,000 adults became adoptive parents in 2012. Overall, the total number of adoptions has fallen between 2001 and 2012 as illustrated in Figure 1 , largely driven by a steep decline in foreign adoptions. The number of domestic public agency adoptions has been stable over the past decade, between approximately 50,000 and 57,000 children a year. The number of domestic private adoptions has fallen from about 70,000 per year in 2001 to 60,000 per year in 2012. (This figure includes stepchild adoptions, which do not qualify for adoption tax benefits. Notably, while data on the number of stepchild adoptions as a share of domestic private adoptions are unavailable, it is believed that they comprise a significant proportion of this type of adoption.) Finally, foreign adoptions have declined between 2001 and 2012 from approximately 20,000 per year to approximately 9,000 per year. Adoption costs vary widely, depending on the type of adoption and the particular circumstances of each adoption. However, the Department of Health and Human Services (HHS) has estimated cost ranges for different types of adoption as follows: Domestic public agency adoptions: $0 to $2,500 Domestic private adoptions: $15,000 to $45,000 Intercountry adoptions: $20,000 to $50,000 Actual adoption costs may be higher depending on the particular circumstances of the adoption. The adoption tax credit helps qualifying taxpayers offset some of the costs of adopting a child. Although the credit may be claimed for nearly all types of adoptions (excluding the adoption of a spouse's child), there are some special rules related to claiming the credit for intercountry adoptions and for adoption of children with special needs. In 2018, taxpayers may be able to receive an adoption credit of up to $13,810 (this amount is annually adjusted for inflation). The credit is reduced for taxpayers with income over $207,140 and is phased out completely for taxpayers with more than $247,140 in income (these amounts are subject to annual inflation adjustment). The adoption credit is not refundable. However, the credit may be carried forward and claimed on future tax returns for up to five years after initially claimed. The eligibility rules and calculation of the credit are described in detail below. Before calculating the credit the taxpayer can claim for a given year, the taxpayer must determine whether the child being adopted (or in the process of being adopted) is eligible, and the amount of qualifying expenses to which the credit can be applied. A taxpayer can only claim expenses related to the adoption of an eligible child. The term eligible child refers to children under age 18 and to older individuals who are physically or mentally incapable of taking care of themselves. Qualifying expenses must be directly related to the adoption of an eligible child. They include reasonable and necessary adoption fees, court costs, attorney fees, travelling expenses while away from home (including amounts spent on meals and lodging), and other expenses directly related to and for the principal purposes of the legal adoption of an eligible child by the taxpayer (e.g., home study costs). Qualified adoption expenses do not include any expense for which a deduction or credit is allowed under any other provision of the tax code; funds for adoption expenses that are received under any federal, state, or local program; expenses incurred to carry out any surrogate parenting arrangement; expenses incurred in connection with adopting a spouse's child (i.e., a stepchild); or adoption expenses reimbursed under an employer program. Taxpayers cannot claim a credit for expenses that violate federal or state law, are incurred in carrying out any surrogate parenting agreement, or are for the adoption of a child who is the child of the taxpayer's spouse, though they may be able to claim expenses for the adoption of a child of a domestic partner (see shaded textbox). To claim the adoption tax credit, a taxpayer must file IRS Form 8839 and include the name of the adopted child (if known), their age, and the child's taxpayer identification number (TIN). In most cases, the child's TIN is their Social Security number (SSN). However, in cases where the adopting parents do not have or cannot obtain the child's Social Security number, they may be able to use an adoption taxpayer identification number or ATIN. If the child's name, age, and TIN are not provided, the IRS may disallow the credit until additional information about the adopted child is provided by the taxpayer. In addition, a married couple generally must file a joint tax return to claim the adoption tax credit. If two taxpayers who are registered domestic partners adopt a child together, they may split the qualified expenses and the resulting credit by mutual agreement, but the total amount of the credit that can be claimed for a given adopted child is still subject to the same limit ($13,810 in 2018). For domestic adoptions that are not yet finalized, taxpayers may claim qualifying expenses for the credit in the year following the year the expense is paid. This means that the taxpayer may claim the adoption tax credit for expenses paid even if a domestic adoption is never finalized. Expenses paid in the year an adoption is finalized can be claimed on that year's tax return. Expenses paid after an adoption is finalized can be claimed the year the payment is made. In contrast, as illustrated in Table 1 , some of these timing rules differ for adoptions of foreign children. Specifically, for adoptions of foreign children, any expenses paid before the adoption is finalized can only be claimed in the year the adoption is finalized. If a foreign adoption is never finalized, the taxpayer cannot apply any expenses connected to that adoption attempt toward the credit. As with domestic adoptions, expenses incurred after a foreign adoption is finalized can be claimed the year they are paid. In 2018, the maximum amount of the credit is $13,810 per child. The maximum adoption tax credit that can be claimed in a given year, per eligible child, is equal to the lesser of (1) qualifying adoption expenses that can be claimed in that year (see the discussion of timing in the preceding section) or (2) the maximum statutory amount of the credit per child. The maximum statutory amount is annually adjusted for inflation. If the child is a special needs child, the credit amount is always the maximum statutory amount per child , irrespective of the actual expenses incurred. (The definition of a "special needs" adoption is discussed subsequently.) The maximum aggregate amount of the adoption tax credit that the taxpayer can claim on their tax return equals the sum of the credit amounts for each eligible child. The maximum amount of the credit a taxpayer can claim in a given year may differ from the actual amount the taxpayer does claim in that year for two reasons: 1. Income Limitation: The maximum credit amount per adopted child (i.e., $13,810 in 2018) is reduced because the taxpayer's income is above the statutory income limitation (i.e., the maximum credit amount is phased down). 2. Nonr efundability /Carryforward : The taxpayer's tax liability is smaller than the amount of the credit the taxpayer can claim in a given year. Since the credit is nonrefundable, the amount of the credit actually claimed in a given year by definition cannot be greater than taxes owed. Hence, in cases where the calculated credit is greater than the taxpayer's tax liability, the actual credit he or she will be able to claim will be equal to their tax liability. For the purposes of the adoption tax credit, the value of the credit in excess of tax liability can be "carried forward" and claimed on future tax returns. Theoretically, both limitations may apply to the same taxpayer. In practice, however, higher-income taxpayers will more likely be subject to the first limitation, while lower- and middle-income taxpayers are more likely to be subject to the second limitation. Notably, while nonrefundability of the credit limits the amount that can be claimed in a given year, a taxpayer may be able to recover the value of the credit on subsequent tax returns as a result of a five-year carryforward provision. Each of these limitations is discussed subsequently. The amount of the credit which can be claimed for each eligible child is reduced if a taxpayer's modified adjusted gross income (MAGI) is above a phaseout threshold. In 2018, this phaseout threshold equals $207,140. This threshold amount is adjusted annually for inflation. The credit amount phases down ratably (i.e., proportionally) if a taxpayer's income is between $207,140 and $247,140. Hence, if a taxpayer's income is $227,140—exactly the midpoint of the phaseout range—the amount of the tax credit is reduced by 50%. Similarly, if the taxpayer's income is $217,140—one-quarter of the phase out-range—the amount of the credit is reduced by 25%. Taxpayers with income $40,000 or more above the threshold —$247,140 in 2018—are ineligible for the credit. Notably, while the phaseout threshold is adjusted annually for inflation, the phaseout range of $40,000 is fixed and does not increase over time. The adoption tax credit is a nonrefundable credit. Nonrefundable credits by definition cannot exceed taxes owed. Absent carryforward provisions for nonrefundable credits, credits in excess of tax liability are effectively forfeited by the taxpayer. In the case of the adoption tax credit, any excess of the credit above tax liability can be "carried forward" on subsequent tax returns for up to five years. In other words, depending on the amount of the tax credit the taxpayer is eligible for and his or her tax liability, a tax credit for an adoption first claimed on a 2018 tax return can be carried forward to a 2023 income tax return or until used, whichever comes first. While taxpayers benefit from being able to carry forward the unused credit, there are practical complexities to carrying a credit over several years. For example, taxpayers must keep track of when expenses are incurred and, if they carry forward a credit, how much they have claimed in previous years for a given adoption. The stylized example in Table A-1 in the appendix illustrates the potential complexity of claiming the adoption tax credit using the carryforward provision. A taxpayer claiming the credit for the adoption of a special needs child is assumed to have incurred the maximum amount of qualifying expenses, regardless of the actual expenses incurred. A special needs child for the purposes of the adoption tax credit (and exclusion) does not necessarily mean the child has a medical condition or a disability. Instead, for the purposes of these tax benefits, special needs adoptions are the adoptions of children whom the state child welfare agency considers difficult to place for adoption. (The definition of "special needs" for purposes of adoption tax benefits is largely the same as "special needs" for purposes of the federal adoption assistance program that is included in Title IV-E of the Social Security Act.) Most foster care adoptions (i.e., domestic public adoptions)—81.3%—are special needs adoptions, but few other adoptions are special needs adoptions. Specifically, a child is considered to have special needs if the child's state of residence determines that the child cannot or should not be returned to the birth parents' home; there is a specific factor or condition (e.g., age of child; child is member of sibling group seeking adoption together; child has medical, physical, or social-emotional disability; or child is member of a minority race/ethnicity) that leads to the reasonable conclusion that the child will not be adopted without assistance provided to the adoptive parents; and the child is a citizen or legal resident of the United States. (This last rule generally excludes any foreign adoptions from being considered special needs adoptions.) As shown in Table 2 , 63,960 taxpayers—0.04% of all taxpayers—claimed the adoption tax credit in 2015. The average credit was $3,928, which was 29% of the maximum credit amount of $13,400 in 2015. The largest share of adoption tax credit claimants—slightly less than one-third of adoption tax credit claimants—had adjusted gross income (AGI) between $100,000 and $200,000. Relatively few taxpayers with AGIs of more than $200,000 claimed the credit as a result of the credit phase out. (As previously discussed, in 2018 the credit amount phases down proportionally if a taxpayer's income is between $207,140 and $247,140.) The greatest share of adoption tax credit dollars—approximately 60%—went to taxpayers with AGI between $100,000 and $200,000. In contrast, no taxpayers with adjusted gross income (AGI) under $30,000 claimed the credit. This likely reflects the nonrefundability of the credit, which results in taxpayers with little to no tax liability receiving little if any amount of the credit. As illustrated in Figure 2 , the number of taxpayers claiming the adoption tax credit each year generally increased between 1997 (when the credit was first in effect) and 2010, then decreased in 2011 and 2012, increased again in 2013 and 2014, and fell in 2015. From 1997 to 2001, the average credit amount per taxpayer was roughly $2,000. This amount roughly doubled between 2002 and 2009 to about $4,000 and then grew significantly to over $11,000 between 2010 and 2011, subsequently falling again to an average of approximately $4,000 between 2012 and 2015. The trends in adoption tax credit claims and the average credit amount per taxpayer illustrated in Figure 2 may have occurred for a variety of reasons. For example, these trends may be partly explained by legislative changes made to the credit. Some of the increase in claimants (and the average amount of the credit) between 2002 and 2009 in comparison to the period between 1997 and 2001 may be the result of legislative expansions of the credit. Under the Economic Growth and Tax Relief Reconciliation Act (EGTRRA; P.L. 107-16 ), the maximum amount of the credit was effectively doubled and the income level at which the credit phased out was also increased. The expanded phaseout range may have resulted in a larger average credit as well as more upper-income taxpayers being able to claim the credit. Some trends—like the decline in the number of claims of the credit between 2006 and 2009—may also be explained by the decline in adoptions, especially of foreign children. Some data suggest that families that adopt foreign children are more likely to claim the adoption tax credit—and claim more dollars of the credit—than families that pursue other types of adoption, especially domestic public adoptions. Hence, the steep decline in foreign adoptions (see Figure 1 ), especially between 2006 and 2009, may have resulted in fewer taxpayers claiming the adoption tax credit in those years. Some of the trends may also be a result of the "carryforward provision" of the credit. Up until 2010, the adoption tax credit was nonrefundable, but taxpayers could "carry forward" any unused credit for up to five years after initially claiming the credit. For example, if a taxpayer was eligible for a $12,000 adoption credit, but their tax liability was $2,000 every year, the taxpayer would claim $2,000 of the adoption credit initially and carry forward the remainder every year for five years. Indeed, as indicated in Figure 2 , up until 2010, taxpayers claimed on average less than half of the maximum value of the credit. If these taxpayers were eligible for the maximum amount of the credit, they would need to carry forward the tax credit to future tax returns to claim the entire value of the credit. This may have resulted in the number of returns claiming the adoption steadily increasing until 2010: every year taxpayers who claimed the adoption tax credit would include first-time claimants as well as claims for previous years. When the credit was made refundable in 2010, taxpayers could the claim entire amount of their 2010 credit and any carryover credit they had from previous years, virtually eliminating credits carried forward to 2011. This may explain the steep drop in the number of claimants in 2011, as compared to 2010, illustrated in Figure 2 . Indeed, the number of taxpayers claiming the adoption credit appears to be more closely linked with the structure of the credit than the actual number of adoptions. For example, between 2000 and 2006, the number of taxpayers claiming the adoption tax credit steadily rose as illustrated in Figure 2 , while the actual number of adoptions fell over the same time period, as illustrated in Figure 1 . After the credit became nonrefundable again in 2012, the number of claimants of the credit began to increase, even though there is no evidence that the number of adoptions increased. Taxpayers whose employers offer qualifying adoption assistance programs as a fringe benefit may not have to pay income taxes on some or all of the value of this benefit. The maximum amount that can be excluded from the taxpayer's income is capped at a maximum amount per adoption which is the same maximum amount of the credit: $13,810 in 2018. Since the exclusion reduces income subject to taxation, it reduces taxes in proportion to the taxpayer's tax bracket. For example, if a taxpayer receives $2,000 of excludible employer-provided adoption assistance and is in the 10% tax bracket, the exclusion results in $200 of avoided income taxes. If a taxpayer is in the 35% tax bracket, the same $2,000 exclusion is worth $700 in tax savings. (By contrast, the tax credit reduces tax liability dollar for dollar of the value of the credit. For example, if a taxpayer had $2,000 of qualifying adoption expenses and applied those expenses toward the adoption credit, he or she could receive a credit of $2,000, irrespective of the taxpayer's tax bracket.) Taxpayers can claim the exclusion and the credit concurrently for the same adoption, but cannot claim both tax benefits for the same expenses. Hence, for one adoption, a taxpayer is eligible for up to $13,810 in tax-free employer-provided adoption assistance and a $13,810 adoption credit. (Taxpayers who claim both benefits for the same adoption must reduce the amount of qualified adoption expenses eligible for the credit by the amount of qualified adoption expenses excluded under an employer-provided adoption assistance plan.) Combined, the maximum value of these two tax benefits could equal up to $18,920 in reduced tax liability per adoption in 2018 depending on a taxpayer's expenses, income level, and availability of employer-sponsored adoption assistance program at their work. In addition to having the same per-adoption maximum as the adoption tax credit, the exclusion for employer-provided adoption assistance is subject to the same income limitation (i.e., phaseout) and the same definitions of "qualified adoption expenses" and "eligible child." Similar rules that apply to special needs children for the credit also apply for the exclusion. In other words, if a taxpayer adopts a child with special needs and an employer has a qualified adoption assistance program, the taxpayer will be able to exclude up to $13,810 of income regardless of what the actual adoption expenses are and even if the taxpayer or the employer does not actually pay any qualified adoption expenses. The filing requirements for the exclusion are the same as for the credit. Finally, the same timing rules that apply to the adoption credit for domestic versus foreign adoption also apply to the exclusion. Thus, in order for the employer-provided adoption benefits to be excludable from income (and hence not taxable) for a foreign adoption, the amounts paid under the adoption assistance program must be paid either during or after the year the adoption becomes final (see Table 1 ). Employer-provided adoption assistance programs are a separate employee benefit that must fulfill all of the following requirements to be excludable from an employee's income: 1. The employer must provide notice of the plan to eligible employees. 2. The plan must not discriminate in favor of highly compensated employees. 3. Employees must provide reasonable substantiations of qualifying expenses. As long as these requirements are met, employers generally have discretion over other aspects of these plans. Administrative data from the IRS on the exclusion of employer-provided adoption assistance—comparable to the data on the adoption tax credit—are unavailable. Before the enactment of the adoption tax credit and exclusion for employer-provided adoption assistance in the mid-1990s, Congress enacted an itemized deduction for adoption expenses associated with the adoption of a special needs child as part of the Economic Recovery Tax Act of 1981 ( P.L. 97-34 ). This deduction was repealed five years later by the Tax Reform Act of 1986 ( P.L. 99-514 ). The Joint Committee on Taxation provided several reasons for the repeal of this tax benefit: Adoption assistance for special needs children was more appropriate through an expenditure program. The itemized deduction provided its greatest benefits to higher-income taxpayers who had less need for federal assistance for adoption. Agencies with expertise in adoption (i.e., not the IRS) should have budgetary control over adoption assistance. However, a decade later, Congress again enacted tax incentives designed to encourage adoptions. A summary of enacting legislation and major legislative changes is provided below. For brevity, laws that made technical corrections or minor changes are not discussed. The Small Business and Job Protection Act of 1996 ( P.L. 104-188 ) created an adoption tax credit and an exclusion for employer-provided adoption assistance that went into effect in 1997. Between 1997 and 2001, the adoption credit was available to special needs and non-special needs adoptions. As with the current credit, the amount of the credit equaled the amount of qualifying expenses up to a maximum credit amount. Under P.L. 104-188 , the maximum amount of qualifying expenses that could be applied toward the credit was $5,000, or $6,000 for expenses associated with the adoption of a special needs child. The credit phased out proportionally for taxpayers with AGI between $75,000 and $115,000. (Neither the maximum amount of the credit nor the phaseout levels were annually adjusted for inflation under this law.) Qualifying adoption expenses, rules related to foreign adoptions, the five-year carryforward, the definition of a special needs adoption, and the definition of an eligible child were effectively the same as they are under current law. Notably, beginning in 2002, the credit would only be available for special needs adoptions. Effectively, the $5,000 credit available for adoptions that were not special needs adoptions was scheduled to expire at the end of 2001. The law also enacted a temporary exclusion for employer-provided adoption assistance that went into effect beginning in 1997. The maximum amount of the exclusion, like the credit, was limited to $5,000, or $6,000 for special needs adoptions, and the amount that could be excluded phased out for taxpayers with AGI between $75,000 and $115,000. (Neither the maximum amount of the exclusion nor the phaseout levels were annually adjusted for inflation under this law.) As under current law, many terms and definitions of the exclusion were identical to those of the credit. The exclusion—for both non-special needs and special needs adoptions—was scheduled to expire at the end of 2001. Advocates for these adoption tax incentives believed that these benefits would alleviate the financial barrier to adoption, and thus encourage more adoptions. In addition, it was reported at the time when the current tax benefits were enacted, at least eight House members had adopted one or more children and had personally experienced both the financial and bureaucratic burden of adopting. Congress seemed especially concerned with encouraging adoptions of children from the U.S. foster care system, children who for the purposes of adoption tax benefits are often categorized as "special needs." This may have been an important factor in creating a larger credit for special needs adoptions. As then-Representative Cardin stated: It is very costly in our system to adopt children. Many parents are not able to do that because of the costs. So the central part of this bill is to remove that financial burden, to reduce it significantly on the outset, to make it possible for more children to be adopted. Madam Speaker, I want to point out another feature of the bill, and that is special needs adoptions which are much more difficult children to place, that have disabilities, that are older, and it is more difficult to place these children in permanent adoption circumstances. This bill recognizes that and provides additional incentives for special needs adoption. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ) temporarily extended and expanded the adoption tax credit and the exclusion for employer-provided adoption assistance. Specifically, from 2002 through 2010, the law extended the adoption credit for the adoption of children other than special needs children; increased the maximum credit and exclusion amount from $5,000 ($6,000 for a special needs child) to $10,000 per eligible child, including special needs children (this amount was adjusted annually for inflation); provided that for the adoption of special needs children the credit and exclusion amount equal the maximum credit and exclusion amount ($10,000) regardless of actual expenses (this amount was adjusted annually for inflation occurring since 2002); and increased the income level at which the credit and exclusion phased out from $75,000 to $150,000 (these amounts were adjusted annually for inflation). Hence the credit phased out for taxpayers with income between $150,000 and $190,000. According to the Joint Committee on Taxation, the credit and exclusion were extended because "Congress believed that the adoption credit and exclusion have been successful in reducing the after-tax cost of adoption to affected taxpayers." These benefits were increased because Congress noted that many taxpayers incurred expenses above the previous maximums of $5,000 and $6,000 for special needs adoptions. Ultimately, "Congress believed that increasing the size of both the adoption credit and exclusion and expanding the numbers of taxpayers who qualify for the tax benefits will encourage more adoptions and allow more families to afford adoption." The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ) temporarily modified the adoption tax credit and exclusion for 2010 and 2011. Specifically, the law made the adoption tax credit refundable for these two years. The law also increased the maximum credit amount and exclusion amount from $10,000 to $13,170 in 2010 and subsequently adjusted for inflation in 2011 . Senator Nelson, speaking at a news conference concerning the modifications to the adoption tax credit included in the ACA, justified making the credit refundable as a way to encourage adoption among lower-income Americans who might not be able to afford adoption: ... the adoption credit has been increased, and in addition to that, it's been made as a refundable tax credit so that lower-income people, adoption is getting more and more expensive. It's not like when I adopted, much more expensive. And this will mean that lower income people would have the opportunity for adoption, as well. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) extended the EGTRRA provisions for the credit and the exclusion through 2012, but allowed all the modifications made by the ACA to expire as scheduled at the end of 2011. Hence the credit reverted to a $10,000 nonrefundable credit annually adjusted for inflation occurring since 2002. The maximum amount of the exclusion also reverted to $10,000 adjusted for inflation occurring since 2002. The American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ) made the EGTRRA modifications to the credit and exclusion permanent. There are several ways economists evaluate tax benefits, including adoption tax benefits. Specifically, economists may assess whether adoption tax benefits encourage adoptions, the distribution of these benefits among taxpayers, and the complexity of administering the tax provision. These perspectives may be helpful to policymakers interested in analyzing or modifying adoption tax benefits and are discussed subsequently. Adoption is generally viewed as beneficial to all individuals involved in the process (adopted children, adopted parents, and birth parents) and society more broadly. Hence, many believe that adoption should be encouraged, including through federal policies like tax benefits. There is currently little evidence, however, that adoption tax benefits are an effective policy tool to increase adoptions. Although the amount of adoption tax benefits has increased over time ( Figure 2 ), the actual number of children adopted has not ( Figure 1 ). Current adoption tax benefits may simply be too small in comparison to the actual costs of adoption to encourage families to adopt, or a family's decision to adopt may not be heavily influenced by financial incentives, but instead may be influenced by more personal issues or beliefs. If adoption tax benefits do not lead to additional adoptions, they are considered economically inefficient by economists and are instead a windfall benefit to families that would have adopted even in the absence of these benefits. Given that there is little evidence that adoption tax benefits encourage adoption, the fairness of these benefits may be of particular interest. As previously discussed, the vast majority of adoption tax benefits go to upper-income Americans, even though data suggest that a significant number of lower- and middle-income Americans adopt. In 2015, while half (50.4%) of adoption tax credit claimants had income under $75,000, these taxpayers received one-fifth of adoption credit dollars (20.7%), as illustrated in Table 2 . The majority of adoption tax credit dollars (79.3%) went to taxpayers with income of $75,000 or more, with 60% of adoption tax credit dollars going to those with income between $100,000 and $200,000. While comparable data are not available for the exclusion of employer-provided adoption benefits, exclusions generally tend to provide the largest tax savings to those paying the highest marginal tax rates (i.e., upper-income taxpayers). Under several economic definitions of "fairness," adoption tax benefits would be considered unfair (or inequitable). For example, the principle of vertical equity implies that taxpayers with greater income, and hence more economic resources, should pay more in tax. The principal of vertical equity underpins the progressive nature of the federal income tax code, where those with more income pay a greater share of that income in taxes through higher tax rates. Under the definition of vertical equity, adoption tax benefits which primarily benefit higher-income taxpayers would lessen the progressivity of the federal income tax and hence be inequitable. Adoption tax benefits may also be considered inequitable under the definition of "horizontal equity." According to the principal of horizontal equity, similar taxpayers should pay a similar amount in taxes . Many economists consider taxpayers to be similar if they have similar levels of income. Hence, if two tax units earn $40,000 and both pay $8,000 in taxes, then the tax system is horizontally equitable. However, adoption tax benefits (like many tax preferences) can result in taxpayers with the same income paying different amounts in taxes, depending on their characteristics such as whether they own a home (the mortgage interest deduction), send a child to college (higher education tax benefits), or adopt (adoption tax benefits). Recent evidence suggests that adoption tax benefits have been difficult for the IRS to administer to keep both erroneous benefit claims and taxpayer burden low. In 2012—when the IRS was processing mostly 2011 income tax returns and the adoption tax credit was refundable—they selected 69% of returns with adoption tax credit claims for audit. In most cases, these returns were selected because the IRS flagged the required adoption documentation as missing, invalid, or insufficient. However, after auditing these returns the IRS "disallowed $11 million—or one and one half percent—in adoption credit claims." One reason the IRS may have flagged such a large proportion of returns for audit—even when so few dollars of benefits were improperly claimed—was the IRS's lack of familiarity with adoption documentation. As the IRS Taxpayer Advocate (TAS) remarked, The documentation that certifies adoptions varies from state to state. A determination of whether a child is considered to have special needs is also a state-based decision. The result is a variety of documentation that may meet the requirements for the adoption credit. As we have seen with the Earned Income Tax Credit (EITC), when taxpayers are required to provide non-standardized documentation to establish eligibility, it often leads to problems for both taxpayer and the IRS. The recent IRS challenges with administering the refundable adoption credit highlight fundamental challenges with having the IRS—which is focused on collecting revenue—administer a social policy like an adoption incentive. Adoption tax benefits were originally enacted to encourage more adoptions, especially of American children in the foster care system. More recently Congress temporarily made the credit refundable for 2010 and 2011, expanding eligibility for the credit to lower- and middle-income taxpayers. Congress may in the future seek further modifications to the credit or exclusion for employer-provided adoption assistance to achieve certain policy goals. Some of these options are discussed below. Given that there is little evidence that adoption tax benefits increase adoptions, Congress may be interested in eliminating these benefits and replacing them with direct spending on adoption, especially if it views a direct spending program as more effective at encouraging adoptions. Alternatively, Congress could eliminate adoption tax benefits and direct any additional revenue to deficit reduction. Congress could modify the benefits in a variety of ways to make them larger. For example, they could increase the credit and exclusion percentage from 100% to 200% of qualifying expenses, doubling the amount of the credit and exclusion. Alternatively, Congress could increase (or eliminate) the current statutory cap on the value of the benefits ($13,810 in 2018), so that the tax benefits were closer to the actual adoption costs. While this would increase the value of adoption tax benefits for many taxpayers, it is still unclear if it would encourage more adoptions. While there is some evidence that the type of adoption is influenced by cost (i.e., families may pursue a domestic foster care adoption due to cost versus a more expensive international adoption), there is little evidence of any effect of adoption tax benefits on the decision to adopt. In addition, increasing the size of adoption tax benefits will increase the total cost of adoption tax benefits. Data from the IRS indicate that on 2015 tax returns, about $251 million worth of adoption tax credits were claimed. (Similar data for the exclusion are unavailable, although estimates from the Tax Policy Center suggest that the cost of the exclusion is small in comparison to the credit.) Congress could choose to make the adoption tax credit refundable, so that taxpayers with little or no tax liability could claim the entire value of the credit in a given year. As previously discussed, under current law, the adoption tax credit is nonrefundable, meaning the value of the credit claimed in any year cannot exceed income taxes owed in that year. In effect, tax liability acts as a cap on the value of a nonrefundable tax credit. However, unlike other nonrefundable credits for individuals, the amount of the credit in excess of income taxes owed in a given year may be carried forward and claimed for up to five years after initially claimed. The adoption tax credit was temporarily refundable for two years—2010 and 2011—which may provide some insights into the benefits and costs of making this credit refundable. Policymakers interested in expanding eligibility for the adoption tax credit to low- and middle-income taxpayers may consider making the adoption tax credit refundable. This would promote equity among taxpayers at different income levels who are able to adopt. Making the credit refundable may also reduce taxpayers' compliance burden in claiming the credit and result in current claimants receiving the full value of the credit sooner, instead of carrying the credit forward for up to five years. As previously discussed and illustrated in Figure 2 , when the adoption tax credit was nonrefundable, taxpayers on average claimed significantly less than the maximum amount of the credit. Given that adoption expenses tend to exceed the maximum credit amount, many of these taxpayers may have carried the adoption credit forward on subsequent tax returns. This would require diligent record keeping on the part of taxpayers until they had claimed the total credit amount or they had exhausted the five-year time limit of the carryforward, whichever came first. It would also mean that among those taxpayers who carried forward the credit, there could be a significant lag between when adoption expenses were incurred and when the credit for those expenses was actually claimed. For example, if a taxpayer incurred $10,000 in legal expenses in 2010 for a foreign adoption that was finalized in 2012, they could only begin claiming the credit on their 2012 income tax return, filed in early 2013. Depending on their tax liability, they could continue to carry forward the credit for those expenses until their 2017 tax return, a return filed generally in early 2018. Finally, making the credit refundable could encourage the adoption of more children from the domestic foster care system, an often repeated goal of these tax benefits (see " Legislative History of the Credit and Exclusion "). Data indicate adoptions from foster care tend to account for a greater share of adoptions among low-income taxpayers—who would likely not be eligible for a nonrefundable credit—than higher-income taxpayers. One study found that "foster care adoptions accounted for about 10 percent of the adoptions completed by filers with incomes over $100,000, compared with more than 25 percent of the adoptions completed by filers with incomes below $50,000." The same study found that foster care adoption accounted for 29% of adoptions among taxpayers with income under $25,000, while overall foster care adoptions accounted for 18% of adoptions among all tax filers. On the other hand, making the credit refundable could potentially increase compliance burdens on taxpayers claiming the credit as well as pose administrative challenges to the IRS. Insofar as policymakers remain concerned about the improper payments of refundable tax credits, they may seek ways to prevent taxpayers from either mistakenly or fraudulently claiming the adoption tax credit. Depending on the processes used to reduce improper payments, taxpayer burden could increase, as could administrative difficulties for the IRS. For example, when the adoption tax credit was temporarily refundable, the IRS required taxpayers claiming the credit to file a paper return (they could previously e-file), and include both IRS Form 8839 as well as specific adoption-related documentation, which varied based on whether the adoption was foreign or domestic, final or not final, and of a child with special needs or not. Finally, making the adoption tax credit refundable could increase the budgetary cost of the credit if no other modifications to the credit were made (like reducing the maximum credit amount). As illustrated in Figure 3 , the total amount of the credit claimed in 2010 ($1.2 billion)—the first year the credit was refundable—and 2011 ($610 million) was nearly four times and two times, respectively, the average annual aggregate credit amount between 2002 and 2009 (approximately $325 million per year). Some of the increased cost in 2010 may have been a result of taxpayers with unused "carried forward" credit dollars claiming all of the remaining credit in 2010, as opposed to carrying it forward after 2010. Taken as a whole, the 2010 and 2011 data provide some indication as to the range of the cost of making the credit refundable with no alterations to the formula. Policymakers could also make the credit refundable and adjust the credit formula (and the phaseout income level) to reduce the budgetary cost of refundability. As previously discussed, the legislative history indicates that Congress intended to provide the largest tax benefits to taxpayers adopting children from the U.S. foster care system. Insofar as this policy goal changes, Congress may modify adoption tax benefits to provide parity between different types of adoption. For example, if Congress was interested in encouraging more foreign adoptions, it could change the timing rules of foreign adoptions to be identical to domestic adoptions. Currently, taxpayers who adopt a child from abroad can only claim tax benefits once the adoption is finalized, unlike those who adopt domestically, who can claim benefits the year after expenses are incurred (see Table 1 ). In addition, Congress could modify the definition of "special needs adoption" to include children adopted through domestic private adoption or internationally, allowing more families to claim the maximum benefit regardless of actual expenses incurred. As previously discussed, when the credit became refundable, the IRS required taxpayers to file a paper tax return with copies of adoption documentation. While this policy was intended to help the IRS verify adoption claims, the IRS, according to the Taxpayer Advocate, seemed unfamiliar with the enormous varieties of documentation, and flagged many returns erroneously for audit. One potential solution that Congress may consider is allowing taxpayers to use a standard third-party affidavit that allows the relevant adoption intermediary, be they a state or private agency, to attest to the adoption. This would also provide IRS examiners with one standardized document to verify, potentially reducing confusion among IRS examiners, and burden among taxpayers. The exclusion for adoption assistance is only available to taxpayers whose employers provide adoption assistance benefits. One option to expand the availability of this benefit is to convert the exclusion into a deduction that could be claimed regardless of whether adoption assistance was provided as an employee benefit. For example, the exclusion could be converted to an "above-the-line" deduction available to all taxpayers regardless of whether they itemize their deductions or not. The same formula for the credit and income phaseouts could apply. While this policy change might expand the availability of this benefit, it would also likely increase the cost of the provision and complexity for taxpayers, who could now claim both a credit and deduction for their expenses. In addition, the value of the deduction in terms of tax savings—like the exclusion—depends on the taxpayer's tax bracket. A $5,000 deduction (or exclusion) can save a taxpayer up to $500 in the 10% tax bracket, but $1,750 if he or she is in the 35% bracket. In other words, deductions and exclusions tend to provide the greatest tax savings to the highest-income taxpayers. Appendix A. Timing Rules and Carryforwards of the Adoption Credit Below is an illustrative example of how a taxpayer who incurs $20,000 in adoption expenses would claim the adoption tax credit using the carryforward. For simplicity, this example is a domestic private adoption (i.e., not a special needs nor a foreign adoption). In addition it is assumed that the taxpayer's income is below the phaseout amount, so he or she can claim the maximum credit. In 2012, the taxpayer incurs $5,000 of expenses, but since the adoption is not finalized, the credit cannot be claimed on his or her 2012 income tax return. Instead, the taxpayer must wait to file a 2013 tax return to apply these expenses toward claiming the credit. (For domestic adoptions, if the adoption is not yet finalized, the expenses can be applied toward claiming the adoption tax credit the year after they are incurred.) On a 2013 tax return, the taxpayer can apply expenses incurred in 2012 and claim up to a $5,000 tax credit for that year. However, in 2013 the taxpayer's income tax liability is $3,000, so the actual amount of the adoption tax credit the taxpayer can claim in 2013 is $3,000. The taxpayer can carry forward the difference of $2,000. On the taxpayer's 2014 tax return, he or she can apply the $15,000 of expenses incurred in 2013 as well as the $2,000 in carried-forward expenses from the previous year, for a total of $17,000 of expenses. (The $15,000 of expenses incurred in 2014 can be claimed on the taxpayer's 2014 return because the adoption is finalized in 2014.) The maximum amount of the credit the taxpayer can claim in 2014 is $10,190 (the statutory maximum minus the $3,000 of credit already claimed). As a result of the $3,000 tax liability in 2014, the taxpayer will claim a $3,000 credit, and carry forward the difference of $7,190. On a 2015 tax return, even though the taxpayer has incurred no additional expenses, he or she can apply the carried-forward expenses of $7,190 and continue to claim the credit. The maximum amount of the credit that can be claimed in 2015 is $7,400 (the statutory maximum minus the $6,000 of credit already claimed). However, in 2015 the taxpayer's income tax liability is $4,000, so the actual amount of the adoption tax credit the taxpayer can claim in 2015 is $4,000. The taxpayer can carry forward the difference of $3,190. The taxpayer can apply the carried-forward expenses of $3,190 and continue to claim the credit on a tax return in 2016. The maximum amount of the credit that can be claimed in 2016 is $3,460 (the statutory maximum minus the $10,000 of credit already claimed). In 2016 the taxpayer's income tax liability is $4,000, so the actual amount of the adoption tax credit the taxpayer can claim in 2016 is $3,190. The taxpayer has no additional carryforward.

The federal government supports adoption in two primary ways: federal grants to state governments and tax benefits for individual taxpayers that help offset the costs of adopting a child. This report focuses on federal adoption tax benefits, which consist of an adoption tax credit and an income tax exclusion for employer-provided adoption assistance. The adoption tax credit helps qualifying taxpayers offset some of the costs of adopting a child. Although the credit may be claimed for nearly all types of adoptions (excluding the adoption of a spouse's child), there are some special rules related to claiming the credit for intercountry adoptions and for adoptions of children with special needs (generally children whom the state child welfare agency considers difficult to place for adoption). In 2018, taxpayers may be able to receive an adoption credit of up to $13,810 (this amount is annually adjusted for inflation). The credit is reduced for taxpayers with income over $207,140 and is phased out completely for taxpayers with more than $247,140 in income (these amounts are subject to annual inflation adjustment). The adoption credit is not refundable. However, the credit may be carried forward and claimed on future tax returns for up to five years after initially claimed. In addition, taxpayers whose employers offer qualifying adoption assistance programs as a fringe benefit may not have to pay income taxes on some or all of the value of this benefit. The amount that can be excluded from a taxpayer's income is capped at a maximum amount per adoption which is the same maximum amount of the credit: $13,810 in 2018. Taxpayers can claim the exclusion and the credit concurrently for the same adoption, but cannot claim both tax benefits for the same expenses. Many of the eligibility rules for the adoption tax credit apply to the exclusion for employer-provided adoption assistance. The legislative history of the current adoption tax benefits indicates that Congress enacted these incentives to encourage more adoptions. However, there is currently little evidence that adoption tax benefits are an effective policy tool to increase adoptions. Instead, data suggest that adoption tax benefits are often a windfall to families that would have adopted in their absence. In addition, the vast majority of adoption tax benefits go to upper-income Americans, even though data indicate that a significant number of lower- and middle-income Americans adopt. Finally, recent evidence suggests that adoption tax benefits have been difficult for the IRS to administer in terms of keeping both erroneous benefit claims and taxpayer burden low. In light of these concerns with current adoption tax benefits, Congress may consider modifying the credit or the exclusion for employer-provided adoption assistance to achieve certain policy goals. For example, Congress may move to replace these benefits with a direct spending program, especially if Congress views direct spending as more effective at encouraging adoptions. Alternatively, Congress could eliminate adoption tax benefits and direct any additional revenue to deficit reduction. Congress could also choose to make the adoption tax credit refundable, so that taxpayers with little or no tax liability could claim the entire value of the credit in a given year. Or Congress could modify adoption tax benefits in other ways, such as changing the maximum amount of the credit or the income level at which the credit phases out. Finally, policymakers could modify some of the eligibility rules or methods to make the credit easier to administer.

Congress's role and operation in national politics is fundamentally shaped by the design and structure of the governing institutions in the Constitution. One of the key principles of the Constitution is separation of powers. The doctrine is rooted in a political philosophy that aims to keep power from consolidating in any single person or entity, and a key goal of the framers of the Constitution was to establish a governing system that diffused and divided power. Experience with the consolidated power of King George III had led them to believe that "the accumulation of legislative, executive, and judicial powers in the same hands … [was] the very definition of tyranny." These objectives were achieved institutionally through the constitutional separation of powers. The legislative, executive, and judicial branches of the government were assigned distinct and limited roles under the Constitution, and required to be comprised of different political actors. The elected branches have separate, independent bases of authority, and specific safeguards prevent any of the branches from gaining undue influence over another. The constitutional structure does not, however, insulate the branches from each other. While the design of the Constitution aims to prevent the centralization of power through separation, it also seeks the same objective through diffusion. Thus, most powers granted under the Constitution are not unilateral for any one branch; instead they overlap. The President has the power to veto legislation; the Senate must approve executive and judicial nominations made by the President; the judiciary has the power to review actions of Congress or the President; and Congress may, by supermajority, remove judges or the President from power. This report provides an overview of separation of powers. It first reviews the philosophical and political origins of the doctrine. Then it surveys the structure of separation of power in the Constitution. It next discusses the consequences of the system, for both the institutions and for individual political actors. Finally, there is a discussion of separation of powers in the context of contemporary politics. The American system of separation of powers is not the most common arrangement of democratic institutions in the modern world. Most modern democracies are parliamentary systems, in which the legislative branch is sovereign, and the executive has no independent constitutional base of authority, instead being chosen by the legislature. Indeed, even when the United States has participated in the construction of democratic governments in the 20 th and 21 st centuries—in Germany and Japan after World War II; in Iraq in the first decade of the 21 st century—the chosen structure has been parliamentary, not an American system of separated powers. This is perhaps, in part, because experience has suggested mass democracy and legislative supremacy—two (at the time) untested concepts that concerned the framers of the U.S. Constitution in the 18 th century—to be satisfactory arrangements for stable democratic governing. There is also a widely held contemporary belief that modern democracy is inherently based on political parties and that parliamentary systems produce stronger parties. Neither of those prospects would have sat well with the framers of the American Constitution, who were skeptical of political parties. Finally, parliamentary systems are often encouraged for fledgling democracies because they tend to produce unified governments that can relatively easily legislate and implement policy without difficulty, allowing for smoother government functioning during the dangerous and unstable early stages of a new national governing system. At their core, parliamentary systems are based on contested elections followed by unified party control of the powers of government. This is quite emphatically not the case with the American system. Our constitutional system is based on contested elections followed by separated control of the powers of governing. The system, by design, produces conflict. The constitutional structure of separation of powers invites conflict between the branches, particularly between Congress and the President. The electoral structure of the federal government provides not only separate bases of authority, but also different bases of authority for political actors, as well as different time horizons. Likewise, the assignment of powers under the Constitution is not only overlapping, but also somewhat vague, creating inter-branch contests for power across many key functions of the government. Finally, numerous questions of authority are not even addressed by the Constitution. Although each branch has strong incentives to protect its prerogatives, in many cases individual political actors have incentives that run counter to their institutional affiliation. In particular, political actors will often, quite reasonably, place the short-term achievement of substantive policy goals ahead of the long-term preservation of institutional power for their branch of government. Likewise, partisan or ideological affiliations will place political actors at cross purposes, where they will be forced to choose between those affiliations and their branch affiliation. Such anti-branch incentives are important contours to consider for political actors seeking to increase the power of their own branch. In order to fully illuminate the contemporary implications of our separation of powers system, it is helpful to understand its origins. The structure of the Constitution reflects the collective preferences of the state delegates who drafted it in 1787. These preferences were chiefly shaped by two things: the political philosophy of the colonial Americans, and their actual political experiences as English colonists. The fingerprints of both can be found throughout the legislative debate at the constitutional convention, the arguments for and against the Constitution during the ratification debate in the states, and, of course, in the text of the Constitution itself. Undoubtedly, the colonists' philosophy also shaped how they understood their colonial interactions with London, and vice versa, making it difficult if not impossible to untangle the degree to which either had primacy in shaping the Constitution. What is clear, however, is that by 1787, the philosophy and the experiences of the framers had created something of a consensus among them about how an optimal government should be structured. The political theory underlying the constitutional separation of powers goes back thousands of years, and traces its development through many eminent philosophers, among them Aristotle, Aquinas, Machiavelli, Locke, and Montesquieu. Virtually all of these philosophers were living under non-democratic systems of government, or systems of very limited democracy that did not feature separation of powers. Therefore, much of their writing is either normative—what should such a system look like?—or applied to non-democratic governing structures. As a result, much of the development of the philosophy ignored the practical problems of establishing a separation of powers democracy, and by the time of the American Revolution, left the framers long on theory but short on practical advice. The conceptual roots of separation of powers are usually attributed to ancient Greek and Roman writers. Aristotle is typically credited with articulating the first conception of government as divided into three basic functions or "powers," which he labeled "deliberative," "magisterial," and "judicial," and which roughly correspond to the contemporary notions of legislative, executive, and judicial roles of government. The ancient philosophers, however, did not conceptualize the possibility of (or benefit of) separating these functions among different officials or institutions. In both Athens and Rome, the various functions were often taken on by single entities. Later philosophers tied this concept of functions to the idea of a "mixed government," in which the interests of society would be balanced through the use of multiple forms of government. This formed the basis of pre-modern English government for centuries: a hereditary monarchy, limited in its authority by a legislature consisting of elements of aristocracy (House of Lords) and democracy (House of Commons). While the "mixed government" system did not separate functions by institution, it did promote the idea that liberty for all could be enhanced by blocking any individual or entity from dominating government. Since these classes of society were rigid, their interest were perpetual and often in conflict. By combining them in the various forms into the government, none would gain the power necessary to dominate the others. The modern conception of separation of powers developed largely among 17 th and 18 th century Enlightenment thinkers. Although many writers were active in this area, John Locke and Montesquieu are usually given credit for articulating the philosophy. In the Second Treatise on Government , Locke argues that a division between the legislative and executive powers is fundamentally necessary to secure the liberty of the people. If the two functions are fused into a single person or entity, the likely result is tyranny. Locke also explains the concept of a "mixed government," in which multiple forms of governing—monarchy, oligarchy, democracy—are simultaneously used. The fully formed conception of separation of powers as understood by the framers of the Constitution is credited to Montesquieu. In The Spirit of Laws , Montesquieu identifies three powers of the government: legislative, executive, and judiciary. He then argues for their placement in the hands of different people or entities: When the legislative and executive power are united in the same person, or in the same body of magistrates, there can be no liberty, because apprehensions may arise, lest the monarch or Senate should enact tyrannical laws, to execute them in a tyrannical manner. Again there is no liberty, if the judiciary power be not separated from the legislative and executive. Were it joined with the legislative, the life and liberty of the subject would be exposed to arbitrary control, for the judge would then be the legislator. Were it joined to the executive power, the judge might behave with violence and oppression. There would be an end of every thing, were the same man, or the same body, whether of the nobles or the people, to exercise those three powers, that of enacting laws, that of executing the public resolutions, and of trying the causes of individuals. Montesquieu also provides the basis for the concept of checks and balances, writing that the executive power and legislative power should be "restrained" by each other. For Montesquieu, the critical executive restraint on the legislature is the veto; the "power of rejecting" legislation. The critical restraint of the legislature is the annual power of the purse, for if "the executive power [were] to determine the raising of public money … liberty would be at an end." At the heart of the theory is a simple proposition about human nature: as noted by James Madison, men are not angels, and left unrestrained they will tend to abuse power. To leave one man as both lawmaker and judge, for Locke, was to invite tyranny. Drawing on the Aristotelian description of the various "functions" of government, Montesquieu envisioned a government structure that would preclude the tyrannical combinations, by isolating what he saw as the three prime functions: making laws, executing laws, and trying alleged lawbreakers. It is unclear to what degree these philosophies influenced colonial thinking in the late 18 th century. What is not unclear is how the structure of colonial governance provided ample reason for the colonists to become wary of the consolidation of power. Experience with the consolidated power of King George III had led them to believe that "the accumulation of legislative, executive, and judicial powers in the same hands … [was] the very definition of tyranny." Experience with the royal governors of the colonies led them to distrust institutions that had mixed government functions. And experience with legislative democracy in the fledgling states during the 1780's had reinforced their concerns about the potential for "elective despotism." The majority of the colonies in North America were run by "mixed governments," much like the central British government. Eligible colonists were allowed to elect representatives to the lower chamber of an assembly, but the governor was appointed by the crown, and in addition to the executive duties, had significant influence across the other functions of government. The royal governor typically had absolute veto over colonial statutes, appointment authority for the upper chamber of the legislature (called the "governor's council"), and the power to dissolve the assembly. The governor's council also typically served as the highest court in the colony. The assembly did have some checks on the governor—most notably control over his salary and authority over taxation. This arrangement served the colonists fairly well during most of the 18 th century. The indifference of parliament and the crown toward the administration of government in the colonies resulted in a political culture that was much more democratic in character than the culture in England proper. Having developed a norm of self-government during the first half of the 18 th century, the tighter control over colonial government exhibited by parliament and the crown after the conclusion of the French and Indian War caused significant tension between the colonists and British government. When the colonists sought to address these problems, they found that the institutions of the colonial governments were not well-suited to successfully challenging the crown once the crown was intent on an active approach to colonial administration. Once the crown took a greater interest in the administration of colonial government, the democratic character of the colonial governments receded and the power of the governors, and the direct power of the crown, under the system became apparent. In common thought about the American Revolution, much is made about the lack of representation of the colonies in the English parliament. Even a cursory reading of the Declaration of Independence, however, reveals that most of the particular grievances of the colonists revolved around the administration of government within the colonies, and that many of those grievances were framed as problems with the fusion of government functions under the crown. For example, the list of facts provided in the Declaration includes the following charges against the king: He has dissolved Representative Houses repeatedly; He has refused for a long time, after such dissolutions, to cause others to be elected; He has called together legislative bodies at places unusual, uncomfortable, and distant; He has refused to Assent to laws ... for the public good; and He has made Judges dependent on his Will alone, for their tenure and … salaries. These specific grievances suggest a developing colonial belief that the separation of powers was a prerequisite for a government that sought to preserve liberty, and that the centralization of such powers would necessarily lead to oppression and tyranny. Following independence, the newly independent states began to pursue governmental structures more closely aligned with our modern view of the separation of powers. Between 1776 and 1780, all 13 original states drafted new state constitutions. The colonial and revolutionary experience, however, also took on a strong anti-executive character. The colonial assemblies, after all, had been the branch of government controlled by the colonists and their principal source of governmental power. The dissatisfaction with the king and the colonial governors led many colonists in the 1770s to believe that strong legislatures were the key feature of optimal governments. Early on, in 1776 and 1777, many of the new states adopted new systems of government with weak and dependent executive branches. In Delaware, Virginia, and New Jersey, the governor would be appointed by the legislature and had no veto or appointment authority. In Pennsylvania, there would be no single executive; a council chosen by the legislature would take on the role. Likewise, the national government under the Articles of Confederation contained no independent executive or judicial branch, instead leaving the creation of those functions up to the national legislature. Other states, however, adopted constitutions featuring separation of powers more in line with the future federal Constitution. The New York constitution of 1776 provided for an independent, elected governor with a three-year term, veto power, and appointment authority. The Massachusetts constitution (1780) required that "the legislative department shall never exercise the executive and judicial powers... the executive shall never exercise the legislative and judicial powers ... the judicial shall never exercise the legislative and executive powers ... " By the early 1780s, many began to rethink investing so much power in the legislatures. Both Thomas Jefferson and John Adams were early opponents of the legislative-dominated state constitutions. The experiences of Pennsylvania and other states with weak executives proved to be disappointing. The failure of the Articles of Confederation as a national governing document further eroded belief in government by legislature alone. By the time the framers met to amend the Articles of Confederation, public opinion in the colonies had followed a meandering path, largely rejecting both the tyranny of an unchecked executive and the tyranny of an unchecked legislature. The proper arrangement of government for the enhancement of liberty is thus, they believed, one in which no one can gain unilateral power, and no power goes unchecked. As Madison argued in the Federalist Papers , the objective of the framers was to preclude a "faction" from gaining monopoly control of the government. The framers viewed human nature as inherently bad, and suspected that the natural inclination of men is to abuse power. Tyranny, to them, was "the accumulation of all powers, legislative, executive, and judiciary, in the same hands." To separate the functions of government into independent branches was necessary but not sufficient. Each branch would also need the ability to stand as a check against the others. No branch, however, would possess an overruling influence over the others, and each would be provided with the necessary means to resist encroachment from the others. Translating the collective political philosophy of the founders and their constituents into a government required the construction of institutional structures that reflected and, hopefully, sustained their preferences. Institutional design of the new Constitution, therefore, required careful consideration. The legislative, executive, and judicial branches of the government were assigned distinct and limited roles under the Constitution, and political actors are restricted from serving simultaneously in the legislature and another branch. The elected branches have separate, independent bases of authority, and specific safeguards were designed to prevent any of the branches from gaining undue influence over another. Although not constitutionally guaranteed, longstanding norms also now exist that provide each branch with its own independent resources for staffing, research, and advice. The following section discusses four key aspects of the constitutional separation of powers: separate roles and authorities; separate personnel; independent electoral bases; and separate institutional supports. It then discusses the checks and balances placed with the various separate institutions. The legislative, executive, and judicial branches of the government are each given separate constitutional bases of power. The executive and legislative branches are populated by leaders who are drawn from different constituencies on different electoral timetables. And judicial branch actors, while not elected, are insulated by tenure provisions that require supermajorities to remove them from office. The Constitution divides the federal government according to its core functions—legislative, executive, and judicial—and places each function primarily in a separate institution. The three institutions are given their distinct authority of their function, made plain by the first sentences of each of the first three Articles. Article I begins, "All legislative power herein granted, shall be vested in a Congress of the United states." Article II begins, "The executive power shall be vested in a President of the United States of America." Article III begins, "The Judicial power shall be vested in one supreme Court[.]" This is separation of powers, as understood by the founders, in the most basic sense: the President is authorized to execute the law; Congress is authorized to make the law; and the Court is authorized to judge the law. The Constitution specifically prohibits individuals from serving in Congress and another branch of the federal government. Article I, Section 6 states that "[N]o Person holding any Office under the United States shall be a Member of either House [of Congress] during his Continuance in Office." While this guarantees that no one will simultaneously hold position in Congress and one of the two other branches, the Constitution places a further prohibition on Members of Congress serving in any office which was created during the period for which they were elected, or for which the salary was increased. The elected officials of the legislative and executive branches—the President, Vice President, Senators, and Representatives—are all drawn from constituencies that do not normally involve the other branches. The President and Vice President are chosen by electors from the states, all of whom are themselves currently chosen by popular vote in the states, but are by law picked in the manner each state legislature directs. Members of Congress are specifically barred from being electors, guaranteeing that they have no direct influence in the election of the President or Vice President. Members of the House and Senate are chosen by direct election in their districts and states, respectively, with no input from the other branches of the federal government. While the federal judiciary is not filled in an independent manner—judges are nominated by the President and confirmed for office by the Senate—the Constitution mitigates legislative or executive branch intrusion into the judiciary by providing federal judges with tenure "during good Behavior," which in practice amounts to life tenure. Each branch of the federal government has developed its own support structure of professional staff. Although not guaranteed in the Constitution to any branch—Congress has authorized and continues to fund the support structures and can, in theory, remove them—strong norms exist among both political actors and citizens that each branch of government should have the resources to fulfill its duties under the Constitution. The resources provide information and advice, conduct research and analysis, investigate problems, organize activities, and carry out other assignments for their principals. Members of Congress have personal staff, as well as committee staff and chamber-wide and branch-wide support organizations to call on for support in the development of legislation. The President has several thousand staff in the Executive Office of the President, and can draw on Cabinet officials or agency heads, who can in turn call on resources within the executive departments themselves. The federal judiciary has both chamber staff to assist them as well as centralized staff in the Administrative Office of the United States Courts and several branch-wide support organizations. The Constitution prevents Congress from specifically reducing salaries of the executive and judicial branch. Article II prohibits the adjustment of the President's salary during his current term of office. Likewise, Article III prohibits the reduction of compensation of federal judges during their service. While the Constitution provides separate institutions and bases of power, the structure does not insulate the branches from each other. While the design of the Constitution aims to prevent the centralization of power through separation, it also seeks the same objective through diffusion. Thus, most powers granted under the Constitution are not unilateral for any one branch; instead they overlap. The President has the power to veto legislation; Senate approval is required for executive and judicial nominations made by the President; the judiciary has the power to review actions of Congress or the President; and Congress may, through impeachment, remove the President, Vice President, and other "civil Officers of the United States." As political scientist Richard Neustadt has observed, what the Constitution created was "separate institutions sharing each other's power." Although each branch is the primary actor in the function that corresponds to its institution, no branch has unilateral control over its core function. Congress is vested with the legislative power, but the President may veto legislation—ensuring him/her a bargaining position on legislation in most cases—and has the power to call Congress into session. The Supreme Court, through the implied power of judicial review, may declare acts of Congress and executive actions unconstitutional. The President is vested with the executive power, but Congress has legislative control over the bureaucratic design of the executive branch and the amount of financial resources the departments of the executive branch receive. Finally, while the Supreme Court has the judicial authority, Congress has the authority to create the inferior federal Courts and prescribe their jurisdiction and regulations, as well as to refine legislation in response to judicial decisions. The constitutional system for filling both the offices of the executive branch and most of the federal judiciary requires the cooperation of both the executive and legislative branches. Principal officers of the United States, including federal judges and high-ranking executive officials are nominated exclusively by the President, but require confirmation by the Senate. Under the 25 th amendment, vacancies in the Vice Presidency are also filled through nomination by the President and confirmation by both the House and Senate. Although the President retains general removal authority over most executive branch officials, Congress has the authority to remove the President, Vice President, and "civil officers of the United States" (including federal judges) for treason, bribery, and other high crimes and misdemeanors. The power, however, is divided between the House of Representatives, which has the power to impeach, and the Senate, which is responsible for trying those impeached by the House. This power is exclusive to Congress; there is no corresponding mechanism in the other branches for the removal of Representatives or Senators, which reveals the primacy of Congress under the Constitution. The House and Senate may expel their own Members, but no outside power, save elections, can otherwise remove them, reflecting the Framer's concept of the sovereignty of the people. Both the executive and legislative branches have investigatory authority over each other. The executive branch, subject to certain constitutional limitations, investigates criminal conduct by Members of the House and Senate, and legislators suspected of violating the law can be prosecuted in federal court. Congress has the authority to investigate activities in the executive and judicial branches, and these investigations can be the basis for either future criminal prosecutions or impeachment proceedings. In addition, Congress has the authority to conduct routine oversight of executive departments to inform future legislation and resource decisions. The Constitution specifically divides matters of war and foreign policy between the branches. The President is commander in chief of the armed forces under Article II, but Congress is granted the authority to declare war, raise and support an army and navy, and make rules governing the armed forces. Congress also has authority over appropriations, including funding for any war effort. The courts have the authority to declare actions of Congress or the President in relation to war unconstitutional. General intercourse with other nations is also a shared responsibility. The President has many of the responsibilities of head of state, but the Senate provides its advice and consent to treaties, and Congress controls the appropriations and legislation needed to implement them. In other cases, Congress or the President may often find ways to reach agreements without a treaty, either through bilateral agreements of the executive branch, or, in the case of Congress, through public law. The constitutional structure of separation of powers is directly consequential for the practice of American politics. It incentivizes specific strategies and behaviors of both individual political actors and the branches of the federal government as a whole. This section discusses three broad consequences of the separation of powers: the inevitability of conflict in the American political system; the desire of each of the branches, in aggregate, to increase its relative institutional power; and the cross-pressures faced by individual political actors as they balance the accumulation and maintenance of power for their institution with policy or other goals that are often at cross purpose with such accumulation. The constitutional structure of separation of powers generates strong political conflict. With political actors in each branch having preferences over public policy but not the capacity to unilaterally realize those preferences, it is inevitable that disagreement will be constant and political actors will seek to expand the power and influence of their respective branches. Far from a defect of the system, this conflict is the very essence of the framers' goal: arrange the federal government such that no faction can accumulate enough power to singularly dominate. The source of conflict in the constitutional structure, however, goes beyond the basic separation of power. If the only structural differences between the branches were the authorities assigned to them and the preferences of the political actors, American politics would likely have much less conflict than it has traditionally exhibited. The Constitution, however, provides several other mechanisms that enhance conflict and limit the ability of any faction from gaining coordinated control of the functions of government. While the elected branches of the federal government have independent electoral bases (i.e., neither branch has a primary role in choosing the members of the other branch), they also have structurally different electoral bases. Representatives are elected every two years, from districts drawn to be approximately the same size. Senators are elected every six years on staggered terms, from statewide votes. The President is elected every four years, from a national vote aggregated through state elections to an electoral college. At any given point in time, the House, Senate, and presidency will be filled with elected political actors drawn from different constituencies at different points in time. No single federal election in the United States can completely alter the political composition of the government; conversely, the composition of the government never completely reflects the preferences of the voters at any single point in time. Consequently, the preferences of individual political actors, and the aggregate preferences of the elected branches of government, will never be perfectly aligned, and often will be in sharp conflict. Every election features important recent events, fresh issues, and new ideas that shift the preferences of voters and alter the electoral choices they make. All Americans are represented in the House, the Senate, and the presidency, but the differing aggregation systems—House districts, states in the Senate, and an indirect national vote for the presidency—create three bodies that, even if wholly elected at the exact same time, would sum to different preferences over policy. Likewise, the varying length of terms for each of the elected branches creates different incentives and structures the political preferences of the actors. As the framers surmised, the shorter terms of Representatives would likely make them more responsive to rapid shifts in public opinion among their constituents, while the longer terms of Senators would insulate them against being aroused by quickly extinguished passions of public opinion. In addition to these regular time horizons for elections, the presidency now has a fixed time horizon; with a maximum of eight years in office, Presidents have strong incentives to move quickly to achieve their policy goals. Representatives and Senators, without such existential term limits, may often see less need for hurried action. The vagueness of much of the Constitution also creates political conflict between the branches. The Constitution, by global standards, is very brief. And while some of the authorities it assigns are uncontestable directives or rules, much of it is open to a variety of interpretations. Not surprisingly, political actors in the different branches are likely to interpret its dictates in ways that enhance or expand their own authority. This is especially true in areas where there are clearly shared responsibilities, such as war powers. The President is commander in chief of the armed forces under Article II, but Congress is granted the authority to declare war, raise and support an army and navy, and make rules governing the armed forces. The political branches of the federal government also routinely come into conflict over questions that the Constitution never contemplates. No 18 th century document could have foreseen the developments of a nation over centuries, and conflicts between the President and Congress often involve issues that would have never even occurred to the framers as important. Even powers that are seemingly firmly entrenched with one branch or another can generate conflict over their application. For example, only Congress has the power to appropriate funds for an activity of the federal government. But does the President have the discretion to not spend funds appropriated by Congress? It is not surprising that the branches of government will seek to enhance their power within the federal government. Since such enhancements of power largely come at the expense of one of the other branches of the government, each branch also has strong incentives to defend its own power from encroachment by the other branches. Such attempts at enhancement and defenses against the encroachments of the other branches can take many forms. Discussed here are three general aspects of the strategies used by the branches. The most basic institutional strategy for enhancing power is to simply assert it in the course of executing policy preferences, or suggest new powers via legislative proposals. The President may decide that military action is needed and choose not to consult with Congress. The President may decide Senate confirmation of a nominee is taking too long and make a recess appointment while the Senate is in recess for just a few hours. Congress may decide that an investigation of perceived wrongdoing at the White House or in the executive branch is necessary, and subpoena documents and records that may be protected by executive privilege. Congress may design a regulatory agency whose principal officials are not nominated by the President. Left unchallenged by the other branch, these actions will not only take effect, but they will potentially set historical precedent for similar future actions, normalize the action in the mind of the public, or lay the groundwork for further enhancements of power in the same vein. Therefore, it is common for each branch to strongly guard its power and challenge attempts by the other branches to assert new or enhanced power. Such guarding of power takes many forms. Often, it is simply public repudiation. If one branch asserts a power and another publicly condemns it, public opinion may quickly force the asserting branch to back down. In 1937 President Roosevelt made legislative proposals to expand the Supreme Court and to reorganize the executive branch. Many in Congress saw these bills as attempts to increase executive power over the courts and public policy, and opponents of the measures came to label them "court-packing" and the "dictator bill." Both measures failed, and Roosevelt was widely repudiated for the attempted power grab. Absent mobilized public opinion, the branches also have the ability to guard their power through lawsuit in the federal courts. Conflicts between the executive and legislative branches may result in one party making a legal claim that the other has exceeded its constitutional authority. In other cases, private citizens may bring federal claims against one of the branches asserting an action exceeded the authority of the branch. Because public opinion shapes the actions of political actors and thus policy outcomes, the maintenance and enhancement of the power of the branches can be augmented by increasing the public prestige of the institution. If voters believe that one branch of government is more or less capable of dealing with public policy problems or other political issues, power is likely to flow toward that branch of government and away from the other branches. In effect, the institutional reputation of the branches at any given moment affects their relative political power and shapes outcomes, particularly in conflicts that arise between the branches. Many things can affect the public prestige of the branches: perceptions about competence, scandal, attacks from the other branches, etc. In many respects, the legislative branch has the most difficulty maintaining its public prestige. The President has the advantage of unity of voice, and relatively rarely does the executive branch appear to be in-fighting. In recent times, the Supreme Court has enjoyed strong public opinion support, and enjoys an apolitical reputation that it closely guards. Congress, however, has neither of these advantages. Disagreement is natural in a legislature, and it is rare for Congress to work either quickly or in a completely united fashion. While these features are often beneficial, they work against Congress as a prestigious institution, particularly in situations where the President can project a single solution or plan while simultaneously portraying Congress as deadlocked and chaotic. The three branches of the federal government can also work to enhance their political capacity, by seeking to augment the resources available to them for public political confrontations. Effecting outcomes in public policy debates often requires the ability to gather and analyze information, research and develop arguments, and package and reach a public audience with the information. In a public policy fight between two entities, the one with the greater resources that can be mobilized will often have an advantage. Therefore, the branches of the government can seek to enhance their own power through the enlargement of their own political capacity. This can take the form of greater staffing, such as the expansion of congressional staff under the 1946 Legislative Reorganization Act. Or it can take the form of the creation of entirely new branch-wide entities, such as the creation of the Executive Office of the President or the Congressional Budget Office or the Federal Judicial Center. In many cases, increases in one branch's capacity is acquiesced to by the other branches; Congress routinely passes legislation increasing executive capacity, and the President often consents to increased legislative capacity by refraining from vetoing such legislation. While the three branches of government themselves have strong incentives to maintain and enhance their power, individual political actors within the branches may often find themselves placed at cross-purposes, where the goal of enhancing power for their institution may come into conflict with other political goals they are seeking to achieve. Generally, three types of goals may create cross-purpose conflicts for political actors seeking to maintain the institutional power of their branch. First, long-term institutional power may come into conflict with personal policy positions. For example, an individual Justice's belief may favor an outcome of a Supreme Court case that may decrease the prestige of the Court; an individual Member of Congress may believe that foreign policy actions taken by the executive branch without the input, or against the majority wishes, of Congress may be the correct decisions; and the President may be unwilling to veto legislation that achieves policy outcomes he prefers despite doing so in a way that reduces executive branch capacity. A second cross-purpose conflict is one that brings institutional power into conflict with partisan affiliation. Members of a political party generally do not to want to embarrass co-partisans or damage the reputation of their party; instead, they seek to enhance the reputation and brand-name of their party in the hopes of accumulating party power and gaining greater control over public policy. It thus often becomes the case that individuals must choose between helping their political party and enhancing the power of their institution. For example, Representatives may refrain from criticizing the actions of a President from their own party, even when such actions are to the detriment of Congress as an institution. The Representative may judge that the benefit to their constituents, party, or ideological policy preferences outweigh the diminishment of power to the institution. A third cross-purpose conflict is when electoral goals conflict with institutional power. This can happen when candidates for office believe that attacking or maligning the power of the institution they are seeking to join will be an effective campaign strategy. Candidates for Congress commonly describe Congress as "broken" or "dysfunctional." Nominees for the Supreme Court often warn in Senate hearings about the need to limit the scope or authority of the Court; and candidates for President routinely attack their predecessors for actions that they believe are overreaches of executive power. The problem of institutional power coming into conflict with other goals is particularly acute for Congress, especially in relation to the executive branch. As individual members of a large body, Representatives and Senators may not believe they have the responsibility or the capacity to defend the institution. Those who may feel such responsibility, such as party and chamber leaders, will often find themselves in situations in which policy or party goals, either their own personal ones or those of their caucus, come into direct conflict with institutional goals. Even when Congress does choose to institutionally defend itself, it often finds itself speaking with less than a unified voice, as only the most vital institutional powers have the ability to unanimously unify Congress. These problems of collective action—the responsibility/capacity to defend the institution, the ability to speak with a unified voice, and the conflict with party or policy goals—rarely if ever occur in the executive branch. The unitary nature of the presidency ensures that the executive branch will ultimately always speak with one voice, and past presidents have often expressed—both in office and after retirement—a deep feeling of responsibility for the maintenance of the powers of the presidency. Finally, it is more unusual for party or policy goals to be directly at odds with executive branch power than congressional power, simply because the President in modern times exerts significant control over both his party's politics and the general public policy agenda. His proposals, therefore, tend to set the agenda and, not surprisingly, they are typically very consonant with executive branch power. While the cross-purposes that place political actors in conflicted situations with respect to institutional power can seem daunting, they also suggest structural situations in which those seeking to enhance institutional power can harness these cross-purposes and use them for the benefit of the institution. In some cases, the partisan or ideological or electoral goals of political actors align with the institutional goals of the branch. It is in these situations that those seeking greater institutional power, particularly in Congress, can most effectively achieve their goals. The arrangement of parties, ideologies, and institutions has many variations. Imagine a stylized America with a liberal and conservative political party, whose core principles tended to either favor executive power or legislative power, but varied over time. In this arrangement, with two institutions (Presidency, Congress), two parties (Party A, Party B), and two philosophies about governance (executive-centered, Congress-centered), eight possible arrangements of government are possible. Some of these arrangements are unlikely to be hospitable to the promotion of congressional power. For instance, when one party controls both institutions and has an executive-centered governing philosophy, enhancing congressional power will be quite difficult. On the other hand, when Party A controls the presidency and Party B controls Congress, if Party B has a Congress-centered philosophy for governing, the most hospitable alignment has been achieved. Those seeking to enhance congressional power will likely achieve their best results in situations of divided government, when the control of Congress is in the hands of a party that naturally is more wary of executive power. In these situations, the partisan, ideological, and institutional incentives all favor an increase of congressional power. There are fewer cross-pressures to conflict members; enhancing congressional power will serve the interests of the institution, the party, and the ideological goals of many members. Clashes between the branches over the proper division of constitutional power and authority have arisen routinely in recent Congresses, as they have throughout American history. Recent issues include the following: War Powers . The 2011 U.S. military operations in Libya raised concerns among some in Congress that the President lacked authority to engage in such operations without congressional approval. What limits can Congress place on Presidential military action? Policy implementation . In 2014, the House of Representatives voted to authorize the Speaker to initiate legal action against the executive branch for implementing aspects of the Affordable Care Act in a manner contrary to the statutory language. What implementation latitude does the administration have under law, and can Congress seek legal enforcement against administration implementation decisions? Congressional organization of the judiciary . In 2015, the Supreme Court examined the question of whether Congress could charge non Article-III courts with certain adjudication tasks. What types of courts can Congress create that do not provide Article III protections to their judges? Recess a ppointments . In 2011, President Obama made several recess appointments while the Senate was in pro-forma session, which led to a lawsuit and ultimately a Supreme Court decision invalidating the appointments. Under what conditions can the President make a recess appointment? Recognition of foreign governments . Does Congress have a role in foreign policy that gives it the authority to recognize foreign governments for some purposes, or does the sole power of recognition lie with the President? Congressional Oversight and Contempt Power . After the Department of Justice refused to provide subpoenaed documents to the House Oversight and Government Reform Committee, the committee voted to cite the Attorney General for contempt, and the Administration invoked executive privilege as the justification for withholding the documents. To what extent does Congress have a right to executive branch documents? Can Congress force a criminal contempt prosecution to be opened? Two general observations warrant mentioning. First, the contemporary balance of power between the President, Congress, and the courts is not the same as it was in 1789, and is perhaps not the balance intended or expected by the framers of the Constitution. A myriad of changes, developments, and specific events in the United States—ranging from amendments to the Constitution to development in technology to the continuing evolution of American political culture—have continually influenced public opinion, political norms, and the behavior of political actors in ways that have rearranged the relative powers of the institutions. Second, the relative power of the President, Congress, and the courts is not on any specific trajectory. At various times since the ratification of the Constitution, the power of each institution has been at times ascendant and at other times on the decline. While specific events and developments may predictably lead to an increase or decrease in relative power for one of the branches, predicting the actual future direction of power shifts between the branches is an inherently difficult task. Many events that alter the power balance are either contingent or otherwise rely on the individual actions of political actors.

Congress's role and operation in national politics is fundamentally shaped by the design and structure of the governing institution in the Constitution. One of the key principles of the Constitution is separation of powers. The doctrine is rooted in a political philosophy that aims to keep power from consolidating in any single person or entity, and a key goal of the framers of the Constitution was to establish a governing system that diffused and divided power. These objectives were achieved institutionally through the design of the Constitution. The legislative, executive, and judicial branches of the government were assigned distinct and limited roles under the Constitution, and required to be comprised of different political actors. The constitutional structure does not, however, insulate the branches from each other. While the design of the Constitution aims, through separation, to prevent the centralization of power, it also seeks the same objective through diffusion. Thus, most powers granted under the Constitution are not unilateral for any one branch; instead they overlap. The constitutional structure of separation of powers invites conflict between the branches, particularly between Congress and the President. The electoral structure of the federal government provides not only separate bases of authority, but also different bases of authority for political actors, as well as different time horizons. Likewise, the assignment of powers under the Constitution is not only overlapping, but also somewhat vague, creating inter-branch contests for power across many key functions of the government. Finally, numerous questions of authority are not even addressed by the Constitution. Although each branch has strong incentives to protect its prerogatives, in many cases individual political actors have incentives that run counter to their institutional affiliation. In particular, political actors will often, quite reasonably, place the short-term achievement of substantive policy goals ahead of the long-term preservation of institutional power for their branch of government. Likewise, partisan or ideological affiliations will at times place political actors at cross purposes, where they will be forced to choose between those affiliations and their branch affiliation. Such anti-branch incentives are important contours to consider for political actors seeking to increase the power of their own branch. The problem of institutional power coming into conflict with other goals is particularly acute for Congress, especially in relation to the executive branch. As individual members of a large body, Representatives and Senators may not believe they have the responsibility or the capacity to defend the institution. Those who may feel such responsibility, such as party and chamber leaders, will often find themselves in situations in which policy or party goals, either their own personal ones or those of their caucus, come into direct conflict with institutional goals. Even when Congress does choose to institutionally defend itself, it often finds itself speaking with less than a unified voice, as only the most vital institutional powers have the ability to unify Congress. This report provides an overview of separation of powers. It first reviews the philosophical and political origins of the doctrine. Then it surveys the structure of separation of power in the Constitution. It next discusses the consequences of the system, for both the institutions and for individual political actors. Finally, there is a discussion of separation of powers in the context of contemporary politics.

Program eligibility requirements and payment limits are central to how various U.S. farm programs operate. These requirements fundamentally address various equity concerns and reflect the goals of government intervention in agriculture. They determine who receives federal farm program payments and how much they receive. Eligibility requirements and payment limits are controversial because they strongly influence what size farms are supported. Policymakers have debated what limit is optimal for annual payments, whether payments should be proportional to production or limited per individual or per farm operation, and whether the limit should be specific to each program or cumulative across all programs. Furthermore, program eligibility requirements and payment limits generate considerable congressional interest because their effects differ across regions and by type of commodities produced, and because a substantial amount of annual U.S. farm program payments are at stake—direct federal outlays have averaged $13.9 billion per year from 1996 through 2015. When federal crop insurance premium subsidies are included, annual farm payments have averaged $17.5 billion over the same period. Farm program payment limits and eligibility requirements may differ by both type of program and type of participating legal entity (e.g., an individual, a partnership, or a corporation). Eligibility and payment limit determinations for farm programs are under the jurisdiction of the U.S. Department of Agriculture's (USDA's) Farm Service Agency (FSA). Congress first added payment limits as part of farm commodity programs in the 1970 farm bill (P.L. 91-524); however, such limits have evolved over time in both scope and amount ( Table A-1 ) as the structure of U.S. agriculture, farm policies, and commodity support programs has changed. With each succeeding farm bill, Congress has addressed anew who is eligible for farm payments and how much an individual recipient should be permitted to receive in a single year. In recent years, congressional debate has focused on attributing payments directly to individual recipients; ensuring that payments go to persons or entities currently engaged in farming; capping the amount of payments that a qualifying recipient may receive in any one year; and excluding farmers or farming entities with incomes above a certain level as measured by their adjusted gross income (AGI) from payment eligibility. Each of these policy measures—depending on how they are designed and implemented—can have consequences, both intended and unintended, for U.S. agriculture including, but not limited to, farm management structure, crop choices, and farm size. Because U.S. farm program eligibility requirements and annual payment limit policy have such broad potential consequences for U.S. agriculture, a review of both current policies and related issues is of potential interest to Congress. This report discusses various eligibility factors and their interaction under current law. It describes current restrictions that limit or preclude payments to farmers based on a number of factors. This report also highlights areas where few, if any, restrictions limit farmers' access to or amount of benefits. This report is not a legal brief, nor does it represent a CRS legal analysis. Furthermore, this report is not intended to discuss the merits, or lack thereof, of federal farm program payments and their current distribution. This report begins by discussing farm program eligibility including the primary types of legal entities participating in farm programs. Other limiting requirements are discussed, such as participant identification, citizenship, the current interpretation of what constitutes "actively engaged in farming" (AEF), adjusted gross income (AGI) limits, and conservation compliance. This is followed by a discussion of the direct attribution of payments to individual recipients for assessing whether a person's payment limit has been exceeded. Next, annual payment limits for the major categories of farm programs are examined. Much of this information is summarized in Table 1 . This report also discusses several issues related to farm program payment limits, including policy design issues, that may be of interest to Congress. Finally, an Appendix contains a history of the evolution of annual payment limits for major commodity programs ( Table A-1 ) and a glossary of acronyms ( Table A-2 ) as an aid to readers. This is the second of two reports on the subject of program eligibility and payment limits. While this report focuses on farm program payment limits, an earlier report (CRS Report R44656, USDA's Actively Engaged in Farming (AEF) Requirement ) focuses on program eligibility requirements—in particular, criteria underpinning the "actively engaged in farming" (AEF) requirements. Not all farm businesses are eligible to participate in federal farm programs. A number of statutory and regulatory requirements govern federal farm program eligibility for benefits under various programs. Some farm businesses, although eligible to participate, are restricted from receiving certain benefits or may be limited in the extent of program payments that they may receive. Over time, program eligibility rules have evolved, expanding to more programs and including more limitations. Cross-cutting methods of determining program eligibility—such as Adjusted Gross Income (AGI) thresholds—are relatively new. Discussed below are cross-cutting eligibility requirements that affect multiple programs, including participant identification, foreign ownership, nature and extent of participation (i.e., actively engaged in farming criteria), means tests, and conservation requirements. Generally, program eligibility begins with identification of participants. Identifying who or what is participating and therefore how payments may be attributed is the cornerstone to most farm program eligibility. To be eligible to receive any farm program payment, every person or legal entity—including both U.S. and non-U.S. citizens—must provide a name and address, and have either a social security number (SSN) in the case of a person, or a Taxpayer Identification Number (TIN) or Employee Identification Number (EIN) in the case of a legal entity with multiple persons having ownership interests. In this latter situation, each person with an interest must have a TIN or EIN and must declare their interest share in the joint entity using the requisite USDA forms. All participants in programs subject to payment eligibility and payment limitation requirements must submit to USDA two completed forms. The first, CCC-901 (Members' Information), identifies the participating persons and/or entities (through four levels of attribution if needed) and their interest share in the operation. The second form, CCC-902 (Farm Operating Plan), identifies the nature of each person's or entity's stake—that is, capital, land, equipment, active personal labor, or active personal management—in the operation. These forms only need to be submitted once (not annually), but must be kept current in regard to any change in the farming operation. Critical changes to a farming operation might include expanding the number of limitations for payment, such as by adding a new family member; changing the land rental status from cash to share basis; purchasing additional base acres equivalent to at least 20% of the previous base; or substantially altering the interest share of capital or equipment contributed to the farm operation. This information is critical in determining the extent to which each person is actively engaged in the farming operation as described below. Many types of farm business entities own operations engaged in agricultural production. For purposes of determining the extent to which the participants of a farm operation qualify as potential farm program participants, three major categories are considered ( Table 2 ). Sole Proprietorship or Family Farm. The farm business is run by a single operator or multiple adult family members—the linkage being common family lineage—whereby each qualifying member is subject to an individual payment limit. Thus, a family farm potentially qualifies for an additional payment limit for each family member associated with the principal operator. Family farms or sole proprietorships comprised nearly 87% of U.S. farm operations in 2012. Joint Operation . Each member of a joint operation—where members need not have a common family relation or lineage—is treated separately and individually for purposes of determining eligibility and payment limits. Thus, a partnership's potential payment limit is equal to the number of qualifying members (plus any special designees such as spouses), times the individual payment limit. C orporat ion . A legally defined association of joint owners or shareholders that is treated as a single person for purposes of determining eligibility and payment limits. This includes corporations, limited liability companies, and similar entities. Most incorporated farm operations are family held. These three categories represent over 98% of U.S. farm operations ( Table 2 ). In addition, federal regulations exist for evaluating both the eligibility of and relevant payment limits for other exceptional types of potential recipients including a spouse, minor children, and other family members as well as marketing cooperatives, trusts and estates, cash-rent tenants, sharecroppers, landowners, federal agencies, and state and local governments. These institutional arrangements represent a small share (< 2%) of U.S. farm operations according to USDA's 2012 Census of Agriculture. Special rules also describe eligibility and payment limits in the event of the death of a previously eligible person. To be eligible for certain Title I commodity program benefits, participants—individuals as well as other types of legal entities—must meet specific requirements concerning their "active participation" in the farming operation. The active participation requirements are referred to as the "actively engaged in farming" or AEF requirements. The AEF requirements apply equally to U.S. citizens, resident aliens, and foreign entities. This section briefly reviews the specific requirements for each type of legal entity—person, partnership, or corporation—to qualify as "actively engaged in farming." An individual producer must meet three AEF criteria. First, the person, independently and separately, makes a significant contribution to the farming operation of (a) capital, equipment, or land; and (b) active personal labor, active personal management, or a combination of active personal labor and management. Second, the person's share of profits or losses is commensurate with his/her contribution to the farming operation. Third, the person shares in the risk of loss from the farming operation. Current law allows for special treatment of a spouse—if one spouse is determined to be actively engaged in farming, then the other spouse shall also be determined to have met the requirement. In addition, an exception is made for landowners who may be deemed in compliance with all AEF requirements if they receive income based on the farm's operating results, without providing labor or management. In a general partnership each member is treated separately for purposes of meeting the AEF criteria and determining eligibility. In particular, each partner with an ownership interest must contribute active personal labor and/or active personal management to the farming operation on a regular basis. The contribution must be identifiable and documentable, and separate and distinct from the contributions made by any other partner. Each partner that fails to meet the AEF criteria is ineligible to participate in the relevant farm program. A corporation—as an association of joint owners—is treated as a single person for purposes of meeting the AEF criteria and determining eligibility. In addition to the AEF criteria cited for a person—of sharing commensurate profits or losses, and bearing commensurate risk—each member with an ownership interest in the corporation must make a significant contribution of personal labor or active personal management—whether compensated or not—to the operation that is (a) performed on a regular basis; (b) identifiable and documentable; and (c) separate and distinct from such contributions of other stockholders or members. Furthermore, the collective contribution of corporate members must be significant and commensurate with contributions to the farming operation. If any member of the legal entity fails to meet the labor or management contribution requirements, then any program payment or benefit to the corporation will be reduced by an amount commensurate with the ownership share of that member. An exception applies if (a) at least 50% of the entity's stock is held by members that are "actively engaged in providing labor or management" and (b) the total annual farm program payments received collectively by the stockholders or members of the entity are less than one payment limitation. Prior to the 2014 farm bill ( P.L. 113-79 ), the definition of active personal labor or management was broad and could be satisfied by undertaking passive activities without visiting the operation, thus enabling individuals who lived significant distances from an operation to claim such labor or management contributions. This was seen as potentially problematic, as passive investors were receiving farm program payments without actively contributing to the farming operation. Recent farm bills have amended the AEF criteria in an attempt to tighten the requirements; however, the issue remains controversial. In particular, the 2014 farm bill (§1604) required USDA, in new regulations, to add more specificity to the role that a nonfamily producer must play to qualify for farm program benefits. As a result of the rule, a limit is placed on the number of nonfamily members of a farming operation that can qualify as a farm manager—depending on the size and complexity of the farm operation. Also, additional record-keeping requirements now apply for each nonfamily member of a farming operation claiming active personal management status. No such limit applies to the potential number of qualifying family members. Generally, if a foreign person or legal entity meets a particular farm program's eligibility requirements, then they are eligible to participate. One exception is the four permanent disaster assistance programs—Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish Program (ELAP); Livestock Forage Disaster Program (LFP); Livestock Indemnity Program (LIP); and Tree Assistance Program (TAP)—and the noninsured crop disaster assistance program (NAP), which explicitly prohibit payments to foreign entities, other than resident aliens. As of the end of 2013, foreign persons held an interest in 26.2 million acres of U.S. agricultural land (including forest land). This accounts for 2% of all privately held agricultural land in the United States and approximately 1% of total U.S. land. Foreign persons or entities can become eligible for most farm program benefits if they have the requisite U.S. taxpayer ID as described in the preceding section, and meet the "actively engaged in farming" (AEF) criteria discussed below. In the case where a foreign corporation or similar entity fails to meet the AEF criteria, but has shareholders or partners with U.S. residency status, then the foreign entity may—upon written request to USDA—receive payments representative of the percentage ownership interest by those U.S. citizens or U.S. resident aliens that do meet the AEF criteria. In addition, current law imposes no specific restrictions on foreign persons or entities with respect to eligibility for crop and livestock insurance premium subsidies. Also, the dairy margin protection program (MPP) makes no distinction about producer or owner citizenship. Instead, the law states that all dairy operations in the United States shall be eligible to participate in the margin protection program to receive margin protection payments. Similarly, no citizenship requirement exists for a sugar processor, or a cane or beet producer, operating under the U.S. sugar program price guarantees; however, the sugar cane and sugar beets being processed must be of U.S. origin. Means testing prohibits a person or legal entity from being eligible to receive any benefit under certain commodity and conservation programs during a crop, fiscal, or program year, as appropriate, if their income is above an established level. The first means test for farm programs was established by the 2002 farm bill (Farm Security Act of 2002, P.L. 107-171 ) ( Table 3 ). Income is measured by an individual's or entity's average adjusted gross income (AGI) from the previous three-year period, but excluding the most recent complete taxable year. Recent farm bills have preserved the three-year average AGI as the relevant measure of income. Now that an AGI limit appears acceptable, the debate has shifted to which programs are covered by the means test and what income level is an appropriate threshold. Since most U.S. farms are operated as sole proprietorships or partnerships ( Table 2 ), most farm households are taxed under the individual income tax rather than the corporate income tax. For an individual, AGI is the Internal Revenue Service (IRS) reported adjusted gross income. AGI measures net income, that is, income after expenses. Farm income is reported on the IRS Schedule F where AGI is net of farm operating expenses. For an incorporated business, a comparable measure to AGI—as determined by USDA—is used to measure income. Since the household is the typical unit of taxation, farm and nonfarm income are combined when computing federal income taxes for farm households. In fact, most federal income tax paid by farm households can be attributed to nonfarm income. Farm operations overwhelmingly report operating losses for tax purposes (because of cash accounting, capital expensing via depreciation, and other practices). For example, in 2004, an estimated 1.4 million, or about 70%, of farm sole proprietors reported a net farm loss for tax purposes. In 2006, nearly three of every four farm sole proprietors reported a farm loss. The substantial portion of capital investment that can be expensed in the first year is an important determinant of the large loss reporting. Program participants are required annually to give their consent to the IRS to verify to USDA that a participant is in compliance with their AGI limit provisions using a specific USDA form (CCC-941). Failure to provide the consent and subsequent certification of compliance will result in ineligibility for program payments, and a required refund of any payments already received for the relevant year. The initial AGI threshold established by the 2002 farm bill was for a total AGI of $2.5 million and covered most farm programs (listed in Table 3 ). However, the 2002 farm bill included an exemption if at least 75% of AGI was from farming. The 2008 farm bill replaced the single AGI limit of the 2002 farm bill with three separate AGI limits that distinguished between farm and non-farm AGI. First, a non-farm AGI limit of $500,000 applied to eligibility for selected farm commodity program benefits including the milk income loss contract (MILC) program, noninsured crop disaster assistance (NAP), and the disaster assistance programs. A second farm-specific AGI limit of $750,000 applied to eligibility for direct payments. A third non-farm AGI limit of $1 million—but subject to an exclusion if 66.6% of total AGI was farm-related income—applied to eligibility for benefits under conservation programs. Also, the 2008 farm bill added a provision for married individuals filing a joint tax return, whereby the joint AGI could be allocated as if a separate return had been filed by each spouse. This would potentially allow the farmer to exclude any earned income from a spouse as well as a share of any unearned income from jointly held assets for purposes of the eligibility cap. This provision had the potential to significantly reduce the share of farms affected by the AGI cap. The 2014 farm bill returned to a single total AGI limit, but at a level of $900,000 for individuals and incorporated businesses. It also retained the provision for married individuals filing a joint tax return to allocate the AGI as if a separate return had been filed by each spouse. In the case of a payment to a general partnership or joint venture comprising multiple individuals, the payment shall be reduced by an amount that is commensurate with the share of ownership interest of each person who has an average AGI in excess of $900,000. Two provisions—highly erodible land conservation (sodbuster) and wetland conservation (swampbuster)—are collectively referred to as conservation compliance. To be eligible for certain USDA program benefits, a producer agrees to conservation compliance—that is, to maintain a minimum level of conservation on highly erodible land and not to convert or make production possible on wetlands. Conservation compliance has been in effect since the Food Security Act of 1985 (1985 farm bill, P.L. 99-198 ). The majority of farm program payments, loans, disaster assistance, and conservation programs are benefits that may be lost if a participant is out of compliance with the conservation requirements. Most recently, the 2014 farm bill extended conservation compliance to federal crop insurance premium subsidies. Within U.S. farm policy, conservation compliance continues to be one of the only environmentally related requirements for program participation. The process of tracking payments to an individual through various levels of ownership in single and multi-person legal entities is referred to as "direct attribution." Several types of legal entities may qualify for farm program payments. However, ultimately every legal entity represents some combination of individuals. For example, a joint operation can be made up of a combination of individuals, partnerships, and/or corporate entities. A particular individual may be part of each of these three component entities, as well as additional sub-entities within each of these components. Farm payments flow down through these arrangements to individual recipients. Congress defines a legal entity as an entity created under federal or state law that (1) owns land or an agricultural commodity, or (2) produces an agricultural commodity. This broad definition of legal entity encompasses the multi-person legal entities discussed earlier such as family-farm operations, joint ventures, corporations, and institutional arrangements. Ownership shares in a multi-person legal entity are tracked via a person's social security number or Employee Identification Number, as reported in the USDA forms mentioned earlier, CCC-901 and CCC-902. Identification at the individual payment-recipient level is critical for assessing the cumulative payments of each individual against their annual payment limit. Direct attribution was originally authorized in the 2008 farm bill (§1603(b)(3)). All farm program payments made directly or indirectly to an individual associated with a specific farming operation are combined with any other payments received by that same person from any other farming operation—based on that person's pro rata interest in those other operations. It is this accumulation of an individual's payments—tracked through four levels of ownership in multi-person legal entities—that is subject to the annual payment limit. The first level of attribution is an individual's personal farming operation. Subsequent levels of attribution are related to those legal entities in which an individual has an ownership share. If a person meets his or her payment limit at the first level of attribution (i.e., on his or her own personal farming operation), then any payments to legal entities at lower levels of attribution are reduced by that person's pro rata share. When the eligibility criteria—including AEF, AGI, and others—are met, the cumulative benefits across certain farm programs are subject to specific annual payment limits (detailed in Table 1 ) that can be received by an individual or legal entity. Explicit payment limits date back to the 1970s. Despite their longevity, payment limits are not universal among programs. Payment limits are enforced differently for different types of legal entities (as mentioned earlier and summarized below). For example, certain program limits may be expanded depending on the number of participants, or they may be subject to exceptions, or may not exist. The major categories of farm program support and the applicability of annual payment limits, if any, are briefly discussed below. Traditionally, much attention focuses on the annual payment limits for the Title I commodity programs, largely because this has been the conduit for the majority of farm program expenditures. Title I commodity program payment limits were first included in a farm bill in 1970, but have evolved substantially since that initial effort ( Table A-1 ). Several major farm support programs—as defined by specific titles of the 2014 farm bill—are currently subject to annual payment limits. Title I c ommodity programs : ARC and PLC . These include the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) Programs of Subtitle A. Title I c ommodity programs : Marketing Assistance Loan . This refers to certain benefits under the Marketing Assistance Loan Program (Subtitle B)—that is, loan deficiency payments (LDP) and marketing loan gains (MLG), but not benefits under forfeiture or commodity certificate exchanges. Title I d isaster assistance programs . These include the Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish Program (ELAP), Livestock Forage Disaster Program (LFP), Tree Assistance Program (TAP), and Livestock Indemnity Program (LIP) of Subtitle E. Title XII (Subtitle C , §12305 ) Noninsured Crop Disaster Assistance Program (NAP) . Available for crops not currently eligible for crop insurance. When the farm program benefits for a qualifying recipient exceed the annual limits (as listed in Table 1 ) for a given year, then that individual is no longer eligible for further benefits under that particular program during that year, and is required to refund of any payments already received under that program that are in excess of the relevant payment limit for that year. A partnership's payment limit is equal to the limit for a single person times the number of persons or legal entities that comprise the ownership of the joint operation plus any additional exemptions or exceptions. Adding a new member can provide one or two (with qualifying spouse) additional payment limits. Each member of a partnership or joint venture must meet the AEF criteria and must be within the AGI limit. Furthermore, the payment limit is reduced by the share of any single member that has already met his/her payment limit on another farm operation outside of the partnership. A corporation is treated as a single person for purposes of determining eligibility and payment limits, provided that the entity meets the AEF criteria. Adding a new member to the corporation generally does not affect the payment limit, it only increases the number of members that can share a single payment limit. Three types of commodity program benefits are not subject to annual payment limits. Two are benefits obtainable under the marketing assistance loan program: (1) benefits derived from forfeiting to the CCC the quantity of a commodity pledged as collateral for a marketing assistance loan; and (2) marketing loan gain (MLG) benefits that result from use of commodity certificates to repay a marketing assistance loan. In addition, a general exception to annual payment limits under any program benefits (including Title I and most other payments) could result when the principal operator or a major partner dies during the course of a program year. These three exceptions are briefly described here. Forfeiture of a pledged crop in lieu of loan repayment is an option that is available for all marketing loan crops that have been pledged as collateral under a USDA marketing assistance loan. Generally, a farmer repays the loan at the value of the loan rate plus interest. But rather than repaying the loan with cash, farmers can fulfill their loan obligation by forfeiting the pledged crop. By forfeiting the crop, the farmer keeps the value of the loan (equal to the loan rate times the volume of pledged crop) and forgoes paying any interest on the loan. This feature is meaningful only when the current market price for the pledged crop—that is, the posted county price (PCP) for grains and oilseeds, or effective adjusted world price (AWP) for rice and upland cotton—is less than the marketing loan rate. The gain associated with the forfeiture, which is the difference between the higher loan rate and the PCP or AWP, is equivalent to an MLG or LDP. For large producers, an important aspect of the forfeiture option is that the gain associated with forfeiting the crop does not count toward the payment limit of $125,000 per person, unlike a gain from repaying the loan with cash (or receiving an MLG or LDP). Producers decide which route to pursue (repay loan with cash at the local PCP or AWP and retain any MLG or LDP subject to payment limits, or forfeit the crop retaining any MLG or LDP but not subject to payment limits) depending on the expected value of each option, their need for loaned funds, and their likelihood of exceeding the payment limit. If a farmer chooses to forfeit the crop, USDA takes ownership of the crop. Storage costs would then accrue to USDA until it sells or finds an alternate use for the crop. Forfeiture can be a particularly attractive option for peanut producers if the PCP is below or even slightly above the loan rate because USDA, by law, then pays for costs associated with storage, handling, and interest. Otherwise, in the case of a producer who does not forfeit the crop under loan, but instead takes a MLG or LDP payment, the producer assumes all costs associated with storage. Another option for producers with crops under marketing loan that confront payment limits is the use of commodity certificates. Commodity certificates are payment-in-kind certificates issues by the CCC that can be used to pay off an outstanding marketing assistance loan, accrue any MLG benefits, and avoid having the benefits count against a payment limit. Commodity certificates can be purchased at the PCP for grains and oilseeds or the effective AWP for rice and upland cotton. Commodity certificates are useful when the relevant PCP or AWP is lower than the market loan rate such that the certificate can be purchased at a discount to the marketing loan rate. A producer purchases the certificate at the PCP or AWP for the volume of crop under marketing assistance loan, then immediately returns the certificate to USDA to pay off the loan. Thus, the producer re-acquires the crop being held as collateral for the loan in exchange for the certificate that he or she has just purchased from USDA. When the PCP or effective AWP is below the loan rate, producers benefit from commodity certificates by obtaining a lower loan repayment rate. Furthermore, such benefits are not counted against a payment limit as ordinary MLG or LDP benefits would be. Thus, certificates allow farmers to repay marketing assistance loans for less than the loan price, but without counting the resulting marketing loan gains against payment limitations for farm subsidies. The use of commodity certificates was eliminated in 2009 by a provision in the 2008 farm bill ( P.L. 110-246 , §1607). However, the Consolidated Appropriations Act of 2016 ( P.L. 114-113 , §740), enacted in December 2015, authorized the CCC to issue commodity certificates to agricultural producers in exchange for crops pledged under marketing assistance loans beginning with the 2015 crop year. Payments received directly or indirectly by a qualifying person (i.e., someone who meets AEF, AGI, and any other eligibility requirements) may exceed the applicable limitation if all of the following apply: ownership interest in farmland or agricultural commodities was transferred because of death; the new owner is the successor to the previous owner's contract; and the new owner meets all other eligibility requirements. This provision also applies to an ownership interest in a legal entity received by inheritance if the legal entity was the owner of the land enrolled in an annual or multi-year farm program contract or agreement at the time of the shareholder's death. The new owner cannot exceed the payment amount that the previous owner was entitled to receive under the applicable program contracts at the time of death. However, the new payment limit associated with this transfer would be in addition to the payment limit of the person's own farm operation. If the new owner meets all program and payment eligibility requirements, this provision applies for one program year for ARC and PLC. This reflects the idea that individual resources were committed by both farming operations (the deceased's and the inheritor's) during the growing season with no expectation of death, and that individual payment limits should reflect that resource commitment and not impose an unnecessary and unexpected burden on the inheritor. Three other major types of federal farm support programs that are not currently subject to annual payment limits include the following: Title I (Subtitle C) sugar program . This refers to the indirect price support provided to producers of sugar beets and sugarcane, and to the direct price guarantees provided to the processors of both crops in the form of a marketing assistance loan at statutorily fixed prices. USDA administers the U.S. sugar program at no budgetary cost to the federal government by limiting the amount of sugar supplied for food use in the U.S. market, thus indirectly supporting market prices. This indirect subsidy is implicit and not subject to budgetary restrictions. Furthermore, there is no citizenship requirement for a sugar processor; however, the sugar cane and sugar beets being processed under the U.S. sugar program price guarantees must be of U.S. origin. Title I (Subtitle D) dairy program . This refers to the margin protection program (MPP) for dairy producers created under the 2014 farm bill (§1401-§1431). Participants may benefit from two potential types of support: an implicit premium subsidy, and an indemnity-like payment made when MPP price triggers are met. The fees or premiums charged for participating in the MPP are set in statute rather than being set annually by an actuary based on historical data and market conditions. Thus, the subsidy is implicit to the premium paid with no limit on the level of participation. Similarly, any payments made under the MPP are not subject to payment limits. Title XI c rop - and livestock-related insurance premium subsidies and indemnity payments . These refer to federal premium subsidies for both catastrophic and buy-up insurance coverage, and to any indemnity payments made under either of these coverage levels. To be eligible to purchase catastrophic risk protection coverage, the producer must be a "person" as defined by USDA; and for eligibility to purchase any other plan of insurance, the producer must be at least 18 years of age and have a bona fide insurable interest in a crop as an owner-operator, landlord, tenant, or sharecropper. Premium subsidies are not subject to any limit on the level of participation or underlying value. Similarly, indemnity payments made under crop insurance are not subject to payment limits. Theoretically, market prices—based on relative supply and demand conditions and assuming competitive market conditions hold —provide the most useful signals for allocating scarce resources. In other words, in a situation where no policy support is available, most producers would make production decisions based primarily on market conditions. If these conditions hold, then tighter payment limits (i.e., a smaller role for government support policies) would imply that more land would be farmed based on market conditions, and less land would be farmed based on policy choices. Supporters of payment limits use both economic and political arguments to justify tighter limits. Economically, they contend that large payments facilitate consolidation of farms into larger units, raise the price of land, and put smaller, family-sized farming operations and beginning farmers at a disadvantage. Even though tighter limits would not redistribute benefits to smaller farms, they say that tighter limits could help indirectly by reducing incentives to expand, thus potentially reducing upward price pressure on land markets. This could help small and beginning farmers buy and rent land. Politically, they believe that large payments undermine public support for farm subsidies and are costly. In the past, newspapers have published stories critical of farm payments and how they are distributed to large farms, non-farmers, or landowners. Limits increasingly appeal to urban lawmakers, and have advocates among smaller farms and social interest groups. Critics of payment limits (and thus supporters of higher limits or no limits) counter that all farms are in need of support, especially when market prices decline, and that larger farms should not be penalized for the economies of size and efficiencies they have achieved. They say that farm payments help U.S. agriculture compete in global markets, and that income testing is at odds with federal farm policies directed toward improving U.S. agriculture and its competitiveness. In addition to these concerns, this section briefly reviews other selected payment-limit issues and eligibility requirements. A large amount of money is involved in farm payments—much of it goes to a small share of large operators. According to USDA's 2012 Agricultural Census, farms with market revenue equal to or greater than $250,000 accounted for 12% of farm households, but received 60% of federal farm program payments. Selecting a particular dollar value as a limit on annual government support payments involves a fundamental choice about who should benefit from farm program payments. This has important, but complex, policy implications. For example, numerous academic studies have shown that government payments are usually capitalized into cropland values, thus raising rental rates and land prices. Higher land values disfavor beginning and small farmers who generally have limited access to capital. As a result, critics contend that there is a lack of equity and fairness under the current system of farm program payments that appears to favor large operations over small, and that payment limits are really about farm size. In contrast, supporters of the current system argue that larger farms tend to be more efficient operators, and that altering the system in favor of smaller operators may create inefficiencies and reduce U.S. competitiveness in international markets. Furthermore, they contend that tightening payment limits will have different effects across crops, thus resulting in potentially harmful regional effects. Tighter payment limits do not affect all crops and regions equally. As limits are tightened, they will likely first impact those crops with higher per-unit and per-acre production value. Among the major U.S. program crops, higher valued crops include rice, peanuts, and cotton, all of which tend to be produced in the Southeast, Mississippi Delta, and Western states. Furthermore, payment limits may influence local economic activity. In particular, payment limits are likely to have a greater economic impact in regions where agricultural production accounts for a larger share of economic output—that is in rural, agriculture-based counties—and where there may be fewer opportunities for diversification to offset any payment-limit-induced reduction in agricultural incomes. Under the 2008 farm bill, the annual limit on payments for Title I commodity programs attributable to a person was split into two components: a $40,000 limit on direct payments and a $65,000 limit for combined CCP and ACRE payments, while there was no limit on benefits under the marketing assistance loan program ( Table A-1 ). The 2014 farm bill established a single aggregate limit of $125,000 for combined annual payments under the LDP and MLG benefits of the marketing assistance loan program and the PLC and ARC programs (which replaced the previous CCP and ACRE programs). As a result, in those situations where marketing assistance loan benefits are negligible and an individual relies primarily on either PLC or ARC, then his/her individual limit has been significantly expanded. For example, consider a producer that relied on CCP and direct payments under the 2008 farm bill. Suppose that under the 2014 farm bill that same producer now relies almost exclusively on the PLC program for support (in part since direct payments were eliminated by the 2014 farm bill). In this case, his/her annual payment limit has been nearly doubled from $65,000 for CCP to a new $125,000 limit for PLC payments. Thus, depending on market conditions and a producer's mix of program activities, aggregation of the program limits could result in situations that favor specific crops and programs ( Table A-1 ). The absence of a limit on benefits received under the marketing assistance loan's (MAL's) commodity certificate exchange and forfeiture options represents the potential for unlimited, fully coupled USDA farm support outlays. As a result, an apparent equity issue emerges when comparing program benefits of a producer facing a hard cap for ARC and PLC payments as compared to a producer with access to MAL forfeiture or commodity certificates. Furthermore, MAL program outlays count directly against U.S. amber-box spending limits under World Trade Organization (WTO) commitments. To the extent that such program outlays might induce surplus production and depress market prices, they could result in potential challenges under the WTO's dispute settlement mechanism. When eligibility requirements or payment limits are changed, rational producers are likely to alter their behavior to mitigate the effect of the policy changes while optimizing net revenue under the new set of policy and market circumstances. For example, new eligibility requirements or tighter payment limits may result in a reorganization of the farm operation to increase the number of eligible persons, or to lower the income that counts against a new AGI limit or the farm program payments that count against a smaller payment limit; a change in the crop and program choices or marketing practices, for example, to take advantage of the absence of a payment limit on MAL certificate exchange gains and forfeitures benefits; or a change in land use, such as, instead of farming the same acreage, renting out or selling some land to farmers that have not hit their payment limits. Payment limits applied per unit or per base acre represent an alternative to per-person payment limits that may avoid distortions to producer behavior. An example of such a per-unit payment limit is the 85% payment reduction factor applied to base acres receiving payments under either the PLC or ARC programs. The reduction factor is applied equally across all program payments irrespective of farm size, AGI, or total value of payments. Such a payment reduction factor is generally applied for cost-saving reasons rather than for "fairness" or equity reasons that at least partially motivate per-person payment limits. Analysis by USDA (2016) found that the number of farms affected by the single 2014 farm bill AGI cap ($900,000) is well below the number affected by the multiple farm ($500,000) and non-farm ($750,000) AGI caps of the 2008 farm bill. For example, while federal income tax data are not available for the $900,000 cap level, published data from 2013, a year of record-high farm income, found that only about 0.7% of all farm sole proprietors and share rent landlords reported AGI in excess of $1 million. Thus, it is likely that consolidating the separate AGI farm and non-farm limits into a single AGI limit with a higher bound has restored eligibility for farm program payments to some farm operations that had previously been disqualified. Other major exemptions from the AGI limit include state and local governments and agencies, federally recognized Indian tribes, and CRP contracts entered into prior to October 1, 2008. Furthermore, the 2014 farm bill shifted the farm safety net focus away from traditional revenue support programs and toward crop insurance programs, which are not subject to the AGI cap. During the five-year period of 2011-2015, federal crop insurance premium subsidies averaged $6.8 billion annually. Extending the AGI cap to crop insurance subsidies was considered during the 2014 farm bill debate, however, concerns were raised that the elimination of subsidies for high-income participants could affect overall participation to the extent that it could damage the soundness of the entire program. In contrast, USDA estimates that in most years, less than 0.5% of farms and less than 1% of premiums would be affected by the $900,000 income cap if it were extended to crop insurance participation as well as to farm programs.

Current U.S. farm program participants—whether individuals or multi-person legal entities—must meet specific eligibility requirements to receive benefits under certain farm programs. Some requirements are common across most programs while others are specific to individual programs. In addition, program participants are subject to annual payment limits that vary across different combinations of farm programs. Federal farm support programs, along with their current eligibility requirements and payment limits, are listed in Table 1. Since 1970, Congress has used varying policies to address the issue of who should be eligible for farm payments and how much should an individual recipient be permitted to receive in a single year. In recent years, congressional policy has focused on tracking payments through multi-person entities to individual recipients (referred to as direct attribution); ensuring that payments go to persons or entities actively engaged in farming; capping the amount of payments that a qualifying recipient may receive in any one year; and excluding farmers or farming entities with large average incomes from payment eligibility. Current eligibility requirements that affect multiple programs include identification of every participating person or legal entity—both U.S. and non-U.S. citizens; the nature and extent of an individual's participation (i.e., actively engaged in farming criteria) including ownership interests in multi-person entities and personal time commitments (whether as labor or management); means testing—persons with combined farm and nonfarm adjusted gross income (AGI) in excess of $900,000 are ineligible for most program benefits; and conservation compliance requirements. In general, if a foreign person or legal entity meets a program's eligibility requirements, then they are eligible to participate. One exception is the four permanent disaster assistance programs created under the 2014 farm bill (P.L. 113-79) and the noninsured crop disaster assistance program (NAP) whereby non-resident aliens are excluded. The process of tracking payments to an individual through various levels of ownership in single or multi-person legal entities is critical for assessing an individual's cumulative payments against their annual payment limit. Current law requires direct attribution through four levels of ownership in multi-person legal entities. Current payment limits include a cumulative limit of $125,000 for all covered commodities under major Title I revenue support programs, with the exception of peanuts, which has its own $125,000 limit. The permanent disaster assistance programs also have a $125,000 per crop year limit, with some exceptions. Supporters of payment limits contend that large payments facilitate consolidation of farms into larger units, raise the price of land, and put smaller, family-sized farming operations and beginning farmers at a disadvantage. In addition, they argue that large payments undermine public support for farm subsidies and are costly. Critics of payment limits counter that all farms need support, especially when market prices decline, and that larger farms should not be penalized for the economies of size and efficiencies they have achieved. Further, critics argue that farm payments help U.S. agriculture compete in global markets, and that income testing is at odds with federal farm policies directed toward improving U.S. agriculture and its competitiveness. As part of the next farm bill debate, Congress may again address these concerns, as well as the following questions: How does policy design of payment limits relate to their distributional impact on crops, regions, and farm size? Is there an optimal aggregation of payment limits across commodities or programs? Do unlimited benefits under the marketing assistance loan program's forfeiture or commodity certificate exchanges reduce the effectiveness of overall payment limits?

"Toxic" drywall, formaldehyde emissions, mold, asbestos, lead-based paint, radon, PCBs in caulk, and many other indoor pollution problems have concerned scientists, federal policy makers, and regulators during the last 30 years. Some problems have been resolved, others remain of concern, and new indoor pollution problems continually emerge, often unexpectedly. Because people spend a high percentage of their time indoors, and concentrations of pollutants often are higher in indoor air than outdoors, the human health risks indoors generally can be greater relative to risks from exposure to pollutants in the ambient (i.e., outdoor) air. In 1987, indoor air quality was identified by EPA scientists as one of the greatest sources of environmental risk to human health. EPA's Science Advisory Board, an independent body of experts, reviewed and endorsed this comparative risk ranking and in 1990 called upon the agency to give a higher priority to funding such high-risk environmental problems. In 1997, the Presidential and Congressional Commission on Risk Assessment and Risk Management again considered the relative risks presented by various environmental problems and concluded that indoor pollution could pose a substantial public health risk. In 2011, a report by the Institute of Medicine warned that many indoor air quality problems might get worse if adaptations to climate change are made without better information and programs aimed at pollution prevention. For example, methods to make homes better insulated and more energy efficient may result in less circulation with outdoor air, potentially increasing indoor concentrations of pollutants unless effective filtration or treatment technologies can be incorporated. This report describes common indoor pollutants, discusses federal statutes that have been used to address indoor pollution, and analyzes key issues surrounding some general policy options for federal policy makers. The focus is on indoor chemical contaminants, rather than on temperature, humidity, or pollution from animals, fungal or bacterial organisms, or plant pests. Indoor pollutants are chemicals that are potentially harmful to people and may be found in the habitable portions of buildings, including homes, schools, offices, factories, and other public gathering places. Indoor pollutants are many and varied. Many exposures may be through indoor ai r . Some substances, like lead or ozone, are also ambient (outdoor) air pollutants. Others, like formaldehyde or asbestos, may be found either indoors or out, but are most often of concern when found at unhealthful concentrations indoors. Indoor pollutants may be natural (for example, carbon monoxide or radon) or synthetic (such as polychlorinated biphenyls [PCBs]), may originate indoors or outdoors, and may be deliberately produced, naturally occurring, or inadvertent byproducts of human activities. People may be exposed to indoor contaminants in the air, tap water, or dust by inhalation, skin contact, or mouth. Some examples of common indoor pollutants are discussed below. Some indoor pollution originates indoors as a result of fuel combustion for home heating or cooking. Fuel type, combustion efficiency, and ventilation affect the nature and extent of pollutant emissions and accumulations. Pollutants produced by combustion include smoke and carbon monoxide. Smoke contains a number of potentially harmful gases and small particles which may aggravate asthma and other health conditions. In developing countries, indoor smoke is a major concern. According to the World Health Organization (WHO), "[i]ndoor air pollution generated largely by inefficient and poorly ventilated stoves burning biomass fuels such as wood, crop waste and dung, or coal—is responsible for the deaths of an estimated 2 million people annually." Indoor combustion also is a concern in the United States, especially in homes without adequate furnaces where people may rely upon unvented space heaters or other devices to keep warm. Indoor combustion also is particularly common in the United States during emergencies when electricity or vented equipment may become unavailable, prompting residents to run generators indoors or to heat or cook with unvented portable devices such as barbeque grills. Accumulation of carbon monoxide, which is a colorless and odorless gas, is responsible for numerous deaths annually in the United States. Smoking that produces environmental tobacco smoke is another source of indoor air pollution. The respiratory tracts of young children are especially vulnerable to infections as a result of exposure to secondhand smoke. Radon is a naturally occurring, extremely toxic, colorless gas that is formed naturally from rocks and soil as a result of radioactive decay of radium. Radon emissions vary widely, but high levels of radon contamination occur in every state. Radon gas can enter homes through porous basement walls or dissolved in drinking water from which it may escape into the air, for example, during showering. Indoors, radon gas may accumulate and pose a long-term risk for lung cancer. There is no known safe level of radon in indoor air. EPA and the Surgeon General recommend fixing a home when the radon level is 4 picocuries per liter of air or greater. EPA recommends that every home be tested for radon levels. According to EPA, exposure to radon in homes accounts for about 20,000 lung cancer deaths annually. Asbestos is a fibrous mineral that is found in certain natural rock formations. It was mined and widely used in the manufacture of fire-retardant materials, including automotive brake linings; roof, ceiling, and floor tiles; and insulation for furnaces, air ducts, and pipes. As the asbestos materials in buildings have deteriorated over time, and when they have been removed for remodeling or otherwise disturbed, asbestos fibers have been released to indoor air. When inhaled, such asbestos fibers have caused lung cancer and other lung diseases. Lead hazards are found in many homes and other buildings where lead-based paint has been applied and is deteriorating, lead solder or plumbing contaminates drinking water, or contaminated soil is tracked indoors. Childhood exposure to lead hazards can lead to brain and nervous system damage, behavior and learning problems, slowed growth, hearing problems, and headaches, according to EPA. Although exposure most commonly is to the lead in dust that gets onto hands and then enters a body through the mouth, indoor air inhalation of lead also can occur, for example, as a result of home renovation, or when contaminated outdoor air enters buildings. Sometimes synthetic chemicals accumulate to noxious levels in indoor air or dust as a result of uncontrolled emissions from building materials, paints, or furnishings, or evaporation following the use of cleaning supplies. Other synthetic chemicals may be inadvertently released (e.g., an ozone-producing machine may be used to "freshen" air). Still other indoor pollution originates outdoors but intrudes into homes, for example as contaminated air infiltrates through porous basement walls or is brought into the home through heating or air conditioning systems, or as contaminated drinking water. Outdoor contamination which migrates into the indoor air through groundwater and soil beneath homes and buildings often is referred to as "vapor intrusion." Prominent examples of industrial pollutants that have been found indoors include formaldehyde, which is emitted to air from some composite wood products; PCBs released from deteriorating caulk, paints, coatings, or plastics; and contamination from dry cleaning solvents, such as trichloroethylene (TCE) or perchloroethylene (PERC), which have migrated indoors through vapor intrusion at many sites. There also has been increasing attention to the potential risks of indoor exposure to perchlorate contamination through vapor intrusion or groundwater sources used for drinking water supplies. Perchlorate is a substance commonly used in solid propellants in military munitions and commercial fireworks. Pesticides released within buildings or around the foundation of buildings also may be indoor contaminants. Termiticides, insecticides, flea foggers, and roach or rodent control products are particularly common sources of toxic chemicals indoors. Even years after use, some of these products may persist where sunlight and rain cannot reach them. For example, scientists found relatively high levels of DDT in indoor dust samples taken in Cape Cod recently. No federal agency has broad statutory authority concerning pollution indoors. On the other hand, numerous federal agencies (at least 23 in spring 2012) have some authority to conduct research or to control particular indoor pollutants, sources of pollution, or environmental quality in particular structures. For example, the EPA has some authority under the Toxic Substances Control Act (TSCA) to address asbestos in schools; building standards, testing, and research related to radon; and lead-based paint hazards in housing. Key agencies and authorizing statutes are briefly described below. For more information about the authorities and activities of federal agencies with respect to indoor air quality, see EPA's 1989 Report to Congress on Indoor Air Quality, Volume 2, chapter 8. For additional background information about the research conducted by federal agencies, see the 1999 report by the U.S. General Accounting Office (GAO, now the Government Accountability Office), Indoor Pollution: Status of Federal Research Activities , GAO-RCED-99-254. A more recent summary of federal research and development and outreach activities related to indoor environments is available in Report of the Surgeon General's Workshop on Healthy Indoor Environment, January 12-13, 2005. Information is also available on agency websites. For direct links to some agencies' indoor environmental quality programs, visit http://www.epa.gov/iaq/ciaq/members.html . The origin of the Environmental Protection Agency (EPA) is rooted in a reorganization of the executive branch under the Nixon Administration. In Reorganization Plan No. 3 of 1970, President Nixon proposed the establishment of EPA to integrate the administration of numerous federal pollution control laws that had been carried out by several federal agencies. This plan was part of a broader effort to reorganize an array of environmental responsibilities of many federal agencies. The Nixon Administration created EPA through this reorganization with congressional approval under procedures established in the Reorganization Act of 1949, as amended. This reorganization provided the administrative framework for the creation of EPA. However, numerous federal environmental laws actually provide the statutory authority for the agency to carry out its overall mission to protect human health and the environment, with each law authorizing specific responsibilities. EPA's responsibilities generally have grown over time as Congress has amended these laws and enacted new laws to address particular needs. EPA has delegated the day-to-day implementation of many of these laws to the states, as provided in the state delegation authorities of the requisite statutes. EPA has used its various statutory authorities to address indoor pollution in numerous ways over time. Some of EPA's authorizing statutes also have given the agency specific authority to characterize indoor air problems; identify, assess, and implement strategies to mitigate hazards; and disseminate information about indoor environmental quality control. Selected noteworthy statutory authorities and mandates related to indoor pollution are abstracted below. Title I of the Toxic Substances Control Act (TSCA) provides very broad authority to EPA to identify and control the manufacture, distribution, and use of chemicals. This authority extends to chemicals that may be indoor pollutants, with the exception that TSCA does not cover chemicals regulated under other laws, such as pesticides, tobacco, nuclear material, substances subject to certain taxes (e.g., alcohol), and food, drugs, cosmetics, and devices regulated under the Federal Food, Drug, and Cosmetic Act. TSCA authorizes EPA to require manufacturers to test a chemical for toxicity, and the law directs EPA to control exposure to any chemical that poses an unreasonable risk to health or the environment. However, before controlling risks, EPA "must weigh the reduction in risk attributable to the regulation against the regulatory burdens to society, including costs. Further, EPA must use the 'least burdensome' sanction, taking into account whether the health threat could be eliminated or reduced to a sufficient extent under other Federal statutes." Among the eight chemical substances that ever have been restricted under the general authority of TSCA Title I (40 CFR Part 260) is the indoor pollutant asbestos, for which EPA banned all applications that were not already in use. In addition, TSCA 6(e) explicitly requires EPA regulation of polychlorinated biphenyls (PCBs). Under other TSCA authorities, EPA has gathered data or restricted new uses for thousands of other new and existing chemicals, some of which are actual or potential indoor pollutants. Congress enacted Title II of TSCA, the Asbestos Hazard Emergency Response Act (AHERA), to address asbestos hazards in schools. The law requires EPA to set standards for responding to the presence of asbestos in schools. The standards, set at levels adequate to protect public health and the environment, identify appropriate response actions that depend on the physical condition of asbestos. Schools, in turn, are required to inspect for asbestos-containing material, and to develop and implement a plan for managing any such material. Title II requires asbestos contractors and analytical laboratories to be certified, and schools to use certified persons for abatement work. Training and accreditation requirements also apply to inspectors, contractors, and workers performing asbestos abatement work in all public and commercial buildings. Other Title II requirements (such as mandates that buildings be inspected for asbestos) have not been extended to non-school buildings. To enforce requirements, TSCA Title II authorizes EPA to take emergency action with respect to schools if school officials do not act to protect children. The act also authorizes citizen action with respect to asbestos-containing material in a school and to compel action by EPA, either through administrative petition or judicial action. Civil penalties are authorized for violations, such as failing to conduct an inspection or to develop a school management plan. Concern about how schools would pay for required actions was addressed in separate legislation (the Asbestos School Hazard Abatement Act of 1984, or ASHAA, P.L. 98-377 ). It established a program offering grants and interest-free loans to schools with serious asbestos problems and demonstrated financial need. Repaid ASHAA loans are returned to an Asbestos Trust Fund to become a dedicated source of revenues for future asbestos control projects. In 1988, Congress added to TSCA a third title, Indoor Radon Abatement (15 U.S.C. 2661 et seq. , P.L. 100-551 ), to provide financial and technical assistance to states that choose to support radon monitoring and control; neither monitoring nor abatement of radon is required by the act. Title III requires EPA to update its pamphlet A Citizen ' s Guide to Radon , to develop model construction standards and techniques for controlling radon levels within new buildings, and to provide technical assistance to states. EPA is to provide technical assistance by establishing an information clearinghouse; publishing public information materials; establishing a national database of radon levels detected, organized by state; providing information to professional organizations representing private firms involved in building design and construction; submitting to Congress a plan for providing financial and technical assistance to states; operating cooperative projects with states; conducting research to develop, test, and evaluate radon measurement methods and protocols; developing and demonstrating new methods of radon measurement and mitigation, including methods that are suitable for use in nonresidential child care facilities; operating a voluntary program to rate radon measurement and mitigation devices and methods and the effectiveness of private firms and individuals offering radon-related services; and designing and implementing training seminars. In 1994, EPA promulgated final standards for the control of radon in new residential buildings. In the early 1990s, the EPA proficiency rating program and certification for training programs collected fees for service, and therefore were meant to be self-supporting, although Congress authorized $1.5 million to be appropriated to establish these programs. The proficiency program was privatized in 1998. A matching grant program was established for the purpose of assisting states in developing and implementing programs for radon assessment and mitigation, with funds targeted to states or projects that made efforts to ensure adoption of EPA's model construction standards and techniques for new buildings; gave preference to low-income persons; or addressed serious and extensive radon contamination problems or had the potential to reduce risk or to develop innovative assessment techniques, mitigation measures, or management approaches. Other sections of Title III require EPA to conduct a study to determine the extent of radon contamination in schools; identify and list areas of the United States with a high probability of having high levels of indoor radon; make grants or cooperative agreements to establish and operate at least three regional radon training centers; and provide guidance to federal agencies on radon measurement, risk assessment, and remedial measures. A map of radon zones in the United States is online. Four regional training centers were established, but they have not received regular federal funding in recent years. The 102 nd Congress added Title IV to TSCA when it enacted the Residential Lead-Based Paint Hazard Reduction Act of 1992 as Title X in the Housing and Community Development Act of 1992 ( P.L. 102-550 ). TSCA Title IV directs EPA to ensure that people engaged in detection and control of lead hazards are properly trained and contractors are certified; the public is informed about lead hazards; and there are quality controls for laboratories, laboratory methods, and commercial products used to detect or reduce risks associated with lead-based paint. Title IV explicitly applies these requirements to federal facilities and federal activities (including federally funded activities) that may create a lead hazard. In addition, Congress directed EPA to promulgate guidelines for the renovation and remodeling of buildings or other structures when these activities might create a hazard. Title IV authorizes states to propose programs to train and certify inspectors and contractors engaged in the detection or control of lead-based paint hazards. States also may develop the required informational pamphlets. TSCA requires EPA to promulgate a model state program that may be adopted by any state. Congress gave EPA the authority to approve or disapprove authorization for state proposals and to provide grants for states to develop and implement authorized programs. A federal program must be established, administered, and enforced by EPA in each state without an authorized program. At the end of 2007, the 110 th Congress added a fifth title to TSCA, subtitled Healthy High-Performance Schools. Enacted as Title IV, Subtitle E (§461) of P.L. 110-140 , the Energy Independence and Security Act of 2007, TSCA Title V authorizes EPA to establish a state grant program to provide technical assistance for EPA programs to schools and develop and implement state school environmental health programs. State programs must include standards for school building design, construction, and renovation, and identify ongoing school building environmental problems and recommended solutions. Environmental problems specifically mentioned in the law include "contaminants, hazardous substances, and pollutant emissions." EPA's authority to provide grants expires five years after the date of enactment. Title V requires the EPA Administrator, in consultation with the Secretary of Education and the Secretary of Health and Human Services, to issue voluntary guidelines for selecting sites for schools (presumably new schools), and voluntary guidelines for developing and implementing state environmental health programs for schools. These guidelines must take into account "environmental problems, contaminants, hazardous substances, and pollutant emissions"; natural day lighting; ventilation; heating and cooling; moisture control and mold; maintenance, cleaning, and pest control; acoustics; and "other issues relating to the health, comfort, productivity, and performance of occupants of the school facilities." In addition, Title V requires that the guidelines provide "technical assistance on siting, design, management, and operation of school facilities"; collaborate with children's environmental health centers in school environmental investigations; assist states and the public to better understand and improve the environmental health of children; and take into account "the special vulnerability of children in low-income and minority communities to exposures from contaminants, hazardous substances, and pollutant emissions." In July 2010, Congress enacted the Formaldehyde Standards for Composite Wood Products Act ( P.L. 111-199 ), adding a new Title VI to TSCA. The new title mandates specific formaldehyde emission standards for hardwood plywood, medium-density fiberboard, and particleboard that is sold, supplied, offered for sale, or manufactured in the United States. The standards are based on the voluntary national formaldehyde emissions standards established by ASTM International (formerly known as the American Society for Testing and Materials), method ASTM E-1333-96 (2002). EPA is required to promulgate regulations ensuring compliance with the emission standards and must include provisions relating to labeling, chain of custody requirements, sell-through provisions; ultra low-emitting formaldehyde resins, finished goods, third-party testing and certification; auditing and reporting of third-party certifiers; recordkeeping; enforcement, laminated products; and exceptions for products and components containing "de minimis amounts" of composite wood products. The new law prohibits stockpiling of products manufactured before the effective date of the act for sale after that date. Also prohibited is any requirement for labeling products manufactured prior to the "designated date of manufacture." The Comprehensive Environmental Response, Compensation, and Liability Act is the primary federal statute that authorizes EPA to respond to releases of hazardous substances into the environment. CERCLA established the Hazardous Substance Superfund Trust Fund to finance appropriations for EPA to carry out the authorities of the statute under the Superfund program. The program primarily focuses on the cleanup of the most hazardous sites which EPA has placed on the National Priorities List (NPL). The states also participate in cleanup decisions at these sites, and may share a portion of the cleanup costs if the responsible parties cannot be found or cannot pay to satisfy their liability. EPA oversees the cleanup of federal facilities under the Superfund program in conjunction with the states, but the agencies which administer those facilities are responsible for performing the cleanup with their own appropriations. Most contaminated federal facilities served national defense purposes and are administered by the Department of Defense and the Department of Energy, discussed later in this report. For the purposes of CERCLA, the term "environment" is defined in the statute to encompass only the outdoor environment (i.e., ambient air, land surface or subsurface strata, surface water, or groundwater, including drinking water supplies). Although CERCLA principally applies to releases into the outdoor environment, EPA's policy is to apply CERCLA to a release inside a home or a building if the release originated from an outside source and subsequently migrated indoors presenting an exposure risk. Otherwise, CERCLA generally prohibits EPA from using the authorities of the statute to respond to releases originating from, and remaining contained within, a home or building, unless there is the potential for an indoor release to migrate outdoors and therefore constitute a release into the environment as defined in the statute. Section 104(a)(3) of CERCLA explicitly limits EPA's authority to respond to releases of naturally occurring substances (either indoors or outdoors), and to releases from structural components within a home or building if the release would result solely in indoor exposures. However, Section 104(a)(4) provides an exception if EPA determines that the hazard constitutes a public health emergency, and no other person with the authority and capability to respond to the emergency will do so in a timely manner. To date, EPA has made a public health emergency declaration under CERCLA at one site, the Libby Asbestos Site in Montana. EPA Administrator Lisa Jackson issued the declaration for this site on June 17, 2009, because of potential risks in homes and buildings contaminated with vermiculite, a form of asbestos, which originated from the Libby mine. As such, the Libby Asbestos Site is somewhat unique. In practice, CERCLA most frequently has been used to respond to indoor pollution resulting from contaminated water supplies or vapor intrusion from external sources of contamination. As noted in the section on " Indoor Pollutants and Health Concerns ," vapor intrusion may occur when contaminants in groundwater or soil beneath a home or building may migrate into a structure and be released into indoor air. For example, contaminants may be released indoors if they migrate upward from groundwater through the soil column and penetrate porous basement floors and walls, or cracks in foundations. As the potential health risks from vapor intrusion have received increasing attention, EPA has been considering whether to include a ranking criteria for these risks in determining the eligibility of sites for listing on the NPL. Historically, there have been no listing criteria for vapor intrusion. Sites at which vapor intrusion is the only pathway of exposure generally have not been listed on the NPL, making them ineligible for Superfund appropriations to pay for the long-term remediation (as only sites listed on the NPL are eligible). This limitation does not apply to NPL sites at which the responsible parties pay for the cleanup, and the sites therefore do not rely on Superfund appropriations (including federal facilities). EPA still may use Superfund appropriations to perform more limited emergency removal actions to respond to vapor intrusion (or other risks), regardless of whether a site is listed on the NPL. While the consideration of NPL listing criteria has been under way, EPA also has been revising its 2002 policy on evaluating risks from vapor intrusion at sites that are eligible under the Superfund program. This guidance also applies to performing site assessments under CERCLA at "brownfields" not addressed under the Superfund program, and to hazardous waste sites addressed under the Resource Conservation and Recovery Act (RCRA), discussed below. Similar to sites addressed under CERCLA, hazardous waste sites or petroleum sites to which RCRA applies may present risks of exposure to occupants in homes or buildings if water supplies become contaminated or there is the potential for vapor intrusion through the migration of contamination beneath homes or buildings. Subtitle C of RCRA authorizes "corrective actions" to clean up contamination originating from hazardous waste facilities, and Subtitle I authorizes corrective actions to clean up petroleum contamination caused by leaking underground storage tanks. Although CERCLA does not apply to releases of petroleum, cleanup authorities under CERCLA and Subtitle C of RCRA can overlap. Hazardous substances are defined in CERCLA to include substances that meet the characteristics of hazardous wastes under Subtitle C of RCRA. Considering that both CERCLA and Subtitle C of RCRA may apply to the cleanup of hazardous wastes, EPA has issued guidance that is intended to avoid potential overlap or duplication between the two statutes. Subtitle C authorizes enforcement actions to require owners or operators of facilities which treat, store, or dispose of hazardous wastes to perform corrective actions to clean up contamination originating from those facilities. However, Subtitle C does not authorize federal funding to ensure the performance of the cleanup if the facility owners or operators cannot pay. Rather, Subtitle C primarily is an enforcement authority to require corrective actions that are necessary to protect human health and the environment at active hazardous waste treatment, storage, or disposal facilities regulated under Subtitle C, whereas CERCLA more broadly authorizes EPA to fund the cleanup of hazardous substances under the Superfund program even if there are no viable responsible parties to pursue. EPA has delegated the implementation of the hazardous waste corrective action authorities of Subtitle C of RCRA to all but eight states, including Alaska, Iowa, Kansas, Maryland, Mississippi, Nebraska, New Jersey, and Pennsylvania. In delegated states, EPA still retains its authority to issue cleanup orders to respond to imminent hazards. Subtitle I of RCRA authorizes appropriations from the Leaking Underground Storage Tank (LUST) Trust Fund to oversee and enforce corrective actions conducted by responsible parties, or to pay for corrective actions at petroleum sites and recover the costs from the responsible parties. If the responsible parties cannot be found or cannot pay, LUST Trust Fund appropriations may be used to pay for the corrective actions to ensure the performance of the cleanup, similar to the cleanup of sites without viable parties under the Superfund program. The corrective action and enforcement authorities of Subtitle I generally are carried out by the states under cooperative agreements with EPA, financed with appropriations from the LUST Trust Fund. EPA has compiled various guidelines for evaluating risks from vapor intrusion at petroleum sites to assist states in carrying out these agreements. The Radon Gas and Indoor Air Quality Research Act was enacted as Title IV of the Superfund Amendments and Reauthorization Act of 1986 (SARA, P.L. 99-499 ). It directs EPA to establish a research program to (1) gather data and information on all aspects of indoor air quality in order to contribute to the understanding of health problems associated with the existence of air pollutants in the indoor environment; (2) coordinate Federal, State, local, and private research and development efforts relating to the improvement of indoor air quality; and (3) assess appropriate Federal Government actions to mitigate the environmental and health risks associated with indoor air quality problems. EPA is required to characterize the extent of the indoor air pollution problem; to disseminate information on indoor air quality and solutions; to establish an advisory committee composed of representatives of federal agencies and another of representatives of states, "the scientific community," industry, and public interest organizations to assist the agency in carrying out its research program; and to report to Congress on implementation plans and activities. EPA also is required to provide to Congress appropriate recommendations. Section 404 of Title IV specifies that it does not authorize EPA to carry out "any regulatory program or any activity other than research, development, and related reporting, information dissemination, and coordination activities specified in this title." Title XIV of the Public Health Service Act, also known as the Safe Drinking Water Act (SDWA), directs EPA to regulate contaminants in drinking water to protect public health. Generally, regulation of contaminants in drinking water is beyond the scope of this report. However, some of these contaminants, such as benzene, xylene, radon, or trichloroethylene, are volatile and may be released to indoor air, for example during showering. To address risks due to indoor air exposure to such compounds, the EPA has cited its SDWA authority to protect against "any adverse effect on the health of persons." In March 2011, EPA announced that it would attempt to regulate volatile organic compounds (VOCs) in drinking water as a group. In addition, the SDWA specifically authorizes EPA to regulate radon to reduce indoor air levels. The Clean Air Act (CAA) does not appear to authorize any EPA activity to assess or directly control indoor air pollution. Although "the Clean Air Act confers general responsibility to EPA to protect the public health and welfare from air pollution," according to EPA, "its structure and provisions direct EPA to control air pollution outdoors." The CAA nevertheless improves indoor air indirectly when its programs lower concentrations of air pollution outdoors. For example, by restricting emissions of volatile organic compounds (VOCs) from consumer products or architectural coatings (defined under Section 183(e) to include paints, coatings, and solvents) in order to reduce ozone levels in ambient air, EPA reduces potential sources of indoor air pollution as well. Similarly, EPA regulation of wood stoves, to control releases of particulates to the ambient air, may reduce indoor levels of pollution. The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) requires EPA to regulate the sale and use of pesticides in the United States through registration and labeling of pesticide products. The sale of any pesticide is prohibited in the United States unless it is registered and labeled. FIFRA directs EPA to restrict usage of pesticides as necessary to prevent unreasonable adverse effects on people and the environment, taking into account the costs and benefits of various pesticide uses. EPA has restricted use of various pesticides intended for indoor use, including chlordane, used to control termites, and mercury, which was used to control mildew. In registering pesticides, EPA routinely takes into account risks due to exposure to pesticides through food, drinking water, and indoor air in residences as well as in agricultural fields. Under the Atomic Energy Act, EPA issues generally applicable environmental radiation standards for radioactive nuclides, such as radon. When EPA was formed, this authority was transferred to EPA from the Atomic Energy Commission. According to EPA, "other federal and state organizations must follow these standards when developing requirements for their areas of radiation protection." In addition, EPA received the authority "to develop guidance for federal and state agencies containing recommendations for their use in developing radiation protection requirements" and "to work with states to establish and execute radiation protection programs." Section 104(i) of CERCLA established the Agency for Toxic Substances and Disease Registry (ATSDR) within the Department of Health and Human Services to assess potential health risks at each site that EPA has placed on the NPL under the Superfund program. The ATSDR also may assess health risks at other potentially contaminated sites in response to petitions. Similar to the scope of EPA's response authority, the ATSDR may examine indoor risks of exposure to hazardous substances if there is potential for outdoor contamination to migrate indoors, or if there is potential for indoor contamination to migrate outdoors and constitute a release of a hazardous substance into the environment under CERCLA. The ATSDR assesses potential health risks at individual sites based on the likelihood of human exposure to contamination through all pathways of exposure, including pathways that may result in indoor exposure risks such as contaminated water supplies or vapor intrusion. In 2008, the ATSDR issued specific guidance for the evaluation of indoor health risks from vapor intrusion. The purpose of the ATSDR's public health assessments is two-fold: to inform the public of potential health hazards at a contaminated site, and to aid decision-makers in evaluating what cleanup actions may be warranted to prevent potentially harmful exposure. Although the findings of the ATSDR may be used to inform the selection of cleanup actions, the agency does not have any regulatory or oversight authority to direct cleanup decisions by EPA or the states. As such, the ATSDR's role primarily is informational in nature. The Consumer Product Safety Commission (CPSC) may prevent or reduce indoor pollution by controlling certain hazards associated with consumer products. The Consumer Product Safety Act (CPSA, 15 U.S.C. 2051-2084), which established the CPSC in 1972, authorizes the CPSC to set a mandatory standard, ban a product, issue a recall, or issue other sorts of regulations or guidance to reduce unreasonable risks of injury. However, the CPSA mandates reliance upon voluntary standards whenever compliance with voluntary standards would eliminate or adequately reduce the risk of injury, and substantial compliance with voluntary standards is likely. Moreover, the CPSC is prevented from regulating if needed corrective action could be taken under the authority of the Occupational Safety and Health Act, Atomic Energy Act, or Clean Air Act. Therefore, the CPSC operates by collaborating with the industries producing consumer products and the consuming public. For example, the CPSC researches and promotes best practices for the industries, producing guidelines for manufacturers, importers, distributors, and retailers. According to EPA, many CPSC activities emphasize applied research "to provide the technical basis for the development of voluntary standards and to disseminate information to the public." The CPSA defines "consumer product" as any article, or component part thereof, produced or distributed (i) for sale to a consumer for use in or around a permanent or temporary household or residence, a school, in recreation, or otherwise, or (ii) for the personal use, consumption or enjoyment of a consumer in or around a permanent or temporary household or residence, a school, in recreation, or otherwise. Not all products that might be considered consumer products under the general definition are subject to consumer product safety laws administered and enforced by the CPSC. For example, there are express exemptions for products covered under other statutes, such as tobacco, pesticides, firearms and ammunition, aircraft, boats, drugs, and any article which is not customarily intended for use by a consumer. With specific respect to indoor pollution, entire buildings are not within CPSC authority, and the CPSA does not authorize CPSC to issue indoor air quality or ventilation standards. CPSC authority to regulate building components is unclear. When CPSC attempted to ban the use of urea-formaldehyde foam insulation under this authority, the regulations were struck down by the courts. In recent years, CPSC has relied on product recalls as well as voluntary methods to reduce consumer risks. For example, CPSC disseminates publications to inform consumers about potential hazards. The Federal Hazardous Substances Act (FHSA, 15 U.S.C. 1261-1278) authorizes the CPSC to require labeling for household products that are hazardous substances, and bans sale of any children's article that contains a hazardous substance. The FHSA defines "hazardous substances" to include household substances or mixtures that are toxic, corrosive, flammable, combustible, irritants, strong sensitizers, or that generate pressure through decomposition, heat, or other means if the substances "may cause substantial personal injury or substantial illness" when used in a foreseeable manner. The FHSA might contribute to the protection of indoor environmental quality, therefore, to the extent that it regulates substances that otherwise might be released through indoor use or storage. The Department of Defense (DOD) is authorized to clean up environmental contamination at U.S. military facilities under its jurisdiction and decommissioned U.S. military facilities that were under its jurisdiction at the time the contamination occurred. DOD administers the cleanup of these facilities primarily under its Defense Environmental Restoration Program, subject to oversight by EPA and the states to ensure that applicable requirements are met. CERCLA is the principal federal statutory authority that governs cleanup performed by DOD, but RCRA corrective action also may be used as an applicable requirement at some sites. DOD may address indoor exposure risks in performing the cleanup of environmental contamination at individual sites, but subject to the same scope and limitations as EPA under CERCLA discussed earlier. DOD's guidance for the implementation of the Defense Environmental Restoration Program generally directs the assessment of all potential pathways of exposure to contamination, including indoor pathways such as water supplies and vapor intrusion. DOD also has developed its own guidelines for evaluating risks from vapor intrusion at sites administered under the Defense Environmental Restoration Program, which may supplement EPA's broader guidance. To augment these efforts, DOD has conducted research under its Strategic Environmental Research and Development program and Environmental Security Technology Certification program to better understand the migration of contamination into homes and buildings through vapor intrusion. This research also could be used to inform the assessment of risks associated with vapor intrusion at sites administered by EPA, other agencies, and the states. The Department of Energy (DOE) coordinates federal energy policy and energy-related research as required by the Department of Energy Organization Act of 1977 ( P.L. 95-91 ; 42 U.S.C. 7101 et seq.), which created DOE. DOE also implements numerous federal statutes aimed at increasing the efficiency of energy production, transmission, and use, and it investigates the potential impacts of these activities on the environment and human health. The scale and focus of these programs have led to a leadership role for DOE within the federal government with respect to indoor air quality, where DOE is recognized to be an authority on indoor air quality. The department shares its knowledge with other federal agencies and sometimes assists them with environmental impact statements. It also disseminates information to the general public. In facilities under its jurisdiction, DOE regulates the use of potentially polluting materials like insulation made with formaldehyde. Other DOE programs focus on mitigating risks from so-called "legacy" contamination which resulted from past activities at facilities that were involved in the production of nuclear weapons or nuclear energy research. DOE's cleanup of these facilities may entail addressing indoor exposure risks. Finally, the Energy Reorganization Act of 1974 ( P.L. 93-438 , 42 U.S.C. 5801) specifically authorizes establishment of "programs to utilize research and development performed by other Federal agencies to minimize the adverse environmental effects of energy projects." The three major areas of DOE authority related to indoor environmental quality—energy conservation, cleanup of environmental contamination, and research programs—are discussed in more detail below. DOE also is co-chair of an interagency Committee on Indoor Air Quality, which coordinates research. That activity is discussed in a subsequent section of this report under the heading " Other Federal Agencies and the Interagency Committee on Indoor Air Quality ." DOE authority to promote energy efficiency in buildings is provided by the Energy Conservation and Production Act (ECPA, 42 U.S.C. 6801 et seq.), as amended by the Energy Policy Act of 1992 ( P.L. 102-486 ), the Energy Policy Act of 2005 (EPAct, P.L. 109-58 ), the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140 ), the American Reinvestment and Recovery Act (ARRA, P.L. 111-5 ), and many other public laws. ECPA authorizes energy efficiency programs targeting residential, commercial, and federal facilities. For example, the DOE Weatherization and Intergovernmental Program provides grants, technical assistance, and information to state and local governments, Indian tribes, "community action agencies," municipal utilities, overseas U.S. territories, and low-income families through programs that use a variety of energy efficiency and renewable energy technologies. These programs aim to retrofit existing residences. Although not all of these programs directly affect indoor environmental pollution, they generally strive to avoid undesirable impacts on indoor environments by carefully choosing the materials and methods they employ to reduce energy consumption. With respect to commercial buildings, ECPA requires the Secretary of Energy to appoint a Director of Commercial High-Performance Green Buildings (Commercial Director). Green building programs generally consider indoor environmental quality. ECPA orders the Director to (1) establish and manage the Office of Commercial High-Performance Green Buildings; (2) coordinate activities with the General Services Administration's (GSA's) Office of Federal High-Performance Green Buildings; (3) promote research and development of high-performance green buildings; (4) jointly establish with the Federal Director of the GSA office a national high-performance green building clearinghouse to provide high-performance green building information and disseminate research results; and (5) work with GSA and relevant federal agencies to ensure full coordination of high-performance green building information and activities. ECPA, as amended, specifically directs DOE to "establish, by rule, Federal building energy standards that require in new Federal buildings those energy efficiency measures that are technologically feasible and economically justified." Moreover, the standards must be updated periodically and take into account measures regarding radon and other indoor air pollutants. DOE has been responsible for the cleanup of over 100 facilities that were involved in the production of nuclear weapons for national defense purposes, and nuclear energy research. Similar to sites addressed under EPA's Superfund program or DOD's Defense Environmental Restoration Program discussed earlier, DOE's cleanup of nuclear facilities may entail addressing the migration of outdoor contamination into homes or buildings via contaminated water supplies or vapor intrusion, or addressing contamination inside a facility to prevent migration into the outdoor environment. DOE administers the cleanup of these nuclear facilities under its Office of Environmental Management. Although the cleanup of most of these facilities is complete, the cleanup of the larger and more complex facilities is not expected to be complete for several years or decades in some cases. Once the cleanup of a facility is complete, the Office of Legacy Management becomes responsible for the long-term stewardship if the facility no longer would have an ongoing DOE mission. The long-term stewardship of a DOE facility with a continuing mission is administered by the DOE office responsible for that mission. CERCLA is the principal federal statute that governs the cleanup of hazardous substances at these facilities. RCRA corrective action authority also governs the cleanup of hazardous wastes generated at these facilities. The Atomic Energy Act primarily governs the management and disposal of radiological wastes and nuclear materials. EPA and the states are responsible for overseeing cleanup actions performed by DOE under CERCLA and RCRA, but there is not a comparable oversight mechanism under the Atomic Energy Act. DOE has a large research program that investigates means of improving energy efficiency, as well as the sources, presence, and health effects of energy-related pollutants, methods of pollution prevention, and remediation. Originally authorized by the Atomic Energy Act (42 U.S.C. 2011 et seq.) and focused on nuclear power, the research scope broadened with enactment of the Energy Reorganization Act of 1974 ( P.L. 93-438 , 42 U.S.C. 5801), which terminated the Atomic Energy Commission and created the Energy Research and Development Administration (ERDA; P.L. 93-438 ). Five DOE laboratories form the National Laboratory Collaborative for Buildings Technologies, including Argonne National Laboratory, Lawrence Berkeley National Laboratory, National Renewable Energy Laboratory, Pacific Northwest National Laboratory, and Oak Ridge National Laboratory. They "work together to advance energy-efficient building technologies," "conduct research and development (R&D), provide technical advice and review DOE plans and activities, and work with … private sector commercial building owners and operators—to evaluate and test technologies, establish performance evaluation criteria, and perform energy verification of buildings and systems." Some projects are of particular interest to indoor environmental quality. For example, the Pacific Northwest National Laboratory, operated by Battelle, develops model building-energy code language. The Environmental and Energy Technologies Division of the Lawrence Berkeley National Laboratory has an indoor and outdoor environmental quality research program that focuses on reducing the energy used for thermally conditioning and distributing ventilation air in buildings, improving indoor air quality (IAQ), thermal comfort, and the health and productivity of building occupants, understanding human exposures to environmental pollutants found in indoor and outdoor air, improving the scientific understanding of factors and processes affecting air quality, and developing sound science to inform public policy on the most effective ways of reducing hazardous air pollutants. At Brookhaven National Laboratory, the Environmental Remediation Science Program (ERSP) seeks to provide the fundamental scientific knowledge needed to address environmental problems that impede the remediation of contaminated sites. ERSP investigates transport of contaminants within the subsurface at DOE sites to better inform long-term site stewardship. Research priorities for the ERSP include defining and understanding the processes that control contaminant fate and transport in the environment and providing opportunities for use, or manipulation of natural processes to alter contaminant mobility. Finally, the Ames Laboratory's Environmental & Protection Sciences Program is conducting research to improve the clean up of hazardous waste. The Pacific Northwest Laboratory also conducts research to improve environmental remediation of hazardous substance contamination. Because many hazardous wastes may migrate indoors, these remediation programs also may be relevant to indoor environmental quality. Health-related programs of the U.S. Department of Health and Human Services (HHS), including those related to indoor environmental quality, are administered by eight agencies in the U.S. Public Health Service (PHS), primarily under the authority of the Public Health Service Act, as amended (42 U.S.C. 201-300mm-61, PHSA). The PHSA directs HHS to conduct and "promote the coordination of, research, investigations, experiments, demonstrations, and studies relating to the causes, diagnosis, treatment, control, and prevention of physical and mental diseases and impairments of man, including water purification, sewage treatment, and pollution of lakes and streams." The act authorizes grants and information dissemination and mandates an annual report on carcinogens. More specifically, HHS is required to conduct research on the effects of low-level ionizing radiation and, in coordination with other agencies, research on the health effects of pollution originating from "human activity in any place in the indoor or outdoor environment, including places of employment and residences." Various research institutes and centers established under the PHSA, such as the National Institutes of Health (NIH) and the Centers for Disease Control and Prevention (CDC), including the National Institute for Occupational Safety and Health (NIOSH), share this responsibility. NIH's mission is scientific: "to seek fundamental knowledge about the nature and behavior of living systems and the application of that knowledge to enhance health, lengthen life, and reduce the burdens of illness and disability." To achieve this mission, NIH conducts basic and applied research and disseminates knowledge gained from that research. NIH also trains scientists and develops research tools. Many of the institutes conduct research related to indoor environmental quality, but a few institutes are particularly noteworthy with regard to research relating environmental pollution and health outcomes. The National Institute of Environmental Health Sciences (NIEHS), for example, supports epidemiological studies of relationships between physical and chemical factors and respiratory disease. Similarly, the National Cancer Institute explores factors contributing to the development of cancer, and the National Heart, Lung and Blood Institute has focused on the health effects of parental smoking and other indoor pollutants. CDC is authorized to educate, assess technology, and conduct epidemiology regarding lead poisoning, asthma, secondary tobacco smoke, and other pollutants (42 U.S.C. 247b-3, b-8, and b-10). Using this authority, CDC proposed for FY2013 the creation of a Healthy Home and Community Environments program—a new, multi-faceted approach to address healthy homes and community environments through surveillance, partnerships, and implementation and evaluation of science-based interventions to address the health impact of environmental exposures in the home and to reduce the burden of disease through comprehensive asthma control. This integrated approach aims to control asthma and mitigate health hazards in homes and communities such as air pollution, lead poisoning hazards, second-hand smoke, asthma triggers, radon, mold, unsafe drinking water, and the absence of smoke and carbon monoxide detectors. The consolidated program will replace CDC's long-standing National Asthma Control Program and Healthy Homes and Lead Poisoning Prevention Program. CDC will take two years to transition to this new, coordinated approach. According to CDC, the new Healthy Home and Community Environments program would continue "to collaborate with states and other federal agencies to reduce or eliminate multiple housing-related health hazards," and to support "state and local data collection to be used by HUD and other federal, state, and local agencies to target the most vulnerable populations living in homes with lead-based paint hazards." Many other statutes authorize specific HHS activities relevant to assessment and control of indoor environmental quality. For example, the Agency for Toxic Substances and Disease Registry (ATSDR, currently within CDC) is required to assess pollution pathways and risks associated with hazardous substances released to the environment at all Superfund and many other contaminated sites. In particular, ATSDR is authorized to investigate the relationship between particular contaminants and disease, and to track the health of people who have been exposed to specific chemical substances. HHS also has responsibilities under Title IV of TSCA, which mandates a study by CDC and the National Institute for Environmental Health Sciences (NIEHS) to determine the sources of lead exposure to children who have elevated lead levels in their bodies. NIOSH is directed to study ways of reducing occupational exposure to lead during abatement activities and "at a minimum" $10 million was authorized (under P.L. 102-550 , §1033) to be appropriated for each of the fiscal years 1994 through 1997 for training people who remove or immobilize lead-based paint. NIOSH obtains its primary authority to conduct research related to indoor environments from Section 20 of the Occupational Safety and Health Act (OSH Act, 16 U.S.C. 651 et seq.). That law established NIOSH to provide scientific support for occupational health and safety regulation. OSHAct empowers NIOSH to investigate work environments at the request of authorized representatives of employees or employers and to develop health-based criteria for toxic substances. Those criteria may then be used by the Occupational Safety and Health Administration (OSHA) to set enforceable safety and health standards. OSHA is discussed below. Authorities of the Indian Health Service, including those related to indoor environmental quality, are based in the U.S. Constitution and various treaties. Relevant statutes include the Snyder Act of 1921 (25 U.S.C. 13) and the Indian Health Care Improvement Act of 1976 (25 U.S.C. 1601). In addition, numerous other laws, court cases, and executive orders define the relationship between tribal governments and the federal government. Generally, on tribal lands, the Indian Health Service performs functions similar to those of the U.S. Public Health Service. The Federal Property and Administrative Services Act (FPASA), as amended (P.L. 152, codified as amended in scattered sections of 40 U.S.C. and 41 U.S.C.), established the General Services Administration (GSA), transferring to it certain property management functions of other federal entities. Generally, the FPASA authorizes GSA to centralize and oversee federal administrative services, management policy, and provision of products and services. The Public Buildings Act, as amended (40 U.S.C. §3301-3315) specifically authorizes GSA to take certain actions related to property management, for example, to construct, lease, and renovate federal civilian facilities. The Public Buildings Service (PBS) within GSA is the largest provider of office space to federal agencies and is responsible for the design, construction, operation, maintenance, and disposal of thousands of federally owned properties. "PBS owns or leases 9,624 assets, maintains an inventory of more than 370.2 million square feet of workspace for 1.1 million federal employees." PBS establishes design standards and criteria for new buildings, major and minor alterations, and work in historic structures. Environmental standards and guidance are provided by the Environmental Program within PBS to ensure protection of indoor environments in accord with various federal laws and executive orders which apply to all federal agencies. Selected general authorities as well as authorities specific for the GSA are described briefly below. GSA's actions in the area of energy efficiency closely follow mandates set forth in the Energy Policy Act of 1992 ( P.L. 102-486 ), the Energy Independence and Security Act of 2007 ( P.L. 110-140 , ESIA) and numerous executive orders, most recently President Obama's Executive Order 13514, "Federal Leadership In Environmental, Energy, and Economic Performance," and President George W. Bush's Executive Order 13423, "Strengthening Federal Environmental, Energy, and Transportation Management." President Obama's Executive Order 13514, "Federal Leadership In Environmental, Energy, and Economic Performance," expanded on the energy reduction and environmental performance requirements for federal agencies found in Executive Order 13423. The Energy Independence and Security Act of 2007 ( P.L. 110-140 , EISA, codified as 42 U.S.C. 17092) established within GSA an Office of Federal High-Performance Green Buildings. The designated Federal Director of that office is required to coordinate high-performance green building information and activities within GSA and with other relevant agencies, including DOE. In addition, the Federal Director is to work with EPA to develop and execute a comprehensive indoor air quality program for all federal facilities, and to provide to the Secretary of Energy a certification system to encourage a comprehensive and environmentally sound approach to certification of green buildings. Finally, the EISA mandated cooperation with DOE's Director of Commercial High-Performance Green Buildings to establish a clearinghouse "to carry out public outreach to inform individuals and entities of the information and services [related to high-performance green buildings] available governmentwide" (§423(1)). The Federal Director is required to ensure, "to the maximum extent practicable" that the public clearinghouse "receives and makes available information on the exposure of children to environmental hazards in school facilities" (§503(b)). President George W. Bush issued Executive Order 13423 in January 2007 making it the policy of the United States that "Federal agencies conduct their environmental, transportation, and energy-related activities under the law in support of their respective missions in an environmentally, economically and fiscally sound, integrated, continuously improving, efficient, and sustainable manner." The order directed federal agencies to implement this policy using specific strategies, including several with potential effects on indoor environments. Those strategies include energy efficiency, greenhouse gas emissions avoidance or reduction, and petroleum products use reduction; pollution and waste prevention and recycling; reduction or elimination of acquisition and use of toxic or hazardous chemicals; and high performance construction, lease, operation, and maintenance of buildings. Congress mandated the use of integrated pest management to reduce pesticide use on federal property when it enacted the Food Quality Protection Act of 1996 amending FIFRA (7 U.S.C. 136r-1). The Code of Federal Regulations (41 CFR 102-74.35) requires reliance on IPM at all agencies subject to GSA authority. Since 1989, GSA has distributed guidance to federal agencies on how to implement IPM. Although there are no federal regulations for radon specific to the federal government, GSA has adopted EPA guidelines for use in federal buildings. Also, GSA in cooperation with other federal agencies implements the Federal Radon Action Plan. President William J. Clinton issued an Executive Order 13058, "Protecting Federal Employees and the Public from Exposure to Tobacco Smoke in the Federal Workplace," on August 9, 1997, establishing a smoke-free environment for federal employees and members of the public visiting or using federal facilities. In furtherance of EO13058, GSA issued FMR Amendment 2008-08, which enforces additional restrictions in GSA-controlled buildings. It is generally GSA policy to enhance indoor environmental quality. To that end, GSA prohibits use of specific pollutants in the construction of its facilities, including products containing asbestos; products containing urea formaldehyde; products containing polychlorinated biphenyls (PCBs); products containing chlorinated fluorocarbons; solder or flux containing more than 0.2% lead and domestic water pipe or pipe fittings containing more that 8% lead; and paint containing more than 0.06% lead. The National Housing Act (12 U.S.C. 1701 et seq.) directs the Department of Housing and Urban Development (HUD) to pursue a national goal of providing "a decent home and suitable living environment to every American family" (12 U.S.C. 1701t). Various specific provisions of the act authorize regulatory and voluntary programs affecting the quality of indoor environments. For example, HUD has specific authority under the National Housing Act (12 U.S.C. 1703) and the Manufactured Housing Improvement Act of 2000 (42 U.S.C. 5401 et seq.) to develop minimum construction and safety standards "to assure the livability and durability of" manufactured homes. HUD used this authority to regulate formaldehyde emissions from certain wood products in manufactured homes. In July 2010, when Congress enacted the Formaldehyde Standards for Composite Wood Products Act ( P.L. 111-199 ), it directed the HUD Secretary to update those regulations to ensure that the standards established by TSCA Title VI are implemented. The National Energy Conservation Policy Act of 1978 authorizes financing for energy conservation improvements in housing "in the form of grants, low-interest-rate loans, interest subsidies, loan guarantees, and such other forms of assistance as the Secretary deems appropriate to carry out the purposes of this section. Assistance may be made available to both owners of dwelling units and tenants occupying such units." Other statutes authorize HUD activities related to lead-based paint. The Lead-Based Paint Poisoning Prevention Act (LBPPPA, 42 U.S.C. 4822) is the basis for federal regulation of lead- based paint hazards in federally assisted housing. During the 1970s, the LBPPPA Title II provided grants to cities and communities to develop local programs to eliminate the causes of lead-based paint poisoning. However, funding for poisoning prevention became less available after 1978 when the programs under Title II were combined with other programs into block grants. In 1991, Congress created the Office of Lead Based Paint Abatement and Poisoning Prevention (42 U.S.C. 3532 note). The Residential Lead-Based Paint Hazard Reduction Act of 1992 (Title X of the Housing and Community Development Act of 1992, P.L. 102-550 , which also enacted TSCA Title IV) directs that office to develop a national strategy to eliminate "as far as practicable" lead-based paint (LBP) hazards in all public housing and private housing constructed prior to 1978 that receive federal financial assistance. Title X requires periodic risk assessments and interim measures to reduce identified LBP hazards in such housing. In addition, the law requires inspection for LBP hazards prior to federally funded rehabilitation or renovation. The federal government, acting through HUD, pays for the construction and renovation (including LBP detection and abatement) of public housing, using funds available through the Comprehensive Improvement Assistance Program to carry out the requirements of the LBPPPA, as amended. Title X authorizes federal grants administered by HUD to state and local governments that choose to establish LBP poisoning prevention programs targeted at low-income residents in private housing. Grants may be used to conduct risk assessments and to remove, immobilize, or otherwise reduce the LBP hazard, with particular attention to hazards to children living in housing constructed prior to 1978. For more information about federal lead-based paint programs, see CRS Report RS21688, Lead-Based Paint Poisoning Prevention: Summary of Federal Mandates and Financial Assistance for Reducing Hazards in Housing , by [author name scrubbed]. The Occupational Safety and Health Act (OSH Act, 16 U.S.C. 651 et seq.) authorizes the Secretary of the Department of Labor, which has delegated authority to the Occupational Safety and Health Administration (OSHA), to issue and enforce health and safety standards to protect employees in office buildings, industrial settings, and commercial establishments. The standards apply to all employers in the private sector and to federal agencies. The OSH Act does not apply to public sector employers at the state or local levels. However, Section 18 of the OSH Act gives each state the authority to set its own occupational safety and health standards, by adopting a state plan that provides at least as much protection as provided by OSHA under the OSH Act. Once a state plan is approved by OSHA and is fully operating, employees who work for that state or local government within that state have OSH Act protections. OSHA no longer has jurisdiction in such states. If states adopt plans that only cover public sector workers, OSHA retains jurisdiction over private-sector workers. Roughly half the states have state plans, including four states that protect public sector workers only. With respect to toxic substances, the act directs the Department of Labor to set "the standard which most adequately assures to the extent feasible, on the basis of the best available evidence, that no employee will suffer material impairment of health or functional capacity even if such employee has regular exposure to the hazard dealt with in such standard for the period of his working life." To enforce standards, OSHA inspects facilities and may prescribe abatement of any hazards identified or propose civil monetary penalties for violations. The Office of the Federal Environmental Executive is authorized by Executive Order 13514 to promote sustainability and environmental stewardship throughout the federal government. Administered by EPA and housed at the President's Council on Environmental Quality, the Office works with the Office of Management and Budget to support sustainability efforts at executive agencies with expertise, detailed guidance, case studies, and tools. It is particularly responsible for ensuring implementation of Executive Orders on federal environmental performance, including those mandating improvements in energy efficiency. Many other federal agencies have statutory authority relevant to the quality of indoor environments. This section briefly describes a sampling of such agencies and their activities. The Department of Transportation (DOT) has responsibility for overseeing indoor environmental quality in "enclosed spaces, such as airliner cabins, buses, and highway tunnels," if these involve interstate commerce. DOT acted through the Surface Transportation Board (formerly the Interstate Commerce Commission) using its very general regulatory authority under the Interstate Commerce Act (49 U.S.C. 13301 et seq.) to prohibit smoking in interstate, commercial motorcoach buses. Through the Federal Aviation Administration (FAA), DOT issued regulations addressing airline cabin air quality for commercial interstate carriers. The U.S. Coast Guard (formerly in DOT but currently in the Department of Homeland Security) has jurisdiction over indoor environmental quality of ships in interstate commerce. The Architectural and Transportation Barriers Compliance Board (Access Board) is an independent federal agency devoted to accessibility for people with disabilities. It operates under the authority of the Americans with Disabilities Act (ADA; 42 U.S.C. 12101 et seq.) and the Architectural Barriers Act (ABA; 42 U.S.C. 4151 et seq.) to provide guidelines for construction of accessible buildings. According to the Access Board website, ADA standards govern the construction and alteration of places of public accommodation, commercial facilities, and state and local government facilities. The Department of Justice (DOJ) maintains ADA standards that apply to all ADA facilities except transportation facilities, which are subject to similar standards issued by the Department of Transportation (DOT). Federal facilities are covered by standards consistent with those of the ADA issued under a different law, the Architectural Barriers Act (ABA). Because the Access Board accepts that there are a significant number of people who are particularly sensitive to chemicals and electromagnetic fields, the board sponsored a study on ways to improve indoor environmental quality. Conducted for the board by the National Institute of Building Sciences (NIBS), this project brought together various stakeholders to examine building design and construction issues that affect the indoor environment, and to develop an action plan. The resulting report is available on the Access Board website. The Tennessee Valley Authority is a corporation with a board of directors that is authorized to promote the general welfare of people living within its jurisdiction in the valley of the Tennessee River or its tributaries. The board is authorized to make alterations, modifications, or improvements in existing plants and facilities, and to construct new plants in the area. TVA has investigated indoor radon levels throughout the TVA region and the contribution of radium in building materials. TVA studies also have examined indoor concentrations of volatile organic compounds (VOCs) and nitrogen dioxide. Wood stove design and emissions have been studied, as have indoor pollution levels following weatherization of facilities. TVA distributes information about indoor environmental quality to residents of the region. The Act of August 15, 1876 (40 U.S.C. 162–163) directs the Architect of the Capitol (AOC) to maintain, operate, develop, and preserve buildings and land throughout the vicinity of the U.S. Capitol. "This includes the House and Senate office buildings, the U.S. Capitol, Capitol Visitor Center, the Library of Congress buildings, the Supreme Court buildings, the U.S. Botanic Garden, the Capitol Power Plant, and other facilities." The AOC Design Standards address sustainable design, including design to "conserve energy resources, improve environmental performance and increase the use of environmentally preferable products." The AOC's Design Standards change to reflect changes in federal sustainability guidelines and industry standards. The Department of Commerce also has a role in controlling indoor environmental quality, particularly through the National Institute of Standards and Technology (NIST). NIST is a non-regulatory federal agency that promotes "U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology in ways that enhance economic security and improve our quality of life." NIST research lays a foundation for assessment and remediation of most indoor contaminants. For example, NIST has developed tools and metrics to evaluate the air quality impacts of technologies used in low-energy buildings. In addition, NIST is developing tools to measure the release, distribution, and chemical forms of nanoparticles in a "typical dwelling" that may be emitted by gas and electric stoves, hair dryers, power tools, and candles. NIST staff routinely are involved in the development of standard measurements and procedures as they serve on committees of ASTM International (ASTM), the American Society of Heating, Refrigerating and Air-Conditioning Engineers, Inc. (ASHRAE), the American Society of Mechanical Engineers (ASME), the American Society of Civil Engineers (ASCE), the American Concrete Institute (ACI), the American Institute of Steel Construction (AISC), the National Fire Protection Association (NFPA), Underwriters Laboratories, Inc. (UL), the Society of Fire Protection Engineers (SFPE), the International Organization for Standardization (ISO), the International Council for Research and Innovation in Building and Construction (CIB), the International Code Council (ICC), the Construction Industry Institute, and others. More information about NIST's role is available through its Pollution/Indoor Air Quality portal at http://www.nist.gov/pollution-portal.cfm . The Department of Agriculture (USDA) through its Rural Development division is "committed to helping improve the economy and quality of life in rural America," as authorized Section 2204 of Title 7 of the U.S. Code. For example, the Rural Energy for America Program provides assistance to agricultural producers and rural small businesses to install and maintain renewable energy systems, energy efficiency improvements, renewable energy development, energy audits, and feasibility studies. In addition, Rural Development has adopted into its regulations certain portions of EPA and HUD rules regarding lead-based paint hazard reduction. Similarly, asbestos and radon control measures are adopted from EPA standards. USDA provides Rural Housing Repair and Rehabilitation Loans to "very low-income rural residents who own and occupy a dwelling in need of repairs. Funds are available for repairs to improve or modernize a home, or to remove health and safety hazards." In addition, the Agricultural Research Service investigates means of reducing indoor contaminant levels both in residences and in facilities where food is processed and stored. Twenty-three federal agencies, including all of those discussed above, are members of an interagency committee that meets tri-annually to discuss their activities related to indoor air. The Committee on Indoor Air Quality (CIAQ) was formally established in response to the Radon Gas and Indoor Air Quality Research Act (discussed above). That act directed EPA to carry out and coordinate indoor air research and related activities with the assistance of a federal interagency committee and an advisory committee comprised of representatives of the states, "scientific community, industry, and public interest organizations." The current interagency committee has five co-chairs, EPA, DOE, OSHA, NIOSH, and CPSC. Agencies cooperating in the CIAQ that have not been discussed above include the Department of Interior, National Aeronautics and Space Administration, Small Business Administration, the Department of State, and the Department of the Treasury. These departments and administrations may use their general administrative authority to improve environmental quality in their own facilities or for facilities they construct or support; implement guidance or regulations issued by EPA or OSHA; or conduct research relevant to their general missions. For example, the National Atmospheric and Space Administration conducts research to determine levels of gases emitted from test materials that might be used in vehicles or stations. The Internal Revenue Service, in the Department of the Treasury, administers the tax code, which provides incentives and disincentives to energy conservation and alternative fuels which may affect indoor emissions as well as ventilation rates. For other examples of programs in these agencies, see EPA's 1989 Report to Congress on Indoor Air Quality , Volume II: Assessment and Control of Indoor Air Pollution, Exhibit 9-6 on pages 9-9 to 9-10 (EPA Office of Air and Radiation, EPA/400/1-89/001CANR-445). State governments are active and often dominant partners in ensuring safe indoor environments. Many states have statutes relating to radon, asbestos, lead, carbon monoxide, formaldehyde, and other indoor pollutants. Most states have enacted laws prohibiting smoking in workplaces, restaurants, and bars. Some states, such as California, New Jersey, and Washington, have been particularly active in promoting indoor environmental quality to protect worker health. For a list of state and regional radon and indoor air contacts, visit EPA's website "Indoor Air, Where You Live, State and Regional Contact Information." A database of state indoor air quality laws is kept by the Environmental Law Institute. A specialized database focused on schools also is available. Local governments vary in the scope of authority they are given under their state constitutions, but many forms of local government intervene to promote indoor environmental quality by issuing and enforcing ordinances or issuing and advising citizens about guidance. City zoning, building codes, and licensing of professional contractors can be powerful influences over conditions indoors. Numerous agencies have contributed to federal efforts to understand and control indoor environmental quality. Given the diverse nature of pollutants and indoor environments, the number of contributing agencies may not be surprising. However, some analysts have questioned the overall adequacy and efficacy of federal initiatives. Others would prefer a smaller or more focused role for the federal government in addressing indoor pollution, given fiscal limitations or a view that indoor pollution problems might be more amenable to state or local remedies. These issues, the adequacy and efficacy of existing federal actions and the proper role of federal programs relative to state and local programs, are discussed below. GAO has been highly critical of federal efforts to address indoor environments. The abstract of a 1980 GAO report on indoor air pollution summarizes its general, continuing view: "Federal efforts to deal with the problem have been piecemeal, receiving little support primarily because no one Federal agency has responsibility for the problem. Until responsibility is assigned to one agency to oversee Federal efforts, they will continue to be ineffectual." In 1991, GAO looked at the state of indoor air research by the federal government and concluded "that EPA's emphasis on indoor air pollution, as reflected by the amount of funding for research and related activities, was not commensurate with the health risks posed by the problem … [and] that better coordination was needed among federal agencies in their indoor air-related activities, including research." Moreover, GAO reported that "the indoor air program, unlike other statutorily mandated EPA programs, did not have the kinds of legislatively mandated time frames and goals that tend to drive the resource allocation process and set research funding priorities." Finally, GAO noted: In passing title IV of SARA, the Congress expected EPA to work with other federal agencies that have programs affecting indoor air quality and to develop a national program addressing indoor air pollution. Although CIAQ was established for this purpose, it has not been as effective as it could be because of the limited commitment of other federal agencies. Furthermore, CIAQ lacks a clear charter that establishes the roles and responsibilities of all federal agencies and defines how the agencies will work together to address indoor air issues. Eight years later, another GAO report was more complimentary: notable progress has been made in understanding the problem of indoor pollution and in devising strategies for mitigating pollutant exposures. Consumer products have been reformulated, and building materials and practices have been altered. Guidance documents have also been developed for use by building managers, homeowners, and consumers to help them better understand the causes and sources of indoor pollution and enable them to take steps to prevent pollution problems or remedy them when they occur. However, GAO also noted that "many gaps in knowledge and understanding of the problem remain." The consensus of experts GAO consulted is that significant progress in filling these gaps and resolving these uncertainties will require a comprehensive and coordinated research effort involving multidisciplinary research teams composed of experts in such areas as epidemiology, exposure assessment, medicine, chemistry, microbiology, and building systems. Experts consulted by GAO also argued that research should promote "a clear understanding of cause and effect relationships—not just documentation of phenomena, as has often been the case up to now." GAO also has examined more than 90 initiatives of 11 federal agencies aimed at fostering green building in the nonfederal sector. HUD, DOE, and EPA lead more than two-thirds of such efforts. DOE chairs an Interagency Energy Management Task Force, which includes 10 of the 11 federal agencies, to encourage collaboration on green building in the federal sector. "However, GAO did not identify a governmentwide effort to collaborate on green building issues, including shared goals and common performance measures, for the nonfederal sector" and concluded that such an effort would be useful to identify opportunities for enhancing efficiency and reducing costs. Concerns about coordination of federal efforts to address indoor pollution have been expressed by the general public, GAO, and the U.S. Congress in the aftermath of various national crises. For example, after the attack on the World Trade Center, which left surrounding business and residential spaces alike contaminated with asbestos, corrosive dust, and other debris, Congress investigated EPA testing and clean up of the neighborhood and the need for better data collection to assess health impacts. A lawsuit was filed challenging the adequacy of EPA's efforts to test for and clean up contamination. EPA's Inspector General also found the clean-up effort inadequate, and recommended that EPA should "develop protocols for determining how indoor environmental contamination would be handled in the event of a future disaster." The Natural Resources Defense Council issued a report critical of response efforts. As a result of the ambiguous jurisdictional setting, some important governmental functions related to the environmental health emergency following September 11 th slipped through the cracks. Information on health risks and safety precautions was not effectively communicated to the public. Environmental health protection for workers at Ground Zero was given lower importance compared to other priorities. Residents and office workers were largely left to fend for themselves when confronting questions of debris cleanup and short-term health symptoms that followed from the September 11 th attacks. And while several registries are being launched [in 2002] to aid in systematic tracking of health complaints and illnesses of some Ground Zero workers (for example, firefighters), no comprehensive registry of nearby residents, office workers, and students who experienced heath problems related to September 11 th was created. Agencies have coordinated efforts more deliberately since the National Response Plan was released at the end of 2004 specifically for response to national disasters. Nevertheless, after Hurricane Katrina, federal agency coordination regarding the identification and clean up of mold became an issue, as did the formaldehyde levels found in some trailers provided by the Federal Emergency Management Agency and used to house displaced residents of the affected area. In 2007, GAO examined EPA's continuing efforts to address indoor contamination resulting from the World Trade Center collapse and concluded: "While EPA has acted upon lessons learned following this disaster, some concerns remain about its preparedness to respond to indoor contamination following future disasters. Specifically, EPA has not developed protocols on how and when to collect data to determine the extent of indoor contamination." In the future, if climate change increases the frequency or severity of extreme weather events, as some predict, more frequent crises may be expected, sometimes with attendant air quality problems. A report by the National Academy of Sciences warns that many indoor air quality problems might get worse if adaptations to climate change are made without better information and programs aimed at pollution prevention. The appropriate role of the federal government in addressing indoor pollution also is open to discussion. In prior Congresses, some policy makers introduced legislation that would have expanded and strengthened federal involvement in achieving indoor air quality; less attention has been given to other aspects of indoor pollution. Other policy makers preferred a more limited federal role. A few have questioned the need for any action, arguing that there was insufficient evidence that a problem existed. Proposed legislation in the 102 nd Congress, H.R. 1066 , would have provided "a system for developing a national response plan to be taken to reduce exposure to indoor air contaminants" and would have allowed states "to develop response programs to reduce indoor air pollution" within the states. In addition, H.R. 1066 would have authorized research at OSHA and mandated cooperation among OSHA, EPA, and NIOSH to conduct research and, if necessary, to issue standards. The most recent version of the Indoor Air Quality Act, H.R. 2952 in the 105 th Congress, was less ambitious; it would have directed EPA to publish a list of common sources of indoor air health risks and voluntary guidelines for identifying, reducing, and preventing such risks. EPA would have been directed to investigate contractor businesses to determine whether there was a need for a program to certify contractors, and if there was, to establish a voluntary certification program. Finally, the bill would have authorized EPA to provide grants to states and local governments to implement programs to identify, reduce, and prevent indoor air risks. Since 1998, no legislation has been introduced that would comprehensively address federal control of indoor air quality, or indoor environmental quality more generally. During hearings on H.R. 1066 , real estate developers and builders suggested that the federal role should be limited to research for which building owners and developers lack sufficient resources. They argued that building designers and managers already are subjected to building code standards with regional or local application, which they believed would be more effective than national standards, because regional and local standards would be better tailored toward local climates. It is true that local zoning ordinances and state building and housing codes traditionally are used to address many indoor pollution concerns. For example, state and local governments have controlled smoke, dust, carbon monoxide, and pests, simply by requiring adequate ventilation, insulation, screening, filtration, and/or mechanical cooling or heating to improve air quality indoors. State and local regulations also address such problems as lead-based paint, formaldehyde emissions, and pesticide use. Building developers also noted the active involvement of private consensus organizations, such as the American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE), as well as real estate trade associations, in addressing concerns about asbestos management and disclosure during real estate transactions. Voluntary standards often are generally applicable, regardless of building use, and they tend to be aimed at preventing rather than remediating problems. By contrast, federal regulations for indoor environments tend to be pollutant or situation-specific, and reactive, addressing cleanup rather than prevention of indoor pollution. Many options are available to Congress with respect to indoor pollution. Options range from maintenance of the status quo to expansion or reduction of federal involvement in research, information dissemination, financial incentives, or regulation. Some policy makers might prefer to do nothing new, leaving the current statutory directives and authorities described above and associated appropriation levels intact and allowing federal agencies to continue to implement their programs as they have in the past. This approach has the advantages of familiarity and predictability as well as experienced personnel to carry out federal programs. It would entail no new resources. Congress might choose this alternative if it finds that the programs are adequate to address any potential or acknowledged indoor pollution problems. On the other hand, any inadequacies or inefficiencies in the current system would be expected to persist. If Congress wants help in understanding whether or not there is a need for current or additional federal programs addressing indoor environments, it might want to form a blue ribbon panel of scientists or stakeholders to examine the state of knowledge about indoor environments and pollutants and how they currently are regulated. A report could form the basis of future oversight hearings and perhaps also legislation. A third avenue might be to better coordinate current levels of federal involvement, as recommended by the 1997 Presidential and Congressional Commission on Risk Assessment and Risk Management. The commission recommended legislation that would mandate a coordinated strategy by EPA, CPSC, OSHA, and other federal agencies to address the issue, noting that while outdoor air pollution is extensively regulated, "many problems in offices, public buildings, and homes remain relatively unrecognized and unaddressed." The commission observed that a more effective and coordinated approach to dealing with this issue was unlikely to emerge without a mandate from the Congress. Alternatively, Congress might conclude that enough already is known about the potential risks of indoor pollutants and that current knowledge justifies reducing federal support for, and conduct of, research and other programs. This option may be appealing if Congress finds that the issue does not merit current efforts or that activities would be better coordinated and conducted by local or state government personnel or by the private sector. The advantages of reduced involvement would be the reduced costs to tax payers, fewer mandates to state and local governments, and possibly reduced distortion of the marketplace for building materials (if such exists), which might be a more efficient guide to consumer preferences for new products and services. Disadvantages might include reduced research and therefore less knowledge as a basis for the design, implementation, and evaluation of agency programs. Depending on where cuts were made, agencies might become less effective at developing or disseminating information, coordinating with other agencies, or regulating indoor environments. Or, to the degree that states, universities, and others may spend more to replace federal efforts, duplicative or inefficient efforts could result in lower cost-effectiveness and possibly a greater use of societal resources. However, if Congress also curtailed federal activities and funding for controlling indoor environments, any inefficiencies due to reduced knowledge might be proportionately less significant. If Congress ended all federal activities aimed at understanding or controlling indoor environments, any public health impacts of exposure to known (e.g., smoke or carbon monoxide contamination of indoor air) or undiscovered pollutants would remain, or even be exacerbated: Employees and visitors to federal buildings would be exposed to pollutants, and workers might be subject to potentially harmful conditions in commercial establishments if state and local governments did not retain their own programs. The latter result may seem unlikely, given the traditional role of many state and local governments, but indoor environmental controls at the state level are quite variable. Another path might involve a search for specific federal activities that could be eliminated or reduced. Congress could examine current programs in oversight hearings or ask a panel of experts to inform the process by providing a report to Congress. Legislative action could follow to reduce authority or funding for initiatives that Congress found to be redundant or relatively unimportant. This approach might be able to save money while sacrificing little or no public health benefit. Other possible paths for Congress would involve some commitment to increasing the federal role, perhaps as proposed in H.R. 1066 , discussed above. An advantage of an increased federal role might be an increased consistency across states in housing or building codes, or in regulation of consumer products. Interstate consistency could facilitate interstate commerce and reduce some obstacles to business development. Building construction and maintenance might be simplified if guidance and regulations were standardized. On the other hand, increased guidance or regulation might impose a burden on businesses that currently operate in a less regulated environment. Alternatively, an increased role could be effected simply through budgetary actions, perhaps focused on research and information dissemination initiatives. According to some, federal funding for indoor pollution-related research is disproportionately small relative to the costs that indoor pollution imposes on individuals and society, according to estimates of these costs by EPA and other federal and private sector researchers. Items considered in cost calculations include medical treatment and reduced productivity due to workers' absences when ill and impaired performance on the job due to exposure to indoor pollution. Researchers at DOE's Lawrence Berkeley National Laboratory estimated these costs to the United States in the tens of billions of dollars and productivity gains that might be achieved at a similarly high level. For example, nationwide savings and productivity gains from reduced respiratory disease have been estimated at between $6 billion and $19 billion annually. From reduced allergies and asthma, a subset of respiratory diseases, such savings and gains have been estimated at between $1 billion and $4 billion annually. From reductions in the health symptoms that are associated with sick building syndrome, such savings and productivity gains have been estimated at between $10 and $20 billion annually. Finally, from direct improvements in workers' performance that are unrelated to health (because indoor environmental factors can affect comfort and productivity without producing discernible health effects) estimates of productivity gains have been put at between $12 billion and $125 billion annually. According to the DOE scientists, a comparison of the potential economic benefits of improving indoor environments with the costs of achieving such improvements suggests that benefits exceed costs by a very large factor. Thus, public health and the national economy might benefit from an increased federal role, particularly if increased funding for research and dissemination prompted states to improve indoor environmental quality. However, there is considerable uncertainty about the effectiveness of expanded federal research and the cost estimates in the referenced analysis.

"Toxic" drywall, formaldehyde emissions, mold, asbestos, lead-based paint, radon, PCBs in caulk, and many other indoor pollution problems have concerned federal policy makers and regulators during the last 30 years. Some problems have been resolved, others remain of concern, and new indoor pollution problems continually emerge. This report describes common indoor pollutants and health effects that have been linked to indoor pollution, federal statutes that have been used to address indoor pollution, key issues, and some general policy options for Congress. Indoor pollutants are chemicals that are potentially harmful to people and found in the habitable portions of buildings, including homes, schools, offices, factories, and other public gathering places. Some indoor pollutants, like lead or ozone, are also outdoor pollutants. Others, like formaldehyde or asbestos, are primarily indoor pollutants. Indoor pollutants may be natural (for example, carbon monoxide or radon) or synthetic (polychlorinated biphenyls [PCBs]), and may originate indoors or outdoors. They may be deliberately produced, naturally occurring, or inadvertent byproducts of human activities. For example, they may arise indoors as uncontrolled emissions from building materials, paints, or furnishings, from evaporation following the use of cleaning supplies or pesticides, or as a combustion byproduct as a result of heating or cooking. Some pollution that originates outdoors infiltrates through porous basements (e.g., radon) or is inadvertently brought into indoor spaces, perhaps through heating or air conditioning systems or in contaminated drinking water. Often pollutants accumulate indoors as a result of deliberate improvements to increase energy efficiency, for example by reducing building permeability to air. The health risks posed by indoor pollutants have concerned scientists for many years. Because people spend a high percentage of their time indoors, and concentrations of pollutants often are higher in indoor air than outdoor air, the risks due to exposure can be higher than many other environmental risks. Moreover, a 2011 report by the Institute of Medicine warns that many indoor environmental quality problems might get worse if adaptations to climate change are made without better information and programs aimed at pollution prevention. No federal agency has broad authority concerning pollution indoors. Nonetheless, numerous federal agencies have some authority to control particular indoor pollutants or sources of pollution or the quality of indoor environments in a particular class of structures. For example, the U.S. Environmental Protection Agency (EPA) has authority under the Toxic Substances Control Act (TSCA) to study and issue safety guidelines for radon and lead-based paint hazards. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) authorizes EPA also to respond to releases of hazardous substances into the outdoor environment which may migrate indoors. The Consumer Product Safety Commission (CPSC) has authority to set emission limits for, and to restrict uses of, certain chemicals in consumer products. The Department of Housing and Urban Development (HUD) and the General Services Administration (GSA) regulate some indoor pollutants in federal buildings. These and other agencies have conducted research to examine the risks of various indoor pollutants. Concerns about coordination of federal efforts to address indoor pollution have been expressed by the general public, the U.S. Government Accountability Office (GAO), and the U.S. Congress. But any federal response to indoor pollution is complicated by the need to coordinate with local and state governments as well to address potentially overlapping jurisdictions and resources. Options for Congress range from maintenance or improvement of the status quo to reduction or expansion of federal involvement in research, information dissemination, or regulation.

I n United States v. Windsor , the U.S. Supreme Court held that Section 3 of the Defense of Marriage Act (DOMA) was unconstitutional, finding, in part, that it violated the Constitution's equal protection and substantive due process guarantees. Section 3 had required that marriage be defined as the union of one man and one woman for the purpose of federal enactments, rendering individuals in a same-sex marriage ineligible for spousal Social Security benefits. After the Windsor decision, the Social Security Administration (SSA) started processing Old-Age, Survivors, and Disability Insurance (OASDI) applications for some claimants in a same-sex marriage. Under the Social Security Act, eligibility for spousal benefits depends on the applicant's marital status as defined by the state in which the Number Holder is domiciled. ("Number Holder" simply refers to the person on whose work record benefits are based.) However, until Obergefell v. Hodges , the legality of some same-sex marriages remained in flux as state legislatures and courts changed and interpreted state marriage laws. Because the Social Security Act determines marital status by considering the laws of the state in which the Number Holder is domiciled, SSA could only process spousal benefits for some same-sex couples whose domicile state would recognize their marriage, even if they were married legally in another state. In Obergefell , the U.S. Supreme Court held that the Fourteenth Amendment requires a state to permit a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out of state. Thus, because same-sex couples may now marry in all states, individuals in a same-sex marriage are eligible for spousal Social Security benefits, if they have met other statutory requirements. This report addresses eligibility for Social Security spousal benefits for individuals in a same-sex marriage. The report begins with an overview of the Social Security program, followed by a discussion of the marital requirements regarding eligibility for Social Security spousal benefits. The report concludes by analyzing how the recent Supreme Court cases have impacted Social Security eligibility for same-sex couples. Social Security is a federally administered, work-related entitlement program authorized by Title II of the Social Security Act. The program is financed primarily by payroll taxes paid by individuals who work in Social Security-covered employment and their employers. Employees and their employers each pay 6.2% of covered earnings, up to an annual limit on taxable earnings; self-employed individuals pay 12.4% of net self-employment income, up to an annual limit on taxable earnings. The program is also credited with federal income taxes that some beneficiaries pay on a portion of their benefits; reimbursements from the general fund of the Treasury for a variety of purposes; and interest income from the Treasury on the investment of Social Security revenues in special federal government obligations. The program provides monthly cash benefits to eligible retired or disabled workers and their family members, and to the family members of deceased workers. To be eligible for a retired-worker benefit, a worker needs a minimum of 10 years of covered employment, among other requirements. Fewer years of covered employment are needed to qualify for a disabled-worker benefit, depending on the age of the worker when he or she becomes disabled. As of September 2015, there were nearly 60 million Social Security beneficiaries: 43 million retired workers and their family members (72%); 11 million disabled workers and their family members (18%); and 6 million survivors of deceased workers (10%). A worker becomes eligible for Social Security benefits by working in Social Security-covered employment for a specified period, among other requirements. To be eligible for a retired-worker benefit, a worker needs a minimum of 40 earnings credits (10 years of covered employment). Fewer credits are needed to qualify for a disabled-worker benefit if the worker is under age 62. The number of credits needed varies, depending on the age of the worker when he or she becomes disabled. For example, a worker who becomes disabled before age 24 needs six credits (1½ years of covered employment) in the three years before the onset of the disability. For Social Security purposes, disability is defined as the inability to engage in substantial gainful activity (SGA) by reason of a medically determinable physical or mental impairment that is expected to last for at least 12 months or result in death. Generally, the worker must be unable to do any kind of substantial work that exists in the national economy, taking into account age, education, and work experience. A worker is eligible to receive a retirement benefit as early as age 62. However, if a worker begins receiving a retirement benefit before the full retirement age (FRA), his or her benefit is permanently reduced to take into account early retirement and the longer period of expected benefit receipt. The FRA ranges from age 65 to age 67, depending on the worker's year of birth. As of September 2015, retired workers accounted for 67% of the beneficiary population, and disabled workers accounted for 15% of all beneficiaries. A worker's monthly Social Security benefit is based on his or her career-average earnings in covered employment. Specifically, a worker's primary insurance amount (PIA) is his or her monthly benefit payable at the FRA. The PIA is determined based on the following steps: (1) the worker's annual earnings in covered employment are indexed to historical wage growth, to bring past earnings up to near-current wage levels; (2) the highest 35 years of indexed earnings are summed to get the total earnings; (3) the total earnings are divided by 420 months (35 years x 12 months) to get the amount of average indexed monthly earnings (AIME) over the worker's career in covered employment; and finally, (4) a progressive benefit formula is applied to the worker's AIME (the progressive benefit formula is designed to provide a higher replacement rate for lower-wage workers compared to higher-wage workers). The monthly benefit that is payable to a worker may be less than or greater than his or her PIA, depending on circumstances. For example, a worker's benefit is permanently reduced if he or she claims retirement benefits before the full retirement age, to take into account the longer period of expected benefit receipt (based on average life expectancy). Similarly, a worker's benefit is permanently increased if he or she claims retirement benefits after the full retirement age (up to age 70), to take into account the shorter period of expected benefit receipt. In addition to benefit adjustments based on a worker's age at the time of entitlement, benefits may be adjusted for other reasons. For example, under the r etirement e arnings t est , benefits are temporarily reduced if a beneficiary is below the FRA and has earnings above specified thresholds. As of September 2015, the average monthly benefit was $1,338 among retired workers and $1,165 among disabled workers. In addition to qualifying for Social Security benefits based on one's own work record, a person may qualify for benefits based on another person's work record as an eligible family member. Benefits are payable to the spouse, divorced spouse, or child of a retired or disabled worker. Benefits are also payable to the widow(er), divorced widow(er), child, or dependent parent of a deceased worker. In addition, a mother's/father's benefit is payable to a young widow(er) who is caring for a deceased worker's child, if the child is under the age of 16 or disabled and the child is entitled to benefits. Table A-1 in the Appendix to this report provides a summary of Social Security benefits payable to family members based on the worker's record, including the basic eligibility requirements and benefit amounts for each type of benefit. If a person becomes simultaneously entitled to benefits based on his or her own work record and the work record of another person as an eligible family member, the person does not receive both benefits in full. Rather, under the dual entitlement rule , the person receives (1) his or her own benefit, plus (2) the benefit based on another person's work record (the auxiliary benefit) after it has been reduced by the amount of the person's own benefit (in some cases, the auxiliary benefit may be reduced to zero). In effect, the person receives the higher of the two benefit amounts. Other adjustments to auxiliary benefits may apply. For example, auxiliary benefits are reduced if total benefits payable based on the worker's record exceed the maximum family benefit . As of September 2015, dependents and survivors of retired, disabled, or deceased workers accounted for 18% of the beneficiary population. Sections 216(a) through (g) of the Social Security Act define the terms spouse, surviving spouse, wife, widow, divorced spouse, child, husband, and widower for purposes of qualifying for benefits as an eligible family member of the worker. In order to qualify for these benefits as one of these family members, the applicant must meet the relationship requirements to the Number Holder (also referred to as the insured) as set out in these provisions. (As noted previously, the Number Holder is the worker on whose record benefits are claimed.) Section 216(h) of the Social Security Act ( Determination of Family Status ) references the use of state law in the determination of entitlement to Social Security benefits as a spouse, surviving spouse, child, or parent of the worker. While state law does not affect a person's entitlement to benefits as a retired or disabled worker, it does affect a person's entitlement to benefits as a family member of a retired, disabled, or deceased worker. In determining family relationship for purposes of a person's application for benefits as a spouse or surviving spouse , SSA looks to the laws of the state—as interpreted by the courts of that state—where the Number Holder is domiciled at the time of the application, or at the time of the Number Holder's death, as specified in Section 216(h)(1)(A) of the Social Security Act. SSA has interpreted "domiciled" in this context to mean the "true and fixed home (legal domicile) of a person ... to which a person intends to return whenever he or she is absent." The relationship requirement is met if the applicant and the Number Holder were validly married under state law as interpreted by the courts of that state at the time of application for spousal benefits, or at the time of the Number Holder's death in the case of an application for surviving spouse benefits. Alternatively, the relationship requirement is met if, under state intestate law, the applicant would be able to inherit a wife's, husband's, widow's, or widower's share of the Number Holder's personal property if the Number Holder were to die without leaving a will. The Uniform Probate Code, which serves as a guideline for the intestate laws of some states, does not explicitly define "spouse" or "marriage." For the purposes of defining marriage in intestate law, the Uniform Probate Code instead directs state legislatures to incorporate that state's particular legal definition of marriage. If a relationship by marriage cannot be established under state law, the applicant may be eligible for benefits as the wife, husband, widow, or widower of the Number Holder under other circumstances (i.e., based upon a deemed valid marriage), as specified in Section 216(h)(1)(B) of the Social Security Act. For example, the regulations state, in part: You will be deemed to be the wife, husband, widow, or widower of the insured if, in good faith, you went through a marriage ceremony with the insured that would have resulted in a valid marriage except for a legal impediment. A legal impediment includes only an impediment which results because a previous marriage had not ended at the time of the ceremony or because there was a defect in the procedure followed in connection with the intended marriage. Same-sex couples were not always eligible for Social Security spousal benefits, as Section 3 of the Defense of Marriage Act (DOMA) had required that marriage be defined as the union of one man and one woman for the purpose of federal enactments. Under the Social Security Act as discussed above, SSA looks to the laws of the state in which the Number Holder is domiciled to determine whether the applicant and Number Holder are married for the purposes of spousal benefit eligibility. Changes in the state laws and the Supreme Court decisions in U.S. v. Windsor and Obergefell v. Hodges have impacted SSA's processing of spousal benefit claims for applicants in a same-sex relationship. The following sections analyze the changes in Social Security eligibility for individuals in same-sex marriages by tracking the recent Supreme Court cases and their impact on state marital laws. On June 26, 2013, in United States v. Windsor , the Supreme Court held that Section 3 of the Defense of Marriage Act (DOMA) is unconstitutional, finding, in part, that it violated the Constitution's equal protection and substantive due process guarantees. Section 3 had required that marriage be defined as the union of one man and one woman for the purpose of federal enactments. According to the Court, federal statutes that refer to a marriage for federal purposes should be interpreted as applying equally to legally married same-sex couples. The Court did not address Section 2 of DOMA, which allows individual states to refuse recognition of same-sex marriages. In response to the Windsor decision, SSA started processing Social Security (OASDI) applications for some claimants in same-sex marriages. Because eligibility for spousal Social Security benefits depends on the applicant meeting the relationship requirement to the Number Holder, as outlined in 216(h), some but not all applicants in a same-sex marriage were eligible for these benefits during the period between the Windsor and Obergefell decisions. As discussed in the previous section, the Social Security Act's Section 216(h) states that when determining family relationship for purposes of a person's application for benefits as a spouse or surviving spouse , SSA looks to the laws of the state—as interpreted by the courts of that state—where the Number Holder is domiciled at the time of the application, or at the time of the Number Holder's death. Thus, in order for SSA to have recognized a same-sex couple as married during this period of time, the couple must have had a valid marriage and the Number Holder must have been domiciled in a state that recognized such marriage at the time of the application. For example, an applicant in a same-sex marriage was eligible for spousal benefits if the couple married and lived in a state that recognized same-sex marriage. However, an applicant in a same-sex marriage was not eligible for spousal benefits if the couple legally married in one state and then, at the time the applicant filed the application, the Number Holder moved to another state that did not recognize same-sex marriage. For applicants in a same-sex domestic partnership or civil union, SSA generally determined eligibility for spousal benefits by looking at whether the domicile state would grant inheritance rights to the applicant. When considering these types of relationships, SSA first determined whether the nonmarital legal relationship was valid in the place it was established and whether the relationship qualified as a marital relationship under the laws of the state of the Number Holder's domicile. SSA determined whether a nonmarital legal relationship qualified as a marital relationship using the intestate laws of the Number Holder's domicile. If under such a state's intestate laws, an applicant could inherit a spouse's share of the Number Holder's personal property if the Number Holder died without a will, then SSA would have considered the same-sex couple's relationship as a marital relationship for the purposes of determining entitlement to Social Security benefits. If the Number Holder's domicile-state at the time of application did not recognize the nonmarital legal relationship for same-sex couples or does not grant that type of relationship with the rights to inherit under intestate law, then SSA would not have considered that marriage as valid for the purposes of determining entitlement to benefits. On June 26, 2015, in a 5-4 decision, the Supreme Court struck down state same-sex marriage bans in Obergefell v. Hodges. The Court held that the fundamental right to marry includes the right of same-sex couples to marry under the Fourteenth Amendment's due process and equal protection guarantees. Under the Court's decision, all states must both permit same-sex couples to marry in their respective states and recognize same-sex marriages that were celebrated in other states. Because eligibility for Social Security spousal benefits depends on whether the state would recognize the applicant's marriage to the Number Holder at the time of the application, individuals in a same-sex marriage are now eligible for spousal Social Security benefits, if they have met other statutory requirements. Following the Obergefell decision, SSA noted that "more same-sex couples will be recognized as married for purposes of determining entitlement to Social Security benefits." With respect to policy guidance concerning the processing of applications for same-sex couples who may have been ineligible for benefits before Obergefell , SSA further stated: "We are working with the Department of Justice to analyze the [ Obergefell ] decision and provide instructions for processing claims." The agency indicates that new information regarding implementation of the Obergefell decision will be posted to its website as it becomes available. The following table shows the dates when states and U.S. territories permitted or recognized same-sex marriage. The dates are considered, for example, when establishing whether a same-sex marriage is valid and the duration-of-marriage requirement is met for purposes of determining entitlement to Social Security benefits. In some cases, the specified dates are consistent with the recent Supreme Court decisions affecting Social Security eligibility for same-sex couples: United States v. Windsor (June 26, 2013) and Obergefell v. Hodges (June 26, 2015). Table A-1 summarizes the different types of Social Security benefits payable to eligible family members based on a worker's record, including basic eligibility requirements and basic benefit amounts before any applicable adjustments. Benefits payable to family members may be subject to adjustments for a variety of reasons. For example, if a person becomes simultaneously entitled to benefits based on his or her own work record (a worker benefit) and the work record of another person as an eligible family member (an auxiliary benefit), the auxiliary benefit is reduced by the amount of the person's own worker benefit under the dual entitlement rule . In effect, the person receives the higher of the two benefit amounts (not both benefits in full). In other examples, auxiliary benefits are reduced if the person becomes entitled to auxiliary benefits before attaining the FRA; total benefits payable based on the worker's record exceed the maximum family benefit ; the auxiliary beneficiary receives a pension from work that was not covered by Social Security (under the government pension offset ); or the auxiliary beneficiary is below the FRA and has current earnings above specified thresholds (under the retirement earnings test ).

This report addresses eligibility for Social Security spousal benefits for individuals in a same-sex marriage. Key Takeaways Under the Social Security Act, eligibility for spousal benefits depends on the applicant's marital status as defined by the laws of the state as interpreted by the courts of that state in which the Number Holder, the person on whose work record the benefit is based, is domiciled. Section 3 of the Defense of Marriage Act (DOMA) had required that marriage be defined as the union of one man and one woman for the purpose of federal enactments, rendering individuals in a same-sex marriage ineligible for spousal Social Security benefits. In United States v. Windsor, the U.S. Supreme Court held that Section 3 of the Defense of Marriage Act (DOMA) was unconstitutional, finding, in part, that it violated the Constitution's equal protection and substantive due process guarantees. In response to the Windsor decision, the Social Security Administration (SSA) has started processing Old-Age, Survivors, and Disability Insurance (OASDI) applications for some claimants in same-sex marriages. However, until Obergefell v. Hodges, the legality of some same-sex marriages remained in flux as state legislatures and courts changed and interpreted state marriage laws. Because the Social Security Act determines marital status by considering the laws of the state in which the Number Holder is domiciled, the Social Security Administration could only process spousal benefits for some same-sex couples whose domicile state would recognize their marriage, even if they were married legally in another state. In Obergefell v. Hodges (June 26, 2015), the U.S. Supreme Court held that the Fourteenth Amendment requires a state to permit a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out of state. Thus, because same-sex couples may now marry in all states, individuals in a same-sex marriage are eligible for spousal Social Security benefits, if they have met other statutory requirements. With respect to policy guidance concerning the processing of applications for applicants in same-sex marriages who may have been ineligible for benefits before Obergefell, SSA has stated that it is working with the Department of Justice to analyze the Obergefell decision in order to provide instructions for processing claims. The agency has indicated that new information regarding implementation of the Obergefell decision will be posted to its website as it becomes available.

On July 21, 2010, Title VIII of the Dodd-Frank Act, the Payment, Clearing, and Settlement Supervision Act of 2010 , became effective upon enactment. Title VIII authorizes the Federal Reserve, in coordination with other federal agencies, to supervise and regulate the infrastructure that enables financial intermediaries to process and complete financial transactions. Payment, clearing, and settlement (PCS) activities facilitate a variety of financial transactions such as transferring payments for and completing retail purchases, foreign exchange transactions, securities transactions, and derivatives trades. Some key systems in the United States have been operated by the Federal Reserve Banks and others by the private sector. PCS systems serve a critical role in the financial services sector and the broader economy. In the United States, the value of transactions for large-value payment systems amounted to $1.06 quadrillion in 2011. Attention was drawn to the functioning of the U.S. financial system in 2008 when major financial institutions entered bankruptcy (e.g., Lehman Brothers), receivership (e.g., Washington Mutual), or were kept solvent through government assistance (e.g., AIG). The interconnectedness of large financial intermediaries deemed "too-big-to-fail" heightened concerns about systemic risk, which can be understood as the failure of one firm leading to system-wide disruptions. One channel through which systemic risk can spread, as discussed in this report, is a disruption, such as the failure of a "too-big-to-fail" institution, cascading through PCS systems or activities. AIG, a major insurance company, experienced a crisis stemming from a subsidiary that was a leading underwriter of credit default swaps (CDS), a type of over-the-counter derivative. CDS provide protection to buyers against credit events such as an issuer's default on corporate debt obligations and structured securities. CDS had been traded bilaterally between institutions through an over-the-counter market system that regulatory authorities had criticized for its inefficiencies and lack of transparency. The Federal Reserve Bank of New York undertook efforts to encourage industry participants to voluntarily improve the infrastructure of the OTC derivatives market in recent years. In 2006, Alan Greenspan, then-Chairman of the Federal Reserve, reportedly said that he was appalled that people were relying on scraps of paper to record transactions, a practice which some blamed for causing a backlog of unconfirmed contracts. Prior to the Dodd-Frank Act, various federal regulatory authorities had oversight responsibilities for certain systems or entities engaged in processing those financial transactions. Title VIII reflects recommendations by the previous and current administrations to give the Federal Reserve explicit statutory oversight authority with respect to elements of the financial infrastructure in the United States, while also giving similar authority to the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) for certain parts of the infrastructure. Title VIII introduces the term "financial market utility" (FMU or utility) for those multilateral systems that transfer, clear, or settle payments, securities, or other financial transactions among financial institutions (FI) or between a FMU and a financial institution. Title VIII addresses the federal regulatory oversight of systemically important payment, clearing, and settlement (PCS) systems and PCS activities of financial institutions that facilitate various financial transactions. Financial transactions processed daily in the U.S. economy include payment transfers ranging from small-dollar retail purchase transactions to large-value purchases of securities; clearing transactions for derivatives trading; and securities settlement. Title VIII regulatory powers apply specifically to those financial market utilities and PCS activities (of financial institutions) that are designated as systemically important by the Financial Stability Oversight Council (FSOC), also created by the Dodd-Frank Act. It is notable that Title VIII does not consolidate or centralize authority for the approval of the formation of new utilities or PCS activities with the Federal Reserve or any single regulatory agency. Prior to the enactment of Title VIII, the Federal Reserve derived its oversight responsibilities for payment and settlement systems from a range of statutory responsibilities for monetary policy, banking supervision, lender of last resort, and provision of payment and settlement services. Recently, the Federal Reserve released a final rule regarding FMUs. On July 18, 2012, FSOC voted unanimously to designate eight FMUs as systemically important (see " FMUs Designated by the FSOC "). FSOC did not designate any PCS activities as systemically important at that time. Title VIII primarily addresses the regulatory framework rather than affecting the flows of funds through existing payment and settlement systems. TitleVII addresses the derivatives clearing systems and activities for OTC swap transactions. Some Representatives opposed Title VIII and struck the title governing PCS supervision from the financial reform bill that the House of Representatives passed in December 2009. Concerns held by some opponents of the title may have included a sense that the U.S. financial infrastructure was adequately supervised, or that the title might have given too much discretionary authority to the Federal Reserve. Other reservations may have included the view that Title VIII was unnecessary in light of the Federal Reserve's efforts to encourage firms to voluntarily strengthen infrastructure procedures in various markets, and the absence of a PCS-related breakdown in September 2008. S. 3497 , introduced on August 2, 2012, seeks to repeal Title VIII, stripping FSOC of its authority to designate FMUs as systemically important. This report begins by introducing the major PCS systems operating in the United States, followed by the basics of PCS systems and activities. The report then describes the different risks, including systemic risk, that are commonly associated with PCS systems and activities. The next part of the report discusses the oversight authority of the FMU and FI regulators that was in place prior to the enactment of the Dodd-Frank Act, after which the report summarizes the changes made by Title VIII, including the new regulatory oversight authority of the Fed. The final part of the report addresses implementation of Title VIII by relevant agencies and the impact of Title VIII on FMUs and FIs. The Federal Reserve and the private sector operate the systems that constitute the infrastructure for the processing and completion of financial transactions in the United States. Listed below are some of the major systems currently operating in the United States. Some privately-operated systems have been designated by FSOC as systemically important under Title VIII. Additional information regarding selected systems, including recent transaction volume levels, is set forth in an Appendix to this report. In the future, new and evolving types of financial products, transactions and instruments could lead to new payment, clearing, and settlement systems and activities. On July 18, 2012, FSOC voted unanimously to designate eight FMUs as systemically important. Each was assigned a supervisory agency on the basis of the types of activities that they perform. The eight systemically important FMUs are The Clearing House Payments Company, on the basis of its role as operator of the Clearing House Interbank Payments System (CHIPS). (Supervisory Agency—The Federal Reserve) CLS Bank (foreign exchange) (Supervisory Agency—The Federal Reserve) Chicago Mercantile Exchange (CME) Clearing (credit default and interest rate swaps) (Supervisory Agency—Commodity Futures Trading Commission) Depository Trust Company (DTC) (Supervisory Agency—Securities and Exchange Commission) Fixed Income Clearing Corporation operating the Government Securities Division (GSD) and the Mortgage-Backed Securities Division (MBSD) (Supervisory Agency—Securities and Exchange Commission) ICE Trust (credit default swaps) (Supervisory Agency—Commodity Futures Trading Commission) National Securities Clearing Corporation (NSCC) (Supervisory Agency—Securities and Exchange Commission The Options Clearing Corporation (equity derivatives) (Supervisory Agency—Securities and Exchange Commission) The Clearing House operates an interbank funds transfer system known as CHIPS and an ACH system known as EPN. DTCC operates the Depository Trust Company (DTC), the major U.S. depository, and clearing corporations for government, mortgage-backed, and corporate and municipal securities. These entities provide the primary infrastructure for the clearance, settlement, and custody of the vast majority of transactions in the United States involving equities, corporate debt, municipal bonds, money market instruments, and government securities. In the future, FSOC may add or remove PCS systems from the designated list, as conditions warrant. The Federal Reserve Banks operate the following three wholesale payment services and an electronic payment system providing ACH services to depository institutions: Fedwire ® Funds Service Fedwire Securities Service, also known as the National Book-Entry System (NBES) National Settlement Service (NSS) FedACH ® Service The Federal Reserve Banks began providing services using telecommunications in the early 1900s to transfer funds between accounts maintained in different Federal Reserve Districts. In 1981, the Federal Reserve was required by law to price most of the Federal Reserve Bank financial services, including funds transfers and securities safekeeping, and to give nonmember depository institutions direct access to those services. The Fedwire services enable depository institutions, the U.S. Treasury and other government agencies to transfer funds and book-entry securities nationwide. The Fedwire Funds Services is a real-time gross settlement (RTGS) system to settle funds electronically between banks; the Fedwire Securities Service provides issuance, settlement, and transfer services for U.S. Treasury securities and other government-related securities; and the National Settlement Service, which is a multilateral settlement service, is used by clearinghouses, financial exchanges, and other clearing and settlement groups. The Fedwire funds and securities transactions are processed in real time when received and are final and irrevocable when settled. By increasing the efficiency of Federal Reserve open market operations and helping to keep the market for government securities liquid, the Fedwire Securities Service plays a significant role in how the Federal Reserve conducts monetary policy, which is commonly understood as the regulation of the money supply and interest rates by central banks. Open market operations, which are purchases and sales of U.S. Treasury and federal agency securities, are the Federal Reserve's principal tool for implementing monetary policy. When the FSOC designated the private sector FMUs in July 2012, the Fed "reaffirmed its long-standing policy of applying relevant international risk-management standards to the Federal Reserve Banks' Fedwire funds and Fedwire securities services." There are other smaller or foreign-based PCS systems that FSOC did not designate as FMUs in 2012. For example, the Depository Trust & Clearing Corporation (DTCC) also operates other essential, though not systemically important, private-sector systems in the United States. These systems are a group of DTCC subsidiaries, which include Euro CCP, AVOX and FICC among others. Some foreign-based systems provided PCS services for U.S. financial actors. For example, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is an international financial messaging system headquartered in Belgium with U.S. operations, and LCH.Clearnet is an important clearinghouse for several categories of assets. The Appendix to this report provides additional information regarding these systems. The existing infrastructure in the United States for those activities consists of systems operated by the Federal Reserve through the Federal Reserve Banks, and by the private sector. In some cases, PCS activities are conducted primarily through one central party, such as the Fed or a clearinghouse. In other cases, activities are also conducted bilaterally through two financial institutions. This section describes the definitions and functions of these systems and activities that may partly overlap. The following types of systems and activities are covered by Title VIII: payment systems, which transfer funds electronically from one institution to another; clearing systems (or clearinghouses), which in the derivatives market often transfer credit risk to a central counterparty (CCP) (clearinghouse) from each counterparty to a trade; and settlement systems, which complete transactions such as securities trades. In general terms, a payment system consists of the means for transferring money between suppliers and users of funds through the use of cash substitutes such as checks, drafts, and electronic funds transfers. The Committee on Payment and Settlement Systems (CPSS), consisting of representatives from several international regulatory authorities, has developed generally accepted definitions of standard payment system terminology. As defined by the CPSS, a payment system is a system that consists of a set of instruments, banking procedures, and, typically, interbank funds transfer systems that ensure the circulation of money. In the United States, the Federal Reserve Banks and the private sector operate payment systems that process retail or wholesale transactions. Retail payment systems facilitate a consumer's ability to purchase goods and services, pay bills, obtain cash through withdrawals and advances, and make person-to-person payments. Retail payments tend to generate a large number of transactions that have relatively small value per transaction and are processed through electronic funds transfer systems, including automated clearing house (ACH) transactions and debit and credit card transactions at the point of sale. The ACH is an electronic funds transfer (EFT) system that processes credit and debit transactions such as direct deposit payroll and consumer bill payments. ACH is the primary EFT system used by federal governmental agencies to make payments, according to the Financial Management Service (FMS), a bureau of the United States Department of the Treasury. Providers of ACH services include the Federal Reserve Banks through the FedACH Service and The Electronic Payments Network, which is the only private-sector ACH operator in the United States. Rules governing the ACH system for participating financial institutions are established by NACHA – The Electronic Payments Association, a trade association, which oversees the ACH Network, and by the Federal Reserve. NACHA reports that more than 20.2 billion ACH payments were made in 2011. Wholesale payment systems generally support domestic and international commercial activities and financial market related activities. Large-value, wholesale funds transfer systems are used for purchasing, selling, or financing securities transactions; disbursing or repaying loans; settling real estate transactions; and making large-value, time-critical payments (e.g., settling interbank purchases, Federal funds sales, or foreign exchange transactions). Wholesale payments tend to have a large per-transaction value and a relatively small number of transactions generated daily and are processed through payment systems such as the Fedwire Funds Service (Fedwire) and The Clearing House Interbank Payments System (CHIPS). Wholesale payment systems also provide final clearing and settlement for a variety of retail payment systems at the end of the business day. Financial institutions use intra-bank systems to initiate, process, and transmit large-value payment orders internally and to interface with Fedwire and CHIPS. Clearing systems conduct various activities related to payment, currency, securities or derivatives transactions. The CPSS defines a clearing system as a set of procedures whereby financial institutions present and exchange data or documents relating to funds or securities transfers to other financial institutions at a single location (clearing house). The procedures often include a mechanism to facilitate the establishment of net positions of participant obligations for settlement, a process known as netting. A clearing house is a central location or central processing mechanism through which financial institutions agree to exchange payment instructions or other financial obligations such as securities. The term clearing , which is the process of transmitting, reconciling and possibly confirming payment orders or security transfer instructions prior to settlement, sometimes is used imprecisely to include settlement. Two of the major types of clearing houses in the United States process securities and derivatives transactions. For securities transactions, a clearing corporation or a depository must register with the Securities and Exchange Commission (SEC) as a clearing agency (CA). Clearing corporations clear member transactions, enable automated settlement of those trades, and often act as intermediaries in making settlements. They also guarantee the completion of all transactions and interpose themselves as parties to both sides of a transaction. Depositories maintain ownership records of securities on the books of the depository, hold securities certificates (physical securities are held in vaults), and make securities deliveries for settlements requiring delivery. Currently, the Depository Trust Company (DTC) is the primary U.S. securities depository. The DTC is a subsidiary of The Depository & Clearing Corporation (DTCC), which also operates the Fixed Income Clearing Corporation (FICC). FICC clears government and mortgage-backed securities through its clearing corporation divisions known as the Government Securities Division (GSD) and the Mortgage-Backed Securities Division (MBSD). In addition, the National Securities Clearing Corporation (NSCC), which is a subsidiary of DTCC, is a registered clearing corporation regulated by the SEC that provides clearing and settlement services for corporate and municipal securities. In the futures and options markets, a clearing house, known as a derivatives clearing organization (DCO), must register with the Commodity Futures Trading Commission (CFTC) to provide clearing services with respect to futures contracts and options on those futures contracts traded on a designated contract market and swap transactions traded over-the-counter. A DCO enables the parties to a derivatives transaction (counterparties) to transfer credit risk to the clearing house, for example, through novation. Novation occurs when a single derivatives contract between two counterparties becomes two separate contracts: one between the clearing house and each counterparty. As of August 2012, there were 25 DCOs registered with the CFTC. The CPSS defines settlement , in part, as the completion of a transaction wherein the seller transfers securities or financial instruments to the buyer and the buyer transfers money to the seller. A settlement may be final or provisional. A settlement system is used to facilitate the settlement of transfers of funds or financial instruments. In a real-time gross settlement system (RTGS), processing and settling occur on an order-by-order basis in real time instead of through netting of transaction positions. A securities settlement system is a particular kind of settlement system that consists of the full set of institutional arrangements for confirmation, clearance and settlement of securities trades and safekeeping of securities. In the United States, the Federal Reserve Banks and the private sector operate different settlement systems for securities transactions. Securities processing within financial institutions and the major markets accounts for the majority of large-value payments. The major securities markets in the United States include the markets for government securities, corporate equities and bonds, money market instruments, and municipal bonds. Those instruments are generally traded through organized exchanges or through over-the-counter dealer markets. Depository institutions play several important roles in securities clearing and settlement. In addition to participating in clearing and settlement transactions, depository institutions act as custodians, issuing and paying agents, and settling banks for their customers. The U.S. government securities market includes all primary and secondary market transactions in securities issued by the U.S. Treasury, certain federal government agencies, and federal government-sponsored enterprises. Trading in government securities is conducted over-the-counter between brokers, dealers, and investors, which means that parties trade on a bilateral basis with one another rather than on an organized exchange. The Federal Reserve operates a book-entry system known as the National Book-Entry System, or the Fedwire Securities Service, through which nearly all U.S. government securities are issued and transferred. The Fixed Income Clearing Corporation (FICC) also supports the selling and trading of U.S. government securities. Corporations and municipal governments also issue various types of securities, including corporate equities and bonds, commercial paper, and municipal bonds. Various securities are traded on established U.S. exchanges, including the New York Stock Exchange, the American Stock Exchange, and the NASDAQ system, and on over-the-counter markets. The National Securities Clearing Corporation (NSCC) provides clearing, settlement, and other services for virtually all broker-to-broker trades involving equities, corporate and municipal debt, and certain other instruments traded on over-the-counter markets and exchanges. Section 802 of the Dodd-Frank Act reflects concern about risks related to PCS systems and activities. For example, the proper functioning of the financial markets is considered dependent upon safe and efficient arrangements for the clearing and settlement of payment, securities, and other financial transactions. Although financial market utilities that conduct or support multilateral PCS activities may reduce risks for their participants and the broader financial system, such utilities may also concentrate and create new risks. Congress also found that PCS activities conducted by financial institutions present risks to the participating financial institutions and to the financial system. Congress found it necessary to enhance the regulation and supervision of utilities and PCS activities that are systemically important, in part, to reduce systemic risk and to promote safety and soundness. Further, both the Bush and Obama Administrations addressed the risks arising from payment and settlement systems in proposing financial regulatory reforms. In those proposals for heightened supervision by the Federal Reserve, the U.S. Department of the Treasury noted concerns about the ability of payment and settlement systems to contribute to financial crises, rather than reduce them, potentially threatening the stability of U.S. and foreign financial markets. There is no single definition of systemic risk. The Federal Reserve Bank of Cleveland has indicated that a firm is considered systemically important if its failure would have economically significant spillover effects which, if left unchecked, could destabilize the financial system and have a negative impact on the real economy. In order to provide more guidance in practice, however, the Cleveland Fed proposes using the following four factors, other than size, for designating firms as systemically important: contagion, correlation, concentration, and conditions (context). The International Monetary Fund summarizes systemic risk as the large losses to other financial institutions induced by the failure of a particular interconnected institution. Congress has addressed systemic risk in a number of provisions of the Dodd-Frank Act, in part, through the establishment of the Financial Stability Oversight Council and the regulation of systemically significant firms. Systemic risk can be increased by the transmission of financial system disruptions through payment and settlement systems. The global payment and settlement infrastructure consists of a network of domestic and cross-border systems that are increasingly connected through a wide array of complex interrelationships. Financial market utilities, financial institutions, and other system participants are increasingly connected as operators of and participants in such systems. Payment and settlement risks have the potential to impose losses on the entity at the source of a disruption as well as on its direct counterparties or customers, and in some circumstances, their counterparties or customers. Financial institutions engage in a range of financial activities that require the settlement of obligations and transfer of assets, which can lead to principal credit losses or replacement costs when these transfers do not occur as expected. The entity that is the source of an initial credit, liquidity or operational disruption, such as a failed securities trade or operational outage, may face lost revenue. That entity's customers and counterparties may face replacement costs from the purchase of additional funds or securities at a potentially higher market price to complete their own obligations. A settlement institution may also redistribute payment and settlement risks back to its participants through loss-sharing arrangements that may apply to participants that had no transactions with the failing entity. Further, some types of interdependencies among systems can allow an initial disruption to activate a chain of different risks and transmit an initial disruption through multiple systems. The interdependencies of financial intermediaries thus increase the potential for disruptions to spread quickly and widely, including across multiple systems. Several factors over the past few decades have contributed to the development of such interdependencies. These factors include the globalization and regional integration of the financial sector, consolidation of financial institutions, and advances in computer and telecommunications technology. Events during the financial crisis of 2008 included the transmission of disruptions arising from the failure of large, interconnected financial institutions through payment, clearing, and settlement systems. In the view of some international banking regulators, the financial market infrastructures generally performed well during the recent financial crisis and did much to help prevent the crisis from becoming even more serious. Those regulators have argued that when robust financial market infrastructures can enable settlement to take place without significant counterparty risk, such systems help markets to remain liquid even during times of financial stress. Some observers argue that another source of systemic risk could be the clearing house that functions as a central counterparty, i.e., the buyer to every seller and the seller to every buyer, in derivatives transactions. That risk arguably could increase because of the Title VII provisions requiring the clearing of swaps transactions under certain circumstances. In addition, academics are studying whether the use of central clearing counterparties actually reduces counterparty risk. In Title VIII, Congress indicated that financial market utilities may also concentrate and create new risks and stated that such utilities must be well designed and operated in a safe and sound manner. In addition to systemic risk, the Federal Reserve has identified the following four basic risks in payment and settlement systems: credit risk , which is the risk that a counterparty will not settle an obligation for full value either when due, or anytime thereafter; liquidity risk , which is the risk that a counterparty will not settle an obligation for full value when due; operational risk , which is the risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events, and which includes various physical and information security risks; and legal risk , which is the risk of loss because of the unexpected application of a law or regulation or because a contract cannot be enforced. These risks can, but need not, lead to systemic risk. Due to the potential for significant loss resulting from the large dollar value of wholesale payments, regulators expect financial institutions to implement effective and appropriate risk management policies, procedures, and controls to protect against such risks as well as reputation and strategic risk. Institutions involved with wholesale payments must also manage legal and compliance risk under laws administered by the Office of Foreign Assets Control imposing economic sanctions against specified foreign countries and individuals and by the record-keeping and reporting requirements of the Bank Secrecy Act, as amended by the USA PATRIOT Act. Operational risks arising from wholesale payments include risks relating to internal and operational controls, audit, information security, business continuity planning, and vendor and third-party management. Security risk may arise from intra-bank funds transfers. A financial institution's funds transfer operation, often known as "the wire room," is responsible for originating, transmitting, and receiving payment orders. Financial institutions must establish the authenticity of incoming and outgoing funds transfer messages and the time of receipt of incoming payment orders. Prior to Title VIII, an entity's supervisory agency, and for certain entities, the Federal Reserve, conducted prudential oversight of payment, clearing, and settlement systems and activities of financial institutions. The Federal Reserve relied on "a patchwork of authorities, largely derived from [its] role as a banking supervisor, as well as on moral suasion" as a means to help ensure that payment and settlement systems had necessary procedures and controls in place to manage their risks. In 2008, the Chairman of the Federal Reserve System asked Congress for authority to oversee systemically important payment and settlement systems, noting that many major central banks around the world have that explicit statutory authority. In that testimony, Chairman Bernanke stated that "the stability of the broader financial system requires key payment and settlement systems to operate smoothly under stress and to effectively manage counterparty risk." Prior to the enactment of Title VIII, United States and international regulatory authorities called for the strengthening of the supervisory oversight of the financial infrastructure for payment and settlement systems. The U.S. Department of the Treasury issued reports during both the Bush and Obama Administrations recommending that oversight of systemically important payment and settlement systems should be given to the Federal Reserve. The Federal Reserve, together with other regulators and the private sector, was also engaged in efforts to strengthen various financial infrastructures prior to the Dodd-Frank Act. In 2005, the Federal Reserve Bank of New York began leading an initiative with industry participants to strengthen clearing and settling of credit default swaps and other OTC derivatives. In addition, the Federal Reserve Bank of New York has worked with the private sector to enhance the oversight of tri-party repurchase agreements (repos ). Prior to the Dodd-Frank Act, the Federal Reserve had prudential oversight responsibilities for key private-sector infrastructure systems, including CHIPS, CLS, DTCC (and its three primary subsidiaries, DTC, NSCC, and FICC), ICE Trust, and SWIFT. The Federal Reserve had authority to oversee certain firms or their PCS activities under its statutory authority to conduct monetary policy and banking supervision, to act as the lender of last resort, and to supervise the Federal Reserve Banks' provision of payment and settlement services. Other federal and state regulatory agencies also exercised prudential oversight of PCS systems and activities within their supervisory jurisdiction. For example, DTC was supervised by the New York State Banking Department based on its charter as a limited-purpose trust company under New York law. In addition, DTC was regulated by the Federal Reserve as a Fed member institution and by the SEC as a registered clearing agency. The Federal Reserve also has supervisory authority (under the Federal Reserve Act) with respect to the Federal Reserve Banks' operation of key payment and settlement systems, including the Fedwire Funds Service and the Fedwire Securities Service. The Federal Reserve Board sets policy and is responsible for general supervision and oversight of the Federal Reserve Banks, including the provision of payment services. Under such authority, the Federal Reserve conducts regular reviews of these systems and periodic assessments of the Fedwire Services against the relevant international standards. The prudential regulators include the CFTC for derivatives clearing organizations, the SEC for clearing agencies, and the federal bank regulatory agencies for depository institutions. Prior to the enactment of the Dodd-Frank Act, the SEC regulated clearing agencies (CAs) under the authority of the Exchange Act, sections 17, 17A and 19. CAs had to register with the SEC but were considered self-regulating organizations (SROs). Registration required compliance with established rules and a list of organizational and capacity standards. Because CAs are SROs though, little more was required of them other than filing to register with the SEC. Although they had to provide SEC any proposed changes to their rules, and self-enforce compliance to ensure that participants abided by these rules, CAs established the rules for their own industry. While the SEC has maintained the authority to adopt rules for CAs deemed necessary and appropriate to the public interest, Dodd-Frank looks to codify more specifically enhanced risk management standards. The CFTC, for its part, had regulatory authority over derivatives clearing organizations (DCO) under the Commodities Exchange Act (CEA). A DCO had to register with the CFTC and comply with 18 core principles in order to maintain its registration. The core principles ranged in topic from risk management to default rules to information sharing, among others. DCOs were granted authority to implement their own rules, but they had to comply with the CEA and be approved by the CFTC. While the CFTC program takes a "risk-based approach," Title VII and VIII state more explicitly how DCOs are to operate. The Federal Reserve Policy on Payment System Risk (PSR Policy) addresses the risks that payment and settlement activity present to the financial system and the Federal Reserve Banks. The PSR Policy sets out the Board's views, principles and minimum standards applicable to risk management for private-sector and Federal Reserve Bank payment and settlement systems. In addition, the Federal Reserve's Regulation F requires insured depository institutions to establish policies and procedures to avoid excessive exposures to any other depository institutions, including those created through the clearing and settlement of payments. Bank supervision guidelines include the 2003 Interagency Paper on Sound Practices to Strengthen the Resilience of the U.S. Financial System adopted by the Federal Reserve, SEC and OCC to improve the resilience of the private-sector clearing and settlement infrastructure following the events of September 11, 2001. The goal of the Interagency Paper was to ensure the smooth operation of the financial system in the event of a wide-scale disruption. A 2008 interagency agreement among the Federal Reserve, the CFTC, and the SEC reflects the agencies' intent to cooperate and share information in carrying out their respective regulatory and supervisory responsibilities with regard to central counterparties for credit default swaps. The CFTC has also entered into an international interagency agreement with the United Kingdom Financial Services Authority (FSA) regarding derivatives clearing organizations and clearing houses based in the UK. In 2009, the CFTC and FSA signed a memorandum of understanding (MOU) that establishes a framework expressing their willingness to cooperate in the interest of fulfilling their statutory functions with respect to the clearing organizations, including on-site visits of respective clearing organizations. International banking regulators have also taken actions to identify risks related to PCS systems and to strengthen the financial infrastructure. The Committee for Payments and Settlement Systems (CPSS) was set up in 1990 under the aegis of the Bank for International Settlements (BIS) by the central banks of the Group of 10 countries. In 2009, the CPSS enlarged its membership to include many other important central banks. The CPSS meets three times annually and promotes sound and efficient payment and settlement systems. The CPSS acts as an international standard-setting body for payment and securities settlement systems and as a forum for central banks to monitor and analyze developments in domestic PCS systems and cross-border and multicurrency settlement systems. The standards consist of the Core Principles for Systemically Important Payment Systems (January 2001) and two sets of recommendations published together with IOSCO (International Organization of Securities Commissions), the Recommendations for Securities Settlement Systems (November 2001) and the Recommendations for Central Counterparties (May 2004). In February 2010, the CPSS and IOSCO launched a comprehensive review of the three sets of standards for financial market infrastructures with a view to strengthening them where appropriate. The CPSS also publishes policy reports analyzing issues related to large-value payment systems, retail payment instruments and systems, settlement mechanisms for foreign exchange transactions, and clearing and settlement of securities and derivatives transactions. A CPSS report from May 2005 expressed the view that a core responsibility of central banks is the oversight function with respect to payment and settlement systems. In September 2010, the CPSS published a report entitled Strengthening Repo Clearing and Settlement Arrangements after the repo markets proved to be a less reliable source of funding liquidity than expected in some countries during the recent financial crisis. The CPSS published another report in April 2012 entitled Principles for Financial Market Infrastructures, Assessment Methodology and Disclosure Framework. The report establishes international standards for payment, clearing and settlement systems, including central counterparties, that are more demanding than previous standards. The new set of standards replaces the previous set. The new standards raise minimum risk requirements, provide more specific guidance, and increase the number of institutions under its purview. Members of CPSS have been encouraged to adopt the new standards by the end of 2012. Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act , P.L. 111-203 establishes a regulatory framework for systemically important utilities and systemically important PCS activities conducted by financial institutions. It provides explicit statutory oversight authority to the Federal Reserve (Fed) in coordination with an entity's chartering and supervisory authority, establishing a consistent framework across supervisory authorities. The Dodd-Frank Act also affects PCS systems and activities through Title VII, the Wall Street Transparency and Accountability Act of 2010 , which establishes a comprehensive regulatory framework in regard to the over-the-counter (OTC) derivatives market and swap transactions. Title VII establishes requirements for the clearing of certain bilateral swap transactions through derivatives clearinghouses. Title VII also strengthens regulatory oversight of designated clearing entities (registered derivatives clearing organizations and clearing agencies) by the CFTC and the SEC, which are subject to the regulatory framework established in Title VIII. The Senate, but not the House of Representatives, passed a version of the financial reform bill containing a title similar to Title VIII. The House Financial Services Committee considered but struck by amendment a similar title in mark up, prior to the House of Representatives' floor consideration of the financial reform bill, H.R. 4173 . Both the version of Title VIII in the Senate's bill and the version offered in the Conference Committee were modeled on proposed legislation released by the Obama Administration in 2009. During the Conference Committee, participants agreed to changes that enhanced the authority of the CFTC and SEC with respect to their supervised entities. The changes to the relevant title gave the CFTC and the SEC rule-writing authority for risk management standards and excluded some of their supervised entities from definitions and Federal Reserve oversight. Title VIII defines systemically important and systemic importance apply to a situation where the failure of or a disruption to the functioning of a financial market utility or the conduct of a PCS activity could create or increase the risk of significant liquidity or credit problems spreading among financial institutions or markets and thereby threaten the stability of the financial system of the United States. In general, Title VIII defines a supervisory agency as the federal agency that has primary jurisdiction over a designated financial market utility under federal banking, securities, or commodity futures laws and means the SEC with respect to a registered clearing agency, the CFTC with respect to a registered derivatives clearing organization, the appropriate federal banking agency with respect to an institution described in section 3(q) of the Federal Deposit Insurance Act, and the Federal Reserve Board with respect to any other type of designated financial market utility. Title VIII broadly defines FMU systems and activities, but then explicitly excludes several specific systems and activities from its scope. Section 803 of Title VIII excludes from the FMU definition specified registered trading entities (exchanges) and data repositories registered and subject to CFTC oversight, including designated contract markets and swap data repositories, or registered and subject to SEC oversight, including national securities exchanges and swap execution facilities. Those exclusions are limited to the activities that require the entities to be registered. Other exclusions from the FMU definition apply to various parties that act as intermediaries, including any broker, dealer, transfer agent, investment company, futures commission merchant, introducing broker, commodity trading advisor, or commodity pool operator. Such exclusions are limited to functions performed as part of the institution's named business. Also excluded are activities conducted by such institutions on behalf of a FMU or an FMU participant so long as the activities are not part of the FMU's critical risk management or processing functions. Section 803 excludes from the financial institutions (FI) definition designated clearing entities , which are the systemically important DCOs and CAs subject to oversight by the CFTC and the SEC, respectively. The exclusion applies to the activities that require the entity to be registered. Thus, Title VIII regulation could apply to those entities only as FMUs rather than FIs. Section 803 also excludes from the FI definition those registered trading entities (exchanges) and data repositories subject to CFTC or SEC oversight that are excluded from the definition of an FMU, such as designated contract markets, swap data repositories, and swap execution facilities, and additionally other entities, including securities information processors. The exclusion applies to the activities that require the entity to be registered. Congress provides a role to the newly created Financial Stability Oversight Council (Council) in the enhanced regulatory oversight framework in Title VIII. The members of the Council include the Secretary of the Treasury as Chairperson of the Council, the Chair of the Federal Reserve Board, and the heads of certain other agencies. The agencies with a role in Title VIII (the CFTC, SEC, and the federal banking agencies) are all members of the Council. Section 804 authorizes the Council to designate by at least a 2/3 vote, including the Chairperson (Secretary of the Treasury), those financial market utilities or PCS activities that the Council determines are, or are likely to become, systemically important. Prior to such determination, the Council shall consult with the relevant Supervisory Agency and the Federal Reserve Board. The Council may similarly rescind a designation of systemic importance at any time. The Council has broad authority to determine systemic importance. In addition to four listed factors, Congress provides that the Council shall consider any other factor that the Council deems appropriate. The Council must consider the following statutory factors: first, the aggregate monetary value of transactions processed by the utility or carried out through the PCS activity; second, the aggregate exposure of the utility or financial institution to its counterparties; third, the relationship, interdependencies, or other interactions of the utility or PCS activity with other financial market utilities or PCS activities; and, fourth, the effect that the failure of or a disruption to the utility or PCS activity would have on critical markets, financial institutions, or the broader financial system. The Council must give advance notice of the proposed determination and opportunity for a written or oral hearing before the Council to the utility or financial institution. The Council may waive or modify those procedural safeguards, however, upon 2/3 vote, including the Chairperson, if necessary to prevent or mitigate an immediate threat to the financial system posed by the utility or PCS activity. The Council's final determination must be made within 60 days of any hearing or 30 days after the expiration of the opportunity to request a hearing, and the Council may extend the time periods affecting the consultation, notice, and hearing process. In connection with assessing systemic importance, the Council may require any utility or financial institution to submit information as the Council may require if the Council has reasonable cause to believe that the utility or PCS activity meets the standards for systemic importance. The statutory changes made by Title VIII are consistent with the view of international banking authorities that the oversight of payment and settlement systems is a core responsibility of central banks. Except with respect to designated clearing entities, section 805 of Title VIII authorizes the Fed to prescribe risk management standards, in consultation with the Council and Supervisory Agencies, governing the operations related to PCS activities of systemically important financial market utilities and the conduct of systemically important PCS activities by financial institutions. The Fed may prescribe such standards by rule or order and must take into consideration relevant international standards and existing prudential requirements. The CFTC and the SEC may each prescribe regulations, in consultation with the Council and the Fed, containing risk management standards of similar scope for systemically important DCOs and CAs, respectively, and supervised financial institutions (for example, a futures commission merchant supervised by the CFTC) that engage in systemically important PCS activities. Those regulations, like the Fed's standards, must take into consideration relevant international standards and existing prudential requirements. If the Fed determines that CFTC or SEC rules are insufficient to prevent or mitigate certain risks to the financial markets or to the financial stability of the United States, the Fed may impose risk management standards on an SEC- or CFTC-regulated entity. If the CFTC or the SEC objects within 60 days of the Fed's determination, then the Council would decide with a 2/3 vote which agency's risk management standards would apply. The standards of the Fed, the CFTC, and the SEC may address areas such as risk management policies and procedures, margin and collateral requirements, participant or counterparty default policies and procedures, the ability to complete timely clearing and settlement of financial transactions, and capital and financial resource requirements for designated financial market utilities. The agencies' standards must, where appropriate, establish a threshold of the amount (level or significance) of an institution's activity that will cause the standards to apply to the institution. The Fed and the Council may not impose standards with respect to certain specified areas under CFTC or SEC authority, including the approval of clearing requirements, transaction reporting, or trade execution. Further, pursuant to section 811, Title VIII in general does not divest any federal or state agency of any authority derived from any other applicable law. However, any standards prescribed by the Federal Reserve Board under section 805 shall supersede any less stringent requirements established under other authority. Section 806 applies four Federal Reserve services or requirements to FMUs that apply to depository institutions. First, designated utilities may have certain accounts and deposit accounts at Federal Reserve Banks provided to depository institutions. Second, Federal Reserve Banks may pay earnings on balances maintained by a designated utility to the same extent paid to depository institutions. Third, the Fed may exempt a designated utility from reserve requirements or modify any applicable reserve requirement. Lastly, the Fed may authorize a Federal Reserve Bank to provide discount and borrowing privileges to a designated utility, but only in unusual or exigent circumstances and upon majority vote of the Fed after consultation with the Secretary of the Treasury. The utility would have to show that it is unable to secure adequate credit accommodations from other banking institutions. Title VIII also establishes procedures that a systemically important financial market utility must follow when proposing changes to its rules, procedures, or operations. The designated utility must provide its Supervisory Agency with 60 days' advance notice of a proposed change that could materially affect the nature or level of risks presented by the utility. If the agency objects within 60 days, the utility may not implement the change. However, a designated utility may implement changes on an emergency basis in order for the utility to provide its services in a safe and sound manner. Section 807 requires a Supervisory Agency to conduct examinations at least annually of a systemically important financial market utility to assess compliance with Title VIII. In addition to standard-setting authority, Congress gives the Fed a role in examinations conducted by prudential regulators and enforcement for compliance with Title VIII. The Fed may, at its discretion, participate in an examination of a systemically important utility and may exercise back-up examination authority of a financial institution in certain circumstances. Title VIII also enables the Fed to take enforcement actions directly when necessary and with the Council's approval. The Supervisory Agency must consult with the Fed at least annually regarding the scope of such examinations. The Fed in its discretion may participate in such examinations led by the Supervisory Agency. After consulting with the Council and Supervisory Agency, the Fed may at any time recommend that the agency take enforcement action to prevent risks to the financial markets or the financial stability of the United States. In the event of imminent risk of substantial harm to financial institutions, critical markets, or the U.S. financial system, the Fed with the affirmative vote of the Council may take enforcement action against the designated utility. Section 808 authorizes the appropriate financial regulator of a financial institution to examine such institution with respect to a systemically important PCS activity for compliance with Title VIII. The Fed may consult with, and provide technical assistance to, the appropriate financial regulator, and the regulator may ask the Fed to conduct or participate in such examination or enforce Title VIII against the financial institution. Title VIII also gives the Fed back-up examination and enforcement authority, which the Fed may exercise with the Council's approval under certain conditions, including having reasonable cause to believe that a financial institution is not in compliance with Title VIII. Title VIII extends certain enforcement provisions of section 8 of the Federal Deposit Insurance Act to a systemically important financial market utility to the same extent as if the utility were an insured depository institution and to a financial institution subject to standards for a systemically important PCS activity. As described in the purposes of Title VIII in Section 802, Congress is trying to mitigate systemic risk in the financial system and promote financial stability by authorizing the Board to promote uniform risk management standards for relevant institutions. It also aims to accomplish this by providing the Board an enhanced role in the supervision of such standards. Title VIII, however, in general maintains certain regulatory and supervisory authority of the CFTC and SEC with respect to designated clearing entities. Further, Title VIII establishes various limitations requiring the Fed to consult with or act in coordination with the primary supervisor of a utility or financial institution and to obtain approval of the Council to exercise certain authority. The Council similarly must consult with or act in coordination with other agencies in certain circumstances. Title VIII does not remove prudential oversight by federal and state regulatory and supervisory agencies of their supervised institutions. In general, the Federal Reserve must exercise its new authority and responsibilities in coordination with prudential regulators. In some circumstances, however, the Federal Reserve may take actions, or seek approval of the Financial Stability Oversight Council to take actions, without the agreement of the primary supervisory agency. The following provisions illustrate examples of required regulatory coordination under Title VIII: the Council must consult with the Fed and Supervisory Agencies in making systemic importance determinations under Section 804; the Fed or the Council must coordinate with a utility's Supervisory Agency or a financial institution's supervisor to request material information from or impose reporting or recordkeeping requirements on the entity under Section 809; the Fed, Council, Supervisory Agency, and appropriate financial regulator are authorized to promptly notify each other of material concerns about a designated utility or financial institution engaged in designated activities and share appropriate reports, information, or data relating to such concerns under Section 809(e); and coordination of examination and enforcement authority under Sections 807 and 808 is required, except to the extent that the Fed may exercise back-up or independent authority in limited circumstances. Under Section 811, Title VIII does not divest agencies of existing authority derived from other applicable law except that standards prescribed by the Fed supersede any less stringent requirements established under other authority to the extent of a conflict. The Conference Committee added certain provisions that limit the role of the Federal Reserve with respect to entities supervised by the CFTC and SEC. For example, Section 805 authorizes the CFTC and SEC to prescribe risk management standards for designated clearing entities (registered derivatives clearing organizations and registered clearing agencies), which the Fed can potentially override with the approval of the Council. Title VIII also requires the CFTC and SEC to exercise certain authority in coordination with the Fed. Section 812 requires the CFTC and SEC to consult with the Fed prior to exercising authorities, including rulemaking authorities, under various provisions of law as amended by Title VIII. Section 813 requires the CFTC and the SEC to coordinate with the Fed to jointly develop risk management supervision programs for designated clearing entities. FSOC promulgated final rules for Title VIII on July 18, 2011. The rules authorized FSOC to designate financial market utilities it deemed systemically important. FSOC determines whether an FMU is systemically important if any failure of an FMUs operations could "create or increase the risk of significant liquidity or credit problems spreading among financial institutions or markets and thereby threaten the stability of the U.S. financial system." Section 805 of the Dodd-Frank Act provides that, except for certain entities supervised by the CFTC and SEC, the Federal Reserve by rule or order shall prescribe risk management standards governing operations of systemically important utilities and the conduct of systemically important activities by financial institutions. On July 30, 2012, The Federal Reserve released its final rule regarding FMUs. It comprises much of the same material that was included in the proposed rules. The final rule implements risk management standards for FMUs, and standards for determining when FMUs must give notice about changes to rules, procedures, or operations that would alter the nature of risks they present. The addition of two rules, one centering on application waivers, and the other revising the list of changes that do not require notice, mark the difference between the final rule and the proposed rule. Title VIII provides the CFTC and the SEC, respectively, with additional authority to supervise and regulate those systemically important utilities that are derivatives clearing organizations (DCOs) and clearing agencies (CAs), which together are called designated clearing entities. Section 805 of the Dodd-Frank Act authorizes the CFTC and SEC to prescribe regulations containing risk management standards governing the operations of designated clearing entities or the conduct of designated activities by financial institutions that each agency supervises. Although the Fed may challenge such rules as insufficient, the CFTC and SEC may object to the Council regarding the Fed's determination. The Council would make the final decision upon the affirmative 2/3 vote of its members. In July 2011, the Fed, CFTC, and SEC outlined the rulemaking governing their new authorities over DCOs and CAs, detailing the enhanced risk management standards these entities must follow. That rulemaking has since been largely finalized. For instance, the SEC announced final rules on June 28, 2012 specifying registering and review procedures for CAs. The CFTC announced a final rule on April 9, 2012, adopting new Dodd-Frank statutory provisions. The scope of Title VIII encompasses the infrastructure for the clearing of OTC derivatives, which is governed by the regulatory framework established in Title VII of the Dodd-Frank Act. Title VII requires firms to clear certain OTC derivatives, including credit default swaps, through central counterparties. Both the CFTC and the SEC must write various rules to implement Title VII, which will apply to derivatives clearing organizations and clearing agencies supervised by those agencies. The clearing requirements in Title VII could increase the likelihood of a systemic importance designation under Title VIII for financial market utilities that engage in clearing OTC derivatives. Those financial market utilities and PCS activities conducted by financial institutions that are designated as systemically important will be affected by additional supervision and requirements to comply with newly adopted risk management and conduct standards. Further, those designated firms could potentially be subject to increased oversight through the Federal Reserve's enhanced examination authority and role in enforcing compliance with applicable rules. Certain payment system infrastructures were previously subject to Federal Reserve or other agency oversight. Newer systems and technologies may be developed in the future to process financial transactions via the Internet and by other means. The impact on evolving technologies would depend upon the extent to which their activities fall within the scope of the supervisory framework established under the Dodd-Frank Act and whether newer systems become systemically important. The impact of Title VIII on a particular entity is likely to vary depending upon whether a financial market utility or financial institution is currently subject to Federal Reserve supervision, whether a system or institution has operated previously outside the scope of bank regulatory or other federal agency oversight, and whether the utility or institution will also be subject to requirements and potentially increased clearing transaction volume under Title VII requirements. The impact of Title VIII will also depend upon the actions of various regulators such as how broadly the Financial Stability Oversight Council applies the designation of systemic importance to financial market utilities and PCS activities of financial institutions and how stringently the Fed, CFTC and SEC decide to set risk management rules and standards.

The U.S. financial system processes millions of transactions each day representing daily transfers of trillions of dollars, securities, and other assets to facilitate purchases and payments. Concerns had been raised, even prior to the recent financial crisis, about the vulnerability of the U.S. financial system to infrastructure failure. These concerns about the "plumbing" of the financial system were heightened following the market disruptions of the recent crisis. The financial market infrastructure consists of the various systems, networks, and technological processes that are necessary for conducting and completing financial transactions. Title VIII of the Dodd-Frank Act, P.L. 111-203, the Payment, Clearing, and Settlement Supervision Act of 2010, introduces the term "financial market utility" (FMU or utility) for those multilateral systems that transfer, clear, or settle payments, securities, or other financial transactions among financial institutions (FI) or between an FMU and a financial institution. Utilities and FIs transfer funds and settle accounts with other financial institutions to facilitate normal day-to-day transactions occurring in the U.S. economy. Those transfers include payroll and mortgage payments, foreign currency exchanges, purchases of U.S. treasury bonds and corporate securities, and derivatives trades. Further, financial institutions engage in commercial paper and securities repurchase agreements (repo) markets that contribute to liquidity in the U.S. economy. In the United States, some of the key payment, clearing, and settlement (PCS) systems are operated by the Federal Reserve, and other systems are operated by private sector organizations. With Title VIII of the Dodd-Frank Act, which was enacted on July 21, 2010, Congress added a new regulatory framework for the FMUs and PCS activities (of FIs) designated by the Financial Stability Oversight Council as systemically important. On July 18, 2012, the Council voted unanimously to designate eight FMUs as systemically important. Title VIII expands the Federal Reserve's role, in coordination with those of other prudential regulators, in the supervision, examination, and rule enforcement with respect to those FMUs and PCS activities of financial institutions. Additionally, FMUs may borrow from the discount window of the Federal Reserve in certain unusual and exigent circumstances. Although Title VIII primarily affects the scope of regulatory powers, certain provisions directly affect a utility's business operations. For example, Title VIII allows FMUs to maintain accounts at a Federal Reserve Bank and provides access to the Fed's discount window in unusual and exigent circumstances. Related to PCS, Title VII of the Dodd-Frank Act imposes requirements that will significantly affect the business of clearinghouses in the over-the-counter (OTC) derivatives (swaps) market. By requiring clearing of certain swap transactions through central counterparties (CCPs or clearinghouses), Title VII is expected to increase the volume of transactions processed by clearing systems subject to Title VIII. Critics contend that Title VIII grants too much discretionary authority to the Fed in an area that they argue was not a source of systemic risk during the recent financial crisis. S. 3497 seeks to repeal Title VIII of the Dodd-Frank Act, stripping FSOC of it's authority to designate FMUs as systemically important. This report outlines the changes to the supervision of key market infrastructure that are embodied in the Dodd-Frank Act. It is intended to be used as a reference for those interested in the financial system's "plumbing," and how the associated systems are currently overseen and regulated.

The political unrest and transitions that have swept through several countries in the Middle East and North Africa (MENA) since early 2011—often referred to as the "Arab Spring" or "Arab Awakening"—have prompted the United States, along with the broader international community, to discuss approaches and take actions to support democratic political transitions in the region. A key focus is the role that economic growth can play in solidifying and supporting political transitions in the region. Calls for greater U.S. trade and investment with the region in support of economic growth have come from policymakers in the Administration and Congress. In May 2011, President Obama announced the MENA "Trade and Investment Partnership Initiative" (MENA-TIP) to facilitate trade and investment with the region. The initiative has a primary focus on Egypt, Jordan, Morocco, and Tunisia. Within Congress, some Members have called for new free trade agreements (FTAs) with Egypt and Tunisia, and deeper economic ties with Libya. Presently, U.S. trade and investment policy in the region is focused on using trade and investment to foster economic growth, promote greater economic reforms, provide support for successful and stable democratic transitions, and generally support U.S. foreign policy objectives. The U.S. government is pursuing such efforts both as part of the MENA-TIP initiative and through broader or long-standing U.S. trade policy measures. Measures to bolster trade and investment ties are often long-term in nature, and could build on other shorter-term measures to support transitioning countries. However, continued political uncertainty and changing security environments in the region could prompt greater scrutiny of U.S. engagement, as policymakers grapple with questions of timing, feasibility, and political support for such efforts. Congress has oversight, authorization, and appropriation responsibilities related to U.S. trade and investment policy. New U.S. trade and investment initiatives with the MENA region could require congressional involvement. For example, legislative action would be needed to implement new free trade agreements. Congress also may want to exercise oversight over any changes to government programs that promote U.S. trade and investment. The structure of this report is as follows: The report begins with background and analysis for policymakers considering a re-evaluation of U.S. trade and investment in the MENA in light of political change in the region. In particular, the report examines the economic challenges facing many countries in the region and the area's limited economic integration—both in the world economy, including relatively weak economic ties with the United States, and in the MENA regional economy. The report then analyzes current U.S. trade and investment policy efforts in the region and various policy options for increasing trade and investment with MENA countries. The report concludes by discussing (1) the premise of the policy agenda, specifically whether increased trade and investment can support or lead to successful democratic transitions and political stability; and (2) if such a policy agenda is pursued, possible implementation questions that policymakers may face. As a whole, the MENA region lags behind other regions on many key economic indicators ( Figure 2 ). In 2011, the region accounted for 5.6% of the world's total population, but its economic output is disproportionately smaller, accounting for just 4.4% of the world's gross domestic product (GDP). Additionally, the region's GDP per capita in 2011 ($7,831) was lower than those of Latin America and the Caribbean ($9,754) and East Asia and the Pacific ($8,475). The region generally has poorly developed manufacturing and service sectors; the value-added of manufacturing and services relative to GDP in MENA in 2010 was the smallest in the world. Weak economic opportunities, combined with one of the fastest-growing populations in the world, have resulted in high levels of unemployment. Unemployment in the region was 9.7% in 2008, more than double the unemployment rate in East Asia and the Pacific (4.7%) in 2009. Unemployment among youth in particular is a challenge. For example, in 2009, youth (15-24 year-olds) unemployment was 27% in Jordan, and 22% in Morocco. By contrast, youth unemployment in Thailand, which has a similar GDP per capita to Jordan's, was markedly lower at 4.3% in 2009. While several countries in the region are rich in natural resources, especially oil and natural gas, the revenues from these resources have been poorly utilized and the development of other production and export industries has lagged. MENA countries produced 30% of the world's oil and 22% of the world's natural gas in 2011. Oil production is concentrated in Algeria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, the United Arab Emirates (UAE), and Yemen. Other countries in the region typically import more oil than they produce, or do not produce any oil at all. The mismatch between endowments of natural resources and weak economic development is frequently called a "resource curse," since endowments of natural resources like oil seem to have deterred, rather than jumpstarted, broad economic development in many countries and potentially exacerbated inequality. In some countries, notably in the oil-rich Gulf region, governments are now actively seeking to leverage state oil export revenues to support the development of non-hydrocarbon economic sectors and the expansion of employment opportunities. In countries where energy resources must be imported, governments may struggle with fiscal pressures. Numerous explanations have been put forward to explain why economic development in the MENA region has lagged behind other regions. For example, it has been argued that: Weak integration in the global economy has prevented the region from reaping the opportunities of globalization; " Easy money" from natural resources in some MENA countries has provided few incentives to develop sound economic policies or other productive industries, with the benefits of natural resources going to a few and not the public at large; Non-democratic political institutions have stifled innovation and economic competition, leading to slow growth and distortions in the economy; A weak business environment , stemming from heavy government involvement in the economy, red tape, corruption, and weak rule of law, has deterred foreign investment; A weak educational system has not equipped youth in the region with the skills demanded by the private sector in a competitive global environment; Subsidies and l ack of government infrastructure spending , with large portions of the budget going to defense and subsidies for basic needs, creates distortions in the economy; and Women constitute a low proportion of the labor force, preventing the region from tapping all its productive potential. Despite the economic challenges faced by the region as a whole, it is important to note that there have been some areas of economic success. Appreciating economic diversity among the MENA economies may have implications for the types of economic policies that might be pursued to bolster growth in the region, and suggests that policy solutions may need to be tailored to the specific circumstances of each economy. For example, the World Bank and the International Monetary Fund (IMF) have applauded success on various social indicators of well-being and macroeconomic stability for the region. In 2010, the MENA had a life expectancy of 72 years and a primary education completion rate of 91%, and an under-5 mortality rate of 31 per 1,000 births. Absolute poverty in the region is also relatively low, with approximately 4% of the population living on $1.25 a day. Additionally, the IMF has noted that, over the past two decades, the region has generally been successful in reining in inflation, improving trade balances, and reducing public debt levels. However, some countries undergoing political transition are experiencing macroeconomic instability. Substantial diversity also exists in the region, and some countries have achieved greater levels of economic success than others ( Table 1 ). For example, some of the region's small, oil-exporting countries are among the richest countries in the world; GDP per capita is higher in Kuwait and Qatar ($62,664 and $92,501 respectively in 2011) than in the United States ($48,111 in 2011). Likewise, some countries have stronger political and legal institutions than others; according to the World Bank's Worldwide Governance Indicators , Qatar ranked in the 74 th percentile among countries worldwide in strength of rule of law in 2011. Economic reforms have taken root in some countries; in the World Bank's Doing Business Report, Saudi Arabia is ranked as the 22 nd - easiest country in the world in which to do business. While female participation in the labor force is low in many countries, women made up 47% of the labor force in Israel in 2010. Finally, some countries in the region continue to grapple with various social challenges and macroeconomic stability, areas where the region as a whole is viewed as having succeeded. For example, poverty in Egypt is relatively high, with nearly one in six Egyptians (15.4%) living on less than $2 a day in 2008. The under-5 mortality rate in Yemen was 77 per 1,000 births in 2011, more than twice the average for the region as a whole. In terms of macroeconomic stability, Lebanon has a high level of public debt (forecasted to be 135% of GDP in 2013), and Egypt is running a large budget deficit (forecasted to be 9.8% of GDP in 2013). With some exceptions, MENA countries face serious economic challenges despite some countries' large oil and gas production. Weak integration in the global economy, including weak integration within the region, is frequently cited by economists as a factor impeding economic development in the region. On the surface, MENA appears to be relatively active in global trade. Relative to GDP, the region had the highest level of exports (45% of GDP in 2010) of any major geographic region in the world in that year, and the highest levels of imports (39% of GDP in 2010, see Figure 3 ). Net inflows of foreign direct investment (FDI) into MENA countries were 2.0% of GDP in 2011, slightly below the average for countries worldwide (2.3% of GDP). Delving deeper, however, reveals the limitations of MENA's interactions in the global economy. First, MENA's trade tends to be highly concentrated in a few key products. Figure 4 shows that oil dominates the region's exports, with fuel accounting for 62% of the region's total exports in 2009. MENA's imports are also heavily concentrated on manufactured goods, which accounted for 54% of total imports in 2009, as shown in Figure 4 . Some lower-income countries in the region still have relatively high levels of protectionism. Tariff rates averaged 6.1% in 2010 among developing MENA countries, compared to an average of 4.3% among developing countries and 2.7% for countries worldwide. For trade in goods, MENA's biggest trading partner is the European Union (EU), although countries in the region also trade heavily with Japan, the United States, and large emerging markets, including China and India, as shown in Figure 5 . Intra-MENA trade is relatively limited, accounting for just 10% of total exports and 16% of total imports in 2011. There are a number of economic and political explanations for why trade within the region is limited. Some of the countries in the region produce similar products, limiting the opportunities for intra-regional trade. Political tensions among countries also may restrict intra-regional trade. For example, the Arab League, an umbrella organization of more than 20 Middle Eastern and African countries and entities, has maintained an official boycott of Israeli companies and Israeli-made goods since the founding of Israel in 1948. Trade and investment between the MENA and the United States is relatively limited, suggesting scope for deeper economic ties. U.S. trade with MENA countries accounts for a small share of total U.S. trade: $193 billion, about 5% of the U.S. total, in 2011. U.S.-MENA trade primarily consists of exchanging a wide variety of U.S. goods for crude oil, which is then processed and refined into such petroleum end-products as gasoline, diesel fuel, heating oil, kerosene, and liquefied petroleum gas. As shown in Figure 6 , oil accounted for 73% of all U.S. imports from the MENA in 2011 ($90 billion out of $123 billion). If Israel were removed from the list of countries, oil's share of all U.S. imports from the region would rise to over 90%. Despite the fact that the MENA consists of several oil exporters, it still ranks as the second-largest U.S. oil supplier, accounting for about one-fifth (21%) of U.S. oil imports, with Canada ranking first (24%) and Mexico third (10%). The United States exports a range of goods to the MENA region, including motor vehicles, machinery, aircrafts, and diamonds ( Figure 6 ). Within the region, the value of U.S. trade with individual economies varies widely ( Figure 7 ). In 2011, U.S. trade with the MENA region was concentrated in eight countries: Saudi Arabia, Israel, Algeria, Iraq, UAE, Egypt, Kuwait, and Qatar. Together, these eight countries accounted for more than 90% of all U.S. trade (exports and imports) with the region. For four of these countries—Saudi Arabia, Algeria, Iraq, and Kuwait (designated by a red dot in Figure 7 )—oil constituted nearly all of their exports to the United States. Other countries for which oil represents more than 65% of its exports included Qatar, Oman, Tunisia, Yemen, Libya, and Syria. In contrast, Israel exports a broader mix of products to the United States. More detailed trade data are provided in the Appendix . Closely linked to trade is FDI. Figure 8 shows that the MENA region accounts for a small share of global FDI by U.S. firms ("outward" FDI). In 2011, the total stock of U.S. outward FDI was $4.2 trillion. Of this, about only $56 billion, or 1%, was invested in the MENA region. Likewise, the total stock of FDI in the United States ("inward" FDI) in 2011 was $2.5 trillion. Firms located in MENA countries accounted for approximately $17 billion, or 1% of total FDI into the United States. Figure 9 shows the stock of U.S. foreign direct investment in specific MENA economies in 2011. FDI from the United States to the region was concentrated in a small number of countries, including Egypt, Qatar, Israel, Saudi Arabia, Algeria, and the UAE. Figure 9 also shows that Israel accounted for roughly 90% of FDI into the United States from MENA countries, with more than $15 billion invested in the United States. What factors have limited U.S.-MENA trade and investment ties? Some countries in the region have undertaken efforts to improve their regulatory and business environments. However, serious challenges remain to international firms, including U.S. firms, looking to do business in the region. One source of information about obstacles to doing business in various countries overseas is the Country Commercial Guides published by the U.S. Commercial Service, part of the Department of Commerce. For the region, the reports generally emphasize impediments to U.S. firms seeking to do business in MENA countries related to lack of transparency, bureaucratic red tape, weak rule of law, corruption, and differences in business cultures. Some examples of issues raised by these U.S. government reports in selected MENA countries are listed below. Egypt: corruption; ill-defined regulatory framework; generally unresponsive commercial court system; and multiplicity of regulations and regulatory agencies. Tunisia: inconsistent procedures in customs administration and delays in customs clearance. Morocco: irregularities and lack of transparency in government procurement procedures; corruption; and counterfeit goods. Saudi Arabia: weak enforcement of arbitration of private sector disputes; foreign visitors need to obtain a local sponsor to obtain a business visa; and preference to local firms in government contracts. UAE: difficult to dismiss non-performing local employees; difficult to sell without a local partner; slow payments; and cumbersome dispute resolution mechanisms. Given the economic and governance challenges, recent political upheaval, and the MENA region's limited integration into world markets, policymakers, both domestically and internationally, have discussed how trade and investment could foster support for successful and stable democratic transitions. For example, President Obama said in his May 2011 speech on the region that, "just as democratic revolutions can be triggered by a lack of individual opportunity, successful democratic transitions depend upon an expansion of growth and broad-based prosperity." U.S. trade policy in the region is focused on using trade and investment to foster economic growth, promote greater economic reforms, provide support for successful and stable democratic transitions, and generally support U.S. foreign policy objectives. Such goals also fit into long-standing and overall U.S. trade policy goals of creating and sustaining U.S. jobs by opening international markets and through rules-based trade, as well as by monitoring and enforcing U.S. rights under trade agreements. Important exceptions to overall U.S. trade policy objectives in the region are Iran and Syria. There is broad international support, including from the United States, to support progressively strict economic sanctions on Iran to try to compel it to verifiably confine its nuclear program to purely peaceful uses. Likewise, the State Department has designated Syria as a state sponsor of terrorism, making Syria subject to a number of legislatively mandated penalties, including export sanctions and ineligibility to receive most forms of U.S. aid or to purchase U.S. military equipment. Should fundamental political change occur in Syria, Congress may revisit long-standing restrictions in consultation with the Administration. The United States uses policy tools to promote trade and investment, both with the MENA and globally, that may be grouped into two broad categories: (1) formal agreements and discussion frameworks to liberalize trade and investment and advance rules-based trade, such as free trade agreements and bilateral investment treaties; and (2) U.S. federal government programs that aim to encourage international trade and investment, such as export assistance and financing. Details on selected policy tools are provided in the text box below. The U.S. government has organized much of its trade policy response to the political change in the region through the MENA "Trade and Investment Partnership" (MENA-TIP). Announced by President Obama in May 2011, the objectives of the initiative are to facilitate trade within the region; promote greater trade and investment with the United States and with other global markets; and "open the door to willing and able MENA partners—particularly those adopting high standards of reform and trade liberalization—to construct a regional trade arrangement." Under this initiative, the United States has engaged primarily with Egypt, Jordan, Morocco, and Tunisia, focusing cooperation initially on investment, trade facilitation, support for small- and medium-sized enterprises (SMEs), and regulatory practices and transparency. The United States also has engaged, to a lesser extent, with Libya. The Office of the U.S. Trade Representative (USTR), which formulates, coordinates, and implements U.S. trade policy, takes the lead on implementing the MENA-TIP initiative. Other government agencies, including the Departments of Commerce, State, and the Treasury, also participate in the initiative. Efforts under the MENA-TIP initiative include: Egypt: In January 2012, the United States and Egypt announced their intention to develop an "Action Plan" to enhance the bilateral trade relationship. The two sides have outlined possible steps to achieve objectives in three main areas. Actions to (1) boost exports could include enhancing Egypt's utilization of the Generalized System of Preferences and Qualifying Industrial Zones programs; (2) promote investment could include business missions and investment conferences, the development of a joint statement on investment and services, and technical assistance; and (3) strengthen Egypt's SME sector could include sharing best practices, establishing SME business centers in Egypt, and providing Overseas Private Investment Corporation financing to encourage lending by Egyptian banks to Egyptian small businesses. Morocco: In December 2012, the United States announced the completion of two bilateral agreements with Morocco to stimulate bilateral and regional trade and investment. The non-binding "Joint Principles for International Investment" is intended to signal commitment to adopt and maintain an open, stable investment environment. Similarly, the non-binding "Joint Principles for Information and Communication Technology (ICT) Services" is intended to demonstrate commitment to the global development of ICT services. Both sets of principles are modeled after U.S.-EU agreements. The United States and Morocco also are discussing a third, possibly binding agreement on trade facilitation, modeled after negotiations in the World Trade Organization. The agreement could include new commitments reflecting electronic and other developments in trade facilitation since the U.S.-Morocco free trade agreement (FTA) was signed in 2004. Jordan: In January 2013, the United States announced the completion of two bilateral agreements with Jordan, a "Joint Principles for International Investment" and "Joint Principles for Information and Communications Technology (ICT) Services." These agreements are the same as the December 2012 agreements signed between the United States and Morocco (discussed above). In addition, the United States and Jordan concluded an "Implementation Plan Related to Working and Living Conditions of Workers," which reaffirms Jordan's commitment to protect internationally recognized worker rights and to enforce its labor laws. Follow-up cooperation on labor issues is planned, including through the Labor Subcommittee established as part of the U.S.-Jordan FTA. The United States may negotiate similar sets of agreements on principles with other countries in the region, such as Egypt. Current U.S. trade and investment initiatives with MENA countries are the result of previous efforts undertaken to expand economic and political ties with the region. The Bush Administration in 2003 launched a plan to create a U.S. Middle East Free Trade Area (MEFTA) by 2013. MEFTA aimed to support economic growth and prosperity in the Middle East through liberalizing trade and investment regionally and bilaterally with the United States, as part of a broader plan to fight terrorism. The plan included actively supporting membership in the World Trade Organization (WTO) for countries in the region who were not yet members, negotiating formal bilateral investment treaties (BITs) with interested countries, and negotiating comprehensive free trade agreements (FTAs), among other provisions. The initiative, carried out over several years, fell short of creating a regional free trade area, but did result in the completion of new FTAs with four countries in the region: Bahrain, Jordan, Morocco, and Oman. FTAs were also explored with the UAE and Egypt. Before MEFTA, the only FTA that the United States had in the region was with Israel, completed in 1985. The United States currently has a network of trade and investment agreements in the MENA region that vary dramatically across countries ( Table 2 ). Most of the countries in the region are members of the WTO. The MENA countries that are not—Algeria, Iran, Iraq, Lebanon, Libya, Syria, and Yemen—have "observer status," which enables them to follow discussions on matters of direct interest to them. With the exception of Syria, all of these countries are in various stages of the process to join the WTO. The United States has supported some of these efforts, for example, providing technical support to Iraq, Lebanon, and Yemen for their WTO accession efforts. Presently, the United States has Trade and Investment Framework Agreements (TIFAs) with most MENA countries, and bilateral investment treaties (BITs) with five MENA countries: Bahrain, Egypt, Jordan, Morocco, and Tunisia. It also has FTAs with five countries in the region: Bahrain, Israel, Jordan, Morocco, and Oman. U.S. FTA negotiations with some MENA countries have experienced complications. For example, discussions on a potential FTA between the United States and Egypt were put on hold in 2005 due to concerns over election results and human rights. Issues of particular concern included questions about Egypt's willingness to negotiate a comprehensive FTA, the adequacy of Egypt's intellectual property rights regime, and import duties for certain apparel and textile products. As another example, negotiations between the United States and the UAE on an FTA were placed on hold in 2007, complicated by differing views on issues related to labor, market access for services, and government procurement. Elements of this network of trade agreements and policy initiatives serve as additional components of U.S. economic engagement with the MENA. For instance, in support of Tunisia's political transition, in October 2011, the United States and Tunisia "re-launched" talks under the TIFA, originally established in 2002. In March 2012, they met under the bilateral TIFA Council to explore options for bolstering bilateral and intra-regional trade and investment ties. The United States also seeks to enforce U.S. rights under existing trade and investment agreements with MENA countries. In addition to formal agreements to liberalize trade and investment and advance rules-based trade, the United States relies on federal programs to encourage and support international trade and investment. For the MENA countries, the most important of these programs include the Generalized System of Preferences (GSP); Qualifying Industrial Zones (QIZ); and export finance and other export promotion programs run by various federal government agencies. Certain elements of such programs are a part of the MENA-TIP Initiative. The United States grants preferential treatment to imports from certain developing countries under the GSP program. GSP beneficiary countries in MENA include Algeria, Djibouti, Egypt, Iraq, Jordan, Lebanon, Oman, Tunisia, the West Bank/Gaza Strip, and Yemen. Specifically, GSP allows certain products from designated developing countries to enter the United States duty-free. In order to be eligible for GSP, countries must comply with trade, investment, labor, and other conditions. The United States first authorized the program in 1974. In October 2011, President Obama signed legislation authorizing GSP through July 31, 2013 ( P.L. 112-40 ). Overall, GSP program utilization among beneficiary developing countries, including in the MENA region, remains low. In 2011, 0.8% of total U.S. imports from beneficiary developing countries in the MENA constituted goods entering the United States under GSP. One reason for this is that oil accounts for more than 70% of all MENA exports to the United States, but oil from most MENA countries is not eligible for GSP tariff benefits. Additionally, some of the region's other major exports, including apparel, iron, and steel, are goods that are excluded from preferential treatment under the GSP program. QIZs, established by Congress in 1996, permit the West Bank, the Gaza Strip, and qualifying zones in Egypt and Jordan to export certain products to the United States duty-free. Products eligible for duty-free export to the United States must be manufactured in the West Bank, the Gaza Strip, or specified designated zones within Jordan or Egypt and must contain a certain percentage of inputs from Israel. The purpose of the QIZ legislation is to support the Middle East peace process and to build closer economic ties between Israel and its Arab neighbors. U.S. imports under the QIZ programs in both Egypt and Jordan are dominated by apparel products. Jordan: Exports from Jordan to the United States under the QIZ program grew from about $159,000 in 1999 to about $95 million in 2011. However, the QIZ share of Jordan's total exports to the United States has declined in recent years, from a high of about 90% in 2002 to about 9% in 2011. This is because most imports from Jordan increasingly enter the United States duty-free under the U.S.-Jordan FTA rather than the QIZ program. Egypt: Exports from Egypt to the United States under the QIZ program have grown from about $266 million in 2005 to about $1 billion in 2011. The QIZ share of Egypt's total exports to the United States also has grown during this time period, from about 13% in 2005 to about 52% in 2011. Certain issues have emerged in the QIZ programs. For example, in Jordan's QIZ facilities, labor issues related to working conditions, particularly for migrant laborers, have emerged; the United States is working with Jordan to resolve these issues (see previous discussion on engagement with Jordan under the MENA-TIP initiative). The U.S. government plays an active role in promoting U.S. exports of goods and services by administering various forms of export assistance through federal government agencies. A combination of congressional mandates and executive branch actions has directed U.S. export promotion efforts. Most recently, such efforts have been focused through the National Export Initiative (NEI), the Obama Administration's plan to double exports to support U.S. jobs. The NEI does not have a specific emphasis on the MENA, but federal agencies' efforts to boost U.S. exports worldwide under the NEI, such as through more trade missions and greater levels of export financing, may nevertheless contribute to MENA-specific U.S. trade policy goals. Key export promotion agencies that may play a key role in promoting U.S. commercial ties with MENA countries include the Department of Commerce, Export-Import Bank (Ex-Im Bank), Overseas Private Investment Corporation (OPIC), and Trade and Development Agency (TDA). Taken together, these agencies have representation and/or provide support for U.S. exports and investments for most countries in the region (see Table 3 ). The specific countries in which these agencies provide support may vary according to factors such as their missions, mandated policy criteria, or availability of resources. The Department of Commerce, through its International Trade Administration (ITA), is the lead agency providing export promotion services for non-agricultural U.S. businesses. With respect to the MENA , ITA's major objectives are to expand U.S. exports, engage in commercial diplomacy (such as through government-to-government advocacy) in support of U.S. business interests, remove market access barriers, and promote and facilitate inward investment to the United States. ITA's activities include a focus on supporting SMEs in the region. ITA supports USTR's implementation of the MENA-TIP initiative. The U.S. and Foreign Commercial Service unit of the ITA has a domestic and international network of trade specialists, along with high-level representation at certain U.S. foreign missions, who provide export assistance and advocacy services to U.S. companies seeking foreign business opportunities. The Commercial Service has a presence in many MENA countries (see Table 3 ). At U.S. diplomatic posts where Commercial Service Officers are not present, U.S. Foreign Service Economic Officers of the State Department often conduct U.S. government commercial outreach functions, including through "partnership posts." Examples of ITA's activity in the region include the following: Trade missions: In March and April 2011, the Commercial Service led trade missions to Tunisia (focused on investment opportunities); Morocco (energy and port logistics projects); and Saudi Arabia (information technology sector). In 2012, the ITA led a trade mission to Israel (focused on the oil and gas sector). A 2013 trade mission is planned to Egypt and Kuwait, focused on the energy, infrastructure and safety, and security technology sectors. Trade shows: In January 2013, Commercial Service staff in the UAE supported 200 U.S. exhibitors at the "Arab Health 2013" trade show, the second-largest medical equipment sector show in the world. Business development c onferences: ITA assisted in organizing and promoting the first U.S.-Morocco Business Development Conference in December 2012, which included approximately 200 U.S. participants from the private sector. Advocacy: ITA is working to ensure that U.S. companies can compete for infrastructure projects in Qatar. The Ex-Im Bank provides direct loans, guarantees, and insurance to help finance U.S. exports when the private sector is unable or unwilling to do so, with the goal of contributing to U.S. employment. While MENA is not a specific focus for the agency, Ex-Im Bank authorizations for financing in the region increased markedly between FY2011 and FY2012, from $443 million to $8.9 billion. The share of Ex-Im Bank authorizations for the region also grew, from about 1% in FY2011 (of $32.7 billion in Ex-Im Bank financing worldwide) to about 25% in FY2012 (of $35.8 billion in Ex-Im Bank financing worldwide). The increase in financing for the region was driven in part by large authorizations to Saudi Arabia, including for U.S. exports for power and petrochemical projects (totaling $5.5 billion in FY2012), and the UAE, for U.S. exports of commercial aircraft and nuclear power plant components and services (totaling $3.3 billion in FY2012). OPIC provides political risk insurance and finance to support U.S. investment in developing countries, which may contribute to U.S. exports and employment. Governed by the Foreign Assistance Act of 1961 (P.L. 87-195), as amended, OPIC's activities are intended to support U.S. foreign policy goals. In FY2011, OPIC committed $108.7 million for new investment projects in MENA countries, close to 4% of OPIC's commitments for new investment projects worldwide in that year ($2.8 billion). The largest destinations for new OPIC commitments in the region were the West Bank and Gaza Strip ($40 million), followed by Iraq ($20.5 million) and Jordan ($3.2 million). In FY2011, OPIC's portfolio exposure in MENA totaled $2.6 billion, close to one-fifth of OPIC's total exposure worldwide in that year ($14.5 billion). OPIC's support in the MENA historically has focused on four key areas: support for SMEs, infrastructure development (including housing, energy, and telecommunications), agriculture and food security, and humanitarian assistance. In response to the political change in the region, OPIC has targeted up to $3 billion in support of investment in the region, based on two separate announcements by the Administration: In March 2011, Secretary of State Clinton announced that OPIC would provide up to $2 billion in financial support "to catalyze private sector development" in the region to spur economic growth and job creation. Eligible countries include Egypt, Tunisia, Morocco, Iraq, Jordan, Lebanon, and the Palestinian Territories (and potentially Algeria, Oman, and Yemen). The initiative aims to prioritize investments in SMEs, infrastructure (especially renewable resources), and other key sectors. It will also include "fast-track" approval, to ensure "rapid deployment" of capital, while maintaining "OPIC investment policy standards" related to the environment and worker rights. In May 2011, President Obama announced that OPIC would provide up to $1 billion in financing to support infrastructure and job creation specifically in Egypt. Following the 2011 announcements, OPIC approved $500 million in lending to Egypt and Jordan ($250 million to each country) to support small businesses in those countries. Under the facility, OPIC will guarantee loans by local banks in Egypt and Jordan to small businesses, microfinance institutions, non-banking financial institutions, and other approved borrowers. OPIC is collaborating on the loan guarantee facility with the U.S. Agency for International Development (USAID), which will provide grant funding and technical assistance to the initiative. The Egypt loan guarantee facility currently is not operational; the U.S. project sponsors reportedly are awaiting the required permits from the Egyptian government. In comparison, implementation of the Jordan loan guarantee facility reportedly is further along. TDA, authorized under the Foreign Assistance Act of 1961, as amended, operates under a dual mission of promoting economic development and U.S. commercial interests in developing and middle-income countries. TDA connects U.S. businesses to export opportunities for priority development projects by funding feasibility studies, pilot projects, reverse trade missions, and other activities. In some cases, TDA projects can lead to follow-on financing by OPIC and Ex-Im Bank. The Middle East is one of TDA's major focus areas, and TDA has identified Egypt and Morocco as among 18 "key markets" in which it will focus its programs in FY2013. TDA projects span sectors such as transportation and trade logistics, ICT, energy supply, and water supply management. In FY2012, TDA program funding for the region totaled $5.6 million and constituted about 13% of worldwide TDA funding ($43.9 million), similar to FY2011. Examples of projects include: In September 2012, TDA concluded two grant agreements to expand Egypt's information communication technology (ICT) infrastructure, one for technical assistance to support implementation of an integrated airport ICT system in Cairo, Egypt ($622,225) and the other for a feasibility study to support building a data center in Katameya, Egypt ($351,000). In June 2011, TDA sponsored an Egypt: Forward initiative, bringing together 250 U.S. company representatives and 50 Egyptian public and private sector leaders in the energy, ICT, transportation, and agribusiness sectors, in an effort to foster greater commercial and economic ties. Government initiatives that foster U.S. private sector trade and investment in MENA countries may be attractive policy options compared to others under discussion, such as debt relief and foreign aid, in a time of tight U.S. budget constraints. They also may provide new opportunities for U.S. businesses overseas and generate stronger economic growth. However, the effects of trade and investment initiatives may be borne out over the long term, and they may not provide immediate economic relief. A range of potential options—at the unilateral, bilateral/regional, and multilateral levels—are available to Congress, as well as the executive branch, for increasing U.S. trade and investment ties with countries in the MENA region, should there be interest in doing so. This section analyzes policy options for increasing U.S. trade with and investment in MENA economies. Congress could consider a number of unilateral trade policy tools to support and expand U.S. economic relations with countries in transition and other economies in the MENA region. Such policy tools constitute non-reciprocal trade benefits that would not necessarily require negotiations with MENA trading partners, and thus might be easier to implement in the short term. Countries that receive such trade benefits often have to meet certain criteria (such as worker rights and intellectual property protection requirements) in order to be designated as beneficiaries and to maintain such status. Thus, the U.S. extension of non-reciprocal trade benefits to MENA countries may provide a mechanism to encourage improvement on potential issues of concern. Trade preference programs: The U.S. government could work with MENA governments to increase their use of existing trade preference programs. For example, under the MENA-TIP initiative, the U.S. government is pursuing efforts to expand Egypt's utilization of the GSP program. Additionally, Congress could revise provisions of the GSP program to facilitate and expand use by MENA beneficiary countries, such as by expanding product coverage. Such issues could be examined in the context of possible debate in the 113 th Congress on extending the authority of the GSP program, which currently expires July 31, 2013. Congress also could create a regional trade preference program for the MENA region using existing agreements elsewhere as possible models. Currently, Congress has established five regional or targeted trade preference programs: (1) the Andean Trade Preference Program; (2) the Caribbean Basin Economic Recovery Act (CBERA); (3) the Caribbean Trade Partnership Act (CBTPA); (4) the African Growth and Opportunity Act (AGOA); and (5) the Haitian Opportunity through Partnership Encouragement (HOPE) Act. QIZ program: Congress could consider revising the QIZ program. One option, as currently being discussed by the U.S. and Egyptian governments, could be to expand existing QIZs in Egypt by approving additional zones in these countries. Another option may be to encourage a MENA-wide QIZ, or create QIZs in other countries. Egypt and Jordan were targeted initially for the QIZ program, because they were two Arab countries that had signed peace treaties with Israel. Proposing new Israeli content requirements for QIZ programs may draw criticism from groups opposed to trade with Israel in some MENA countries. Export finance and promotion programs: Congress could consider boosting U.S. export assistance, financing, and other efforts targeted toward the MENA region, or encouraging the executive branch to do so. For instance, with the end of U.S. combat operations and the formation of a governing political coalition in Iraq, economic development in that country could arguably represent export and investment opportunities for U.S. businesses in areas such as transportation and infrastructure, which could require U.S. export financing and political risk insurance. As another example, assuming the political situation in Libya stabilizes, commercial opportunities may emerge in areas such as energy, housing, and infrastructure. U.S. exporters and investors may benefit from federal assistance in pursuing such opportunities. Bilateral and regional policy options also may present avenues for congressional efforts to facilitate U.S. trade and investment with MENA partners. Initiatives for trade and investment agreements may be viewed as longer-term policy options, given the timeframes most agreements take to finalize and the readiness of trading partners to negotiate specific commitments. However, the broader scope of most agreements creates opportunities to affect multiple sectors, foster important economic and governance reforms, and support greater regional integration. To reduce and eliminate tariff and non-tariff barriers to U.S. exports, trade negotiations would allow the United States to gain greater market access to MENA countries, which could assuage U.S. political opposition from import-sensitive sectors of the economy. On the other hand, increased U.S. and other foreign import penetration of regional economies may be opposed by regional economic actors seeking protection from international competitors. In the past, Middle East countries have pursued FTAs with the United States in part to help lock in and advance domestic economic reforms and diversify their economies by building economic ties with the United States, among other objectives. Launching and re-launching TIFAs: The United States has TIFAs with most "developing countries" in the MENA region, Iran and Syria notwithstanding. In 2011, the United States re-launched discussions under the 2002 TIFA with Tunisia to support bilateral trade and investment and regional economic integration. In the same vein, the United States could re-launch TIFAs with other MENA countries. One candidate could be Egypt, in order to reinvigorate potential FTA discussions, although it is worth noting that the United States and Egypt conduct trade and economic dialogues through other mechanisms as well. Negotiating new trade and investment agreements, bilaterally or regionally: Longer-term, the United States could choose to focus its negotiations on trade and investment agreements with selected countries currently undergoing political transitions, such as Egypt or Tunisia. According to some experts, expanding the U.S. partnership with Egypt through an FTA could help to promote economic development, support political reform, contribute to rising living standards for Egyptians, and serve as an incentive for Egypt to play a constructive role in the region and strengthen its ties with economic partners. An FTA with Egypt could also potentially advance other reforms, such as those related to transparency, governance, regulatory standards, and privatization that support economic growth more broadly. However, it is worth noting that under a potential U.S.-Egypt FTA, economic benefits of greater trade and investment for Egypt likely would occur in the longer term; they would not necessarily help to directly address Egypt's short-term economic problems, such as pressures on the country's public debt. In addition, there is concern that, unless complementary reforms are undertaken, the benefits of an FTA may be limited to a narrow section of Egyptian society, and not contribute to general improvement of Egypt's economic conditions and living standards. Some industries, firms, and workers could be adversely affected if increased foreign competition results from an FTA or if particular provisions of the FTA disadvantage their interests. Separately, the United States could focus on countries that currently are not undergoing political transitions. For example, the United States could renew FTA negotiations with the UAE. Additionally, the United States may consider negotiating regional investment and trade agreements, in order to bolster regional economic ties in addition to U.S.-MENA trade and investment. Negotiating new FTAs may be complicated by the fact that Trade Promotion Authority (TPA) expired in 2007. TPA is the authority Congress grants to the President to enter into certain FTAs and to have their implementing bills considered under expedited legislative procedures, provided they meet certain statutory obligations in negotiating them. The President could request and the 113 th Congress could consider the renewal of TPA. Negotiating new BITs may have more momentum given the Obama Administration's conclusion of its review of the U.S. Model BIT in April 2012. The United States negotiates BITs on the basis of a model, which has been subject to periodic reviews and revisions. The Administration is resuming BIT negotiations previously halted during the Model BIT review. Updating existing FTAs and BITs: Congress could consider updating the U.S. BITs with Egypt and Tunisia. Since these BITs came into effect, the U.S. Model BIT framework has been revised periodically, most recently in 2012. The Model BIT also serves as the template for investment provisions in current U.S. FTAs. Congress could also consider revising and "updating" the U.S.-Israel FTA. The U.S.-Israel FTA, signed and entered into force in 1985, was the first FTA ever entered into by the United States. Since then, the scope of issues discussed in trade negotiations has expanded. For example, the U.S.-Israel FTA does not contain provisions on electronic commerce and technical barriers to trade, has limited coverage of services and IPR, and has had limited effect on trade in agricultural products. Conducting o versight of existing FTAs: Congress could examine existing U.S. FTAs in the region. In particular, it may be interested in examining how well they have achieved their objectives, and their impact on increasing and diversifying bilateral trade flows. Congress additionally has multilateral tools at its disposal to foster economic ties with MENA countries. Trade policy at the multilateral level may yield benefits, such as requiring countries to adopt international rules, not available through unilateral or bilateral actions. Congress could encourage the United States to intensify existing efforts to support WTO accession for MENA countries such as Iraq, Libya, and Yemen, and provide technical assistance for countries working towards WTO accession. The United States could work with countries to fully implement their WTO accession commitments, such as through enhanced trade capacity building efforts. The United States could also cooperate more closely with the EU and other countries in international forums. In May 2011, the G-8 launched the "Deauville Partnership with Arab Countries in Transition," a forum for coordinating assistance to "transitioning" MENA countries, currently defined by the Partnership to include Egypt, Jordan, Libya, Morocco, Tunisia, and Yemen. The Partnership also includes the G-8 countries, other countries from the region (Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, and Turkey), and several international financial institutions (IFIs). The Partnership is pursuing a number of policy tools to bolster sustainable, inclusive, growing economies in the region, and could be a fruitful avenue for coordinating with other countries on efforts to increase trade and investment with MENA countries. The current MENA-TIP initiative can be viewed as part of the U.S. contribution to international efforts under the trade and investment "track" of the Deauville Partnership. Congress may face a number of issues if it addresses policy options to facilitate greater U.S. trade and investment with the MENA region. First, some analysts question whether increased trade and investment can support democratic political transitions. Current discussions for increasing trade and investment with the MENA region are rooted in the belief that these policy tools will bolster economic growth and help support the democratic political transitions occurring in the region. However, the link between trade and investment, on the one hand, and democracy, on the other, is contentious. Some experts argue that trade and investment promote governance; increase the size of the middle class; facilitate the flow of ideas; and develop institutions related to protection of property and rule of law, which in turn, it is argued, create popular pressure for democracy. Additionally, some analysts argue that pursuing FTAs and BITs in particular with various MENA countries could help anchor reforms, such as related transparency, governance, and rule of law, that can provide foundations for democratic political transitions and institutions. Others argue that the links between trade, investment, and democracy are not straightforward. They argue that governments can gain legitimacy by opening their economies and securing economic growth, without reforming or opening politically. They cite a number of economies that have opened to the world economically while sustaining governments that are not fully democratic; China is often cited as an example in this context. This raises questions about whether trade and investment could be effective in helping Arab countries transition to more democratic political systems. Additionally, some analysts question whether protestors in various MENA countries want greater trade and investment ties. In Egypt, for example, public opinion indicates that many believe that the economic liberalization pursued under the old regime enabled corruption and exacerbated economic inequality. Second, questions abound about whether U.S. trade policy tools could be effective in overcoming the obstacles to greater U.S. trade and investment in the MENA region. Some analysts question whether trade and/or investment liberalizing agreements will result in increased U.S. trade and investment to the MENA region. According to the U.S. Commercial Service, some of the greatest obstacles to U.S. firms hoping to do business in MENA countries relate to corruption, transparency, governance, rule of law, and bureaucratic red tape, among others. Some argue that completing FTAs or BITs, or encouraging countries to join the WTO, could help MENA governments push through reforms that address many of these impediments. Others express concern that even if such reforms are pursued in the context of FTA, BIT, or WTO negotiations, there could be implementation problems, and that U.S. trade and investment with MENA countries and the region could remain limited. Additionally, a number of factors affect investment and trade flows beyond government policies, including market size, economic growth, labor force, endowment of natural resources, political stability, and infrastructure, among others, which raise questions about how effective policy options could be at dramatically increasing trade and investment flows. In addition, the capacity of federal export finance and other promotion agencies to support U.S. trade and investment in the MENA may be limited. For instance, while Ex-Im Bank and OPIC could work to incentivize exports to the MENA region, U.S. firms' interest in doing business in the MENA region will drive their demand for Ex-Im Bank and OPIC financing. Third, if an agenda of increased trade and investment is further pursued, a host of questions arise that may be considered in implementing this policy agenda. For example: Timing: The political situation in some MENA countries is highly uncertain. Should the United States wait to enhance its trade and investment ties in the region until the political situation stabilizes? Or should the United States continue to enhance trade and investment ties sooner, in order to facilitate political outcomes it views as favorable? If the United States delays engagement, will others—such as EU countries, Turkey, and China—take advantage of business opportunities in the region sooner, depressing opportunities for U.S. businesses? Region-Wide Policies vs. Country-Specific Policies: Current U.S. trade and investment policy is quite diverse across countries in the MENA region, and the MENA economies themselves are quite heterogeneous. Should the United States pursue a region-wide agenda of increasing trade and investment, while tailoring policies to fit the individual needs of specific countries? For example, some argue that Egypt and Tunisia are better positioned than, say, Libya, to enter FTA negotiations with the United States, because they are members of the WTO and have BITs with the United States, while Libya only has WTO observer status and is experiencing political upheaval. While WTO accession is not explicitly required for the United States to negotiate BITs or FTAs with a country, U.S. trade agreements generally build on WTO commitments, and WTO membership is viewed as a stepping stone to a FTA. Cooperation with the EU: In his May 2011 speech on MENA, President Obama suggested that U.S. efforts to increase trade and investment in the region would be pursued cooperatively with the EU. Such cooperation efforts are underway, and questions arise about the scope and depth of the cooperation. In the past, the United States and the EU have adopted different approaches in the MENA. For example, under the MEFTA effort during the Bush Administration, the United States negotiated comprehensive FTAs with individual countries with the goal that such efforts would expand into a region-wide free trade area agreement. In contrast, the EU adopted a more regional approach to economic integration from the start. Other factors may complicate cooperation. For example, the United States and the EU have differing views on regulatory policy and standards, and some view U.S. and EU businesses as competitors in the MENA region. Finally, some of these countries already have strong economic ties with the EU and want to develop closer economies ties with the United States, as was the case with the U.S.-Morocco FTA. U.S.-EU cooperation on the MENA region could expand should the United States and the EU launch negotiations on a Transatlantic Trade and Investment Partnership. As an example of the potential for future collaboration, the "Joint Principles for International Investment" and the "Joint Principles for Information and Communication Technology (ICT) Services"—agreed to bilaterally by the United States with Morocco and Jordan—were modeled after U.S.-EU agreements. Congressional Interest: In October 2011, Congress approved the implementing legislation for FTAs with Colombia, South Korea, and Panama, years after the agreements were formally negotiated. Will their approval provide momentum for further FTA negotiations, or does their lengthy approval point to the polarization in Congress regarding future FTAs? How should Congress prioritize FTAs in the MENA region with ongoing trade negotiations, including with regards to the Trans-Pacific Partnership (TPP) and a potential Transatlantic Trade and Investment Partnership? How should Congress prioritize countries within the MENA region for FTAs? Trade promotion authority (TPA) likely will play a major role in any future FTA negotiation with MENA countries. U.S. trade policy responses to political change in the MENA can be characterized as incremental and long-term—focused on creating "building blocks" that could potentially lead to larger-scale trade and investment agreements in the future. For example, present USTR engagement with Egypt is centered on making the country's business environment more conducive to trade and investment. Such efforts could pave the way for FTA negotiations in the future, though this is not necessarily a current goal for the Administration. Going forward, any trade policy agenda pursued by U.S. policymakers in the region could be affected by a host of external factors, including the following: U.S. trade and investment relationships in the region are diverse, resulting in different "starting points" for engagement. At one end of the spectrum, Libya is not yet a member of the WTO, which many view as a starting point for further U.S. engagement. At the other end of the spectrum, the United States has well-established trade relationships with Morocco and Jordan—which include a bilateral FTA with each country—that serve as a foundation for the recent bilateral agreements on principles on investment and ICT services under the MENA-TIP. Countries in the region have markedly diverse economic situations and priorities. Some countries, such as Egypt, are more focused on maintaining macroeconomic stability over the short term, delaying longer-term initiatives, including trade and investment liberalization. Other countries with more stable economic conditions may be able to engage more effectively with the United States on trade policy issues. Ongoing political uncertainty in some countries can make it challenging to negotiate on trade policy—or even, more fundamentally, know with whom to negotiate. For instance, despite the long-standing U.S.-Egyptian bilateral relationship, it is difficult for U.S. trade negotiators to know with whom to negotiate on the Egyptian side, given the fluid nature of Egypt's political situation. As another example, political uncertainty also can make it more difficult for Foreign Commercial Service staff to operate in the region. In contrast, Tunisia's relatively "smoother" transition has facilitated U.S. engagement with Tunisia under the re-invigorated TIFA process. U.S. trade policy responses are affected by the demand of U.S. companies for doing business in certain areas of the world. While agencies such as OPIC, Ex-Im Bank, and TDA can choose to make supporting U.S. commercial activity in the region a top priority and make resources available for this purpose, U.S. businesses will take advantage of the financing and funding only if they have sufficient commercial incentives to do so. Depending on the type of trade policy responses pursued in the region, questions may arise about the effectiveness of policy tools used to promote increased trade and investment, as well as their impact on political transitions, and how quickly their benefits would be borne out. Additionally, how these policies are designed could have substantial implications for U.S. interests. However, in a constrained budgetary environment, trade and investment may be attractive policy tools compared to other options, such as foreign aid, for supporting economic development in MENA countries—as well as encouraging transparency, governance, and other reforms in the region—while also potentially creating new economic opportunities for U.S. businesses.

U.S. interest in deepening economic ties with certain countries in the Middle East and North Africa (MENA) has increased in light of the political unrest and transitions that have swept the region since early 2011. Policymakers in Congress and the Obama Administration are discussing ways that U.S. trade and investment can bolster long-term economic growth in the region. In May 2011, President Obama announced the MENA "Trade and Investment Partnership Initiative" (MENA-TIP), through which various federal government agencies are engaged in efforts to enhance trade and investment with the region. Such activities are in line with long-standing U.S. trade policy goals and measures. Some Members of Congress have called for deeper economic ties with MENA countries undergoing political change. However, continued political uncertainty and changing security environments in the region have prompted greater scrutiny of U.S. engagement. This report analyzes policy approaches that Congress might consider concerning U.S.-MENA trade and investment. MENA Economies and Integration in the Global Economy Economic performance in the MENA as a whole lags behind other regions in the world in terms of gross domestic product (GDP) per capita (living standards), employment, and economic diversification, despite the fact that several MENA countries are major producers of oil and natural gas. Limited integration in the global economy is frequently cited as an obstacle to the region's overall economic development. MENA's trade with the world is concentrated in a small number of products (oil exports and imports of manufactured goods) and among a small number of trading partners (particularly the European Union). Tariffs also remain high in some MENA countries, and intra-regional trade and investment flows are relatively low. With regard to the United States, the MENA region accounts for less than 5% of U.S. total trade and 1% of U.S. foreign direct investment (FDI) outflows. U.S. businesses face a number of non-tariff barriers, such as lack of transparency, bureaucratic red tape, corruption, weak rule of law, and differences in business cultures. Policy Approaches and Challenges Current U.S. trade and investment policies with MENA countries are quite varied. The United States has free trade agreements (FTAs) with five MENA countries (Bahrain, Israel, Jordan, Morocco, and Oman), but more limited ties with other countries, such as Libya, which is not a member of the World Trade Organization (WTO). Important exceptions to overall U.S. trade policy objectives in the region are Iran and Syria, which are both subject to trade sanctions. Analysts disagree about the merits of deepening U.S. trade and investment ties with the MENA region. Some analysts maintain that new trade and investment agreements help anchor domestic reforms, such as in governance and rule of law; support sound economic growth; are a cost-effective way to support transitioning countries in an environment of budgetary constraints; and could promote U.S. exports and investment. Others argue that the empirical record between economic openness and democracy is weak and that it is unclear whether protesters in various Arab countries favor more economic liberalization, which they sometimes associate with corruption, inflation, and inequality. They also argue that political uncertainty in the region, such as the fluidity of Egypt's political transition, merits a "wait-and-see" approach before proceeding with substantial policy changes. The 113th Congress could consider a number of approaches regarding U.S. trade and investment with the region, including maintaining the status quo until the impact of the political changes in MENA countries is clear; providing technical assistance to countries working towards WTO membership, as well as trade capacity building support to countries working to implement WTO commitments; negotiating new trade and/or investment agreements with countries in the region that do not already have them, such as Egypt and Tunisia; utilizing existing trade frameworks for greater dialogue and progress on trade and investment and encouraging regional integration; reauthorizing existing trade preferences through the Generalized System of Preferences (GSP) program or creating a U.S. trade preference program, differing from GSP, that grants preferential market access to exports from MENA countries; and increasing assistance from federal export and investment promotion agencies to the region. In considering such approaches, some questions that could arise include Should the U.S. government promote expanded trade and investment in the near term in order to support democratic transitions, or should it wait until the political situation stabilizes in various countries? To what extent should the United States balance a regional approach of increased trade and investment with more tailored policies to the specific needs of individual countries? To what extent should the United States cooperate with the European Union or others on trade and investment in the MENA region? Are existing U.S. frameworks and agreements on trade and investment with MENA countries benefitting the region, and achieving the intended objectives? What lessons can be learned from past U.S. efforts to promote trade and investment? How effective are current efforts to expand trade and investment under the MENA-TIP initiative?

As the 80 million baby boomers approach retirement, many are concerned they will not have sufficient savings to sustain their standard of living throughout retirement. Few, however, have focused on another risk to their retirement security—the potential cost of financing often expensive long-term care services. The cost of long-term services and supports (LTSS) for the majority of older Americans may far exceed their financial resources in the future. Private long-term care insurance (LTCI) is available to provide some financial protection for persons against the risk of the potentially high cost of LTSS. To date, however, only about 1 in 10 individuals aged 55 and older own a LTCI policy. This report discusses the role of LTCI in financing LTSS and current trends in the LTCI industry; factors affecting the demand for LTCI, including cost and complexity of the product and adequacy of consumer protections; and legislative options available to improve affordability, strengthen consumer protections, and expand consumer education. Services provided by a LTCI policy may include a broad range of services and supports to help people with a limited capacity for self-care due to a physical, cognitive (such as Alzheimer's disease), or mental disability or condition. Health care and LTSS are different. Health care services typically treat specific acute and chronic medical conditions in a medical setting by a medical professional. LTSS, on the other hand, include a wide range of health and health-related support services provided on an informal or formal basis to people who have functional disabilities or cognitive impairments over an extended period of time with the goal of maximizing their independence. Unlike medical treatments, LTSS primarily assist individuals in their day-to-day activities. These "activities of daily living" (ADLs) include bathing, dressing, eating, toileting, and transferring (from a bed to a chair or vice-versa). Generally, LTCI policyholders are eligible to begin to receive benefits if they have at least two of the ADL limitations. LTCI policies may be sold to an individual directly or to a group as part of an employer-sponsored policy. The premiums charged for LTCI vary by age of purchase, with higher premiums charged to those purchasing at older ages. This age differential reflects the higher risk of needing LTSS at advanced ages. One study has estimated that over two-thirds of individuals who turn 65 years old will require LTSS at some point before they die. Although private LTCI is available to finance LTSS costs, only about 6% of LTSS spending was paid by LTCI in 2010. Nearly half of LTSS spending (nearly 43%) was financed by the Medicaid program, which is funded jointly by the federal government and states. Medicaid is intended to provide a safety net and is not available to everyone. To be eligible, individuals must meet certain functional criteria as well as state-specified income and asset thresholds. Medicare (which currently provides health care to older Americans and certain disabled individuals) financed about 22% of LTSS, but these funds were predominantly for post-acute care for short-stays in a skilled nursing home following hospitalization or for skilled home health care. Individuals who seek paid LTSS but do not qualify for public funding or do not have private LTCI must pay for these services directly out-of-pocket. In 2010, about 16% of LTSS spending was paid out-of-pocket. The magnitude of out-of-pocket costs will depend on the setting, intensity (including the skill level of the provider), and the duration of LTSS. For example, the setting of care can include care provided in one's own home, in a community-residential care setting such as an assisted living facility, or in an institutional setting such as a nursing home. For those receiving care at home, in 2012, the average cost of personal unskilled care (such as bathing, dressing, and transferring) was $19 an hour. Studies have found that individuals use on average about 18.4 hours a week of informal care, which would result in an annual cost of about $18,179 a year in 2012. The annual cost of care will also vary by intensity and duration of care, with individuals receiving care in an institutional setting paying more than those staying at home. For example, assisted living facilities that provide hands-on personal care for those who are not able to live by themselves (but do not yet require constant care provided by a nursing home) cost on average $39,600 annually in 2012. Nursing home care, on the other hand, generally costs more in that it provides LTSS assistance 24 hours a day. In 2012, the annual cost of a nursing home stay was $73,000 for a semi-private room and $81,030 for a private room. These estimates are national figures and can vary widely by geographic region. The private LTCI market has undergone significant changes in the past three decades. The employer-sponsored market has grown as a share of total LTCI sales and the overall market has become more concentrated in terms of the number of companies selling the product. Further, a number of newer product lines have been introduced that combine LTCI with other retirement and life-insurance products. The following discussion provides greater details on these trends. There are currently between 7 million to 9 million Americans with an active LTCI policy (often called "in-force"). The growth in the number of LTCI policies in both the individual and group markets increased at double-digit rates from 1995 to 2002 before slowing in more recent years (see Figure 1 ). The composition of the market has also changed as employer-sponsored LTCI has grown as a share of the total LTCI market. In 2011, employer-sponsored LTCI represented about one-third of all active policies, compared with less than 3% in the mid-1990s. Employer-sponsored LTCI is distinct from employer-sponsored health insurance in that employers typically do not contribute to LTCI premiums. Rather employer-sponsored LTCI provides the advantage of a larger risk pool and generally lower premiums than if LTCI is purchased in the individual market. Among employers offering LTCI, the federal government is the largest employer offering group LTCI. Over the past decade, the number of companies selling LTCI has declined significantly. Between 1987 and 2002, more than 100 companies were selling LTCI. A downturn in sales beginning in 2003 prompted many insurers to exit the market or merge with other firms. As a result, the LTCI market has become much more concentrated, with the top 10 LTCI companies producing 88% of new sales in 2010. This number has fallen further in recent years. Since 2010, a number of well-known companies have exited the LTCI market. MetLife has announced that it has discontinued new sales of LTCI effective December 30, 2010. MetLife assured existing policyholders that their coverage will continue without any interruptions or changes. In February of 2011, Unum Group announced it will no longer sell group policies. In March of 2011, Prudential announced it will no longer sell LTCI policies to individuals and will instead focus on the group market. The consolidation of the LTCI industry reflects several factors, including high administrative expenses for policies relative to premiums, lower than expected terminations (i.e., lapse rates) that increased the number of people likely to submit claims, low interest rates that reduced the expected return on investments, and new government regulations limiting direct marketing by telephone. A number of legislative changes have enabled insurers to begin to develop hybrid products that combine LTCI with either an annuity or a life insurance product. The Pension Protection Act of 2006 ( P.L. 109-280 ) simplified tax rules regarding combination products (effective in 2010) and added a tax provision specifying that proceeds from an annuity can be used tax-free to purchase an LTCI policy. LTCI policies can also be combined with a life insurance policy through an accelerated death benefit rider. Circumstances that trigger these accelerated benefits include diagnosis of a terminal illness or a medical condition that would drastically shorten the policyholder's life span, the need for LTSS, or permanent confinement to a nursing home. Because these newer hybrid policies are just entering the market, it is too early to tell their impact on demand for LTCI in the future. In addition to the above-mentioned hybrid LTCI policies, there is also a LTCI product that is linked to Medicaid eligibility. The Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ) established the Medicaid Partnership Long-Term Care Insurance Partnership Program (hereinafter referred to as the Partnership Program). Individuals who purchase certain LTCI policies may qualify for Medicaid without the same means-testing requirements that other applicants must meet. Generally, Partnership Program purchasers would seek Medicaid for extended coverage of LTSS after their LTCI benefits have been exhausted. For these individuals, Medicaid means-testing requirements are relaxed at (1) the time of application to Medicaid, and (2) the time of the beneficiary's death when Medicaid estate recovery is generally applied. , The original Partnership Program was established in four states: California, Connecticut, Indiana, and New York in the early 1990s. The Omnibus Budget Reconciliation Act of 1993 (OBRA 93, P.L. 103-66 ) prohibited other states from implementing the program. However, the Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) lifted this prohibition and allowed any state with a Secretary-approved Medicaid state plan amendment to operate a Partnership program. As of July 2011, 40 states, including the 4 original partnership states, elected to adopt a LTCI Partnership program. Ten states have yet to adopt a LTCI Partnership Program. There are about 641,000 Partnership Program policies in force, accounting for 9% of all LTCI policies in force. After 15 years of strong growth, demand for private LTCI has slowed considerably since 2004. In 2008, the latest year in which demographic data are available, about 11% of the population aged 55 and older and 12% of the population aged 65 and older owned a LTCI policy. Low demand for this product has occurred despite enhanced tax incentives (mainly at the state level), increased emphasis on consumer protections, and the enactment of a private LTCI program for federal employees. The factors affecting the demand for LTCI can be viewed by comparing two key cohorts: those under the age of 65 and those aged 65 and older. For those under the age of 65, annual LTCI premiums are generally lower. However, this cohort also faces competing demands of the cost of raising families and saving for retirement. Many do not fully understand their future risks or coverage options for LTSS. According to a survey by America's Health Insurance Plans, 28% of non-buyers believe Medicare will cover their LTSS needs, and another 22% do not know who would pay. Although Medicare does cover up to 100 days of care in a skilled nursing facility, and limited home health care, it does not cover longer stays in a nursing home or personal home care. By the time individuals reach the age of 65 or so, if they have not sufficiently planned for their LTSS needs, the cost and complexity of the LTCI policies become a major barrier to purchase. In addition, increased concerns have arisen about the adequacy of consumer protections for LTCI as a result of inconsistencies in LTCI laws and regulations across the states. More recently, adverse publicity about potential problems with premium stability, claims denials by LTCI companies, and heightened concerns about the future solvency of LTCI companies in the current economic environment have further dampened demand. The following section discusses these issues in greater detail. The cost of LTCI has been cited as a major deterrent to purchasing the product. Among potential buyers of LTCI who choose not to purchase a policy, 87% cite cost as a "very important" or "important" reason for their decision. Over the past decade, LTCI premiums have increased significantly above the overall rate of inflation. As shown in Table 1 , between 1995 and 2010, average age-adjusted premiums have increased 71% (above the overall rate of inflation) for individuals aged 55 to 64 and by 64% for those aged 65 to 69, growing at an annual average rate of 3.7% and 2.8% (respectively) over and above the general rate of inflation. Higher average premiums reflect increased demand for more comprehensive benefit packages (including inflation protection) and higher daily benefit amounts. In addition, low rates of return on investments and under estimates of lapse (termination) rates have prompted insurers to raise premiums for both current and new policyholders. Although more comprehensive policies have raised annual premiums, they have also increased the complexity of the purchase decision. According to the America's Health Insurance Plans (AHIP) survey, 49% of those who did not buy an LTCI policy when given the opportunity stated that the policy options were "too confusing." Potential buyers must evaluate the many different possible combinations of product features available. Potential policyholders must decide the type of coverage, the dollar amount of coverage and annual inflation adjustments, the length or duration of coverage, and the waiting period (which is often referred to as the elimination period). Individuals must choose the type of services to be covered by a LTCI policy. Services covered under a LTCI policy may include care in a variety of settings, such as a nursing home or assisted living facility, or the individual's own home through home health services. Policies may cover respite care for caregivers, homemaker and chore services and medical equipment. Policies purchased in 2010 tend to be more comprehensive in terms of services covered and are most likely to cover both nursing home and home care services. According to AHIP, 95% of policies purchased in 2010 covered both nursing home and home care as compared with 61% of policies purchased in 1995 (see Table 2 ). Another factor affecting the cost and complexity of a policy is how much coverage should be purchased in terms of a daily benefit amount and whether to purchase inflation protection. The dollar amount of the daily benefit is often initially chosen based on the current cost of services. But the decision about how much this daily benefit should be adjusted over time to reflect inflation is a more complicated one. Inflation adjustments (often called inflation protection) are important because a LTCI policy is often purchased 20 to 30 years before services are needed. Thus, a policy purchased today that pays a $150 a day benefit may not be sufficient given growth in the cost of future LTSS. To ensure that policies cover an adequate amount of services, most companies now offer inflation protection and most public awareness campaigns have urged individuals to purchase inflation protection. As a result of these efforts, policies purchased in 2010 are more likely to include inflation protection (see Table 2 ) as compared with those purchased in 1995. In terms of the type of inflation protection, companies offer both simple and compound inflation adjustments. Although both methods increase the daily benefit by a fixed percentage, they vary on which year the percentage is applied. Simple inflation adjustments increase annually based on a fixed percentage of the daily benefit amount calculated from the first year the policy is purchased , so annual adjustments are a fixed dollar amount. Whereas compound inflation adjustments increase the daily benefit amount annually based on a fixed percentage calculated from each previous year's daily benefit amount (see Figure 2 ), so the annual adjustments of the daily benefit amount increase over time. Once the policyholder chooses the type of inflation protection, he or she then must decide how much inflation-protection to purchase annually. In making this decision, one approach would be to rely on historical data. For example, since 2000, the price of nursing home care increased at an annual average rate of 4.3%. However, it is unknown whether these trends will continue in the future. Potential policyholders must decide whether they should choose inflation protection based on historical trends or choose a higher or lower rate based on expectations about the future. This decision affects both the complexity and the cost of the policy. The length of coverage (in years) of a LTCI policy is called the duration of the benefit . Deciding how much coverage to purchase further complicates the decision process. LTCI policies can cover two to five years of services and some policies can provide lifetime benefits. Although potential policyholders want to purchase a policy that may sufficiently cover future risks, most do not know what that risk may be because it varies widely across the older population. For example, researchers have estimated that, of those who turned 65 years old in 2005, approximately one-third will not require any LTSS over their remaining lifetime. At the same time, one in five will require LTSS for more than five years. The longer the duration of coverage, the higher the premiums. LTCI policies often have a waiting or elimination period that is the length of time between the onset of qualifying impairments and commencement of payment for LTSS. The elimination period is selected by the policyholder when he or she purchases the policy. This elimination period is conceptually similar to a deductible in a health care plan—the longer the elimination period the lower the cost of the policy, all other things equal. Policies purchased in 2010 tend to have a longer waiting ("elimination") period, as compared with 15 years earlier (see Table 2 ). Unlike other policy design features, a longer elimination period (holding other design features constant) can reduce premiums. In addition to the cost and complexity of products, there has been a growing concern that many LTCI policies do not have sufficient consumer protections. These consumer protections are important given that a LTCI policy is often purchased 20 years or longer before the actual benefit is used. This long-time horizon introduces a great deal of uncertainty regarding the nature of future benefits, long-run affordability of premiums for purchasers, and the financial stability of insurers. Many of the laws and regulations that have been established by federal and state governments attempt to address these issues. However, each state has its own set of laws and regulations and there is wide variation across states. State governments have primary jurisdiction for regulating the LTCI market. To do this, states have established laws and regulations for LTCI carriers and the products they sell and play an active role in verifying carriers' and products' compliance with these requirements. To help guide states in their LTCI oversight efforts, the National Association of Insurance Commissioners (NAIC) has developed a number of "Model Laws" and "Model Regulations" (hereinafter referred to as Model provisions), which provide recommended guidelines for state lawmakers and regulators to adopt. These Model provisions are updated periodically by the state insurance commissioners. Because each state ultimately establishes its own LTCI laws and regulations, state oversight requirements are not consistent across states, leaving gaps in consumer protections. According to the NAIC, all states, with the exception of Alaska, have adopted some components of the NAIC Model provisions, but there is wide variability in which provisions were adopted. Since 1996, the federal government has attempted to standardize these regulations at a national level for certain LTCI products. Federal law has included provisions for federal tax benefits and minimum consumer protection standards for purchasers of "tax-qualified" LTCI policies as authorized by the Health Insurance Portability and Accountability Act of 1996 (HIPAA, P.L. 104-191 ). HIPAA tax-qualified products must conform to most of the provisions in the 1993 NAIC Model Law and Regulations. These products are also required to offer (but not mandate) inflation protection. The Medicaid Partnership Program established under DRA (see discussion earlier about hybrid LTCI products) includes minimum consumer protection requirements for the LTCI plans sold under the Partnership Program as specified in the 2000 NAIC Model Provisions (see Table 3 ). In contrast to the HIPAA voluntary 5% compound inflation-protection requirement, the DRA provisions include a mandatory inflation-protection provision for certain age groups for the Partnership Program. DRA, however, does not specify the amount of inflation-protection that is required and instead leaves this decision up to the individual states. However, federal laws standardizing LTCI regulations have become outdated and do not include all of the relevant provisions of a specific NAIC Model. For example, neither the HIPAA tax-qualified policies or the Medicaid Partnership Program were ever updated to include the rate stability provisions in the NAIC 2000 Model. These federal laws also do not address recent concerns about the misrepresentation of LTCI by unqualified sales agents nor inappropriate denial of claims. The following section provides more detail about each of these issues. Generally, premiums for LTCI are lower when policies are purchased at younger ages. Yet, younger purchasers will also be paying premiums over a longer period of time and long-run stability of premiums is important to ensure their affordability in the future. Although insurers are prohibited from increasing an individual's premium based on a change in the policyholder's circumstances (i.e., increased age or onset of disability), insurers, however, are still able to request permission from a state insurance commissioner to increase premiums for a class of insured. Comprehensive data on the extent of premium increases across all LTCI companies are not available. However, press reports suggest that major LTCI carriers have applied for or received approval for premium increases between 10% and 40% in one or more states. In addition, the Office of Personnel Management (OPM) announced that premium rates for current federal workers enrolled in the federal LTCI program who had purchased automatic compound inflation protection would increase 25% for most policyholders. These rate increases were a result of a new negotiated LTCI contract for federal workers that included a new benefit option with increased home health care reimbursements, new benefit periods, and higher daily benefit amounts. However, current enrollees who did experience premium increases were provided the opportunity to keep their current premiums substantially the same by making changes to their benefit package. Premium increases can be necessitated by inadequate medical underwriting, premiums that were initially set too low, or insufficient growth in reserves to cover future claims. Thus, premium or rate stability depends largely on the ability of insurers to adequately predict future claims. In addition, lower than predicted voluntary termination (lapse) rates and lower than predicted rates of return on investments have been cited as a key reason for the most recent round of increases. Initially, in 2000, the NAIC revised its model provisions to require companies to provide actuarial information to certify the adequacy of all proposed rates and to show that the vast majority of premium increases are devoted to paying claims. In addition, when premiums are increased, 85% of the increased portion of the premium must be available to cover claims. Further, the 2000 NAIC Model Act requires reimbursement of unnecessary rate increases to policyholders. Policyholders are also provided the option to escape the effect of rising rate spirals by being guaranteed the right to switch to another lower premium policy. Finally, the 2000 NAIC Model provisions authorized the commissioner to ban from the market place for five years companies that persist in filing inadequate initial premiums. But most states have not adopted the full NAIC Model language for premium stability. To address these concerns, the NAIC is currently re-evaluating its rate stability model language. Under the current model regulation an actuarial certification is required when companies submit a premium increase. Specifically, the NAIC model provision states that: "The initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium increases anticipated." The NAIC has recognized that there are potential problems with the "moderately adverse" language because there is no explicit definition of what this means. As a result, the interpretation relies on the judgment of the pricing actuary which makes it difficult to regulate, even for states with an actuary on staff. Regulators are poorly equipped to judge the reasonableness of the company's assumptions. To address these concerns, the NAIC is currently exploring various options to strengthen its rate stability standards including the development of a more concrete definition of "moderately adverse events." Following the 1993 NAIC Model Act, there had been a concern that some private sector insurers and agents were inappropriately selling products to persons with low income and assets who may otherwise be eligible for public assistance under Medicaid. In other words, these LTCI policies would not be suitable for certain individuals given their circumstances. There was also a concern that individuals may not fully understand the future value of the benefits they purchase. To address these issues, the 2000 NAIC Model required insurers to develop and use suitability standards, and to train agents with respect to the standards. Both insurers and agents must ascertain an applicant's ability to pay and his or her goals and needs through the use of a personal worksheet. There are a number of disclosure requirements related to suitability, including the requirement that the agent and insurer must distribute to the potential policyholder a brochure on the "Things to Know Before You Buy." Since then, the 2006 NAIC Model added provisions concerning training of insurance agents to address concerns about suitability. The 2006 Model also includes a new section on producer (insurance agent) training, which requires producers to complete a one-time eight-hour training course before selling LTCI. According to the NAIC, as of November 2008, 27 states have some form of agent's licensing requirements in their state legislation, but not all of them comply fully with the 2006 NAIC Model Act language. There has been anecdotal evidence that some LTCI policyholders are having difficulty in accessing their benefits once a claim is filed. Recent actions by the NAIC against a large LTCI company have heightened these concerns. National level data from the NAIC have also shown that the number of complaints regarding LTCI has increased between 2004 and 2006. One of the key areas for complaints is the denial of claims. Although the number of claims denials has increased, the increase is not as large when adjusted by the number of claims submitted. The total percentage of claims denied for all policies increased since 2004 from 3.2% to 3.9% in 2006. The percentage of claims denied for comprehensive policies increased from 4.1% to 4.9% over the same period. This data reflects activity from 2004 to 2006 and does not provide any information on more recent years. Denial of claims can occur for a number of reasons. For example, a number of issues within the reimbursement process could lead to a delay in payment. The first relates to the eligibility for payments from the insurer. The policyholder (or his/her guardian) must notify the insurer and document that the policy has been "triggered." For example, for non-cognitive impairments this means the policyholder meets the requirement of needing assistance with two or more activities of daily living (ADLs). Documentation can include a written statement from the policyholder's physician verifying this information or the insurer may require an assigned care manager to assess eligibility. Thus, a claim can be denied if the insurer does not receive supporting documentation regarding eligibility for payment in a timely manner. Another reason for denying a claim is that the policyholder has not yet reached the end of the policy's elimination period. Between 2004 and 2006, denied claims for home care only policies because the elimination period had not been met increased 16.3%, for comprehensive policies they increased 37.5%. Finally, denied claims for nursing home benefits where the elimination period had not been met increased 17.7% over the same period. Although anecdotal evidence raised concerns among policymakers that some insurers are further delaying claims on purpose, national level data from the NAIC do not validate these concerns. According to the NAIC, denial of payments beyond 60 days was not a major issue between 2004 and 2006. Other survey data support the fact that relatively few claims are denied. According to a Lifeplans Survey of 1,500 policyholders over a 2½-year period, 96% of claims were approved and 4% were denied. Those who conducted the survey suggest this indicates an industry-wide initial claims denial rate of 4%. The same survey reported that the vast majority (93%) of denied claims had a decision rendered within a two-month period and the remaining 7% within another two months. Although problems in the delay of claims processing are not evident in the NAIC data collected between 2004 and 2006, there is evidence that the problem may be isolated for policies issued by one large insurer. The recent settlement against Conseco, Inc. highlights the use of improper processing practices by the company. In May 2008, state insurance regulators and the NAIC brought a regulatory settlement against Conseco, Inc. for mishandling of LTCI claims. Specifically, claims were not handled in a timely manner and claims files were not documented or maintained. The Conseco investigation found that the primary problem in most cases was a delay in payment of the claim, rather than a denial. Given these concerns the NAIC adopted in 2009 language to the NAIC Model Act that provides for external independent review of benefit trigger denials. The NAIC also created a subgroup to review existing methods by which companies report claims denials. The subgroup recommended and the NAIC adopted changes to the reporting form so that it is clear which method is being used (per claimant, or per transaction). Following the recent economic downturn, concerns about the long-run solvency of LTCI companies may adversely affect the demand for the product. Amidst this uncertainty, potential LTCI policyholders may decide to wait until the economic situation improves before contemplating a purchase of LTCI. In addition, there are concerns about the guarantee of benefits for current policyholders. The insurance industry does provide a number of safeguards to protect LTCI policyholders from an insolvent insurer. The current system of protection for LTCI policyholders is called insurance guaranty funds. This interdependent system is a cooperative effort among regulators and insurers in the states where the insolvent insurer operated. It is administered state-by-state and funded by assessments on insurers. When an insurer's financial condition deteriorates to the point where it may have trouble meeting its obligations, it is placed into receivership. In effect, the company and its policies are taken over by the insurance commissioner of the state where the insurer is domiciled. In the absence of bankruptcy, the commissioner may need to establish a plan to ensure policyholders receive coverage or benefits. For example, the insurance commissioner may allow other insurers to purchase parts of the troubled insurer's business. If, however, the company is liquidated, a state guaranty association may need to assume or reinsure policies of the failed insurer. State law requires insurers to become members of the guaranty associations in each state in which they are licensed to do business. For health and LTCI, the average coverage is about $100,000. One concern about guaranty funds is that the amount of coverage per policy may not be sufficient to insure future potential losses due to insolvency. This does raise the possibility that the guaranty funds would have to raise premium rates and potentially reduce benefits for current policyholders in the future if even a few insurers become insolvent. If participation rates increase in the private LTCI market, most actuaries agree that the overall costs of policies may be further reduced because the available risk-pool would be larger. Specifically, one of the key premises of insurance is to spread risk across as large a population as possible. Adverse selection occurs when individuals who expect to have a higher risk of needing LTSS in the future (e.g., family history of Alzheimer's) are more likely to purchase a policy than those who do not. In a voluntary program, low participation may limit an insurer's ability to spread risk adequately resulting in adverse selection. When adverse selection is present in a voluntary system, insurers must charge higher premiums to cover the higher risk of the insured group. Thus, the greater the participation among the general population, the lower the effects of adverse selection. Many of the concerns about adverse selection were raised when the CLASS Program under the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 , as amended) was enacted, which was intended to be a voluntary, federally administered LTCI program. According to the American Academy of Actuaries, design features of the program, such as guaranteed issue (e.g., no pre-existing condition exclusions), and the voluntary nature of the program may lead to those most likely needing the benefit to opt-in and healthy individuals, who may not need the benefit, to opt-out. It was anticipated that adverse selection would likely lead to higher than average premiums and further reduce demand for the CLASS program among young and healthy individuals. In fact, after examining the actuarial, marketing, and legal issues for a financially solvent program over the next 75 years, HHS sent a letter to Congress, stating that the Administration does not see a viable path forward for implementation of the CLASS program at this time. On January 2, 2013, The American Taxpayers Relief Act of 2012 ( P.L. 112-240 ), among other things, repealed the CLASS program. Legislative proposals intended to increase the demand for private LTCI policies, and overall participation rates, may include proposals to increase tax incentives to lower the after-tax cost of policies, improve consumer protections and increase consumer confidence in the product, and expand consumer education. The following describes these proposals in greater detail. Under current law, premiums paid by employees may be subject to a premium conversion arrangement under a cafeteria plan (flexible spending type account) and deductible from their taxable income. There are also other tax credits available to certain individuals who purchase health care insurance in the individual market. However, LTCI premiums currently do not have as generous tax incentives as health insurance. But a recent survey by AHIP suggests that increased tax incentives may increase the demand for LTCI. Specifically, according to the AHIP survey, 87% of respondents who chose not to purchase LTCI said they would be "much more interested" or "more interested" if they could deduct premiums from their taxable income. This section will first discuss the current tax treatment of LTCI and then detail potential legislative proposals and their implications for after-tax LTCI premiums. Under current law, there are some tax advantages provided to some aspects of private LTCI. Benefits from a "qualified" LTCI policy are excluded from the gross income of the taxpayer (i.e., they are exempt from taxation). In addition, premiums for LTCI are allowed as itemized deductions to the extent they and other unreimbursed medical expenses exceed 10% of adjusted gross income (AGI) for those under age 65 and 7.5% of AGI for those 65 and older. LTCI premium deductions, however, are subject to age-adjusted limits. In 2013, these limits range annually from $360 for persons aged 40 or younger up to $4,550 for persons over the age of 70. In addition, under current law, employer contributions toward the cost of tax-qualified LTCI policies are excluded from the gross income of the employee. Self-employed individuals are allowed to include LTCI premiums in calculating their deductions for health insurance expenses. Only amounts less than or equal to the age-adjusted limits can be deducted or excluded from taxable income. In addition, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ( P.L. 108-173 ) authorized Health Savings Accounts (HSAs), which allow individuals to pay for LTCI premiums on a tax-advantaged basis. Individuals are eligible to establish and contribute to an HSA if they have a qualifying high deductible health plan (HDHP). Individuals enrolled in Medicare are excluded. Withdrawals from HSAs are exempt from federal income taxes if used for purchase of LTCI. As noted earlier, a number of legislative changes to the tax code have enabled insurers to develop hybrid products that combine LTCI with either an annuity or a life insurance product. The Pension Protection Act (PPA) of 2006 simplified tax rules regarding combination products (effective in 2010) and added a tax provision specifying that proceeds from an annuity can be used tax-free to purchase a tax-qualified LTCI policy (under Section 7702B(b) of the Internal Revenue Code (IRC)). PPA also allows individuals to use the cash surrender value of a life insurance policy as payment for a tax-qualified LTCI policy and exclude these payments from taxable income. Finally, PPA revised Section 1035 of the IRC to allow for tax-free exchanges of certain insurance contracts. Under this provision, no gain or loss is recognized on the exchange of a life insurance contract, an endowment contract, an annuity contract for a qualified LTCI contract or the exchange of one qualified LTCI contract for another. Expanding tax incentives for long-term care insurance may improve the affordability of policies by reducing the after-tax cost of policies and increasing the demand for LTCI. To do this, LTCI premiums could be included in one or more of the following options: an employer-sponsored cafeteria or flexible spending account plan, which would exclude them from gross income; as an "above-the-line" tax deduction to arrive at AGI; or as a credit against tax liability ("tax credit"). Table 4 summarizes the advantages and disadvantages of each option. Cafeteria plans are employer-established benefit plans under which employees may choose between receiving cash (typically additional taxable take-home pay) and certain non-taxable benefits. Under this option, LTCI would be an eligible benefit within the plan and the employee would not be taxed on the value of the benefit. This arrangement reduces both income and employment taxes (i.e., Social Security and Medicare payroll taxes). Under some of the current legislative proposals, LTCI could also be an eligible expense in a flexible spending account (FSA). FSAs and cafeteria plans are closely related, but not all cafeteria plans have FSAs and not all FSAs are part of cafeteria plans. Reimbursements through an FSA are also exempt from income and employment taxes. Including LTCI in a cafeteria plan or FSA would also reduce adjusted gross income for purposes of other tax provisions. Cafeteria plans and FSAs only benefit individuals whose employer has established such plans. For an individual filer with $55,000 in gross income and in the 25% tax bracket, this option would reduce the effective cost of the premiums by 32.65% (this includes a reduction in employment taxes of 7.65% as well). Under this option, LTCI premiums would be deducted from a taxpayer's gross income. An above-the-line deduction also reduces adjusted gross income for other tax provisions. The key difference from a cafeteria plan is that the provision is available to everyone and not limited to those employers who offer a plan. In addition, under this option, LTCI premiums (even if deducted from gross income) would still be subject to employment taxes if the individual were employed. For an individual filer with $55,000 in income and in the 25% tax bracket, this option would reduce after-tax LTCI premiums by 25%. A tax credit is applied directly against a taxpayer's tax liability. The key distinction in a tax credit is whether it is refundable or nonrefundable. A fully refundable tax credit is paid to the taxpayer even if the amount of the credit exceeds the taxpayer's tax liability. Under a nonrefundable credit, if the tax liability is less than the credit amount of all refundable credits available, then the taxpayer would not benefit from the full credit. Under this option, after tax premiums for the individual filer with $55,000 in gross income would decline dollar for dollar by the amount of the tax credit if the individual's tax liability was equal to or exceeded the amount of all available tax credits. Although the discussion above provides a brief overview of the impact of the different options, actual tax savings will vary depending on the specific details of each of the proposals. To minimize the cost to the federal government, many of the current legislative proposals would not allow the full deduction or credit of premiums initially. Instead these proposals would phase-in the deduction or credit over time; base the percentage of LTCI premiums that is deductible or creditable on the number of years a policy is held; or limit the income from which a deduction can be taken, allowing only a deduction from gross income for distributions from a 401(k) or IRA. As the market for LTCI expands, there is a growing concern that current regulations may not be sufficient to protect consumers from potential abuses in claims administration and processing and future rate stability. To address these issues, legislative proposals that are introduced to expand tax incentives for LTCI may also require these tax-qualified policies to meet specific NAIC Model Regulations and Laws. (See Table 3 for a summary of different versions of the NAIC Model provisions with respect to consumer protections.) The Long-Term Care Awareness Campaign is a joint federal-state initiative to increase awareness among the American public about the importance of planning for future LTC needs. The Own Your Future Campaign is a collaboration of the Centers for Medicare & Medicaid Services (see http://www.cms.hhs.gov ), the Office of the Assistant Secretary for Planning & Evaluation (see http://www.aspe.hhs.gov ), and the Administration on Aging (see http://www.aoa.gov ), and it has support from the National Governors Association (see http://www.nga.org ). The program was started in January 2005. The project's core activities are state-based direct mail campaigns supported by each participating state's governor, and targeted to households with members between the ages of 45 to 70. Campaign materials include a Long-Term Care Planning Kit and state specific information and resources in both print and on the internet. As of January 2010, 25 states have participated in the Long-term Care Campaign to increase awareness of the need to plan for future LTSS. The response from consumers to the first two phases of the Own Your Future Campaign exceeded expectations, both in terms of consumer interest and in initiating LTSS planning actions. Research following a five-state phase of the campaign indicated that individuals who received the planning kit were twice as likely to take some type of LTSS planning action as compared to those who did not receive the kit. Based on these successes, Congress provided additional support for these education initiatives by establishing the National Clearinghouse for Long-Term Care Information under the Deficit Reduction Act of 2005. Under Section 6021(d) of the act, Congress appropriated $15 million in funding for the National Clearinghouse over five years (2006 to 2010). While ACA had extended funding for the Clearinghouse to 2015 in enacting the CLASS program, the recently enacted American Taxpayers Relief Act of 2012, in repealing the CLASS program, also rescinds the unobligated balance of ACA's funds for the National Clearinghouse. Legislative proposals in the 113 th Congress may expand or extend further into the future funding for the National Clearinghouse.

As the 80 million baby boomers approach retirement, many are concerned they will not have sufficient savings to sustain their standard of living in retirement. Few, however, may be focused on another risk to their retirement security—the potential cost of financing often expensive long-term care services and supports (LTSS). LTSS include help with either functional or cognitive impairment and generally include assistance with activities such as bathing, eating, and dressing. For the majority of older Americans, the cost of obtaining paid help for these services may far exceed their financial resources in the future. Private long-term care insurance (LTCI) is available to provide some financial protection for persons against the risk of the potentially high cost of LTSS. In 2010, about 6% of LTSS spending was paid by LTCI. This low rate of financing reflects relatively low demand for LTCI over the past few decades. Moreover, most policy owners have not yet reached the age where they may need services. In 2010, between 7 million to 9 million Americans owned a private LTCI policy, with about 11% of the population aged 55 and older covered by a policy. A number of factors have adversely affected the demand for LTCI. The cost and complexity of LTCI policies have been cited as major deterrents to purchasing LTCI. In addition, increased concerns have arisen about the adequacy of consumer protections for LTCI as a result of inconsistencies in LTCI laws and regulations across the states. More recently, adverse publicity about premium increases and heightened concerns about the future solvency of LTCI insurers in the current economic environment have further dampened demand, prompting state regulators to re-evaluate current regulations and laws governing LTCI. The private LTCI market has undergone significant changes in the past three decades. The employer-sponsored market has grown as a share of total LTCI sales and the overall market has become more concentrated in terms of the number of companies selling the product. A number of newer product lines have been introduced that combine LTCI with other products, such as retirement annuities and life-insurance products. To address these issues, the 113th Congress may consider a number of legislative options to increase participation in the voluntary LTCI market. These may include proposals to increase tax incentives to lower the after-tax cost of policies, improve consumer protections to boost consumer confidence in the product, and expand consumer education. This report discusses the role of LTCI in financing LTSS and current trends in the LTCI industry; factors affecting the demand for LTCI, including cost and complexity of the product and adequacy of consumer protections; and legislative options available to address these issues.

As Congress considers tax reform, an important and challenging component is the tax treatment of the corporation. Some proposals would cut the corporate rate by broadening the base, with an overall revenue-neutral treatment of the corporate sector, while others would propose raising or reducing revenues. The traditional arguments surrounding the corporate tax, which largely focus on the distortions introduced by the tax, were a focus of a Treasury study issued in January 2017. This study also discussed choice of organizational form and international issues. The debate, however, has sometimes focused on arguments that cutting the corporate tax rate would stimulate economic growth, and even raise revenue, or on claims that the tax is a burden not on capital but on labor. Recently, Steven Mnuchin, Secretary of the Treasury, advanced the argument that the corporate tax is paid by workers, citing a recent study by Azémar and Hubbard as evidence. A recent news report indicated three additional articles referenced by the Treasury press office in support of the burden falling on wages (although the Treasury Office of Tax Analysis currently assigns most of the burden to capital income): studies by Randolph, Hassett and Mathur, and Lui and Altshuler. Opinion pieces have referenced a variety of other studies that find large effects of corporate taxes on economic growth or that find the burden of the tax falls on wages, while others have expressed disagreement. The current debate is similar to one that began over 10 years ago and might be viewed as the beginning of current proposals to cut the corporate rate and broaden the base. Before turning to the basic issues surrounding the corporate tax, it is useful to trace the discussion of issues and proposals for corporate reform. In November 2005, President George W. Bush's Advisory Panel on Tax Reform reported on a variety of proposals for major reform of the tax system, including those for corporate and business income taxes. Hearings were held on these proposals in 2006, but no further action occurred. On July 16, 2007, The Wall Street Journal published an opinion article by Treasury Secretary Henry M. Paulson addressing concerns that the U.S. corporate tax rate is high relative to other countries and announcing a conference to be held July 26 that would examine the U.S. business tax system and its effects on the economy. The Treasury Department also released a background paper that addressed several issues associated with the corporate tax, and identified some base broadening provisions. An opinion piece by R. Glenn Hubbard, President Bush's first chairman of the Council of Economic Advisors, referred to the conference as well as to a study by Hassett and Mathur finding that the tax fell on labor and a study by Devereux considering the revenue-maximizing tax rate. Hubbard concluded by suggesting that cutting the corporate tax rate would reduce a tax that is largely, or even fully, borne by labor and that behavioral responses would offset much of the static revenue cost. During the conference, discussions included whether business representatives would trade tax preferences for lower rates, whether reform should take the form of lower rates or write-offs of investments, and methods of avoiding the corporate tax by income shifting in a global economy. Some participants complained that the corporate tax is outdated, too complex, distorts decisions, and undermines the ability of firms to complete in a global economy. Echoing some issues raised in Hubbard's article, Kevin Hassett indicated that the corporate tax was not an effective way to raise revenues and suggested that lowering the rate would raise revenues. At the time of the Treasury conference, Chairman Charles B. Rangel of the House Ways and Means Committee released a statement inviting the Bush Administration to discuss such issues as tax reform, especially the Alternative Minimum Tax (AMT), addressing tax havens, and increasing equity and fairness in the tax structure. Chairman Rangel introduced a bill, H.R. 3970 , on October 25, 2007, with a revenue-neutral subsection that included some of the base broadeners included in the 2007 Treasury study. The rate reduction, from 35% to 30.5%, was not as large as that discussed in the 2007 Treasury study, 27%. Base broadeners in H.R. 3970 were criticized by some business groups. The corporate tax debate and the issues of burden and effects on growth continued to be in the news. In May 2008, N. Gregory Mankiw published an article suggesting that most of the burden of the tax falls on labor, and citing research suggesting the corporate tax is borne by labor and that revenue losses may be fully or largely offset by behavioral responses. In the 111 th Congress, S. 3018 , introduced by Senators Ron Wyden and Judd Gregg, also provided for a lower corporate tax rate in exchange for a somewhat broader corporate tax base. A similar bill, S. 727 , was introduced by Senators Wyden and Coats in the 112 th Congress. The Fiscal Commission proposed a corporate reform similar to the Wyden-Gregg bill. In addition to the Wyden-Gregg and Wyden-Coats proposals and the Fiscal Commission proposals, there were general proposals by Republican leaders in the House (Majority Leader Eric Cantor, Ways and Means Chairman Dave Camp, and Budget Committee Chairman Paul Ryan) for corporate tax reform with rate reductions. In 2014, Chairman Camp introduced H.R. 1 , a comprehensive proposal that reformed both individual and corporate income taxes and was revenue neutral during the 10-year budget horizon, as well as distributionally neutral. It cut the corporate tax rate to 25%. President Obama also supported revenue-neutral corporate tax reform, although some groups proposed raising additional revenue from corporations. During 2016, Senator Hatch, chairman of the Senate Finance Committee, indicated an interest in corporate tax integration (where only one level of tax would be imposed on corporate income). Most recently, Speaker Paul Ryan and Ways and Means Committee Chairman Kevin Brady proposed a major revision in the tax treatment of business income in their "Better Way" blueprint. It partially transformed the current income tax into, effectively, a domestic consumption tax. The border adjustments that make this proposal a domestic consumption tax appear no longer on the table and a new plan is being formulated in cooperation with the House, Senate, and Administration. This report provides an overview of corporate tax issues and discusses potential reforms in the context of these issues, with particular attention to some of the research concerning large behavioral responses and their implications for revenue and distribution. The first section reviews the size and history of the corporate income tax, and discusses an important issue that has been given little attention by those who propose deep cuts in the corporate tax: its role in preventing the use of the corporate form as a tax shelter by wealthy business owners. This section also discusses the potential effect of behavioral responses on corporate tax revenues. The second section examines the role of the corporate tax in contributing to a progressive tax system and discusses claims that the burden falls on workers. The third section reviews arguments relating to efficiency and revenue yield, and traditional criticisms of the corporate tax as one that causes important behavioral distortions. One aspect of this discussion is the question of how the tax might be viewed differently in a more global economy. The final section examines options for reform. The corporate tax is the third-largest source of federal revenue, but its importance as a revenue source has diminished considerably over time. Despite concerns expressed about the size of the corporate tax rate, current corporate taxes are extremely low by historical standards, whether measured as a share of output or based on the effective tax rate on income. In 1953, the corporate tax accounted for 5.6% of GDP and 30% of federal tax revenues. In recent years, the tax has fluctuated at around 2% of GDP and 10% of revenues, reaching a low of 1.2% of GDP in 2003, and standing at 2.7% in 2006 before falling as a share due to the recession and certain measures to stimulate the economy. The tax is projected to subsequently raise revenues of 1.6% to 1.7% of GPD for the years 2016 to 2027. Today, it is the third-largest federal revenue source, lagging behind the individual income tax, which is 8.4% of GDP in 2016, rising to 9.7% in FY2027, and the payroll tax, which was about 6% of GDP. It is much more significant, however, than excise taxes, which are slightly over 0.5%, and estate and gift taxes at less than 0.12%. In FY2017, the corporate tax is estimated at 9.4% of revenues, falling to 8.5% by FY2027. Much of the historical decline arises from legislated reductions in the corporate effective tax rate on the return to new investment, which has fallen from 63% of corporate profits in 1953 to about 20% today. These changes include a reduction in the top statutory rate from 52% to 35%, more liberal depreciation rules, and the growth of tax favored intangibles investments. The total tax burden on corporate source income has declined even more due to lower rates on dividends and capital gains at the shareholder level and the increased fraction of stocks held in tax exempt form. While a large fraction of the decline in corporate tax revenues is associated with these changes in rates and depreciation, other causes may be more liberal rules that allow firms to obtain benefits of corporate status (such as limited liability) while still being taxed as unincorporated businesses and tax evasion, particularly through international tax shelters. The 2007 Treasury study documented the significant rise in the share of total business net income received by unincorporated businesses from 1980 to 2004, from 21% of total net income to 50%. Whereas the share of proprietorships (which have no limited liability) has declined slightly, from 17% to 14%, the share of Subchapter S firms (firms that are incorporated but are allowed to elect taxation as an unincorporated business) rose from 1% to 15%. These changes followed a dramatic increase in the number of shareholders allowed for the election (the limit of 10 was raised to 35 in 1982, to 75 in 1996, and to 100 in 2004). Partnerships (including limited liability corporations and limited liability partnerships) increased from 3% to 21%, with most of the increase occurring after 1990. This growth reflects in part the growth of limited liability corporations established under state law (the first state adopted such a provision in 1982), which qualify as unincorporated business for corporate tax purposes. While Subchapter S firms are constrained by the shareholder limit, partnerships are not. The latest data (for 2012) indicate that unincorporated businesses accounted for 59% of the total of flow through and corporate business net income, with S Corporations accounting for 16%, partnerships for 32%, and proprietorships for 11%. Although it has declined considerably in importance, the corporate tax remains a major source of federal revenue, and a significant change in individual income taxes would be required to offset a substantial reduction in corporate taxes in a revenue-neutral framework. For that reason, most proposals would trade off rate reductions, or possibly broad investment subsidies that reduce the effective burden on new investment, for base broadening, through reduction of corporate tax preferences. Measuring corporate tax revenue falls short of describing the full role of the corporate tax in contributing to federal revenues because the corporate tax protects the collection of individual income taxes. As long as taxes on individual income are imposed, a significant corporate income tax is likely to be necessary to forestall the use of the corporation as a tax shelter. Without a corporate tax, high-income individuals could channel funds into corporations, and, with a large part of earnings retained, obtain lower tax rates than if they operated in partnership or proprietorship form or in a way that allowed them to be taxed as such. As suggested by the growth in unincorporated business forms above, wealthy business owners may be quick to take advantage of tax rate differentials, which currently tend to favor unincorporated businesses. In 1986, individual tax rates were lowered dramatically (the top rate fell from 70% to 28%, although it was eventually increased to 39.6%), but the combined corporate tax rate (on the firm and on distributions) has been high relative to the individual tax rate. The 2007 Treasury study indicated that 61% of the income of unincorporated businesses was associated with taxpayers in the top income tax bracket. Although the top tax rate on corporations (35%) is close to the top individual rate (39.6%), the corporate tax is graduated. Consequently, for high-income taxpayers, there is an advantage to shifting part of one's income into a corporation because corporate tax rates are graduated (15% on the first $50,000 and 25% on the next $25,000) and are lower than the top marginal tax. This opportunity, however, is restricted by (1) limiting to one the number of corporations income can be shifted to; (2) the amount on which rates are graduated; and (3) disallowing graduated rates for personal service corporations. Out of 1.6 million corporations in 2013, there are 327,000 with tax of less than $6,000 due and 372,000 with tax of less than $10,000 due (tax on the first $50,000 is $7,500), suggesting some shifting occurs. In recognition of the potential use of the corporation as a shelter, tax law has in the past contained a tax on accumulated earnings. As long as dividends were taxed as ordinary income and the accumulated earnings tax was strict enough, it was difficult to use the corporate form to shelter a great deal of income. This tax shelter constraint on lowering the corporate rate may be more binding today because of the lower rates on dividends enacted as part of the Administration's corporate relief package in 2003, although rates were increased in 2010 and 2013. Table 1 calculates the effective tax rate for operating through a corporation, versus an unincorporated business for two cases; one taxed at the top 39.6% rate and not subject to the additional 3.8% tax and one subject to the additional 3.8% tax with the total tax rate is 43.4%. If dividends are taxed at 23.8% and the corporate rate is lowered to 27% as suggested in the Treasury conference, the tax rate in the corporate form would be less than the tax rate on unincorporated businesses. In fact, with a 23.8% rate on dividends, corporations that distributed less than 94% of their income would present a tax shelter opportunity with a 27% tax rate for those unincorporated businesses subject to the additional 3.8% tax; it would represent a tax shelter if it distributed less than 73% of income for those whose Subchapter S business is predominantly capital income. This outcome would occur even without the benefit of graduated rates and could potentially benefit labor income as well as individual capital income. Moreover, although there are rules restricting accumulated earnings, it is common for corporations to reinvest a significant fraction of their earnings. This unlimited sheltering option would not exist as long as the corporate tax were as high as the individual tax, and its scope would be limited if dividends and capital gains were taxed at higher rates. Some reforms might address these shelter issues directly, including raising tax rates on dividends and capital gains at the individual level while lowering the rate at the firm level, eliminating the graduated rate structure, and more formal methods of integrating the individual and corporate income taxes. Some tax reform proposals would not only lower individual rates but provide special lower rates for pass-through income from capital. For example, the "Better Way" tax plan proposes a rate of 20% for corporations, a top individual rate of 33% (with half of dividends and capital gains taxed), and a 25% rate for pass-through businesses, which could still make a corporation a better option with low distribution rates (of 37% or less). A special lower rate for pass-through business would also require pass-through firms to allocate income between labor and capital, an allocation not currently required for proprietorships and general partners. Although it has long been recognized that there are behavioral responses to the corporate tax (even aside from the tax sheltering issues indicated above), and that these responses have important implications for the efficiency of the economy and the burden of the tax, the issue of a revenue-maximizing tax rate, popularly associated with the "Laffer" curve, has rarely entered into the discussion. A Laffer curve graphs revenue against the tax rate, and is based on the notion that revenue is zero at a zero tax rate and zero at a 100% tax rate (at least with respect to some taxes). In a Laffer curve, the revenue first rises with the tax rate and then falls, and at the point it reverses direction is the revenue-maximizing tax rate. The notion that a corporate tax cut could pay for itself continues to enter the debate in 2017, as it did more than 10 years ago during that corporate debate, where it was proposed or alluded to in several articles in the popular press during the debate. One is the article by Glenn Hubbard, cited above. In National Review , Kevin Hassett discusses the Laffer curve and presents a chart that he indicates is an illustration that appears to show a negative relationship between corporate revenues as a share of GDP and the tax rate. Only 13 countries are shown on this graph, however, and the negative relationship is clearly strongly affected by an outlier, Ireland, which is a well-known tax haven; most economists would not find this illustration persuasive proof. The Hubbard and Hassett articles do, however, cite some more sophisticated research. Hassett referred to a paper by Kimberly Clausing, and Hubbard referred to a paper by Michael Devereux. In addition, Alex Brill and Kevin Hassett also prepared a statistical analysis examining the change in the relationship over time. A cross-country study was also prepared by Mintz. Clausing, who is referred to in the Hassett article, is quoted as claiming that the United States is likely to the right of the revenue-maximizing point on the Laffer curve, but this statement, presumably from an earlier draft, is not found in her published article. That article finds a revenue-maximizing tax rate of 33%, in her simple specification, but as she added variables and accounted for other features the revenue-maximizing tax rate seemed to rise, as indicated in Table 2 . Large countries and countries that are less open, such as the United States, have a revenue-maximizing tax rate of 57%—much larger than the combined federal and state rate for U.S. firms of 39%. Michael Devereux's paper indicates that, while he finds a revenue-maximizing rate of 33% under the same specification as Clausing, he finds only weak evidence of a relationship between tax rates and corporate tax revenues as a percentage of GDP. Many of his specifications do not yield statistically significant effects. Brill and Hassett find a rate of around 30%, which has been falling over time. Mintz finds a rate of 28%, but his data span only a few years (2001-2005). The remainder of this section first discusses theoretical expectations of this relationship and then examines these empirical studies. Both the theoretical and empirical assessments suggest that the results of these analyses are questionable. The issue of a Laffer curve has not been a part of the historic debate on corporate taxes because the notion of a revenue-maximizing tax rate other than at very high tax rates is inconsistent with most of the models of the corporate tax. Traditionally, the main behavioral response associated with the corporate tax was the substitution of noncorporate capital for corporate capital within an economy where the amount of capital was fixed. Imposing a corporate tax (in excess of the noncorporate tax) caused capital to earn a lower return in the corporate sector and to flow out of that sector and into the noncorporate sector, thereby lowering the return in the noncorporate sector and raising the return, before taxes, in the corporate sector. The higher pretax return on capital also caused prices to go up in the corporate sector and fall in the noncorporate sector, causing a shift toward noncorporate sector total production. The corporate profits tax base, therefore, had two opposing forces: the amount of capital was falling but the profit rate was rising. The taxable base could, therefore, either increase as tax rates increased, or it could decrease. The direction depended on the substitutability of capital and labor in the corporate sector. The central tendency of most models (with unitary elasticities) suggested, however, that the tax base was relatively invariant to tax rates, and revenues would always rise with the tax rate. Consequently, under any reasonable set of assumptions there would either be no revenue-maximizing tax rate or an extremely high one. If behavioral responses caused the total capital in the U.S. economy to contract, the outcome could be different. One such model, the open economy model, appears to be a motivation for the belief in a relatively low revenue-maximizing tax rate. Brill and Hassett discuss elasticity estimates of foreign capital flows to after tax returns in the range of 1.5 to 3 (they also cite a recent study with an elasticity of 3.3) in their paper that finds a revenue-maximizing tax rate of around 30%. They conclude that "[t]hese high elasticities are consistent with the view that reductions in corporate rates could lure a significant enough amount of economic activity to a locality to create a Laffer curve in the corporate tax space." As shown in the Appendix A , however, this tax rate even with infinite elasticities cannot be achieved. In the most extreme case, where (1) the country is too small to affect worldwide prices and rates of return; (2) capital is perfectly mobile; and (3) products in international trade are perfectly substitutable, the revenue-maximizing tax rate would be the ratio of the labor share of income to the factor substitution elasticity. Assuming fairly common values for a model without depreciation of 75% for labor's share of income and a factor substitution elasticity of 1, the tax rate would be 75%—far above the rates of around 30% reported by Brill and Hassett. This rate could rise as these conditions are relaxed. If the United States is assumed to have 30% of world resources, the rate rises to 81%; if imperfect substitutability between investments across countries and between foreign and domestic products is allowed, it would rise further. Although it is possible to have a revenue-maximizing tax rate that does not asymptotically approach 100%, it is probably not possible to find a rate that maximizes revenues as a percentage of GDP because GDP falls as well as tax revenues. In this case, the same circumstances apply as in the reallocation of capital in the closed economy: with unitary elasticities, the corporate share of income is constant relative to GDP, and with other elasticities, it can rise or fall. A related circumstance where capital can contract would be in a model where savings responds so powerfully that the savings supply is infinitely elastic, that is, when a tax is imposed, the capital stock must contract so much, and the pretax rate of return rises so much that the after-tax return comes back to its original value. This extreme savings response model yields the same revenue-maximizing tax rate as the extreme open economy, 75%, and probably no revenue-maximizing tax rate for revenues as a percentage of GDP. Moreover, the slowness with which the capital stock adjusts (most models allow 150 years for full adjustments) means that the revenue would be affected by tax rates in the past. The result of this discussion makes it clear that revenue-maximizing tax rates cannot arise from physical reallocations or contractions of capital. Nor are they likely to arise from a substitution between debt and equity, since the debt share has changed very little despite significant changes in the relative tax burden, and estimates of elasticities that do exist are small. A remaining source of a different outcome is profit shifting. This effect could involve firms maintaining the same activity and shifting the form of operation to unincorporated businesses. Profit shifting could be a possibility (although the point of revenue maximization would be much too low because much of the tax has not disappeared, but rather has shifted). But, at least in the United States, this shift is probably less the result of high corporate tax rates and more the result of increasingly loose restrictions on operating with limited liability outside the corporate form, actions that have not been taken by other countries. The other profit shifting issue is the shifting of profits (rather than activity) to foreign countries. Such effects are possible, but it would seem unlikely that tax avoidance could be of this magnitude, given the amount of profits shifted and the behavioral response. Although a small low-income country, as is characteristic of most tax havens, might have little enough domestic capital that it could afford the loss from lowering the rate to attract more capital, such an outcome is much less likely for the United States. Recent estimates of elasticities also suggest that cutting the corporate tax rate would lower revenue much more than enough to offset with profits shifted back into the United States. A Laffer curve with a revenue-maximizing tax rate implies that there is a point where the tax base contracts so much that no revenue is gained from a tax increase, and, conversely that cutting tax rates could raise revenue. Revenue offsets that arise from behavioral responses are often referred to as a revenue feedback. For a tax cut, revenue feedback would be the revenue gain from an expanded base as a percentage of the original revenue loss (for a tax increase, it would be the loss from a contraction in the base as a percentage of the original gain). The revenue-maximizing tax rate is the point where induced changes in the tax rate provide 100% revenue feedback. An approach that is empirically based but which is not the result of a direct estimate involves using a general equilibrium model, which is based on empirical estimates of underlying relationships (such as capital mobility). A recent CRS report used such a model and concluded that cutting the corporate tax from 35% to 25% in isolation would result in a revenue offset of 5% due to taxes on increased output in the United States. This effect was not due to the increase in corporate taxes on the additional output, which was negligible, but to an increase in both labor and capital income taxes on increased output. Thus the revenue-maximizing tax rate cannot be near the current 35% tax rate. Some have argued that the revenue feedback for the corporate tax arises not from real changes in investment but from artificial profit shifting, where multinationals use a variety of techniques to declare income in low tax countries. Significant feedback effects from profit shifting were also estimated to be small. Even if all profit shifting ended, estimates suggest they were between 14% and 20% of corporate tax revenues and, thus, if they declined proportionally would add a feedback of no more than 20%. These are far from Laffer curve effects. Moreover, because the jurisdictions where profits are shifted have much lower (sometimes zero) tax rates, very little improvement in profit shifting might occur. Finally, all of these feedback effects would be swamped for a stand-alone tax cut by the increase in the debt, which would crowd out capital and reduce output, leading to an additional loss of revenues of 23% by the 10 th year. This loss of revenues on reduced output is in addition to the direct effect on the budget deficit due to an increase in interest costs of 25% of the revenue loss over the first 10 years. As noted above, several recent studies have examined the relationship between corporate tax rates and corporate tax revenues as a percentage of GDP. The data used for two of these studies were obtained to replicate and extend the analyses. Both studies and the analysis estimate the effect of the top corporate tax rate (and its square) on corporate tax revenues as a percentage of GDP. Panel data for 29 OECD countries is used for the analysis. In their study, Brill and Hassett use panel data for the OECD countries from 1981 to 2003. They use regression analysis (OLS) to estimate the effects. Brill and Hassett find that the corporate tax rate has at first a positive effect on corporate tax revenues as a percentage of GDP and then a decreasing effect—the effect looks like an inverted U, the shape of the classic Laffer curve. All of their coefficient estimates are statistically significant. However, they do not account for problems often encountered with the use of panel data, and their coefficient estimates would appear to be biased and inconsistent. The estimation results from the re-analysis of the Brill and Hassett study are reported in Table 3 . The regression includes a tax rate and a tax rate squared to allow for a curve. Panel A of the table displays the results for central government corporate tax data (in the case of the U.S., this is federal government tax data). The coefficient estimates for the full time period (1980 to 2003) and the four subperiods defined by Brill and Hassett are reported. In all cases, the coefficient estimates are fairly small and none are statistically significant at conventional confidence levels. Panel B of the table displays the results for total government (that is, governments at all levels) corporate tax data. Again, the coefficient estimates are fairly small and none are statistically significant. Once appropriate estimation methods are used to correct problems arising with panel data, there appears to be no statistically significant relation between corporate tax rates and corporate tax revenues as a percentage of GDP. Clausing uses panel data for the OECD countries from 1979 to 2002 to study the effect of corporate tax rates on corporate tax revenue as a percentage of GDP. She includes more explanatory variables than did Brill and Hassett, but her overall research findings and conclusions are essentially the same as theirs—there is a Laffer curve relationship between corporate tax rates and corporate tax revenue as a percentage of GDP. However, her estimation methods would lead to biased and inconsistent coefficient estimates. The estimation results for five different specifications are reported in Table 4 . The five specifications differ by what explanatory variables are included in the analysis. In all five specifications, the coefficient estimates of the corporate tax rate (and its square) are smaller than those estimated by Clausing and have the opposite signs. Most of the coefficient estimates are not statistically significant at conventional confidence levels, but two are statistically significant at the 10% level only. (In these cases where the coefficients are significant on the tax squared term they still do not produce the Laffer curve shape but rather suggest rising revenue with a rising tax rate). Overall, these results suggest that the corporate tax rate has little effect on corporate tax revenues as a percentage of GDP. Consequently, there is little evidence to support the existence of a corporate tax Laffer curve. Even if an empirical study found a statistically significant relationship that indicated a revenue-maximizing tax rate, such results could not be considered reliable if they do not control for base changes. If the rate is lowered but the base is broadened, the data could show rising tax revenues that would be due to the base changes. In a recent paper, Slemrod and Kawano provide estimates controlling for the direction of changes in the base (although not the magnitude, a much more daunting task) and find these controls raise the estimated revenue-maximizing tax rate. Thus, until studies can adequately control for the magnitude of changes in the base, they cannot be the basis for estimating a revenue-maximizing tax rate. Cross-country empirical studies, as noted above, have recently been employed to address the Laffer curve issue and, as will be discussed subsequently, the incidence of the corporate tax on wages. In addition to these direct estimates, there are numerous empirical studies that examine underlying relationships, such as the effect of the user cost of capital (which incorporates the tax rate along with other variables) on investment. Most of these studies have found modest effects on domestic investment and have employed times series estimates within the United States. One recent study on investment, Djankov et al., is similar to the other studies in that it employs a cross-country data base and an independent variable reflecting the tax rate to directly estimate the effect of the corporate tax rate on investment, entrepreneurship and other variables. The study found no effect on investment for statutory tax rates, but very large effects for constructed first year and five year cash flow tax rates. This study, unlike the others discussed in this paper, is a single cross section, so there is no way to introduce fixed country effects. Several difficulties arise in the Djankov analysis. First, the cash flow tax rate variable they construct is a hypothetical one (for a hypothetical firm), which is not representative of the capital stock or the firm size in a country (or in all countries). The denominator is income measured before labor income taxes paid by the firm (such as social security taxes in the United States) and economic depreciation. The first is very problematic because the capital income tax rate increases as the labor income tax rate falls, which is a relationship that seems to have no obvious economic justification. It also measures taxes on a cash flow basis for the first year (or the first five years in an alternative scenario), rather than over the life of the investment. An examination of scatter-plots of their data suggest that the results are highly affected by outliers, particularly Bolivia (which has a very high tax rate and a very low investment rate) and Mongolia, a low tax country where investment has been flowing in recently due to mining. The tax rate for Bolivia is about twice the typical tax rate and is inconsistent with the corporate rate in Bolivia. According to the authors, the tax rate reflects an alternative transactions tax. However, a transactions tax is not a tax on corporate income but falls on all income in the economy. Assuming that about a quarter of income is capital incomes, the tax should be reduced by 75%. As with the Laffer-curve estimates, the results of this study, at least for the United States, are not plausible. According to their estimates, a 10 percentage point drop in corporate tax increased investment by 2.2 percentage points. According to an open economy model developed by Gravelle and Smetters, however, U.S. capital would increase a maximum of 0.7 percentage points with the elimination of corporate tax; with more reasonable elasticities, it would increase by 0.3 percentage points. (This study was directed at the question of tax incidence and will be discussed in more detail in the section below which addresses distributional issues and the burden on labor). Moreover, these effects may understate the investment effects because they do not take into account debt. Thus, their results suggest an investment increase that is at least 11 times too large and that could be 25 or more times too large. Although the issue of fixed effects would cause this study to remain problematic in any case, this section explores the effects of the tax rate changes and of specifications that include multiple control variables. The Djankov et al. sample consists of 2004 tax and economic data for 85 countries. They examine the effect of the corporate tax rate on (1) aggregate investment, (2) foreign direct investment, and (3) two measures of entrepreneurial activity. The main results of their study and the authors' reanalysis are reported in Table 5 . The first row of the table displays the coefficient estimate of the effective corporate tax rate variable taken from the Djankov et al. study. Their basic specification includes only the tax rate as an independent variable. The second row of the table reports the range of estimates when a single additional independent variable is added—the authors add 10 variables, one at a time. In all but one instance, the estimates are statistically significant at the 1% or 5% confidence level, and at the 10% level in the remaining case. Their data was reanalyzed after correcting an error in their tax rate for Bolivia, and cumulatively adding selected independent variables that Djankov et al. included in their analysis; the new analysis also included a region-of-the-world variable for each country. The first row of the bottom panel in Table 5 presents the coefficient estimates for the basic model with only a single independent variable: the effective corporate tax rate. For each dependent variable, the coefficient estimate of the tax rate variable is smaller than Djankov et al.'s estimate, which illustrates the importance of Bolivia to their results. Furthermore, the estimated effect of the tax rate on aggregate investment is not statistically significant. The final row of Table 5 reports the coefficient estimate of the tax rate when the full set of independent variables is included in the analysis. The estimated effect of the tax rate on aggregate investment is much smaller than Djankov et al.'s estimate and not statistically significant. The estimated effect of the corporate tax rate on foreign direct investment and entrepreneurial activity is somewhat smaller than the effects estimated by Djankov et al., but the estimates are statistically significant. a. Significant at 1% level. b. Significant at 5% level. c. Significant at 10% level. A second issue that was a focus of the Hubbard article was the distributional effects of the corporate income tax. This issue also has been recently referenced by Treasury Secretary Mnuchin, who cited a study by Azémar and Hubbard as evidence that most of the corporate tax is paid by workers. If the corporate tax falls on owners of the corporation, or on capital in general, it contributes to a progressive tax system, since higher income individuals have more income from capital than from labor. Based on tax data, for taxpayers with incomes up to $100,000, over 90% of income is labor income, whereas those with incomes over $1 million, less than a third is labor income. The traditional analysis of the corporate income tax indicates that the burden generally spread to all capital, but does not fall on labor income. Most government and private agencies that routinely do distributional analysis allocate the corporate tax largely to capital income. Hubbard referred to three studies in his article: a working paper by economist Arnold Harberger, a working paper by William Randolph of the Congressional Budget Office, and a recent empirical cross-country study using data similar to the studies discussed above, by Hassett and Mathur. At about the same time or shortly thereafter three other empirical studies that use cross-country data were released in 2006-2008, by Felix, by Desai, Foley and Hines, and by Arulampalam, Devereux, and Maffini. Mankiw refers to the Randolph and Arulampalam, Devereux, and Maffini studies, although as will be shown subsequently the Arulampalam et al. study is examining an entirely different phenomenon which is unlikely to be very relevant to the United States corporate tax, as is the case with the Azémar and Hubbard article recently referred to by the Treasury Secretary. These studies reflect differing fundamental approaches to studying corporate tax incidence. One approach uses a general equilibrium model that estimates incidence based on empirical estimates of various behavioral responses and other aspects (such as size). The burden that falls on labor versus capital depends on international capital flows and how well they can be used in different countries (which in turn depend on the technology of production and the preferences of consumers). The second approach is to directly estimate wages as a function of tax rates and other variables from a set of data (this approach is called a reduced form estimate). These direct estimates, in turn, fall into two types: (1) some studies are considering the effects of international capital flows and (2) others are examining the share of the tax on excess profits (or rents) that is born by labor by reducing the share of rents that is captured by labor in wage bargaining. Of the studies mentioned in the previous paragraph, two (Harberger and Randolph) are of the general equilibrium type; three (Hassett and Mathur, Felix, and Desai, Foley, and Hines) are reduced form empirical estimates that reflect capital flows; and two (Arulampalam, Devereux, and Maffini and Azémar and Hubbard) are estimating rent sharing through wage bargaining. A recent news report indicated three articles referenced by the Treasury press office in support of the burden falling on wages (although the Treasury Office of Tax Analysis currently assigns most of the burden to capital income): two studies already mentioned, Randolph, and Hassett and Mathur, and a study by Lui and Altshuler. The last study does not clarify what behavioral response it is measuring, but because it is based on considering wage effects by industry it would be capturing wage bargaining effects. The first two studies explicitly focus on the effects of an open economy. It is a standard finding that for a small open single-good economy with perfect capital mobility and perfect product substitution, the burden of any source based capital income tax falls on labor (whereas for residence based taxes, that is taxes that apply to domestic owners of capital regardless of where they are domiciled, the burden would fall on capital). The corporate tax has some aspects of a source based tax and some of a residence based tax. Both the Harberger and the Randolph studies are based on this simple model of perfect substitution, altered to account for the United States as a large county (which lowers the elasticities) and to account for multiple sectors. Randolph's study does not so much predict the burden of the tax as explore incidence in certain types of models; he acknowledges that less capital mobility causes the burden to shift from labor to capital. Harberger's model has four sectors, corporate and noncorporate tradable sectors and corporate and noncorporate nontradable sectors. He assumes that the corporate tradable sector is more capital intensive than the average industry, which leads to a burden of greater than 100% of the tax falling on capital. Despite the vision of the manufacturing sector as highly capital intensive, it actually is not: housing services, which are 100% capital, account for over a third of the capital stock in the country, and many other industries, such as utilities and agriculture are also more capital intensive than manufacturing. Using the same assumptions about mobility, but with a less capital intensive manufacturing sector, Randolph finds 70% of the corporate tax burden falls on labor. To permit other than perfect substitutability, a much more complex computable general equilibrium model would be required, which neither Harberger nor Randolph has provided. Such a model has been developed by Gravelle and Smetters who find, with reasonable elasticities, that capital still bears most of the burden, about 80%. A recent CBO working paper by Jennifer Gravelle provides an extensive review of the existing general equilibrium models and the factors that drive the results. She finds that five factors tend to move the burden toward falling on capital: a smaller willingness of consumers to substitute between foreign and domestic products, a higher substitutability of labor and capital in the production process, a smaller willingness of investors to substitute investments in different countries, a less capital intensive corporate tradable sector, and a larger country. Her review of the evidence on these factors suggests that, based on these models, the majority of the tax (about 60%) is born by capital, with results differing from the Gravelle and Smetters findings due to a lower substitution elasticity between capital and labor in production. She subsequently considers, however, other factors that could increase the burden on capital (and even benefit labor), including the use of debt (discussed below). Although the general equilibrium models can be very complex, they still abstract from some important features of the corporate tax. There are several other factors that would further push the corporate tax burden toward capital. First, the current corporate tax has elements of a residence based tax, and the burden of a residence based tax falls on capital. Second, if some share of profits is rent, it would be expected to fall on capital in the United States, because only a small share of the private sector (less than 7%) is unionized. Finally, the current corporate tax actually subsidizes debt finance at the firm level, and if debt is much more substitutable than equity, total capital would be less likely to be exported: indeed, raising the corporate tax rate could cause capital to flow in. A study by Grubert and Mutti found that in a general equilibrium model that included debt, such a capital inflow occurred when capital income taxes were raised, an outcome that would lead to labor benefitting from the corporate tax. Finally, note that as long as countries tend to choose tax rates similar to each other, which appears to be the case, the world becomes like the original closed economy, a model stressed by Harberger, with the burden falling on capital. According to the 2007 Treasury study, the U.S. combined state and federal corporate statutory rate was 39%, the G-7 average was 36%, and the OECD average was 31%. In 2013, the rates had declined slightly, with rates of 29% in the OECD and 30% for the largest 15 countries (both excluding the United States). Effective tax rates, which should govern the movement of capital, are even closer together, and in some cases are lower for the United States than for other countries. More recent updates of tax rates indicate that U.S. rates are similar to the rest of the world. Jennifer Gravelle uses OECD tax rates to estimate the share of the U.S. tax falling on labor using a global approach and finds that over 90% falls on capital. An argument is often made that the burden of any capital income tax tends to fall on labor because it reduces savings, an effect that would also occur in a closed economy. While one model predicts that the entire burden of a capital income tax eventually falls on labor, this model requires some extreme assumptions about human behavior such as perfect information, an infinite planning horizon, perfect liquidity, and asexual reproduction. Models allowing for finite lives (such as the life-cycle models) find results that vary, but if the revenue loss is made up by higher taxes on labor, there is little or no effect. Some economists believe that these models are inappropriate, as they assume too much information and skill on the part of individuals; they suggest that individuals use rules of thumb, such as fixed savings rates or targets, instead. These rules of thumb suggest that a cut in capital income taxes either has no effect on saving or reduces savings. These economists also point out that most empirical evidence does not point to an increase in savings; historically, savings rates do not appear to respond to reduced tax rates. While the general equilibrium models do not provide much support for the corporate tax burden falling on labor, Hubbard also referred to an empirical study by Hassett and Mathur that uses the corporate tax rate to explain differences in manufacturing wages. They find a statistically significant result that indicates a 1% increase in the corporate tax causes manufacturing wages to fall by 0.8% to 1%. These results are impossible, however, to reconcile with the magnitudes in the economy. Through competition, wage changes in manufacturing should be reflected in wages throughout the economy, implying that a 1% rise in corporate revenues would cause a 0.8% to 1% fall in wage income. However, corporate taxes are only about 2.5% of GDP at best, while labor income is about two thirds. These results imply that a dollar increase in the corporate tax would decrease wages by $22 to $26, an effect that no model could ever come close to predicting. The lack of theoretical reasonableness of the results may be explained by statistical issues. The Hassett and Mathur study used data from 72 developed and developing countries for the 1981 to 2003 period. For their analysis, their dependent variable is the logarithm of the five-year average of the average manufacturing wage. They justify their use of the five-year average wage by (1) noting that due to capital adjustment costs, the economic effects of corporate tax rate changes show up over longer time periods, and (2) arguing that this may control for possible measurement error induced by the business cycle. The wage rates for all countries were converted to U.S. dollars using annual exchange rates. Hassett and Mathur include the price level of consumption as an explanatory variable to capture cost of living differences across countries. The main explanatory variable of interest is the logarithm of the top corporate tax rate. Hassett and Mathur also use the average effective and marginal effective corporate tax rates (in logarithms) as explanatory variables in some specifications. The Hassett and Mathur basic estimation exercise was replicated: the results are reported in the first row of Table 6 . The coefficient estimate reported in the first column (-0.759) suggests that a 10% increase in the top corporate tax rate will lead to an 7.6% decrease in the average manufacturing wage rate. This estimate is statistically significant at the 5% level. The results are not as strong (the estimates are closer to zero) when using alternative measures of the corporate tax rate (see the next two columns of Table 6 ). The exchange rate between two currencies reflects the relative supply and demand for those two currencies, and is affected by financial markets and government policies. Exchange rates may not be good indicators of the relative buying power of wage rates in two countries. Purchasing Power Parities (PPPs), however, are specifically designed to equalize the internal purchasing power of the currencies. Workers in Australia, for example, are concerned with what their wages will purchase in Australia, and not how many dollars their wages will buy. Using PPPs is a more appropriate way to convert national currencies to a common currency (U.S. dollars). The second row of Table 6 reports the coefficient estimates when the wage rates are converted to U.S. dollars using the consumption PPPs. Consumption PPPs are more appropriate for converting wages than using general PPPs (over GDP) because they omit national expenditures for government and investment goods. Again, nominal wages are the dependent variable. The coefficient estimates are closer to zero than the estimates reported in the first row, but the coefficient estimate reported in the first column (-0.728) is statistically significant at the 5% level. The estimates for the alternative measures of the corporate tax rate are not statistically significant at the conventional confidence levels. a. Significant at 5% level. b. Significant at 10% level. The most appropriate measure of wages is the inflation-adjusted consumption PPP-adjusted wage rate. Wages in each country were converted to U.S. dollars using the consumption PPP and then converted to constant (inflation-adjusted) dollars using the CPI-U before calculating the five-year average. The final row of Table 6 displays the coefficient estimates for the model using this measure as the dependent variable. The estimates are closer to zero than in the other two cases. The coefficient estimate in the first column (-0.488) is statistically significant at the 10% level but not at the 5% level. The other two estimates in columns two and three are not statistically significant at the conventional confidence levels. While there is still some evidence of corporate tax rates having a negative influence on wage rates in manufacturing, the effect is smaller and less robust than reported in the Hassett and Mathur study. Hassett and Mathur averaged wages over five-year periods. They justify using five-year averages by arguing that it helps to control for possible measurement error induced by the business cycle. But, because of missing values in the wage data, 66 observations have the average wage based on less than five years of data (60 observations use only two consecutive years of data for the calculation of the average, which would likely not affect any measurement error). The bottom panel of Table 6 reports the estimation results when these 66 observations are excluded from the analysis (leaving 153 observations). In all cases, the coefficient estimates for all measures of the corporate tax rate are not statistically significant. Averaging the wage data over five years and using the beginning of period value for the explanatory variables, however, eliminates much of the variation in wages and tax rates, thus throwing away much of the information needed to estimate the economic effects. The statistical analysis is repeated using annual data and including various lagged values of the corporate tax rate as explanatory variables. The results are reported in Table 7 . The first column of the table displays the coefficient estimates for the current value of the corporate tax rate (labeled t in the first column) and the values for the previous five years (t-1 to t-5), which allows for longer term effects of tax rates on wages. In each case, the coefficient estimates are negative but very close to zero; none are statistically significant at the conventional confidence levels. Furthermore, all the tax rate variables in column (1) are not jointly statistically significant. The next six columns report the results when the corporate tax rate values (current and lagged) are entered individually. In every case, the coefficient estimates are close to zero and are not statistically significant at conventional confidence levels. In using annual data, there is no evidence that changes in the top corporate tax rate affects wage rates in manufacturing. Hassett and Mathur subsequently produced a revision of their initial paper. One of several generic problems with cross-country wage studies is that a proper specification should take into account not only the country tax rate but the rates of other countries. (Other generic problems include the direction of causation, for example, that countries with lower or slowly growing wages may choose to rely on corporate taxes as a revenue source, so that the wage changes may drive the corporate rate.) Hassett and Mathur address the first issue, in a limited fashion, by adding tax characteristics of neighboring or economically similar countries. This addition, in some cases, reduced the coefficient on taxes and made it statistically significant at a lower level. The study also included some local price indices, but this change did not fully address the issue of comparing wages using purchasing power and did not address other issues raised about the original Hassett and Mathur study. Their results continued to produce implausible estimates. In the case where average tax rates of countries with similar income levels was added, the percentage change in wages for a 1% change in corporate taxes is 0.5%. This level implies a decrease of $13 in wages for each dollar fall in corporate taxes. Several other studies have examined the incidence of the tax on labor income. They are discussed in three different categories: studies that rely on cross-country data as in the case of Hassett and Mathur, studies that rely on cross-state data, and studies that examine not the general incidence of the tax, but the share affecting wages through bargaining over excess profits. The Arulampalam, et al. study cited by Mankiw was the first of these latter types of studies. Three studies in addition to the Hassett and Mathur study have relied on cross-country data. Felix, in a study that controls for education, finds much smaller effects than Hassett and Mathur, but ones that are still too large to be predicted by a theoretical model (about $4 for each dollar of corporate tax revenue). This study has problems similar to those for Hassett and Mathur and, in addition, does not control for country fixed effects, therefore not controlling for unobserved country-specific factors. The sample is unusual as well, with 19 countries covered for varying years. Out of the total of 65 observations (countries and years), about a quarter of the sample is drawn from Italy and Mexico and seven of the 19 countries had only one or two years of data. Another study, by Desai, Foley and Hines uses observations on foreign owned affiliates of U.S. firms across countries and in different time periods. This study uses data on multinational subsidiaries of U.S. firms to estimate the allocation of the tax burden between labor and capital using a seeming unrelated regression for capital income (which they measure by the interest rate) and labor income. In their model, labor and capital burdens are restricted to the total of taxes, and they impose a cross-equation restriction on the estimated burdens. They find the share of the burden on labor income to fall between about 45% and 75% of the total, a number that is not inconsistent with theoretical expectations. This approach, however, has the fundamental theoretical problem that wages at an individual firm should not reflect tax burdens at an individual firm. In deriving a model that assumes it does, they assume that the price level of their goods is fixed and base their results only on their sample of firms (which is comprised solely of multinational corporate sector firms). This approach creates both econometric problems in their analysis and also means that their results cannot be construed as reflecting actual burdens in any of their economies, as discussed in more detail in Appendix C . They also represented equity returns through the interest rate, under the assumptions that investors equate (net of risk) debt and equity returns. If these assets are generally substitutable, the increase in corporate tax should cause portfolios to shift toward debt and drive the interest rate up (while driving the equity return down). Moreover, the tax burdens on debt and equity differ at the individual level and those differences depend, among other things, on any special tax rates for dividends and capital gains, the deferral advantage of capital gains, and the inflation rate. Aside from these theoretical problems, an important issue with their study is that it appears that their results are forced by the cross equation restriction. William Randolph, a discussant at a 2008 conference, found that if the restriction is eliminated there are no statistically significant results from their study. In an example he presented, the estimates of the wage effect was 48% of the burden, with a standard error of 18% in the original study; in a regression without the restriction the share was 19% with a standard error of 100%. Randolph considered a number of other specifications, including excluding the largest countries, but found no statistically significant results. He also suggested that only manufacturing subsidiaries be considered since other subsidiaries may be involved in tax sheltering operations. In the case where he considered only manufacturing subsidiaries, the sign reversed (indicating labor benefitted from the tax) but it was not statistically significant. The most recent of the cross-country studies was undertaken by Clausing using a data set covering the OECD countries. Her study examined a number of different specifications, econometric approaches, and alternative data measurements. Two aspects that differed from the Hassett and Mathur study were comparing wages using purchasing power parity and excluding value-added variables, which Clausing suggests is capturing the effect of corporate taxes (whose burden on labor operates by reducing labor productivity). She expects this latter change would make results for the corporate tax variable larger. Overall, however, while trying many specifications and approaches, she characterizes the results as indicating no robust evidence that corporate tax burdens have large depressing effects of wages. She notes, however, that this outcome does not necessarily mean there is no incidence on labor, but that these effects cannot be detected with aggregate cross-country data, a point also made by Jennifer Gravelle in her review of empirical studies. Three studies estimate tax incidence based on cross-state comparisons, as if each state were a separate country. Felix examines wages by residents of states depending, among other factors, on the state corporate tax rates. She finds a smaller effect than the Hassett and Mathur or her own cross-country study, although the results remain implausible, suggesting that a $1 dollar increase in taxes reduces wages by between $1.40 and $3.60. Other problems with her data set is that it is not a panel, so there is no individual specific control, and the data set also does not allow the identification of place of work, but rather place of residence. Felix and Hines use a similar cross-state data set. Although the stated objective of this study is to examine rent sharing by considering union and non-union differentials, the paper also contains direct estimates of the effects on tax rates on wages. The relationships, however, are positive, not negative. Although the authors conclude that higher corporate tax rates reduce union wage differentials (a point associated with bargaining over surplus discussed in the next section), this differential arises in their empirical estimates because union wages rise less with corporate taxes than do nonunion wages. Thus these results directly contradict the results in the previous Felix study. Carroll also examines individual workers across the states using a different data set. He estimates the effects of the statutory rate (combined federal and state) and also an average state tax rate. The first is only marginally statistically significant (and he does not highlight that result), but the second is highly significant. However, the average tax rate is measured not as taxes divided by profits but as taxes divided by personal income. Since personal income is strongly correlated with wages, this measure of tax would likely produce a powerful negative relationship without any direct relationship with taxes. As with other studies, the incidence estimated in this study is very large relative to the expected shares (he calculates $2.50 for every dollar of tax). Another problem with cross-state studies is that states often allocate profits based on formulas and these formulas change the dynamics of capital flows. For example, if a firm's taxes are based on the share of sales, changing the location of production would not be relevant to the state tax burden. One recent study, by Serrato and Zidar, explicitly addressed the apportionment issue by controlling for the share of the tax that was based on a sales factor (other factors are capital and labor) and thus should not affect location. The study found 30% to 35% of the tax borne by labor. The study also used a spatial approach to address geographic location. A study by McKenzie and Ferede of the Canadian provinces did not control for the effect of formula apportionment (Canadian provincial taxes are levied 50% by sales and 50% by wages). The results of this study, were, however, implausible, finding a range of $0.96 to $1.59, depending on the province. One issue with cross-state studies is whether, even were there no concerns with particular studies, the results could provide guidance to the effects of the federal tax. Capital is likely significantly more mobile across states and products across states are probably closer substitutes, both factors that make the incidence more likely to fall on labor. Labor, however, is also mobile but its relative increase in mobility is probably less than that of capital. The states are also more like small economies on average. As in the case of cross-country studies, the tax rates of other states should be included in the regression. In addition, state corporate tax rates are much lower than the federal tax rate and it would be even more difficult to use this small explanatory variable to explain wages. Several studies have appeared recently that discuss the potential burden of the corporate tax on wages via an entirely different mechanism, which has been misinterpreted in some ways. As noted earlier, Greg Mankiw cited a study by Arulampalam, Devereux, and Maffini (hereinafter, ADM) finding a labor share of the corporate tax burden of 96% as evidence that the corporate tax fell largely on labor. (The most recent version of their study reports 49%). More recently, Treasury Secretary Steve Mnuchin cited a study of this type by Azémar and Hubbard (AH) as evidence that the burden falls largely on labor (they found 60%). ADM, AH and other studies of this nature do not estimate the general equilibrium effects of corporate taxes on economy wide wages but rather the share of the tax on excess profits that falls on workers due to bargaining and rent sharing, as do the other studies reviewed in this section. Because of the method of estimation, the Liu and Altshuler paper referenced by the Treasury Press Office would also be classed with rent-sharing studies. They have relatively little relevance to the general issue of the corporate income tax for the United States (in part, because the shares of workers who belong to unions that bargain on wages is so small). However, their results have been invoked as evidence on the general tax burden and these types of studies appear to be proliferating. The ADM study has apparently inspired several other studies of this nature, which are discussed here. These studies use individual firm or sector observations, which, as noted earlier, are not appropriate for the general incidence of the corporate tax, but are appropriate for the study of rent-sharing. Before proceeding to examine both the ADM study and other studies specifically, it is important to make some general points about these types of studies as measures of the share of the corporate tax borne by labor. First, even if a reliable measure of labor's share could be found, the share cannot be interpreted as the share of total tax falling on wages because the analysis relates only to excess profits, which are in turn only a part, perhaps a small part, of total profits. The share of rents also suggests an upper boundary to the share of the tax which falls on labor that should be detected through these studies. A widely cited study by Gentry and Hubbard estimated that 60% of corporate profits represented earnings in excess of a risk-free return. Since some (perhaps most) of the excess return is a risk premiums and is part of the opportunity cost of capital (not excess profit), the excess profit share should be lower. Some evidence suggests that it is in the neighborhood of 10% to 20%. Every empirical study discussed in this section exceeds that level, with the smallest about 35% and the largest many multiples of 100%. Moreover, the burden relates only to those firms that both have some excess profits and engage in bargaining. While bargaining may be common in some European countries, in the United States, where unions would be expected to do the bargaining, less than 7% of private wage and salary workers are covered by unions. Second, there is an existing literature that has attempted to estimate the share of labor in excess profits (without focusing on tax issues). Most studies have found that, even in those circumstances where bargaining is to be expected, labor tends to capture a relatively small share, typically less than10% and rarely more than 20% or 30%. This small share suggests the amount of labor income due to rent sharing is small, and that is consistent with estimates that the union wage premium is about 15% (with a range of 0 to 30%). Thus the share of the total wage bill that reflects rents of union workers is 1% (the share of union workers, 7%, times the wage premium of 15%). Thirdly, and perhaps the most important point to make, in the standard bargaining model (such as that employed by ADM), a corporate tax rate that applies to excess profits would not be expected to affect wages through the bargaining process. If taxes are treated in a standard way as a rate applied to a firm's revenue minus cost, the tax term does not appear (see Appendix D ). The workers and firm would split pretax profits, with each paying tax (corporate or individual) on their share. The economic intuition behind this is that while a higher tax rate reduces the surplus or size of the pie to be divided, it also makes the "price" of giving a dollar to labor lower because wages are deductible. Economists might think of these as offsetting income and substitution effects and in this model they offset exactly. The only tax effect left is the one that arises (potentially) from the general equilibrium effects on the economy that occur due to the imposition of the tax on normal profits, an effect that applies to firms without excess profits and unions as well and could only be uncovered through some analysis appropriate to economy-wide effects. Under reasonable assumptions the proportional effect on rents is similar to the proportional effect of wages. Because the taxes on the excess profits themselves do not directly drive payments to labor, considering the possibility of rents simply means that an even smaller share of the total corporate tax burden falls on labor than suggested by the general equilibrium models. (For example, if the model estimates 20% of the burden will fall on labor and 25% of profits is excess, then only 75% times 20%, or 15%, of the burden falls on labor.) Given these theoretical insights, one might question why empirical studies of rent-sharing are being pursued at all as a question of tax incidence, and why such significant effects have been found. The ADM study used firm level data (for about 55,000 firms) from several European countries (primarily France, Italy, Spain and Germany) over a relatively short time frame of 1996-2003. It controlled for firm-specific effects. About a quarter of the observations are for only four years and about 45% only five years so that the panel, like that of Felix, shows changes over the short run. The same authors had an earlier version of their study with a smaller sample. Although the authors control for firm level fixed effects, they do not control for country-specific effects. The authors have subsequently revised their study reporting, for the preferred specification, that labor bears 64% of the tax in the short run and 49% in the long run. The ADM study properly derives a model where the tax on revenues minus wages disappears and claims not to consider the tax on normal profits. Instead the authors hypothesize an extra tax term that is not associated with profit that will affect wages directly. It is difficult to imagine exactly what type of tax provision would fall into this category. In any case, the share of the corporate tax arising from this type of provision seems likely to be vanishingly small. Whatever the authors theorize about, it is not what they include in their regression. The variable is total taxes paid per worker (although it is instrumented with tax rates and other variables). The study also excludes other important variables which cannot be observed such as the competitive wage (they use a minimum wage which is obviously far too low). The empirical implementation examines the change in wages as a function of the change in output and taxes (all taxes, not just lump sum taxes) which are closely linked as major elements of a contemporaneous identity and may explain their findings. Thus, it is possible that the statistically significant relationships obtained derive from some other linkage and do not represent a share of the tax burden. There are also some important reservations about the econometric methods. Panel data with short time periods (where persistence effects can be serious) and the need to control for firm specific effects face some significant econometric problems. The authors use a number of different specifications, with widely varying results, which suggest that the results are not robust. There are several other aspects of the econometrics that are not transparent. Overall, it is not clear what relationship or phenomenon the study is measuring. Interest ideally is in how an exogenous tax change affects wages. Yet for some of the countries that constitute a large share of the data, there were no changes in tax rates. In others, tax rate changes were virtually all declines, with most of those declines occurring during the growth period of the late 1990s, when productivity and output was rising. It is possible that the results are capturing that phenomenon. Another study using European data directed at capturing the bargaining share was recently released by aus dem Moore, Kasten, and Schmidt. This study compared the changes in wages of German manufacturing compared with French manufacturing, spanning a time when the German taxes were reformed (including rate cuts) and the French tax was not. This analysis finds a very large effect: an increase in German wages of 6.4% due to the rate cuts. This finding seems large. According to the reported means of the data, the ratio of wages to taxes is 11.9; that is wages are about 12 times the amount of taxes. If wages rose by 6.4%, that amount is 76% of the total corporate tax. It appears that the reduction in German taxes was around 20%, which implies, in dollar terms, that wages rose $4 for each dollar reduction in tax, when it should have been a share of only a small part of the tax. It seems likely that the empirical estimates are capturing some other type of influence, and the authors indicate their study is preliminary and uncertain. The authors never discuss the theoretical finding that this type of tax rate change is the kind of change that would not be expected to show up as a part of rent sharing. Another study, by Dwenger, Rattenhuber, and Steiner, also uses firm data to examine the German tax cut. As with the aus dem Moore et al. study, they do not address theoretical concerns and simply assume that labor will bear some of the burden of the tax via bargaining. Their estimates of this initial wage effect indicate labor bears 156% of the tax. They also assume that the higher or lower wages will lead to employment shifts (so that when wages rise, employment falls and thus the wage bill does not fall as much), which results in a total wage bill effect of 47% of the tax. This line of reasoning regarding employment is also inconsistent with theory, as the wage does not change from the direct bargaining effect. Rather it arises from the increase in the cost of capital via increased taxes, which, while decreasing the demand for capital (assuming there is a non-taxed noncorporate or foreign sector), has effects on employment in the corporate sector that are uncertain. In a general equilibrium model, employment is assumed to be fixed in the economy. In any case, these general equilibrium effects cannot be uncovered with firm specific data within a country because the effect should not relate to the specific taxes of the firm. As with the aus dem Moore et al. study, it is not clear what the authors are measuring when they regress wage rates on tax rates, although it could reflect differential wage growth across industries. A study of subnational taxes in Germany by Bauer, Kasten, and Siemers found a significant effect of the corporate tax on wages. In some ways, this study was similar to the cross-state studies done in the United States in that the explanatory variable was the tax rate. But it also addressed rent sharing by examining the differences between low-skilled workers with less bargaining power. As is the case with some other studies, the results are implausible. They found that a 1% increase in tax rate decreased wages by between 0.28% and 0.46%. Although the incidence was not as large as the Hassett and Mathur results, using the same ratio of wages to taxes as the aus dem Moore, Kasten, and Schmidt study indicated a dollar of corporate tax reduced wages between $3.36 and $5.52 or by 336% to 550%. Fuest, Peichl, and Sioegloch report an incidence of 47% in a wage bargaining model, using data from German municipalities and a series of tax changes in the local business tax. This 47% includes an externally estimated excess burden (efficiency cost); without it the incidence would be 36%. A study by aus dem Moore, comparing outcomes in France and the UK in a wage bargaining model follows the approach of ADM, and finds the share falling on wages 39% in France and 40% in the UK in the short run. In the long run, the results indicate a share of 66% in France and 73% in the UK. Azémar and Hubbard estimated the incidence in a wage bargaining model using data on 13 OECD countries. Using the values for 2004, their estimates indicate 60% of the burden falls on labor. Further estimates that include measures of union density indicate that this effect is highly driven by union density and would probably be negligible for the United States. Two studies have been based on data in the United States. As noted earlier, Felix and Hines actually found wages to rise with increases in state tax rates, but the union differential fell. They indicate that their findings show that workers in a unionized firm bear 54% of the tax burden. Several important points should be understood about their analysis. First, as they make clear, they are not trying to estimate the effect of direct taxes on rents, as this effect disappears from their model. They are rather examining the indirect effect that would arise due to the increase in the cost of capital and the subsequent general equilibrium effects that would arise. Although they have correctly measured a statewide tax rate as their tax variable (rather than a firm specific rate), the model they use to drive their theoretical expectations has a mistake (as shown in Appendix D ) and the expectation from a properly derived model is likely a close to zero effect, and if not zero probably positive. Their estimate appears outside the range of reasonable theoretical prediction and probably in the wrong direction. In addition in calculating incidence they have applied the elasticity to the entire wage bill, not the share that is rent. If the rent share is about 15%, 8% of the tax, not 54%, falls on rents. As shown in the appendix, for a nationwide incidence taking into account union membership and theoretical expectations, the share of the tax that falls on rents is no more than 3% (keeping wages constant) and rents would more likely benefit. The most recent study of the United States is one by Liu and Altshuler. Their theoretical approach is difficult to interpret. As discussed in this review, there are general equilibrium effects that can shift the tax to wages, but within a closed economy with a fixed capital stock the central tendency is for the burden to be spread to all capital, but not to wages. Only in an open economy, where capital can flow across countries (and which would require country observations) could wage shares be estimated through this mechanism and the wage would be an economy-wide (country-wide) wage. Generally, using a single country's data is aimed at measuring a burden that would fall on labor through the rent-sharing mechanism, except that the standard bargaining framework shows that while rents might be shared by labor, the tax on rents should not be. Liu and Altshuler never discuss a bargaining equilibrium and therefore never confront the offsetting price and income effects that tend to eliminate rent-sharing arising from taxes. In fact, at one point in their model, the wage rate becomes the numeraire (is fixed) that implies there are no industry wage differentials. Their empirical approach is to examine how relative wage rates in each industry changed over time based on the mix of assets and the change in marginal tax rates over that period. They conclude that labor bears 60% to 80% of the tax. Why do they obtain such large effects, when theory says they should be zero or negligible? The most likely reason is because the marginal tax rate fell primarily for equipment, and those industries whose investments were more concentrated in equipment (manufacturing, transportation, construction, but especially manufacturing) probably saw slower wage growth over the period due to the decline in unions and international competition. Although there has a resurgence of interest in direct empirical estimates of incidence, this review suggests that these reduced form empirical studies are seriously flawed, produce unreasonable estimates, are not robust (changes in specification change the results), or are inconsistent with theory, as is the case in the rent-sharing studies. Certainly, a serious problem with even the best of these studies is that the corporate tax tends to be dwarfed by the size of labor income so that it is difficult to detect this relationship or control for other factors that affect wages. The advantage of studying incidence through a general equilibrium model is that such a model can control for the factors affecting the incidence (including the limits to the effects), and, even though they are models, they are informed by empirical evidence. Based on these models, it appears that most of the burden of the corporate tax falls on capital. The effect on capital flows without considering debt or rents suggest that labor bears 20% to 40% of the burden. If rents were 20% of total profits (and taxes) the labor share would fall to 16% to 32%. Consideration of debt could easily cause more that 100% of the burden to fall on capital. Thus the tax is a progressive one that falls on capital incomes and thus largely on higher incomes. The traditional criticism of the corporate tax is that the tax causes distortions, and that these distortions are exacerbated by corporate tax preferences that prevent, for a given level of tax revenue, a lower tax rate. The issues discussed in this section include allocation of capital within the domestic economy, savings effects, and international capital flows. Traditionally, the efficiency concern about the corporate tax is related to the misallocation of resources between corporate and noncorporate production (including owner-occupied housing). Over time, efficiency issues have also encompassed differential taxation of the returns to assets of different physical types, and financial distortions, which affect the debt-equity ratio, payout choice, and decision to realize capital gains. Some efficiency costs, including those that alter the mix of a firm's assets, arise not so much from the existence of a corporate tax but from its design. Table 8 captures the effects of the three most significant generally-available provisions that affect tax burdens on different assets: depreciation and capital cost recovery rules, the recently enacted production activities deduction, which in effect allows a lower tax rate on certain domestic activities that are deemed production (manufacturing, construction, etc.), and the credit for expenditures on research and development. The tax rates in this table account only for the corporate tax (that is, they do not include the benefits of deducting interest or the tax at the individual level on interest, dividends, and capital gains). They are also forward looking and marginal: they estimate the share of the return on a prospective investment that is paid in tax. If income were correctly measured and taxed that share would be the statutory rate; most assets face lower tax rates. The variations within a column illustrate the distortions firms face in choosing the mix of capital within a firm. Overall the variations not only distort the mix of capital within a firm, but also the allocation of capital across different industries. Other things equal, firms eligible for the production activities deduction and firms that have a larger share of their capital stock in equipment or in research and development than average will be favored. In the aggregate, the tax rate on equipment is estimated at about 24%, more than a full 10 percentage points below the statutory tax rate. The overall effective rate is 20%. The lowest rates are on intangible investments, such as research, advertising and investment in human capital. These costs are expensed (leading to a zero tax rate on those expenditures) and, in the case of research and development, eligible for a credit as well (leading to a negative rate). Spending on advertising is expensed and subject to a zero rate even though some advertising has future benefits. Table 9 reports the types of distortions that are an artifact of the corporate tax as a separate tax. These estimates, unlike those in Table 8 , take into account all levels of taxes. One of the complications of estimating these tax rates is whether the estimates should consider the significant (over 50%) fraction of individual passive income that is held in tax exempt form through pensions, IRAs, life insurance annuities and non-profits. In some ways, these sources can be viewed largely as not affecting marginal investment (for example, overall savings) because they are capped or not controlled directly by the investors and in other ways they affect choices (such as debt or equity of pension funds). Two sets of CRS estimates are provided which assume either tax exempt investment based on the distribution of shareholders or an alternative used by CBO which has a significantly smaller tax exempt share that reflects the marginal investments of U.S. citizens. These assumptions also differ in the share of borrowing and, to a small degree, in the individual tax rates on dividends, capital gains, and interest. Within the corporate sector, in addition to asset differences, there is a larger differential with respect to debt versus equity finance. The aggregate tax burden on debt is negative, while equity is taxed at 22.4% or 26.5% depending on the estimate. Shareholder taxes do not add much to the burden, since the tax rate on equity accounting only for the firm level taxes is 19.7%. This small effect is due largely to the significant share of tax exempt investors, and, to a lesser extent, the lower tax rates applied to capital gains and dividends. If economic income were measured correctly, interest would be subject to the individual income tax rate, which is typically slightly above 20%. Debt is subsidized at the firm level, however, because nominal interest is deducted (including the inflation premium) while corporate profits before this deduction are effectively taxed at a rate below the statutory rate on real income. The result is that at the firm level debt is subsidized (a negative 53.5% tax rate). At the individual level, the tax on interest for taxable recipients is higher than the statutory rate because nominal interest is taxed, which pushes the overall tax rate toward a small but negative rate. The overall corporate tax rate at the firm level, which would be relevant to international allocation of capital is 5.7%. Evidence on the size of this distortion is limited, but since there appears to be limited substitution between debt and equity, it is probably less than 5% of corporate tax revenue. Some simple measures, however, could significantly reduce this distortion (such as indexing interest payments for inflation). Lower corporate tax rates would also reduce this distortion. The distortion that has probably received the most attention by those studying the corporate tax is the misallocation of capital between the corporate and noncorporate sectors. One source of the distortion arising from the corporate tax system was the taxation of corporate business plant and equipment at around 30%, while unincorporated business is taxed at only 20%. These estimates predate the inclusion of intangible assets that are uncommon in the noncorporate sector. They were also estimated at a time when a larger share of shareholders was taxable. The higher corporate tax also contributes to a larger wedge between corporate production and owner-occupied housing, which is generally taxed at a negligible rate. The magnitude of the estimated distortion produced by having a separate corporate tax varies depending on the model used and ranges from less than 10% of corporate tax revenue to about a third. Since the deadweight loss varies with the square of the tax rate, the recent decline in the differential due to lower tax rates on dividends and capital gains suggests the distortion relative to revenue would be smaller—probably no more than 4% to 7% of revenue, or perhaps even less taking into account intangibles and the increase in tax exempt shareholders. A distortion not captured in Table 9 is the one that affects corporate payouts. Given that appreciation in stock values is not taxed until realized, there is a benefit to retaining earnings. There is a dispute about what determines payout ratios, and what the consequences of the tax are, but, in general, the welfare cost is small. There is also some distortion due to the lock-in effect for capital gains realizations. Considering all of these distortions together, they are probably around 10% of corporate tax revenues, a magnitude that could be considered as a significant component of the burden of the tax. However, given the revenue needs of the government, there would also be distortions, perhaps smaller, associated with alternative taxes. Ways to reduce these distortions may, however, be worth considering. Much of the 2007 Treasury study's discussion emphasized effects on savings although this is not normally the focus of efficiency concerns about the corporate income tax. This distortion is not unique to corporate income taxes, but occurs with all capital income taxes. There are many difficulties with analyzing this issue. The first is that, as noted above in the discussion about the potential effect of savings on the wage rate, the economic distortion depends on the behavioral response of savings to tax changes, and what tax replaces them. Some economists have a strong view that taxes on the rate of return are always distorting, but these views are based on dynamic infinite-horizon models that may not be very realistic. With life-cycle models, the distortions depend on what revenue substitute is provided; substituting taxes on wages for taxes on capital, the most likely substitute in the U.S. tax system, could potentially increase distortions, depending on the responses in the models. In models of bounded rationality, where savings are based on rules of thumb such as fixed shares of income or fixed targets, there is no response, or only an income effect, which would not produce a distorting effect. Tax rules can affect the efficiency of allocation of capital around the world, and, if the U.S. rate is different from other countries, it can cause misallocations of capital. According to a recent study, the U.S. corporate tax rate is 39% compared with an average of 30% for the largest 15 countries excluding the United States and an average of 28.4% for OECD countries excluding the United States (both weighted by output). For firms eligible for the U.S. production activities deductions, characteristic of most multinationals, the rate was 36.3%. The effective tax rate (taxes divided by profits) was about the same and the marginal effective tax rates much lower and about five percentage points higher than the OECD average. These data do not indicate the United States is a notably high tax country with respect to investment. The main source of international distortion, therefore, is probably the increased investment that occurs in low-tax and tax-haven countries because the United States and other developed countries do not tax that income at all or tax it on a deferred basis. This inefficiency is not due to the corporate effective tax rate, but rather is due to the provision of a tax benefit for investment abroad. Even when tax rates diverge, the efficiency costs appear to be relatively insignificant because the evidence suggests, as noted in previous sections, limited mobility of capital as a result of varying tax rates and natural constraints of the economy. A variety of potential revisions could be made to the corporate tax to permit lowering the rate. The revisions discussed here include (1) broadening the corporate tax base and using the revenues to reduce the rate or to provide investment incentives, (2) correcting interest deductions and income for inflation, and (3) increasing the individual level tax to permit a lower tax at the firm level or taxing large unincorporated firms as corporations. (To provide some reference, latest projections show corporate tax revenues at $300 billion in FY2016 and projected at $429 billion in FY2027. In 2007, prior to the recession they were $370 billion, but they were lower during and after the recession due to cyclical factors and legislative changes. ) The first part of this section summarizes the various base broadening tax reform proposals over the years, beginning in proposals advanced in the 2007 Treasury study and continuing through the latest budget proposal in 2016. The second part calculates how much the corporate rate could be reduced for corporate tax expenditures as well as other potential revisions. The remaining sections discuss two revenue estimates for two provisions that are not provided by other sources. One type of revision that would probably be supported by many economic analysts is to eliminate certain corporate preferences in exchange for a lower statutory corporate tax rate. The 2007 Treasury study estimated that eliminating corporate preferences would allow the tax rate to be lowered to 27%. Table 10 shows the preferences the Treasury study listed and the average FY2008-FY2017 revenue costs they reported at that time. The largest preference in the list is expensing and accelerated depreciation ($41 billion) and the second largest is the production activities deduction ($21 billion); both provisions are captured in effective tax rates cited above. Other significant provisions (worth over $10 billion each in these years) include the exclusion of interest on state and local bonds, the research and experimentation tax credit, and the deferral of income from foreign sources, which is probably responsible for much of the international distortions. Interestingly, their list did not include graduated rates for small corporations, which costs slightly more than $4 billion per year. Since owners of small corporations are typically as wealthy (or more wealthy) than owners of large ones, there appears to be little economic justification for not including these rates. In addition, in 2007, H.R. 3970 (110 th Congress) was introduced by then-Chairman of the Ways and Means Committee Rangel. It was a more limited bill that would have lowered the tax rate to 30.5% (at a 10-year cost in FY2008-FY2017 of $363.8 billion), as well as allowing a permanent extension of provisions allowing expensing for small business (at a cost of $20.5 billion). As shown in Table 11 , this proposal did not alter depreciation, and eliminating the production activities deduction was the proposal's largest revenue raising provision. (Note that the revenue estimates were quite different, however.) It also included an alternative to eliminating the deferral of foreign source income that was somewhat more limited: disallowing expenses associated with foreign source income that is tax-deferred and allowing foreign tax credits only to the extent foreign income is currently subject to tax. The proposal also included two other international provisions, one eliminating a provision adopted in 2004 that included worldwide (rather than domestic) interest allocation rules for the foreign tax credit limit and one restricting the availability of lower withholding tax rates on income invested in the United States under treaty rules. However, a delay in the worldwide interest allocation has already been a revenue raiser for other legislation. Another major revenue raiser was a restriction in inventory accounting rules. The only depreciation base broadener in the proposal is one to extend the depreciation period for acquired intangibles. As is often the case in tax legislative proposals, revenue raisers are not always in the tax expenditure list. Over several Congresses, Senator Wyden, along with cosponsors, has introduced a broad tax reform proposal. His proposal for the 111 th Congress, S. 3018 (cosponsored with Senator Gregg) was scored by the Joint Committee on Taxation. It would also eliminate a range of corporate tax preferences and lower the rate to 24%. This legislation would eliminate several of the provisions in Table 10 (accelerated depreciation, the production activities deduction, deferral, the inventory property sales source rule, and some smaller provisions), as well as index corporate debt for inflation (discussed below). This bill is able to achieve more rate reduction because it uses provisions outside the standard tax expenditures to raise revenue. As shown in Table 12 , a major revenue raiser in that study was a provision not in the tax expenditure list to provide a per country foreign tax credit limit (rather than an overall limit) for foreign source income and it was almost as large as accelerated depreciation. S. 3018 also raises significant revenue from disallowing interest deductions that reflect inflation (discussed below). The Fiscal Commission proposed a measure very similar to the Wyden Gregg bill except that they did not include the deferral and per country foreign tax credit limit. Rather, they included a territorial tax that would raise somewhat less revenue than repealing deferral alone. The Senate Finance Committee released discussion drafts on cost recovery and accounting in 2013 that relate to corporate taxation as well as a draft on international corporate tax issues. These proposals have not been scored. The cost recovery provisions would introduce a new depreciation system that would slow depreciation and approximate the present value of economic depreciation. Assets would be added to general pools rather than each vintage of investments being depreciated separately. Real property would be depreciated over 43 years. Research and development expenses would be deducted in equal increments over five years, as would half of advertising expenditures (the remainder would continue to be deducted when incurred). Oil extraction expenses would be recovered over five years and percentage depletion would be repealed. LIFO and lower of cost of market inventory would be repealed. In international tax rules all foreign source income would be subject to tax (equivalent to repealing deferral) but some income would be taxed at a lower rate than the statutory rate (i.e., a minimum tax would be imposed). President Obama's annual budgets have also included corporate tax reform provisions, concentrated in a few areas: international provisions, insurance provisions, inventory accounting, and fossil fuels. These provisions cover unincorporated businesses as well, but primarily affect corporations. The proposals changed in nature between the FY2015 and the FY2016 budget; the earlier set of changes is listed in Table 13 . The first two of the international provisions are the same allocation of deduction and foreign credit provisions contained in H.R. 3970 . In the FY2016 budget, a new approach to international tax reform was taken, and the provisions for disallowing interest expense for unrepatriated income and foreign tax credit pooling were replaced by a minimum 19% tax on foreign source income. In the FY2017 budget it was projected to raise an average annual gain of $35 billion over FY2017-FY2026, with the remaining intangible provisions raising $0.3 billion. Most of the other proposals were the same. Overall the international proposals would raise an average of $48.4 billion over the period. (This number does not include a one-time 14% tax on existing unrepatriated income.) In 2014, revenue estimates were released for the Tax Reform Act of 2014 ( H.R. 1 ) introduced by Dave Camp, then chairman of the Ways and Means Committee. This proposal repealed or revised 115 corporate-related provisions including most corporate-related tax expenditures (which are discussed subsequently); estimates can be found in a Joint Committee on Taxation document. The most important tax expenditures in terms of revenue effect (annual averages over FY2014-FY23) were the slowing of accelerated depreciation ($27 billion), amortization of research and development ($19.3 billion), phase-out and repeal of the production activities deduction ($11.6 billion) and elimination of LIFO and lower of cost or market inventory accounting ($7.9 billion). Note that these provisions are scored under a phased in reduction of the corporate rate to 25% (as well as reduced individual rate). The plan also included some provisions not in the tax expenditure budget, such as the amortization of advertising ($16.9 billion) and allowing net operating losses to offset no more than 90% of income ($7.1 billion). For international tax treatment, the system moved to a territorial tax, but with stiffer anti-abuse rules, a system that lost revenue in the steady state. The CBO includes revenue raising corporate and business tax options in their budget options study, which are shown in Table 14 . Their options include a more limited proposal to restrict depreciation that raises less than half the revenue as replacing accelerated depreciation with the alternative depreciation system (which is the standard against which the tax expenditure is measured). The options also consider a different foreign tax return that would combine allocation of deductions rules with an exemption for active income, a territorial type of tax treatment. How much could corporate tax rates be cut while maintaining revenue neutrality? Proposals discussed above have indicated rate reductions to 27% (Treasury 2007), to 24% ( S. 3018 , although there was a small corporate revenue loss), and to 25% for the Camp proposal. Two important determinants of this potential rate reduction are whether to use revenues associated with unincorporated businesses which are included in these revenue raising options and how to treat provisions that arise largely from timing differences. Base broadeners that depend on timing such as accelerated depreciation would raise more revenue over the immediate budget horizon than they would over the steady state. The options listed in the tables above not only include unincorporated business provisions but also measure revenue gains in the first 10 years which can be almost twice as much as the steady state gain in the case of accelerated depreciation. At one point, the Joint Committee on Taxation estimated that relying solely on elimination of corporate tax expenditures, the rate could be reduced to 28%, although this proposal did not include the repeal of deferral or other foreign provisions. However, since these revenues reflect the first 10 years, such a reform would lose revenue in the longer run. At the same time, the estimate could also be affected by changes in the baseline (such as making some provisions permanent, notably the R&D tax credit and deferral of tax on active financing income). Current estimates of the steady rate effects, as shown in Table 15 , where provisions are expressed in terms of their rate reduction capacity, indicate that eliminating all corporate tax expenditures other than deferral would achieve a revenue-neutral rate of 27% in the long run steady state. If deferral is included the rate could be imposed at 22%. In addition, as shown in the table, most traditional tax expenditures individually account for a very limited amount of rate reduction. Moreover, because each provision becomes less valuable the lower the rate, the tax reductions for a combination is slightly smaller than the sum of the individual points. By far, the most significant provision, in terms of revenue, is the deferral of tax on foreign source income. Of the remaining provisions, the most significant ones are accelerated depreciation and the production activities deduction. A full discussion of the economic merits of these provisions is beyond the scope of this paper, but the standard tax expenditure items are discussed in the Senate Budget Committee Print, Tax Expenditure Compendium ; most would be regarded as provisions that lead to economic distortions. One possible exception is the Research and Experimentation (R&E) credit, because social returns to research and development appear higher than private returns, but many economists believe that the credit is probably poorly targeted and possibly abused. Arguments could also be made that the tax exempt bond benefit is shifted to state and local governments (which can charge lower interest rates) and that these assets and revenue loss would be shifted to individuals. Arguments could also be made that the benefits of the charitable contribution deduction and the low-income housing credit ultimately accrue to charities and lower-income tenants, at least in part. Many other provisions have some support, and may, therefore, be difficult to repeal. Trading accelerated depreciation, the major revenue raiser from the tax expenditure provision, for a rate reduction would raise the cost of capital, because rate reductions provide windfalls for existing capital. How this effect is viewed depends on the objective of reform. If, for example, it reflects a concern about international capital flows, increasing the cost of capital is a concern. The 2007 Treasury study also discussed the possibility of using this base broadening to provide an investment incentive, such as a partial expensing. Currently full expensing has been discussed as part of the 2016 "Better Way" tax proposal in the House. Such a provision would lower the tax rate on new investment although the effect is limited because of the disallowance of interest deductions. It is difficult to design investment subsidies in a fashion that is both neutral across types of assets and generates an even revenue loss pattern over time. Historically, investment subsidies have been restricted to equipment. The provision used most frequently in the past is the investment tax credit which, if allowed at a flat rate, favors short-lived assets. Partial expensing is neutral across investments if allowed for all types but its revenue loss is very large in the short run. Accelerated depreciation can be designed to be neutral, but it also has an uneven revenue loss pattern and cannot be applied to non-depreciable assets, such as inventories. A benefit of lowering the statutory rate is that it reduces the incentive to shift profits abroad to tax havens, although that incentive would probably be considerably lessened in any case if deferral of taxation of foreign source income were ended, as proposed in S. 3018 . Although there are large potential gains from taxing foreign source income, as in S. 3018 , and there are economic justifications for taxing foreign source income the same as domestic source income, and a lesser amount through ending deferral, international reforms are controversial. Indeed pressure has been exerted to move in the other direction, toward a territorial tax. Both the Chairman of the Ways and Means Committee in 2014 and the Fiscal Commission proposed a territorial tax. The "Better Way" proposal would also adopt a territorial tax. Depending on the design features, a territorial tax could raise revenue, lose revenue, or break even. The 2014 Ways and Means proposal would be revenue neutral in the budget horizon but lose revenue in the long run. There are, however, some more limited approaches. For example, the President's advisory panel proposed to exempt dividends of active businesses but disallow costs such as interest to the extent income is exempt. And, as proposed in H.R. 3970 and the President's proposals, one could also defer interest deductions associated with deferred income without making any other changes, or direct restrictive rules to tax havens. Based on the 2013 data, net interest paid, excluding finance and insurance, was $44 billion. Assuming half is due to inflation, multiplying by 35% and scaling up to reflect 2017 levels, the gains would be $8.3 billion, which would produce a 0.6 percentage point reduction in the rate. Given the value of lowering the corporate tax rate to reduce the shifting of income into tax havens and concerns over the U.S. position among other countries, one change that would allow this reduction is to raise the tax at the individual level and use the revenues to lower the corporate tax rate. Since individual taxes tend to be collected regardless of where income is earned, these taxes are neutral with respect to international allocation. This approach also allows more scope for lowering corporate tax rates without creating sheltering opportunities for high-income individuals. If the 2003 tax changes that lowered rates on dividends to 15% (eventually rising to 20% for very high income taxpayers in 2013) were rolled back, the federal corporate tax rate could be reduced to 32.9%. Additional revenue could be raised by taxing capital gains at higher rates, although, based on the JCT revenue estimating methodology the amount of additional revenue would be constrained by the behavioral effect on realizations. One could go even further, by taxing corporate capital gains on an accrual basis, which would yield dramatically more revenue. This type of change would also eliminate distortions arising from payout policies and realizations response. Even lower corporate rates could be achieved by taxing non-profits enough to offset their savings from the lower corporate rates—a change that would leave them unaffected, but would simply shift the source of tax collection. These latter proposals would arguably be broad enough to move much of the way toward an integration of the corporate and individual income taxes. Another provision that might be used to raise revenues is to tax the increasing number of large pass-through as corporations. How much, if any, revenue that change would raise depends on any changes in taxation of dividends and capital gains and the individual and corporate income rates. The calculation in the table is based on measures that would restore the share of pass-through income to its old level (that is, moving it from 41% of business income to 79%). The calculation would depend on the rates of the individual and corporate taxes. The estimate assumes that the profits net of the corporate tax are taxed at an effective 15.7% rate that allows for a 20% rate and a share of capital gains not to be realized and that the current tax on pass-throughs is the same as the current corporate rate, 35%. Thus the tax imposed on the former pass-through businesses would be t + 0.157*(1-t), where t is the tax rate that equates new corporate tax revenues to the sum of the old corporate and pass-through revenues. Is there an urgent need to lower the corporate tax rate, as some recent discussions and analyses have suggested? On the whole, many of the new concerns expressed about the tax appear not to stand up under empirical examination. The claims that behavioral responses could cause revenues to rise if rates were cut do not hold up on both a theoretical basis and an empirical basis. Studies that purport to show a revenue-maximizing tax rate of 30% contain econometric errors that produce biased and inconsistent results; when those problems are corrected the results disappear. Cross-country studies to provide direct evidence showing that the burden of the corporate tax actually falls on labor in some cases yield unreasonable results and prove to suffer from econometric flaws that also lead to a disappearance of the results when corrected. Similarly, claims that high U.S. tax rates will create problems for the United States in a global economy suffer from a misrepresentation of the U.S. tax rate compared to other countries and are less important when capital is imperfectly mobile, as it appears to be. Although these new arguments appear to rely on questionable data, the traditional concerns about the corporate tax appear valid. Although many economists believe that the tax is still needed as a backstop to individual tax collections, it does result in some economic distortions. These economic distortions, however, have declined substantially over time as corporate rates and shares of output have fallen. There are a number of revenue-neutral changes that could reduce these distortions, allow for a lower corporate statutory tax rate, and lead to a more efficient corporate tax system. At the same time, the amount of rate reduction that could be achieved with a long run, revenue-neutral corporate tax reform seems limited to a few percentage points. Appendix A. Revenue-Maximizing Tax Rates in an Open Economy For an exploration of corporate tax revenue, consider a very simplified example where there is a U.S. corporate sector and the rest of the world with no tax. The lowest revenue-maximizing rate would apply in a case where there is a small country which is a price-taker (that is, worldwide price and rate of return after tax are fixed because there is perfect capital mobility and perfect product substitutability). To determine the revenue-maximizing tax rate, begin with the equation for corporate tax revenues: (A1) where , the corporate capital stock, and , the after-tax rate of return, are potentially functions of the tax rate, . Revenue is maximized when the total differential of equation (A1) with respect to taxes is equal to zero, which is: (A2) Assuming the rest of the world can be treated as an aggregate and has a zero capital income tax rate, Gravelle and Smetters show that, in a case of a small country with perfect substitutability, does not change and (A3) where is the labor share of income and is the factor substitution elasticity. Substituting equation (A3) into equation (A2) will obtain the revenue-maximizing rate of . To use some common values, if is 0.75 and is 1, the revenue-maximizing rate is 75%. Since the United States is a large country, the rates would be even higher, because the tax can affect the world wide interest rate. The Gravelle and Smetters paper provide effects for and for a given country share, which can also be substituted into equation (A2). As a result, the revenue-maximizing tax rate is where is the output share. For example, if the United States has approximately 30% of the total output, the tax rate would be 81%. The rates would rise further if capital were not perfectly mobile or products not perfectly substitutable, since these factors would allow to fall further. At the extreme, it would return to a closed economy solution. Gravelle and Smetters present evidence to suggest that the outcome is more similar to a closed economy than a small open economy solution. This same outcome, a 75% rate, would also apply for the most extreme case of growth models, the Ramsey model, where the supply of savings is perfectly elastic. Note that in both of these extreme cases, the after tax return is fixed and the total burden falls on wage income, so that labor income would fall. One could also calculate a corporate tax rate than maximizes revenue while taking into account the effect on wages and keeping the wage rate constant. Again, relying on the model in Gravelle and Smetters and maximizing, (A4) Where is the tax rate wages, obtain a revenue-maximizing corporate tax rate of . With an approximate 20% tax rate on labor income, the revenue-maximizing corporate tax rate is 70%. Note however, that this is not the rate that would be found in the cross-section analysis. Appendix B. Data and Estimation Methods The data used in the Hassett and Mathur study and the Clausing study were obtained. The data used to replicate the Brill and Hassett study were obtained from the original sources cited in the study. The results reported for all studies were replicated. The data are for several countries for a period of several years, and are known as panel data. The model of the relationship between the corporate tax rate (the independent variable) and the various dependent variables takes a linear form: (B1) where is the dependent variable, is the independent variable (the corporate tax rate in our case), and are the regression parameters to be estimated, and is a random error term. The subscripts, i and t , indicate that information for a particular observation comes from country i for year t (for example, information for Australia for 1992). The random error term, , is a random variable and captures omitted and unobservable factors or variables that affect the dependent variable. The error term will be discussed in further detail below. If the following conditions are met: the expected value (mean) of the random error term, , is zero; the variance of the random error term is constant for all observations; the random error term for one observation is uncorrelated with the error term for another observation; and the random error terms are uncorrelated with the explanatory variables... then the ordinary least squares (OLS) estimators will yield the best linear unbiased estimators of the parameters ( and ). The parameter shows the true relationship between the dependent variable and the independent variable, and is the parameter of interest to us. Denote the estimate of as . Since is an estimate, it is a random variable drawn from a probability or sampling distribution with an expected value (mean) and variance. This estimator will have the following desirable properties: unbiased: the expected value of is ; efficient: the variance of is smaller than the variance of all other unbiased estimators; and consistent: the probability distribution of collapses on as the number of observations gets arbitrarily large. Estimation problems often arise with panel data because one or more of the conditions listed above are not met. The result is the OLS estimator will be biased and inconsistent. Problems arise with panel data, as is demonstrated when equation (B1) is rewritten as: (B2) The term is an effect (unobserved heterogeneity) specific to a particular country capturing differences among countries in (1) the measurement of economic data, (2) economic institutions, (3) laws and regulations applying to business, and (4) attitudes toward business, among other things. The term is a time specific effect capturing such things as the international business cycle. Since the corporate tax rate is a reflection of the attitudes toward business in a country, and will be correlated. Ignoring the country-specific unobserved heterogeneity means that the OLS estimate of is biased and inconsistent because the error term in equation (B1) is correlated with the explanatory variable—one of the conditions listed above is violated. Another problem often encountered with data that has a time dimension is the error terms are correlated from one year to the next year (called autocorrelation). Statistical tests indicate that these problems exist with the data obtained. Consequently, the parameters of the model are estimated using the fixed effect estimation procedure allowing for an AR(1) error structure. Identification Neither Brill and Hassett nor Clausing offer any justification in their studies for using OLS rather than the fixed effects method to estimate the parameters of their model. A well-known drawback of the fixed effects method is variables that vary across countries, but not across time within a country, cannot be included in the estimation (that is, the parameters associated with these variables are not identified). Devereux (2006) claims "changes in the statutory [corporate tax] rate within a country are comparatively rare. In practice, as found by Clausing (2006), there is not enough variation within country to identify an effect of the statutory rate, conditional on country fixed effects." To check the correctness of this statement and the justification for using OLS, the variation of the corporate tax rate across countries and over time was directly examined. Table B -1 displays the results for the data from the three studies reanalyzed. The first row displays the relevant explanatory corporate tax rate variable used in the study. The second row reports of mean of the variable. The third row reports the standard deviation (a measure of variation of a variable) of the corporate tax rate variable. The last two rows decompose the standard deviation into the between country component and the within country component. If there is no variation in the variable over time within countries, then the within component of the standard deviation will be zero. Consequently, the effect of that variable on the dependent variable is not identified conditional on fixed effects (that is, it cannot be estimated using the fixed effects procedure). As can be seen from the table, there is almost as much variation within countries (the within component) as there is between countries (the between component). In addition, all OECD countries changed their corporate tax rate at least once between 1979 and 2002. Four countries (Ireland, Norway, Spain, and Switzerland) changed their corporate tax rate only once during this period. In contrast, Luxembourg changed their corporate rate 12 times over this period. On average, OECD countries changed their corporate tax rates once every five years. Therefore, there is no evidence to support the argument that the effect of the corporate tax rate on corporate tax revenues is not identified conditional on fixed effects. Appendix C. Modeling Problems of the Desai, Foley, and Hines Study This appendix explains in further detail the modeling problems associated with the Desai, Foley, and Hines study (hereinafter, DFH), which include the failure to recognize price variability. This means that their cross-equation restriction is not justified (and that restriction is what gives rise to their results). The DFH study also fails to correctly interpret their results given that other sectors exist in the economy. The DFH model effectively begins with an equation that forms a basic part of any general equilibrium model, namely that a percentage change in price is a weighted average of the percentage in costs for small changes. In the case of an imposition of a tax, that is: (C1) where p is price, r is rate of return, w is the wage rate, is the tax rate and is the share of capital income. The hat notation refers to a percentage change except in the case of the tax variable, where the hat means the change in tax rate divided by one minus the tax rate. Beginning with a no tax world, that variable is simply . This relationship can be derived from a profit maximization problem. DFH derive such an equation to motivate their seemingly unrelated regression model. They then assume that p, the price of the good, does not change, which produces an equation of the form: (C2) Since is an exogenous variable this equation indicates that the change in the tax would be shared by interest rates and wages, and this is the basis for the two seemingly unrelated regressions where the dependent variables are r and w, and the coefficients are constrained so that the burden will add up to one. The argument for keeping the price fixed is that such a good would have its price fixed due to trade (e.g., all commodities have to sell at the same price). There are two difficulties with this assumption. First, if consumers in different countries have different preferences for goods based, in part, on country of origin (i.e., they do not consider French wine and German wine to be perfect substitutes) these prices will not be fixed. Indeed, this phenomenon is widely recognized, and the price responses are referred to as Armington elasticities—and they have been estimated empirically. Second, their observations are the weighted average of firms in each country but the firms themselves produce heterogeneous products, and all of these product prices cannot stay fixed because they have different capital intensities and because the products will vary from one country to another. Indeed, the trading of heterogeneous products means that fixed prices cannot be assumed because, in such a model, countries could not produce, consume and trade numerous products with differential taxation because such a world economy would be characterized by corner solutions (i.e., no internal equilibrium). This problem means that there is another variable—price—that is affecting the results and presumably is correlated with the error term (that is, the price would tend to be higher when the tax rate is higher, making the regression suspect and that the coefficient restriction is not appropriate. Even if these problems did not exist, there is an additional problem with the interpretation of their findings, namely that they did not adjust for other sectors in the economy, including non-traded sectors and sectors not subject to the corporate tax. Incidence results must be adjusted for the fact that the tax is only a partial one. To illustrate in the simplest fashion, suppose the remaining sector of the economy is a non-corporate non-traded sector of the economy whose price is denoted by a capital P: (C3) This commodity has no taxes and if the effects on r and w are estimated, those can be used to determine the change in P. What ultimately to be determined is the fraction of the tax, rK c (where K c is the capital in the corporate traded sector) that falls on labor, that is what share of Ldw, where L is total labor in the economy, is of rK c . To derive the real change in wages, the change in nominal wage is divided by the change in total price level in the economy, or, if the corporate sector is responsible for (1-) of output in the economy the percentage change in real wage (which is denoted with a capital W) can be expressed as follows: (C4) If s is the share of the burden falling on labor income, from equation (1), and . And, by substitution of these values into (3) and in turn into (4), and allowing the initial price level to be normalized at 1, obtain the equation for incidence in the economy, noting that equals rK c /wL c : (C5) The first term, total labor divided by labor in the tax sector reflects the increased burden from the spread of the nominal fall in wages to the other sector, while the negative terms inside the next parenthesis reflects the rise in real wages due to the fall in the price of the untaxed sector. Whether the burden rises or falls depends on a variety of factors. As the capital intensity of the untaxed sector rises the burden falls; at the extreme when becomes 1, the first term collapses to 1 and the second term is less than s, so the total burden on labor is less in the economy than it is in the estimation. This possibility is more important than it might initially appear, because one of the most important uses of capital not subject to the corporate income tax is in housing in the United States. Appendix D. Bargaining Models and Rent-Sharing of Corporate Taxes With a number of studies appealing to a bargaining model and rent sharing, it is important to understand the theory implied. Bargaining models start from a standard Nash equilibrium which maximizes the product of the welfare of the two recipients. Using the ADM notation: (D1) B = {[u(w)-u(w*)] N} (1- µ) {Π-Π*} µ where w is the wage earned, u(w) is the utility of the wage earned, w* is the competitive wage, u(w*) is the utility of the competitive wage, N is the number of employees, Π is the profit in the current undertaking and Π* is the alternative profit that could be earned in the competitive industry. The exponents (1- µ) and µ reflect the bargaining strength of the parties. The first term in curly brackets is the value of an excess wage to the workers, while the second is the value of excess profits to the owners. Begin with a no tax world. To maximize B differentiate with respect to the wage (which appears in the value of excess profits because they are reduced by wN), the number of employees and the capital stock (which is embedded in profits). The result is a bargaining solution of the form: (D2) wN= w*N+[(1- µ)/µ] (Π-Π*) This solution is derived in ADM although they express all of their variables in per worker terms. Assuming away intermediate goods and other costs (which will make no difference) Π can be defined as PQ-wL (where P is price and Q is quantity). Π* can be defined as rK where r is the return required to attract capital and the amount earned in the competitive sector. (D3) wN= w*N + [(1- µ)/µ] (PQ-wN-rK) This form of the bargaining formula is used by ADM because they are estimating wages. It is more instructive in understanding the model, however, to examine not the wage but the excess wage. With some manipulation, and now dividing the variables by N to get per capita amounts (with lower cases indicating per capita), obtain (D4) w-w* = (1- µ) (Pq-w*-rk) The last term on the right hand side is excess profit (revenue minus the competitive wage minus the competitive return. The left hand side is the wage in excess of the competitive wage. The workers share is (1- µ) and it is an estimate of this coefficient that the empirical rent sharing literature is intended to identify. Suppose now this bargaining model is being estimated assuming a tax of τ. Now profit, (Π-Π*) is now equal to (PQ – wN)(1- τ) –rK. The first order conditions for wages and labor now contain a tax term to reflect the fact that wages are deductible from the tax. Therefore equation D2 now becomes: (D5) wN= w*N+[(1- µ)/µ] [(Π-Π*)/(1- τ)] Since the tax term is in the denominator, it suggests that the wage would go up through this effect, which basically indicates that adding to wages saves taxes, and hence the price of paying the surplus in wages is smaller. At the same time the excess profit is reduced because taxes are applied to revenues, with wages, but not capital deducted, making the profit term (PQ-wN)(1- τ) –rK. When this term is substituted to provide a version of (4) the tax term in the numerator cancels with the tax term in the denominator with the only effect of taxes on rK. (D6) w-w* = (1- µ) (Pq-w*-rk/(1- τ)) A term similar to this one is contained in the Felix and Hines study. The important point that comes from this last equation is that in discussing rent-sharing the burden of the tax that falls directly on excess profits is not considered because that tax effect disappears from the formula. Although the pie is smaller by τ(Pq-w), the price of the wage share is also lower so the owners bear the entire direct burden of the tax on the firm's excess profits. The only way that taxes enter is to increase the normal cost of capital. ADM ignore this term in their model because this term and its effects on wages are part of the indirect burden (which would be determined by general equilibrium economy-wide results). That is, they are interested in the direct effect of taxes outside the general equilibrium effects. They posit a term (which is neither observable nor clearly defined) which is not related to profit, of the form; (D7) w-w* = (1- µ) (Pq-w*-ϕ/(1- τ) - rk/(1- τ)) where ϕ represents a tax payment that is not part of profits or of the cost of capital. It is not clear what qualifies as part of ϕ or how important it is. Most of the examples they mention such as deductions for interest and contributions to pension funds seem to qualify as either part of deductible costs of funds or wage compensation. And when actually estimating the relationship in D(7) they have no way to measure this value so the regression they run is actually roughly on total taxes per worker (conceptually τ(VA –w) + ϕ) where VA is value added. The tax term is estimated using instrumental variables such as tax rates since w is a left hand side variable and VA. Because of this issue, it is difficult to interpret the importance of their result even if they are capturing a rent-sharing effect rather than some other relationship. Felix and Hines are estimating the union wage premium, and their version of (D6) is not per worker and the premium is divided by the non-union (competitive) wage. To use their notation, they use L to denote labor. The left hand side variable is the total excess labor return, (w-w*)L which is equal to R. Also they denote the competitive wage as w. They also use α as the bargaining share. (D8) R = α (Q-wL-rK/(1- τ)) One peculiar point, to return to, is that they do not have a product price P. They then divide the equation by wL to obtain a ratio: (D8) R/(wL)= α (Q/wL-1-rK/(wL(1- τ))) They want to deal with the effect of tax rates on the demand for capital and labor and obtain an expression for (D8). They also use an optimization model for the firm's factory choices to simplify the expression and this term contains both w and the tax rate. The Felix Hines derivation is in error because they have omitted the product price; as quantity changes so do prices. The proper form of (D8) is: (D9) R/(wL)= α (PQ/wL-1-rK/(wL(1- τ))) First, to maximize profit: (D10) Profit = PQ-wL –rK = P(Q(K,L)Q(K,L) –wL –rK/(1- τ). Q is a function of K and L and P is a function of Q which is in turn a function of K and L. Q in turn is a Cobb Douglas function: (D11) Q = aK γ L (1-γ) The two first order conditions for K and L are: (D12) P(1-1/e)γQ/K = r/(1- τ) (D13) P(1-1/e)(1-γ)Q/L = w where e is the absolute value of the elasticity of demand. One can see from equation (D13) that PQ/wL = (e/(1-e))(1/(1- γ)) and that the last term by dividing D12 by D13 is γ/(1- γ). Combining all of the terms together: (D14) R/(wL) = α [{1/(e-1)}{1/(1-γ)}] What equation (D14) indicates is that there is no effect of the tax or any other factor price on the wage premium. It is also quite sensible. If e is infinite which would be the case with a competitive price taking firm, the premium is zero; as e falls toward one with a less elastic demand (although one that is of necessity greater than 1) the premium becomes larger. In any case, for a Cobb Douglas function there is no reason to estimate a wage premium as a function of tax rates. It also means that rent per employee would fall proportionally with wages. Without presenting the complicated mathematics, the ratio will rise with higher taxes with a factor substitution elasticity of less than one and decline with a factor substitution elasticity higher than one. In the latter case the effect of the tax on rents via general equilibrium effects is ambiguous. That is (D14) becomes: (D14) R/(wL) = α [{1/(e-1)}{1+ (b/(1-b) s (r/(w(1- τ ))(1-s) }] where s is the factor substitution elasticity. It is easier to see what happens if expressed as an elasticity: (D15) d(R/wl)/(R/wL) = (1-s) γ(dr/r –dw/w+d τ /(1- τ)) The last set of terms is expected to be positive, and measures how much the ratio of returns to wages changes. Calculations indicate this is a small semi-elasticity (assuming an overall federal and state tax rate of 30%). If the entire burden is borne by capital the semi-elasticity, as s ranges from 0.5 to 1.5 is 0.09 to -0.09, (as compared with the elasticity of 0.36 found in the study). If the burden were borne entirely by wages, the elasticity would range from 0.21 to -0.21. These calculations assume that γ is 0.25 in the sector under consideration and in the economy as a whole, and the corporate capital stock is half of the total capital stock. If the incidence falls on returns, Kdr = -rK 1 dt/(1- τ)) where K is the total capital stock and K 1 is the corporate. If the incidence falls on wages, Ldw = -rK 1 dt/(1- τ)). Since evidence suggests that, if the factor substitution elasticity is not one, it is probably below 1, the expectation is that ratio of rents to wages It is difficult to interpret these results without knowing the effect on wages which, in their estimates was actually positive (although not always statistically significant). However, their interpretation that 54% of the tax falls on rents is not consistent because they are calculating a reduction in the entire corporate wage bill, not the small portion that is the rent. Assume, for example, that the wage does not change and take their 0.36 semi-elasticity. Their formula indicates that dR/R = -.36d τ. To translate that into incidence on rents, multiply 0.36 times the ratio of rents to corporate tax collects. Rents are the rent premium (15%) times the union share (7%) times the wage share (about 70%), which is 0.7% of output. Corporate taxes are around 2% of output, so the ratio is .0.37. Thus, at their elasticity the share would 13%. If the highest elasticity assuming the tax is borne by capital is used the share is about 3% and if the highest amount assuming the tax is fully borne by capital is used, the share is about 5%.

Interest in corporate tax reform that lowers the rate and broadens the base has developed in the past several years. Some discussions by economists in opinion pieces have suggested there is an urgent need to lower the corporate tax rate, but not necessarily to broaden the tax base, an approach that presents some difficulties given current budget pressures. Others see the corporate tax as a potential source of revenue. Arguments for lowering the corporate tax rate include the traditional concerns about economic distortions arising from the corporate tax and newer concerns arising from the increasingly global nature of the economy. Some claims have been made that lowering the corporate tax rate would raise revenue because of the behavioral responses, an effect that is linked to an open economy. Although the corporate tax has generally been viewed as contributing to a more progressive tax system because the burden falls on capital income and thus on higher-income individuals, claims have also been made that the burden falls not on owners of capital, but on labor income—an effect also linked to an open economy. The analysis in this report suggests that many of the concerns expressed about the corporate tax are not supported by empirical evidence. Claims that behavioral responses could cause revenues to rise if rates were cut do not hold up on either a theoretical or an empirical basis. Studies that purport to show a revenue-maximizing corporate tax rate of 30% (a rate lower than the current statutory tax rate) contain econometric errors that lead to biased and inconsistent results; when those problems are corrected the results disappear. Cross-country studies to provide direct evidence showing that the burden of the corporate tax actually falls on labor yield unreasonable results and prove to suffer from econometric flaws that also lead to a disappearance of the results when corrected, in those cases where data were obtained and the results replicated. Many studies that have been cited are not relevant to the United States because they reflect wage bargaining approaches and unions have virtually disappeared from the private sector in the United States. Overall, the evidence suggests that the tax is largely borne by capital. Similarly, claims that high U.S. tax rates will create problems for the United States in a global economy suffer from a misrepresentation of the U.S. tax rate compared with other countries and are less important when capital is imperfectly mobile, as it appears to be. Although these new arguments appear to rely on questionable methods, the traditional concerns about the corporate tax appear valid. While an argument may be made that the tax is still needed as a backstop to individual tax collections, it does result in some economic distortions. These economic distortions, however, have declined substantially over time as corporate rates and shares of output have fallen. Moreover, it is difficult to lower the corporate tax without creating a way of sheltering individual income given the low tax rates on dividends and capital gains. A number of revenue-neutral changes are available that could reduce these distortions, allow for a lower corporate statutory tax rate, and lead to a more efficient corporate tax system. These changes include base broadening, reducing the benefits of debt finance through inflation indexing, taxing large pass-through firms as corporations, and reducing the tax at the firm level offset by an increase at the individual level. Nevertheless, the scope for reducing the tax rate in a revenue-neutral way may be limited.

T he House of Representatives has several different parliamentary procedures through which it can bring legislation to the chamber floor. Which will be used in a given situation depends on many factors, including the type of measure being considered, its cost, the amount of political or policy controversy surrounding it, and the degree to which Members want to debate it and propose amendments. According to the Legislative Information System of the U.S. Congress (LIS), in the 114 th Congress (2015-2016), 1,200 pieces of legislation received House floor action. This report provides a statistical snapshot of the forms, origins, and party sponsorship of these measures and of the parliamentary procedures used to bring them to the chamber floor during their initial consideration. Legislation is introduced in the House or Senate in one of four forms: the bill (H.R./S.), the joint resolution (H.J.Res./S.J.Res.), the concurrent resolution (H.Con.Res./S.Con.Res.), and the simple resolution (H.Res./S.Res.). Bills and joint resolutions can become law, but simple and concurrent resolutions cannot; they are used instead for internal organizational or procedural matters or to express the sentiment of one or both chambers. In the 114 th Congress, 1,200 pieces of legislation received floor action in the House of Representatives. Of these, 907 (76%) were bills or joint resolutions, and 293 (24%) were simple or concurrent resolutions. Of the 1,200 measures receiving initial House floor action in the 114 th Congress, 1,068 originated in the House, and 132 originated in the Senate. It is generally accepted that the House considers more legislation sponsored by majority party Members than measures introduced by minority party Members. This was borne out in practice in the 114 th Congress. As is reflected in Table 1 , 78% of all measures receiving initial House floor action in the last Congress were sponsored by Members of the Republican Party, which had a majority of seats in the House. When only lawmaking forms of legislation are considered, 76% of measures receiving House floor action in the 114 th Congress were sponsored by Republicans, 24% by Democrats, and none by political independents. The ratio of majority to minority party sponsorship of measures receiving initial House floor action in the 114 th Congress varied widely based on the parliamentary procedure used to call up the legislation on the House floor. As noted in Table 2 , 69% of the measures considered under the Suspension of the Rules procedure were sponsored by Republicans, 31% by Democrats, and none by political independents. That measures introduced by Members of both parties were considered under Suspension is unsurprising in that (as discussed below) Suspension of the Rules is generally used to process non-controversial measures for which there is wide bipartisan support. In addition, passage of a measure under the Suspension of the Rules procedure, in practice, usually requires the affirmative votes of at least some minority party Members. The ratio of party sponsorship on measures initially brought to the floor under the terms of a special rule reported by the House Committee on Rules and adopted by the House was far wider. Of the 172 measures the Congressional Research Service identified as being initially brought to the floor under the terms of a special rule in the 114 th Congress, all but one were sponsored by majority party Members. The breakdown in party sponsorship on measures initially raised on the House floor by unanimous consent was uneven, with majority party Members sponsoring 76% of the measures brought up in this manner. The following section documents the parliamentary mechanisms that the House used to bring legislation to the floor for initial consideration during the 114 th Congress. In doing so, it does not make distinctions about the privileged status such business technically enjoys under House rules. Most appropriations measures, for example, are considered "privileged business" under clause 5 of House Rule XIII (as detailed in the section on " Privileged Business " below). As such, they do not need a special rule from the Rules Committee to be adopted for them to have floor access. In actual practice, however, in the 114 th Congress the House universally provided for the consideration of these measures by means of a special rule, which, in general, could also provide for debate to be structured, amendments to be regulated, and points of order against the bills to be waived. Thus, appropriations measures considered in the 114 th Congress are counted in this analysis as being raised by special rule, notwithstanding their status as "privileged business." In recent Congresses, most legislation has been brought up on the House floor by Suspension of the Rules, a parliamentary device authorized by clause 1 of House Rule XV that waives the chamber's rules to enable the House to act quickly on legislation that enjoys widespread (even if not necessarily unanimous) support. The main features of the Suspension of the Rules procedure include (1) a 40-minute limit on debate, (2) a prohibition against floor amendments and points of order, and (3) a two-thirds vote of Members present and voting for passage. The suspension procedure is in order in the House on the calendar days of Monday, Tuesday, and Wednesday; during the final six days of a congressional session; and at other times by unanimous consent or special order. In the 112 th Congress (2011-2012), the House leadership announced additional policies that restrict the procedure for certain "honorific" legislation, generally require measures considered under Suspension to have been available for three days prior to their consideration, and require the sponsor of the measure to be on the floor at the time of a measure's consideration. These policies continued in force in the 114 th Congress (2015-2016). In the 114 th Congress, 743 measures, representing 62% of all legislation receiving House floor action, were initially brought up using the Suspension of the Rules procedure. This includes 703 bills or joint resolutions and 40 simple or concurrent resolutions. When only lawmaking forms of legislation are counted, 78% of bills and joint resolutions receiving floor action in the 114 th Congress came up by Suspension of the Rules. Eighty-nine percent of measures brought up by Suspension of the Rules originated in the House. The remaining 11% were Senate-passed measures. House rules and precedents place certain types of legislation in a special "privileged" category, which allows measures to be called up for consideration when the House is not considering another matter. Bills and resolutions falling into this category that saw floor action in the 114 th Congress include the following: Order of b usiness r esolutions. Procedural resolutions reported by the House Committee on Rules affecting the "rules, joint rules, and the order of business of the House" are themselves privileged for consideration under clause 5 of House Rule XIII. Order of business resolutions are commonly known as "special rules" and are discussed below in more detail. Committee a ssignment r esolutions. Under clause 5 of House Rule X and the precedents of the House, a resolution assigning Members to standing committees is privileged if offered by direction of the party caucus or conference involved. Providing for a djournment. Under Article I, Section 5, clause 4, of the Constitution, neither house can adjourn for more than three days without the consent of the other. Concurrent resolutions providing for such an adjournment of one or both chambers are called up as privileged. Questions of the p rivileges of the House. Under clause 2 of House Rule IX, resolutions raising a question of the privileges of the House affecting "the rights of the House collectively, its safety, dignity, and the integrity of its proceedings" are privileged under specific parliamentary circumstances described in the rule. Such resolutions would include the constitutional right of the House to originate revenue measures and resolutions impeaching government officials. Bereavement r esolutions. Resolutions expressing the condolences of the House of Representatives over the death of a Representative, President, or former President have been treated as privileged. Measures r elated to House o rganization. Certain organizational business of the House—such as resolutions traditionally adopted at the beginning of a session to notify the President that the House has assembled and to elect House officers, as well as concurrent resolutions providing for a joint session of Congress—have been treated as privileged business. Correcting e nrollments. Under clause 5 of House Rule XIII, resolutions reported by the Committee on House Administration correcting errors in the enrollment of a bill are privileged. In the 114 th Congress, 197 measures, representing 16% of the measures receiving floor action, came before the House on their initial consideration by virtue of their status as "privileged business." All of these 197 measures were simple or concurrent resolutions. The most common type of measure brought up in the House as "privileged business" during the 114 th Congress was special orders of business (special rules) reported by the Rules Committee, followed by resolutions assigning Representatives to committees. A special rule is a simple resolution that regulates the House's consideration of legislation identified in the resolution. Such resolutions, as noted above, are sometimes called "order of business resolutions" or "special orders," although most Members and staff simply refer to them as "rules." Special rules enable the House to consider a specified measure and establish the terms for its consideration—for example, how long the legislation will be debated, what (if any) amendments may be offered to it, and whether points of order against the measure or any amendments to it are waived. Under clause 1(m) of House Rule X, the Committee on Rules has jurisdiction over the "order of business" of the House, and it reports such procedural resolutions to the chamber for consideration. In current practice, although a relatively small percentage of legislation comes before the House via special rule, most measures that might be characterized as significant, complicated, or controversial are brought up in this way. In the 114 th Congress, 172 measures, or 14% of all legislation receiving House floor action, were initially brought before the chamber under the terms of a special rule reported by the Rules Committee and agreed to by the House. Of these, 163 (95%) were bills or joint resolutions, and nine (5%) were simple or concurrent resolutions. When only lawmaking forms of legislation are counted, 18% of bills and joint resolutions receiving floor action in the 114 th Congress came up by special rule. Ninety-one percent of the measures considered under a special rule during the 114 th Congress originated in the House, 9% being Senate legislation. As noted above, all but one measure—a Senate bill—brought before the House using this parliamentary mechanism were sponsored by majority party Members. In current practice, legislation is sometimes brought before the House of Representatives for consideration by the unanimous consent of its Members. Long-standing policies announced by Speakers of both parties regulate unanimous consent requests for this purpose. Among other things, the Speaker will recognize a Member to propound a unanimous consent request to call up an unreported bill or resolution only if that request has been cleared in advance with both party floor leaders and with the bipartisan leadership of the committee of jurisdiction. In the 114 th Congress, 87 measures, or 7% of all legislation identified by LIS as receiving House floor action, were initially considered by unanimous consent. Of these, 41 (47%) were bills or joint resolutions, and 46 (53%) were simple or concurrent resolutions. When only lawmaking forms of legislation are counted, 5% of bills and joint resolutions receiving floor action in the 114 th Congress came up by unanimous consent. Of the measures initially considered by unanimous consent during the 114 th Congress, 66% originated in the House. House Rule XV, clause 2 (sometimes called the "discharge rule"), establishes a means by which a majority of the House can bring to the floor for consideration a bill or resolution that has not been reported from House committee. Discharging a committee in this manner is a lengthy, multi-step process that is rarely successful. If a measure has been referred and pending in committee for at least 30 legislative days, any Member may submit a petition to discharge the committee of its further consideration. If 218 Members—a majority of the House—sign such a petition, a motion to discharge the committee of consideration of the measure may then be offered on the floor. This discharge motion can be made only on a second or fourth Monday that occurs after the petition is filed, and such a motion may not be made in the last six days of a congressional session. The motion to discharge is debatable for 20 minutes, and if it is adopted, a Member may then move that the House consider the legislation in question. In modern practice, it has become common for Members to introduce a special rule establishing unique terms of debate and amendment for an unreported measure and then file a discharge petition on that resolution after it has been pending before the Rules Committee for at least seven legislative days. In the 114 th Congress, one measure—a special rule introduced by a majority party Member providing for the consideration of an unreported bill—was brought to the House floor by the procedures contained in the discharge rule. The House of Representatives has established special parliamentary procedures to bring private legislation to the chamber floor and consider legislation dealing with the business of the District of Columbia. It has also created the Calendar Wednesday procedure, where the standing committees are recognized in turn to call up measures that have been reported but not granted a rule by the Rules Committee. These procedures are infrequently used, and no legislation was brought before the House in the 114 th Congress by any of these three parliamentary mechanisms.

The House of Representatives has several different parliamentary procedures through which it can bring legislation to the chamber floor. Which of these will be used in a given situation depends on many factors, including the type of measure being considered, its cost, the amount of political or policy controversy surrounding it, and the degree to which Members want to debate it and propose amendments. This report provides a snapshot of the forms and origins of measures that, according to the Legislative Information System of the U.S. Congress, received action on the House floor in the 114th Congress (2015-2016) and the parliamentary procedures used to bring them up for initial House consideration. In the 114th Congress, 1,200 pieces of legislation received floor action in the House of Representatives. Of these, 907 (76%) were bills or joint resolutions, and 293 (24%) were simple or concurrent resolutions. Of these 1,200 measures, 1,068 originated in the House, and 132 originated in the Senate. During the same period, 62% of all measures receiving initial House floor action came before the chamber under the Suspension of the Rules procedure, 16% came to the floor as business "privileged" under House rules and precedents, 14% were raised by a special rule reported by the Committee on Rules and adopted by the House, and 7% came up by the unanimous consent of Members. One measure was processed under the procedures associated with clause 2 of Rule XV, the House Discharge Rule. When only lawmaking forms of legislation (bills and joint resolutions) are counted, 78% of measures receiving initial House floor action in the 114th Congresses came before the chamber under the Suspension of the Rules procedure, 18% were raised by a special rule reported by the Committee on Rules and adopted by the House, and 5% came up by unanimous consent. No lawmaking forms of legislation received House floor action via the Discharge Rule or by virtue of being "privileged" under House rules. The party sponsorship of legislation receiving initial floor action in the 114th Congress varied based on the procedure used to raise the legislation on the chamber floor. Sixty-nine percent of the measures considered under the Suspension of the Rules procedure were sponsored by majority party Members. All but one of the 172 measures brought before the House under the terms of a special rule reported by the House Committee on Rules and adopted by the House were sponsored by majority party Members.

RS21558 -- Genetically Engineered Soybeans: Acceptance and Intellectual Property Rights Issues in SouthAmerica Updated October 17, 2003 The United States is the world's leading producer and exporter of soybeans. However, South American soybean production and tradehas expanded rapidly during the past 15 years, greatly increasing the competitiveness of international oilseedmarkets. Together, theUnited States, Argentina, and Brazil are expected to produce nearly 83% of the world's soybeans in 2002/03, andto account for over90% of all soybeans traded on international markets. (1) Given a highly competitive international soybean market and growinginternational debate over the nature of production and trade in genetically- engineered (GE) crops, controversy hasemerged in recentyears over the growing pirated use of Roundup Ready (RR) soybeans, a GE variety, by producers in Argentina andBrazil. (2) Thispractice appears to provide a competitive advantage to Argentine and Brazilian soybean exports, and to be aviolation of theintellectual property rights (IPR) of the RR technology producer, Monsanto. Roundup Ready (RR) soybeans are genetically engineered to be resistant to the herbicide glyphosate. Glyphosate also was developedby Monsanto and is marketed under the brand name Roundup. RR soybeans are patented in the United States byMonsanto. (3) Monsanto licenses the RR technology to seed companies, which incorporate it into their conventional soybeanvarieties and sell theGE seeds to farmers. Among other things, the patent gives Monsanto and those companies to whom it has licensedthe technologymore control in setting prices and restricting the product's use. For example, U.S. farmers pay a technology feeestimated at $7.44 oneach 50-pound bag of RR planting seed. (4) In addition,as part of a signed purchase agreement, U.S. farmers are prohibited fromsaving seed from harvest for future planting or for resale to other farmers. Despite the additional cost andrestrictions, RR soybeansare favored over traditional varieties because they significantly lower production costs, offer more flexibility in cropmanagement, andin many cases increase yields. According to USDA's March 31, 2003, Planting Intentions Report , 80%of the soybeans planted in theUnited States in 2003 will be RR varieties. The Monsanto company is based in St. Louis, Missouri, but has offices throughout the world where its seeks to market its technologyto agricultural producers. Since 1960, a total of 30 countries have approved Monsanto's RR soybean technologyfor import orplanting. (5) However, Monsanto has been unable toobtain patent protection in either Argentina or Brazil. In 1995, Monsanto'sapplication for a patent for RR soybeans in Argentina was rejected. Subsequent applications have not succeeded. (6) In Brazil, thecommercial status of GE soybeans (and GE crops in general) remains in dispute in the courts and no patents on RRtechnology havebeen issued. The status of GE soybeans in Brazil is particularly important to international oilseed markets sinceBrazil representsessentially the last potential major source for non-GE soybeans to world markets. Although RR soybean seeds are not patented in Argentina, Monsanto has agreements with other seed firms in Argentina allowingthem to use the RR technology in their seeds. As a result, Argentine farmers have access to and have increasinglyswitched to RRsoybean varieties. In 2001, about 90% of Argentina's soybean crop was planted to RR varieties. (7) The RR share of the 2003 crop isnearly 100%, according to news reports. An Argentine seed law (Act No. 20247; 1973) requires that all seeds must be certified for commercial use. However, Argentinefarmers have reportedly ignored this law and routinely save RR soybean seeds for planting or resale. Since thegovernment does notenforce this law, a large black market for RR soybeans in Argentina has developed that keeps seed prices low anddiscourages anyattempts by Monsanto or licensed companies to assess technology fees on RR soybeans. According to Monsanto,it is not feasible tocharge a technology fee on soybean seeds in Argentina without patent protection. (8) As a result, Argentine farmers save about $8 to $9per metric ton on the technology fee. (9) This is aconsiderable cost advantage over U.S. soybeans in a highly competitive internationalsoybean market. (10) In September 1998, the Brazilian Biosafety Commission (CTNBio), acting under government authority, approved the commercialplanting of RR soybeans. Two major groups opposed to the use of GE crops -- Greenpeace and the BrazilianConsumer DefenseInstitute -- immediately filed lawsuits in Brazilian courts challenging the CTNBio approval. In 1999 a lower courtissued aninjunction suspending the CTNBio approval of commercial planting of RR soybeans before any approvedcommercial plantingactually occurred. The case was appealed to a three-judge panel of the Brasilia Appeals Court, where it haslanguished. In February2002, the lead judge of the three-judge Appellate Court publicly announced in favor of commercial planting of RRsoybeans. However, a majority of the three-judge panel has yet to render a decision on the commercial use of RR soybeans. As a result, itremains illegal to plant GE soybeans in Brazil. However, Brazilian farmers are aware of the benefits of RRsoybeans and havereportedly smuggled seeds into Brazil from Argentina's black market. Despite the lack of government approval,80% of the crop inthe southernmost state of Rio Grande do Sul is estimated to be planted to RR soybean varieties. (11) USDA estimates that 10 to 20% ofBrazil's total soybean crop may be planted to RR soybean varieties (trade estimates range as high as 30%). (12) As in Argentina, notechnology fees are paid by RR soybean growers in Brazil. (13) The American Soybean Association (ASA) claims that the technologyfee savings for Brazilian growers ranges from $9.30 to $15.50 per acre depending on yields. (14) More recently, other international events have forced the Brazilian government to temporarily alter its official position on GEsoybeans. In June 2001, China -- the world's leading importer of soybeans -- issued controversial rules governingthe use, sale, andimportation of GE soybeans. Under the rulings, China will only accept GE soybeans that have been approved forexport by the sourcecountry, along with certain other conditions. On January 10, 2003, China rejected Brazil's initial application toexport GE soybeans,in part because Brazil does not officially recognize the domestic production and export of GE soybeans. In lateMarch 2003, underpressure from producer groups, the Brazilian government announced temporary Regulation 113 (R113) as an interimmeasureallowing official sales of RR soybeans from the 2002-03 (April-March) crop for both domestic uses and export. R113 expires inMarch 2004, after which Brazilian growers are expected to comply with the current law. Because Brazil's courts have been unable to resolve the crisis prior to this year's October-December planting period, the Lulagovernment has been forced to issue a second temporary reprieve from the GE planting ban. Temporary Regulation130 (R130),signed into law on September 25, 2003, approves the planting of GE soybeans for the 2003-04 growing season andextends thepossible sale period of RR soybeans through December 2004. In an attempt to curb black market trade in RRtechnology, farmersseeking to sell GE soybeans during this period must sign a document pledging not to buy seeds of untraced originin the future. (15) Inaddition, Brazilian soybean farmers are limited to planting GE seed stocks already on hand because R130 containsno provision forimporting or selling GE seeds in Brazil. Also, lack of any labeling protocol for GE crops is likely to complicatedomestic marketing. The Lula government states that it is preparing a comprehensive "bio-safety law" to address these regulatory gaps,but this legislationhas been slow to emerge. The Lula government remains split on this issue. The Minister of Agriculture favorsprompt legalization,while the Minister of Environment is opposed and has asked for an environmental impact study beforecommercialization isallowed. (16) Both ministers agree that rigidenforcement of existing regulations would mean the incineration of all GE crops and theimprisonment of growers for 1 to 3 years at great cost to the country's agricultural sector. Within Brazil, two principal camps argue against legalizing GE soybeans, but for very different reasons. Some consumer andenvironmental groups argue that, because the risks associated with GE crops are unknown, they should not belegalized. Peasantgroups such as the Landless Workers Movement (MST), on the other hand, are not against GE crops per se, butargue that legalizingGE crops will accelerate large-scale farming and give control over Brazil's agriculture to multinational corporationssuch asMonsanto. (17) Brazilian producer groups claim that lack of access to RR technology would place them at a competitive disadvantage in internationalmarkets. To date, no significant market premium for non-GE soybeans has emerged in either domestic orinternational marketssufficient to offset the cost advantages of adopting GE varieties. Given the rapid growth and widespread use of GEsoybeans,legalizing their commercial use may be the only viable solution for Brazil's government. GE Labeling in Brazil. Brazil's food labeling regulation for products containingGE ingredients took effect on December 31, 2001. (18) The law mandates the labeling of all foods for human consumption when morethan 4% of the ingredients are derived from GE commodities. R113, the first temporary regulation allowing GEsoybean planting, hasimposed stricter GE labeling conditions on Brazil's food marketing system. Under R113, non-GE soybeans are tobe segregated witha 0% tolerance level from GE soybeans. (19) Inaddition, labeling is required on all shipments into or out of Brazil with a GE soybeanpresence in excess of 1%. (20) Since improperlabeling is subject to a severe fine, and since Brazil's marketing system is not set up tohandle such strict segregation requirements, it is likely that all soybeans passing through Brazil's marketing systemwill have to belabeled as having GE content. It is reported that Brazil's National Agriculture Federation (NAF) estimates the costof testing thecurrent 2002/03 crop for GE content at about $277 million. The NAF says that passing this cost on to consumerswould make itimpossible for Brazil to remain competitive in the global soybean market. (21) International Market Implications. According to many market analysts, thedecision on the status of GE crops in Brazil will have significant market implications, especially for global soybeanmarkets. First, ifBrazil permanently legalizes GE soybeans, nearly all (about 90%) of the world's internationally traded soybeans willbe of GEvarieties. Second, a decision in favor of GE crops will be nearly irreversible because of mixing in the distributionand transportationsystems. Some analysts suggest that the current widespread planting of GE crops in Brazil is already irreversible. In short, a decisionin favor of GE soybeans by Brazil could do much to moot the debate about whether or not GE soybeans should belabeled or eventraded because there simply would not be any major international supplier of non-GE soybeans left. According to the U.S. Trade Representative, the U.S. is committed to a policy of promoting increased intellectual property protection,both through the negotiation of free trade agreements that strengthen existing international laws and through useof U.S. statutorytools as appropriate. (22) The U.S. Administration'sposition regarding GE crops is that, not only are food products made from GEcrops as safe as their conventional counterparts, but their production has the potential to spur agriculturalproductivity whilebenefitting the environment. (23) Congress hasgenerally supported this position. For example, both the Senate ( S.Res. 154 ) and the House ( H.Res. 252 ) have passed resolutions in support of the Administration's dispute settlementcase atthe World Trade Organization (WTO) brought against the European Union's ban on imports of GE crops. In hearings by the Senate Foreign Relations Subcommittee on Western Hemisphere, Peace Corps, and Narcotics Affairs on May 20,2003, to discuss opportunities for U.S. agriculture in agricultural trade negotiations in the Western Hemisphere, theIPR issue of RRsoybean piracy in Brazil was raised in testimony given by the ASA and Monsanto. (24) In the absence of patent protection in Argentinaor Brazil, accusations of IPR violation may be difficult to sustain in a court of law. However, both Argentina andBrazil are membersof the WTO and, as such, have agreed to abide by the WTO agreement on Trade-Related Aspects of IntellectualProperty Rights(TRIPS Agreement). As a result, if Monsanto were able to eventually obtain patent protection for the RRtechnology in eitherArgentina or Brazil, Monsanto could then seek recourse for IPR infringement via the legal systems of thosecountries perrequirements of the WTO TRIPS agreement.

U.S. soybean growers and trade officials charge that Argentina and Brazil -- the UnitedStates' two major export competitors in international soybean markets -- gain an unfair trade advantage by routinelysavinggenetically-engineered (GE), Roundup Ready (RR) soybean seeds from the previous harvest (a practice prohibitedin the UnitedStates) for planting in subsequent years. These groups also argue that South American farmers pay no royalty feeson the saved seed,unlike U.S. farmers who are subject to a technology fee when they purchase new seeds each year. The cost savingto South Americansoybean growers on the technology fee alone nets out to about $8 to $9 per metric ton -- a considerable costadvantage over U.S.soybeans in the highly competitive international soybean market. This practice also raises concerns about theintellectual propertyrights (IPR) of Monsanto (the developer of RR technology). Commercial use of RR soybeans in Brazil remains illegal despite apparent widespread planting. A 1998government approval of theircommercial use remains suspended by court injunction, and resolution over their commercial legality is beingconsidered by anappellate court. However, two recent Presidential decrees have given temporary reprieve to the ban on planting andmarketing GEsoybeans through December 2004. The eventual outcome on commercial legalization of GE crops in Brazil mayhave importantconsequences for intellectual property rights, as well as for international trade in GE crops. This report will beupdated as needed.

Technological advancement and the proliferation of the smartphone have reshaped the commercial landscape, providing consumers new ways to access the retail marketplace. On-demand companies are one such innovation, and underpinning on-demand commerce is the gig economy , the collection of markets that match service providers to consumers of on-demand services on a gig (or job) basis. Flagship on-demand companies such as Uber (driver services) and Handy (home cleaners and household services) have garnered significant media attention both for their market success and recent legal challenges, particularly concerning the classification of gig workers. Broader questions about the pros and cons of the gig economy have emerged as on-demand markets grow and the gig economy expands into new sectors. By some accounts, workers' willingness to participate in the gig economy provides evidence that gig work is a beneficial arrangement. Indeed, gig jobs may yield benefits relative to traditional employment in terms of the ease of finding employment and greater flexibility to choose jobs and hours. The gig economy may facilitate bridge employment (e.g., temporary employment between career jobs or between full-time work and retirement) or provide opportunities to generate income when circumstances do not accommodate traditional full-time, full-year employment. At the same time, however, the potential lack of labor protections for gig workers and the precarious nature of gig work have been met with some concern. The nationwide reach of gig work and its potential to impact large groups of workers, and their livelihoods, have attracted the attention of some Members of Congress. These Members have raised questions about the size and composition of the gig workforce, the proper classification of gig workers (i.e., as employees or independent contractors), the potential for gig work to create work opportunities for unemployed or underemployed workers, and implications of gig work for worker protections and access to traditional employment-based benefits. In support of these policy considerations, this report provides an overview of the gig economy and identifies legal and policy questions relevant to its workforce. The gig economy is the collection of markets that match providers to consumers on a gig (or job) basis in support of on-demand commerce. In the basic model, gig workers enter into formal agreements with on-demand companies to provide services to the company's clients. Prospective clients request services through an Internet-based technological platform or smartphone application that allows them to search for providers or to specify jobs. Providers (i.e., gig workers) engaged by the on-demand company provide the requested services and are compensated for the jobs. Business models vary across companies that control tech platforms and their associated brands. Some companies allow providers to set prices or select the jobs that they take on (or both), whereas others maintain control over price-setting and assignment decisions. Some operate in local markets (e.g., select cities) while others serve a global client base. Although driver services (e.g., Lyft, Uber) and personal and household services (e.g., TaskRabbit, Handy) are perhaps best known, the gig economy operates in many sectors, including business services (e.g., Freelancer, Upwork), delivery services (e.g., Instacart, Postmates), and medical care (e.g., Heal, Pager). With some exceptions, on-demand companies view providers as independent contractors—not employees—using their platforms to obtain referrals and transact with clients. This designation is frequently made explicit in the formal agreement that establishes the terms of the provider-company relationship. In addition, many on-demand companies give providers some (or absolute) ability to select or refuse jobs, set their hours and level of participation, and control other aspects of their work. In some ways, then, the gig economy can be viewed as an expansion of traditional freelance work (i.e., self-employed workers who generate income through a series of jobs and projects). However, gig jobs may differ from traditional freelance jobs in a few ways. The established storefront and brand built by the tech-platform company reduces entry costs for providers and may bring in groups of workers with different demographic, skill, and career characteristics. Because gig workers do not need to invest in establishing a company and marketing to a consumer base, operating costs may be lower and allow workers' participation to be more transitory in the gig market (i.e., they have greater flexibility around the number of hours worked and scheduling). In addition, a few commonly held characteristics of the provider-company relationship, when taken together, set gig work apart from the traditional freelance worker model. On-Demand Com panies Collect a Portion of Job Earnings. On-demand companies collect commissions from providers for jobs solicited through the company platform. Commissions often take the form of a flat percentage rate applied to job earnings, but some companies employ more sophisticated models. For example, in 2014, Lyft announced that it would return a portion of its 20% commission on rides as a bonus to certain high-activity drivers. On-Demand Companies Control the Brand. On-demand companies rely on the jobs brokered through their platform to generate revenue, and therefore have a clear stake in attracting and retaining clients. Consequently, and to varying degrees, these companies are selective about who can operate under their brand. Some on-demand businesses condition provider participation on a background check and credentials (e.g., some require past work experience, licenses, or asset ownership), and some reserve the right to terminate the relationship if the work delivered does not meet company-defined standards of quality and professionalism. On-Demand Companies Control the Provider-Client Relationship. Some on-demand companies discourage or bar providers from accepting work outside the platform from clients who use the company's platform. The provider agreement for business-services company Upwork, for example, includes a noncircumvention clause that prohibits providers from working with any client that identified the provider through the Upwork site for 24 months. Likewise, "service professionals" working with the on-demand home-services company Handy must agree that they will "not affirmatively solicit [clients] originally referred through the Handy Platform to book jobs through any means other than the Handy Platform." This is a potentially important difference between gig work and traditional freelance work, because it curtails the provider's ability to build a client base or operate outside the platform. Currently, the federal government does not publish statistics on the gig economy workforce. Instead, most of what is known about the number and characteristics of gig workers is drawn from related labor and tax entity statistics or comes from private-sector studies and academic research. Measuring and characterizing the gig economy workforce are challenging tasks for several reasons. A first necessary step to measuring gig workers is establishing a precise and measurable statistical definition of the gig economy, a complicated task given the relative newness of the concept, and its broad and evolving application. A second and closely related challenge is designing a survey that identifies individuals—through self-reported information—who meet this definition. This challenge requires carefully formulated survey questions that account for how workers perceive their gig economy activity and a data collection strategy that aligns with the potential for seasonal or otherwise dynamic participation. In addition to survey design issues, the relative infrequency of gig work in the overall population may create additional challenges to obtaining reliable estimates of these workers' characteristics and work patterns. Finally, modifying existing labor force survey instruments to measure these new labor force areas may require significant time and funding. While not measuring gig work specifically, federal statistics on self-employment, nonemployer establishments (i.e., business owners who are subject to federal income tax and have no paid employees), and nontraditional work arrangements may provide insight into the size and growth of the gig workforce. Existing large-scale labor force survey data on nontraditional work arrangements and self-employment may provide some insights, but are imperfect proxy measures of contemporary gig economy participants. Notably, in 1995, 1997, 1999, 2001, and 2005, the Bureau of Labor Statistics (BLS) funded the collection of data on the number and characteristics of contingent workers (i.e., those who did not expect their jobs to last) and workers in alternative employment arrangements (i.e., independent contractors, on-call workers, temporary help agency workers, and workers employed by contract firms). These data—collected through the Contingent Worker Supplement (CWS) to the Current Population Survey—establish that temporary workers and independent contractors represented a nonnegligible share of the workforce in 2005 and are not new phenomena. However, they are likely to have limited value to analyses of the gig economy workforce today, because these data predate the launch of the Apple iPhone, and the creation of Uber, Lyft, and other gig economy tech-platform companies. New CWS data collection is planned for 2017 and is expected to result in an important source of information on the size and characteristics of the gig workforce. In January 2016, then-Labor Secretary Tom Perez announced plans to rerun an expanded version of the CWS in May 2017 that specifically seeks to measure gig work. In particular, the BLS plans to include new questions in the 2017 CWS that "explore whether individuals obtain customers or online tasks through companies that electronically match them, often through mobile apps, and examine whether work obtained through electronic matching platforms is a source of secondary earnings." How workers participating in the gig economy should be classified—independent contractors or employees—is an open legal question (see section " Are Workers Within the Gig Economy Employees or Independent Contractors? "); nonetheless, self-employment data may provide some value to analyses of this workforce. The Current Population Survey (CPS), the instrument used by the BLS to produce its monthly unemployment rate estimates, routinely collects data on self-employment. Figure 1 shows the average number of unincorporated self-employed workers working each month in the United States from 2002 to 2016 and traces a gradual decline in self-employment from 2006 to 2011, after which growth has been relatively flat, with modest positive growth (approximately 1.3% annualized growth) between 2014 and 2016. Recent trends in self-employment—as illustrated in Figure 1 —do not appear to support a rapidly growing segment of independent contractors operating in the gig economy. However, due to methodological challenges associated with measuring self-employed workers and with capturing gig workers in survey data, it is possible that official self-employment numbers are missing groups of gig workers. CPS asks workers whether they are self-employed and the industry and occupation of their work, but it does not ask if the worker—self-employed or otherwise—uses a tech-based intermediary to find and transact with clients. This could complicate interpretation of self-employment trends because it is not possible to decompose the data into self-employed work in the gig economy and more traditional work that does not include a tech-based intermediary. Another complicating factor to using self-employment data to infer trends in the gig economy workforce is that CPS data are self-reported. This means that how workers are classified in the data is heavily influenced by how workers see themselves (e.g., as an employee or as a self-employed person). Lastly, some gig economy workers are bona fide employees (e.g., Hello Alfred, Managed by Q), and these individuals will not be captured by self-employment statistics. Trends in gig work may be reflected in Census Bureau statistics on nonemployers, business owners who are subject to federal income tax and have no paid employees. Figure 2 plots annual estimates of the number of nonemployer establishments and their receipts from 2002 to 2014. Both the number of establishments and their receipts rose steadily over this period, with temporary declines seen only during the 2007-2009 recession. Figure 1 and Figure 2 tell somewhat different stories about the size and trends in self-employment. Where Census data show a steady rise in nonemployer businesses—most of which are "self-employed individuals operating very small unincorporated businesses" by Census's description—BLS data show that self-employment has declined or experienced modest growth over a similar period. What explains these differences is a matter for further investigation, but some have suggested that they may be related to how survey respondents view their activity. Although individuals recognize (and report to the Internal Revenue Service) that they earn income, they may not view the activities that generate the income as "work," and hence they are not captured in labor force data BLS uses to produce its self-employment estimates. Another possibility is that IRS data reveal self-employed individuals with multiple nonemployer businesses (i.e., IRS data count individual self-employed workers multiple times). A small but growing literature examines data collected from individual companies operating in the gig economy or pockets of gig economy workers. These analyses provide information about worker characteristics, their attitudes toward work in a given company or work arrangement, and earnings. However, with few exceptions, they do not profile the gig economy as a whole; instead, they can be viewed as snapshots of certain groups of gig workers. Together, this body of research suggests that gig workers make up a small share of total workers at a given point in time. Estimates vary, but gig workers constitute less than 1% of total employment in major studies. There is some evidence that workers' participation in the gig economy is transitory (i.e., high rates of worker entry and exit) and that many workers use gig work as a strategy for supplementing income. In 2015, economists Lawrence Katz and Alan Krueger collaborated with the RAND Corporation to administer an augmented version of the BLS Contingent Worker Supplement (CWS) to the RAND American Life Panel; notably, the modified CWS survey instrument used by Katz and Krueger included new questions aimed at identifying work in the gig economy. A primary goal of the project was to obtain current estimates of the number of workers engaged in alternative work arrangements (a work er group that encompasses but is broader than gig work), and the survey revealed that this number increased markedly from 10.7% in 2005 to 15.8% in 2015. Regarding gig work specifically, they estimate that approximately 0.5% of workers operated through an online intermediary in 2015. JPMorgan Chase (JPMC) Institute researchers used data on JPMC primary checking account holders between 2012 and 2016 to estimate the number of adults participating in the gig economy over that time period. They identified gig workers (called "labor platform participants" in the JPMC Institute studies) by observing checking deposits (income) from a selection of on-demand platforms. While there are some issues with the representativeness of the underlying data, the study produces some interesting findings that are consistent with other work in this area. Namely, they found that the share of adult checking account holders who received a checking deposit from a labor platform provider (i.e., received income from such a company) increased between October 2012 and June 2016, with a slowdown in the pace of growth since December 2015. In June 2016, 0.5% of adults with a JPMC checking account received income from a labor platform. A month-to-month analysis of participation (i.e., receipt of income) indicates significant movement into and out of gig work. JPMC Institute researchers estimate that in June 2016, 16% of gig workers were new entrants. Further, among workers who earned income through the gig economy between October 2012 and August 2014, 52% ended their gig careers (i.e., did not receive gig economy income in their JPMC checking accounts) within 12 months. The study also provides some evidence that workers use gig work to supplement income from other sources. Other organizations have used a variety of methods to arrive at nationwide estimates of the gig economy workforce. These vary considerably in magnitude and appear to be sensitive to the estimation methodology (e.g., how the data are collected, assumptions about how trends move together, and who is included in the definition of gig workers). For example, Harris and Krueger calculate a rough estimate of 600,000 gig workers in 2015 (i.e., approximately 0.4% of U.S. employment) using administrative data on Uber drivers from 2014 and "Google Trends" data that record the number of times Uber and other on-demand companies' names were searched for using the Google search engine. McKinsey Global Institute estimates that "less than 1%" of the U.S. working-age population are contingent workers operating through "digital marketplaces for services." Uber Technologies partnered with economist Alan Krueger to analyze data collected from a sample of 601 Uber drivers in December 2014 and 632 drivers in November 2015, and aggregate administrative data collected by the company from 2012 to 2015. Administrative data reveal that 464,681 drivers were actively partnered with Uber in December 2015, a significant increase over the 162,037 active Uber drivers in December 2014. This growth in the number of Uber drivers is remarkable, but may not be indicative of long-term trends; Uber and other driver-service companies are exploring the feasibility of driverless car technology, which may eventually curtail the companies' demand for drivers. Survey data indicate that the majority of Uber drivers were male, more than half were between the ages of 30 and 49, and 47.7% had at least a college degree (in December 2014). Many drivers did not use Uber as their sole source of earned income; in both years studied, more than 60% of drivers held another job. The authors interpret these survey data to show that the flexibility in work hours provided by Uber is a primary draw for drivers. For several years, the consulting firm MBO Partners has conducted an annual profiling survey of independent workers. It collects information on demographic characteristics, income earned, and recently whether workers use an "on-demand economy platform or marketplace as a source of work or income." MBO is careful to flag an important caveat: their sample comprises 1,100 individuals who report that they "regularly work as independents in an average work week. Those who work as independents in the on-demand economy occasionally or sporadically—for example drive for Uber once a month, do web design as a side gig a few times a quarter, or rent out a room on Airbnb 3 times a year—are not included." MBO Partners estimate that in 2014 approximately 900,000 individuals who self-identified as independent contractors used "online talent marketplaces such as Freelancer.com" (i.e., labor only), and 500,000 workers used tech platforms that involve the use of a provider-owned asset (e.g., Uber, Lyft, Airbnb). Whether a worker in the gig economy may be considered an employee rather than an independent contractor is significant for purposes of various federal labor and employment laws. In general, employees enjoy the protections and benefits provided by such laws, whereas independent contractors are not covered. Two laws, in particular, have drawn recent attention. The Fair Labor Standards Act (FLSA) generally requires the payment of a minimum wage and overtime compensation for hours worked in excess of a 40-hour workweek. The National Labor Relations Act (NLRA) recognizes a right to engage in collective bargaining for most employees in the private sector. The FLSA applies only to employees and does not regulate the use of independent contractors. Whether an individual is an employee is often a threshold question that must be answered to determine whether the FLSA's requirements apply. Courts have generally concluded that the economic reality of a working relationship will determine whether an individual is actually employed by an employer. To evaluate the economic reality of such a relationship, courts will examine all of the circumstances of the work activity and not just an isolated factor. Among the factors a reviewing court will consider to determine employee status are the nature and degree of the alleged employer's control over the individual; the individual's opportunity for profit or loss; the individual's investment in equipment or materials required for his task; whether the service rendered requires a special skill; the degree of permanency and the duration of the working relationship; and the extent to which the service rendered is an integral part of the alleged employer's business. In July 2015, a Lyft driver in Florida filed a complaint with a federal district court in Tampa alleging a violation of the FLSA. The driver maintained that Lyft controls the manner and means by which all drivers accomplish their work, controls all rates of pay for its drivers, retains the right to discipline drivers at its sole discretion, and restricts drivers' ability to work by permitting them to work only certain hours each day. In December 2015, however, Lyft and the driver entered an agreement to dismiss the case. Several Uber drivers have also alleged violations of the FLSA. In Suarez v. Uber Technologies, Inc ., for example, a group of drivers alleged that they had not been paid (1) for all of the hours they actually worked, (2) the federal minimum wage for each hour worked, and (3) overtime compensation for hours worked in excess of 40 hours in one week. Uber sought to compel arbitration for the drivers' claims based on its services agreement, which includes a provision that requires arbitration for all disputes related to the agreement and the employment relationship between the company and its drivers. Concluding that the arbitration provision was not unconscionable, the court in Suarez ordered the drivers to submit their claims to arbitration. The enforcement of the arbitration provision in Uber's services agreement has resulted in little case law on the FLSA's application to the company's drivers. Uber drivers have also alleged violations of state worker protection laws. Resolution of these claims would also appear to require a determination about whether the individuals at issue are employees and not independent contractors. In June 2015, California's labor commissioner concluded that a former Uber driver was an employee for purposes of the state's worker protection laws based on the company's control over its drivers. In Berwick v. Uber Technologies , the former driver sought unpaid wages, reimbursement related to the use of her own vehicle, liquidated damages, and penalties associated with the failure to pay prompt wages. After considering various factors, similar to those used to determine employee status under the FLSA, the commissioner maintained, "Defendants hold themselves out as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation. The reality, however, is that Defendants are involved in every aspect of the operation." The commissioner awarded the former driver amounts reflecting mileage for the use of her car and interest on her unpaid balance of expenses, but dismissed her claims for wages, liquidated damages, and penalties. The commissioner noted that the former driver had, in fact, been paid, and that she lacked sufficient evidence to support her claim for additional wages. The former driver's claims for liquidated damages and penalties appear to have been tied to her claim for unpaid wages. Although Uber initially appealed the commissioner's order, the case now appears to be part of a larger settlement effort by the company. In August 2016, a federal district court denied preliminary approval for a proposed settlement that would have included an $84 million payment to Uber drivers in California and Massachusetts. The court maintained that the settlement, which also provided for nonmonetary relief, was "as a whole ... not fair, adequate, and reasonable." The court's rejection of the proposed settlement was based largely on the settlement of the drivers' claim under California's Private Attorneys General Act, which creates a cause of action for private plaintiffs to recover civil penalties that are otherwise only recoverable by the state. Under the proposed settlement, the drivers would have received just $1 million from the company when the potential verdict value of the claim was over $1 billion. In March 2017, a California court rejected a proposed settlement in a separate case involving Uber's alleged failure to comply with the state's minimum wage and overtime requirements. The settlement was reportedly opposed by the court because it would provide little relief to drivers, with the majority of the settlement being given to the state and paying administrative costs and attorneys' fees. Section 7 of the NLRA states, "Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.... " The NLRA requires an employer to negotiate in good faith with a labor organization that becomes the exclusive representative for a bargaining unit of employees. Independent contractors are specifically excluded from the NLRA's definition for the term employee . Thus, the NLRA does not require an employer to negotiate with independent contractors over the terms and conditions of their employment. In light of the exclusion of independent contractors from coverage under the NLRA and a desire to provide collective bargaining rights to at least some gig workers, the city of Seattle has considered legislation that would allow "for-hire vehicle drivers" to be represented by an "exclusive driver representative." Under legislation passed recently by the Seattle City Council, the exclusive driver representative would negotiate with the driver coordinator over various subjects, including minimum hours of work, vehicle equipment standards, and conditions of work. Some, however, have questioned the legitimacy of the measure. At least one commentator has interpreted the NLRA's explicit exclusion of independent contractors as preempting state or local legislation that would restore collective bargaining rights to such individuals. Individuals working in the gig economy may gain potential benefits in the form of easier entry into and exit from work and greater flexibility to choose jobs and hours. In contrast, as discussed above, many of the typical labor protections provided by federal legislation, such as those in the FLSA, center on the concepts of employee and employer. In the case of the FLSA, approximately 128.5 million, or 89%, of the nation's 144.2 million wage and salary workers are covered by its provisions. As discussed, the FLSA protections, including minimum wage and overtime provisions, are generally not extended to independent contractors. In a traditional employment relationship, an individual is economically dependent on an employer, and thus not in control of various aspects of work life (e.g., working hours, choice of work tasks). That economic dependency, however, often comes in exchange for some measure of economic security through benefits and protections. Below is a partial list of labor standards and related provisions that are likely affected by the absence of a traditional employment relationship: Minimum Wage. Most workers covered by the FLSA are entitled to a minimum hourly wage, which is currently $7.25 per hour. In addition, more than half of the states currently have minimum wage rates for FLSA-covered workers that are above the federal rate. In contrast, for workers not covered by the FLSA, a category mainly consisting of independent contractors, there is no guaranteed minimum wage rate. Overtime Compensation. The FLSA does not limit work hours; rather, it requires additional payment for hours worked in excess of 40 per workweek. Most workers covered by the FLSA must be compensated at one-and-a-half times their regular rate of pay for each hour worked over 40 hours in a workweek. Workers not covered by the FLSA are not entitled to additional compensation for hours worked in excess of 40 per workweek. Unemployment Compensation. The cornerstone of the income support for unemployed workers is the federal-state Unemployment Compensation (UC) program, which is generally financed by employer taxes. Whereas the specifics of UC benefits are determined by each state, generally eligibility is based on attaining qualifying wages and employment in covered work and typically does not include independent contractors. Family and Medical Leave. The Family and Medical Leave Act (FMLA) entitles eligible employees to unpaid, job-protected leave for qualifying family and medical reasons. Because eligibility for FMLA benefits is tied to an individual's work history with an employer and uses the FLSA concept of employment, independent contractors are not entitled to FMLA provisions. Employer Payroll Taxes. In a traditional employment relationship, an employer is responsible for paying the employer's share of Social Security and Medicare taxes (payroll or FICA taxes) and for withholding the employee's share of these same taxes. Independent contractors, however, are responsible for paying self-employment taxes (i.e., the employer and employee shares of FICA taxes). Beyond federally mandated labor standards, certain other benefits often associated with traditional employment relationships may not be available in the same form to workers in the gig economy. In many cases, employers may offer a combination of benefit access and subsidies to employees. The information in Table 1 includes rates of access, participation, and take-up that civilian employees have to various benefits. These data are intended to show the relatively high prevalence of certain employer-based benefits that independent contractors, by definition, do not have access to through employers. For each benefit type below, the percentage of workers with access by work status is provided to demonstrate the higher proportion of access for full-time workers. Table 1 data indicate that for some of the major benefit categories, such as health, retirement, and life insurance, a majority of employees have access to these benefits through their employers, with correspondingly high take-up rates for these benefits. The difference between access rates for full-time and part-time workers likewise shows an increasing likelihood of having access to benefits through traditional, full-time employment compared with other work arrangements. To the extent that gig employment more closely resembles part-time employment, it is likely that workers in this segment of the economy might also have relatively lower access to the traditional employment-related benefits. These sorts of benefits have traditionally been provided by employers due to cost (e.g., economies of scale) and administrative efficiency, and are voluntary. This list of possible employer-assisted benefits above does not mean that independent contractors have no access to such benefits. Rather, these benefits, which are more common for traditional, full-time employees, would have to be accessible through another means, such as a spouse's employer or a market mechanism (e.g., health insurance exchange). As shown in previous sections of this report, the gig economy, and the labor and regulatory issues associated with it, is not well understood. There is considerable uncertainty, for example, about the number of workers in the gig economy and whether gig work is a primary or secondary source of income for the workers involved. In addition, some are concerned that gig workers lack access to benefits and protections associated with traditional employment relationships, such as those discussed in " Employee Protections " and listed in Table 1 . Although it is unclear how access to benefits for independent contractors in the gig economy or in general may differ from traditional employment, it is clear that these benefits would likely have to be provided through a nonemployer mechanism, because by definition independent contractors are not employees. If the availability of benefits and protections for independent contractors in the gig economy continues to draw congressional attention, and to the extent that gig workers seek access to benefits traditionally associated with employed workers, several relevant policy-related considerations may arise as to the best approach to resolve these issues. These include the following considerations: Which, if any, protections and benefits should be available to workers in the gig economy? Many of the federal labor protections listed in " Employee Protections " apply to employees but often exclude bona fide independent contractors. This exclusion is often undergirded by assumptions that independent contractors have either sufficient market power or a preference for independence from any employer, such that these workers do not need or prefer the level of protection afforded to traditional employees. If these assumptions do not hold for workers in the gig economy, consideration may be given to which benefits are essential or fundamental for these workers. One recent proposal in this area would provide for the establishment of a third employment category for workers—called independent workers—who are not traditional employees, but who should not be considered independent contractors. Per this proposal, workers in the gig economy who are deemed independent workers would qualify for benefits associated with a more traditional employment relationship (e.g., insurance, tax withholding) but not labor protections that are based on the number of hours worked (e.g., minimum wage and overtime), given the inherent difficulty of tracking hours in gig employment. If protections and benefits are extended to more workers in the gig economy, who is responsible for enforcing protections or providing benefits ? A possible consideration regarding benefits and protections for workers in the gig economy is that individuals may work for multiple businesses. To the extent this occurs and benefits are provided through and protections are enforced by an employer, consideration may be given to determining which of the multiple employers is responsible for providing access or enforcement of labor standards. This could result in determining a primary employer for an individual or determining some shared responsibility across employers. If benefits are accessible outside of a traditional employment relationship, how might access be structured? Rather than employers providing these benefits, intermediaries (e.g., nonprofits) might facilitate the administration and purchasing of various benefits. A recent letter from interested parties in the on-demand economy, for example, urged policymakers to consider creating models that would allow on-demand workers to pay into a common fund that provides health, retirement, unemployment, and other benefits that are not tied to a single employer. New mechanisms, such as portable benefits or risk-pooling, may serve to provide benefits to workers in the on-demand or gig economy.

The gig economy is the collection of markets that match providers to consumers on a gig (or job) basis in support of on-demand commerce. In the basic model, gig workers enter into formal agreements with on-demand companies (e.g., Uber, TaskRabbit) to provide services to the company's clients. Prospective clients request services through an Internet-based technological platform or smartphone application that allows them to search for providers or to specify jobs. Providers (i.e., gig workers) engaged by the on-demand company provide the requested service and are compensated for the jobs. Recent trends in on-demand commerce suggest that gig workers may represent a growing segment of the U.S. labor market. In response, some Members of Congress have raised questions, for example, about the size of the gig workforce, how workers are using gig work, and the implications of the gig economy for labor standards and livelihoods more generally. With some exceptions, on-demand companies view providers as independent contractors (i.e., not employees) using the companies' platforms to obtain referrals and transact with clients. This designation is frequently made explicit in the formal agreement that establishes the terms of the provider-company relationship. In some ways, the gig economy can be viewed as an expansion of traditional freelance work (i.e., self-employed workers who generate income through a series of jobs and projects). However, gig jobs may differ from traditional freelance jobs in a few ways. For example, coordination of jobs through an on-demand company reduces entry and operating costs for providers and allows workers' participation to be more transitory in gig markets (i.e., they have greater flexibility around work hours). The terms placed around providers' use of some tech platforms may further set gig work apart. For example, some on-demand companies discourage providers from accepting work outside the platform from certain clients. This is a potentially important difference between gig work and traditional freelance work because it may limit the provider's ability to build a client base and operate outside the platform. Characterizing the gig economy workforce (i.e., those providing services brokered through tech-based platforms) is challenging along several fronts. To date, no large-scale official data have been collected, and there remains considerable uncertainty about how to best measure this segment of the labor force. Existing large-scale labor force survey data from the Bureau of Labor Statistics (BLS) and the U.S. Census Bureau may provide some insights, but are imperfect proxy measures of contemporary gig economy participants. A small literature examines data collected by individual companies operating in the gig economy or from pockets of gig-economy workers. As such, these analyses can be viewed as snapshots of certain gig workers, but they are not necessarily representative of the full market. The apparent availability of gig jobs and the flexibility they seem to provide workers are frequently touted features of the gig economy. However, to the extent that gig-economy workers are viewed as independent contractors, gig jobs differ from traditional employment in notable ways. First, whether a worker in the gig economy may be considered an employee rather than an independent contractor is significant for purposes of various federal labor and employment laws. In general, employees enjoy the protections and benefits provided by such laws, whereas independent contractors are not covered. Two laws, in particular, the Fair Labor Standards Act and the National Labor Relations Act, have drawn recent attention. In addition, certain other benefits (e.g., paid sick leave, health insurance, retirement benefits) that are often associated with traditional employment relationships may not be available in the same form to workers in the gig economy. Should Congress choose to consider ways of increasing access to such benefits for nontraditional employees, new mechanisms, such as portable benefits or risk-pooling, could serve to provide benefits to workers in the gig economy.

Surface transportation authorization acts authorize spending on federal highway and mass transit programs, surface transportation safety and research, and some rail programs. The most recent multi-year authorization for federal surface transportation programs, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU or SAFETEA; P.L. 109-59 ), expired on September 30, 2009. Since then these programs have operated on a series of extension acts and continuing resolutions. The budgetary environment has changed since the passage of SAFETEA in 2005. The financial resources available to authorizers are more constrained. The highway trust fund (HTF) has provided most of the funding for surface transportation authorization bills since the fund was created in 1956, but the revenues from highway taxes (mostly on gasoline and diesel fuel) that support the HTF have declined in recent years due to the condition of the economy and improvements in vehicle fuel efficiency. Consequently, how to pass a multi-year bill without cutting infrastructure spending, raising the gas tax, or increasing the budget deficit is an underlying theme in the ongoing debate. Other issues such as alternative finance, tolling, public-private partnerships, acceleration of project delivery, and performance management are also being debated in this fiscal context. In addition, the question of equity in the distribution of federal spending among the states, which has been resolved in the past by providing large increases in funding for all states, cannot be solved so easily given currently forecast revenues. For a detailed review of the underlying issues, see CRS Report R41512, Surface Transportation Program Reauthorization Issues for the 112 th Congress , coordinated by [author name scrubbed]. On March 14, 2012, the Senate passed MAP-21, the Moving Ahead for Progress in the 21 st Century Act (MAP-21). The bill would reauthorize the surface transportation programs and activities of the federal government for two years (FY2012-FY2013). In early February 2012, the House committees of jurisdiction over surface transportation reauthorization all reported favorably on their contributions to H.R. 7 , the American Energy and Infrastructure Jobs Act ( H.Rept. 112-397 ). Counting the already-appropriated FY2012, H.R. 7 is a five-year bill providing for a total authorization of roughly $260 billion. The bill, as reported, would link the usual surface transportation reauthorization components with provisions designed to increase oil and gas production, the revenues from which would be provided for highway infrastructure. Especially controversial is a provision to discontinue funding mass transit with HTF revenues. MAP-21 and H.R. 7 differ significantly in programmatic content and treatment of the HTF. Both, however, reduce the number of programs by roughly two-thirds and are free of program earmarks. On April 18, 2012, the House passed the Surface Transportation Extension Act of 2012, Part II ( H.R. 4348 ). The bill would extend surface transportation authorizations through the end of FY2012. It also includes language in regard to the Keystone XL Pipeline; a proposed Gulf Coast Restoration Trust Fund; a proposed Harbor Maintenance Trust Fund guarantee; the text of the Coal Residuals Reuse and Management Act ( H.R. 2273 ); and the environmental streamlining provisions of Title III of H.R. 7 . The Senate, on April 24, 2012, agreed by unanimous consent to an amendment that struck the House-passed language from H.R. 4348 and substituted the language of MAP-21. This action enabled the House and Senate to send the measure to conference. Reportedly, Transportation and Infrastructure Committee Chairman John Mica has taken the position that negotiations will involve the entire substance of H.R. 7 as well as provisions of the extension bill. Accordingly, this report retains analysis of H.R. 7 . Surface transportation reauthorization is one of the more legislatively complex issues before Congress, because it addresses matters under the jurisdictions of many committees. Portions of the pending reauthorization bills, under various bill numbers, were marked up in seven different committees (see Table 1 ) before consolidation under a single bill number in each house. The highway trust fund is financed from a number of sources including sales taxes on tires, trucks, buses, and trailers, as well as truck usage taxes. However, approximately 90% of trust fund revenue comes from excise taxes on motor fuels, 18.3 cents per gallon on gasoline and 24.3 cents per gallon on diesel. The HTF consists of two separate accounts—highway and mass transit. The highway account receives an allocation equivalent to 15.44 cents of the gasoline tax and the mass transit account receives the revenue generated by 2.86 cents of the tax. Because the fuel taxes are set in terms of cents per gallon, rather than as a percentage of the sale price, their revenues do not increase with inflation. The fuel tax rates were last raised in 1993. The period of sluggish economic performance that began in 2007 and the improvements in vehicle fuel efficiency have reduced fuel tax revenues below the optimistic projections assumed in SAFETEA. The highway account has already required three transfers from the general fund totaling $29.7 billion, without which the Federal Highway Administration (FHWA) might not have been able to pay states for work they completed. The Congressional Budget Office (CBO), in its March 20, 2012, HTF baseline projection showed that the Highway account is expected to have a shortfall of $4.6 billion at the end of FY2013. (See Figure A-1 .) The CBO projections show the highway account excess of outlays over tax revenues (plus interest) as $7.8 billion for FY2012 and $9.1 billion for FY2013. A gap of roughly $8 billion to $9 billion per year remains through FY2022. CBO projects that the mass transit account, which received a $4.8 billion general fund transfer in FY2010, will remain above zero through FY2013 but then fall to a negative $1.2 billion shortfall by the end of FY2014. The end-of-year shortfall falls further, to $5 billion at the end of FY2015 and deepens rapidly thereafter. These are the gaps authorizers face as they work to move reauthorization legislation. Without an increase in the existing fuel taxes, a difficult political issue in recent years, the fuel-based trust fund taxation system will not be able to support existing or increased surface transportation spending. The choice for policymakers, assuming no increase in fuel taxes, is between finding new sources of revenue for transportation or settling for a smaller program. The Federal-Aid Highway Program (Highway Program) is an umbrella term for an array of programs administered by FHWA. Over many years, the Highway Program has retained several defining financial and administrative attributes across the programmatic structure. The Highway Program is primarily a state-run program. The state departments of transportation (state DOTs) largely determine where and how money is spent, but have to comply with detailed federal planning guidelines. The state DOTs award the contracts and oversee project development and construction. Federally funded highway projects generally require states and/or local governments to provide a designated local matching share. For most Interstate System projects the state/local match is 10%. For other roads the state/local match is generally 20%. Understanding the particular terminology employed by FHWA in managing the Highway Program is important: Distribution of funds is FHWA notification of the availability of federal funds, usually for four years. The states do not actually receive federal money for highway project spending up front. Apportionment is the distribution of funds among the states as prescribed by a statutory formula. Allocation is an administrative distribution of funds (often for specific projects) under programs that do not have statutory distribution formulas. Reimbursement occurs once a project is approved, the work is started, costs are incurred, and the state submits a voucher to FHWA. The reimbursable nature of the highway program is designed to help prevent waste, fraud, and abuse. Contract authority is a type of budget authority that is available for obligation even without an appropriation (although appropriators must eventually provide authority to pay the obligations, known as liquidating authority). Obligation of contract authority for a project by FHWA legally commits the federal government to reimburse the state for the federal share of a project. This can be done prior to an appropriation. Limitation on obligations , known as ObLim or Oblimit, is used to control annual FHWA spending in place of an appropriation. The ObLim sets a limit on the total amount of contract authority that can be obligated in a single fiscal year. For practical purposes, the ObLim is analogous to an appropriation. There are two categories of programs: formula and discretionary. Formula program funds are apportioned (each state receives a portion) annually among the states based on factors detailed in authorizing legislation. All of the large highway programs are formula/apportioned programs. Discretionary programs tend to be smaller programs allocated by FHWA or earmarked by Congress. Under SAFETEA, the vast majority of the federal-aid highway money for project spending is apportioned to the state DOTs through several large "core" formula-driven programs. These programs are provided with roughly 80% of SAFETEA's contract authority and are the sources of funding for most federal-aid highway projects. The core formula programs are the following: Interstate Maintenance Program (IM) National Highway System (NHS) Surface Transportation Program (STP) Highway Bridge Program (HBP) Congestion Mitigation and Air Quality Improvement (CMAQ) Program Highway Safety Improvement Program (HSIP) Equity Bonus Program (EB)—EB funds are distributed into the programs above The authorization act sets the total amount authorized for each core program and each program's formula is run to determine each state's portion of the program total (hence the budget term "apportionment"). Historically, each federal highway formula program has had its own formula factors based, at least in part, on the policy intent of the program. Over time, the state DOTs have been given increasing flexibility to transfer funds from one program to another (excepting HSIP). Some Highway Program funding may also be used for transit projects. This transferability reduces the importance of funding formulas and program eligibility distinctions. Nonetheless, some state DOTs argue that the programmatic structure prevents them from using federal highway funds as they deem best. The Equity Bonus Program is the largest highway program in dollar terms. Its purpose is to guarantee each state a minimum share of funds, regardless of the funding formulas. At present, each state must receive total formula program funding equal to at least 92% of its highway users' tax payments to the highway account of the HTF. The Equity Bonus Program is often viewed as diluting the policy rationales associated with the core program formulas. Several smaller discretionary highway programs (referred to as "allocated" programs) are also part of the Federal-Aid Highway Program. These programs are nominally under the control of FHWA and were designed to allocate funds to projects chosen through competition with other projects. During SAFETEA, most of this funding was earmarked by Congress. The term "program" is used very broadly. FHWA's Financing Federal-Aid Highways listing of allocated programs includes entries for 59 activities, some of which are clearly programmatic in nature, mixed in with others that more resemble specific project designations, temporary pilot programs, studies, and other narrowly directed activities that are not truly "programs." The federal transit program, administered by the Federal Transit Administration (FTA) in the U.S. Department of Transportation (DOT), is a collection of individual programs, each with different funding amounts, distributional mechanisms, and spending eligibility rules. There are four main federal transit programs in SAFETEA, together accounting for 85% of authorized transit funding. Funding in two of these programs, the Urbanized Area Formula Program and the Fixed Guideway (or Rail) Modernization Program, is distributed by formula. The Urbanized Area Formula Program, which accounts for 41% of authorized transit funding in SAFETEA, provides funding to urbanized areas with populations of 50,000 or more. Funds can be used for a broad range of expenses including capital, planning, transit enhancements, and operations in urbanized areas with populations of up to 200,000. Fixed Guideway Modernization Program funds, 16% of authorized transit funding, go mainly for the replacement and rehabilitation of transit rail system assets. The other two main transit programs, the New Starts Program and the Bus and Bus-Related Facilities Capital Program, are discretionary programs. New Starts funding, 18% of overall authorized transit funding in SAFETEA, is available primarily on a competitive basis for new fixed guideway systems and extensions. While the majority of New Starts funding over the years has gone to transit rail projects, the program has funded projects for busways and bus rapid transit, ferries, automated guideway systems, and vintage trolleys. Congress enacted a new "Small Starts" program in SAFETEA to fund projects with a total cost of $250 million or less in which the federal share is $75 million or less. Small Starts projects are funded with $200 million annually from the New Starts authorization beginning in FY2007. Bus Program funds, 9% of authorized funding, are provided to purchase buses and bus-related equipment, including the construction of buildings such as administrative and maintenance facilities, transfer facilities, bus shelters, and park-and-ride stations. Until recently, these funds were mostly earmarked in authorization and appropriations legislation. Currently, FTA allocates these funds. A number of smaller funding programs, including the Rural Formula Program, the Jobs Access and Reverse Commute (JARC) program, the Elderly and Disabilities grants program, and the New Freedom Program, together with program administration, account for the remaining 15% of transit program funds. Highway transportation is by far the leading cause of transportation-related fatalities and injuries in the United States. Highway safety is primarily the responsibility of the states, controlling as they do much of the road network and having the authority to legislate restrictions on driver behavior. Congress has established federal highway safety programs to assist states in improving highway safety. Three DOT agencies administer highway safety programs authorized in SAFETEA: the National Highway Traffic Safety Administration (NHTSA), which focuses on driver behavior and vehicle safety; the Federal Motor Carrier Safety Administration (FMCSA), which focuses on commercial driver qualifications and commercial vehicle safety; and FHWA through the Highway Safety Improvement Program, which focuses on the safety of roadway design. NHTSA provides grants to states to support and encourage state traffic safety efforts, regulates motor vehicle safety, and carries out research on traffic safety. It oversees the use of federal grant funds by requiring states to submit highway safety plans. A state's plan must be approved by NHTSA in order for the state to receive federal traffic safety funds. Each state's plan must identify the state's primary safety problems, set goals for addressing the problems, and establish performance measures by which progress toward those goals can be judged. NHTSA also provides training and technical assistance to states. NHTSA provides grants to states through one large formula program (the State and Community Highway Safety Program, often referred to as the Section 402 program from its statutory identification as Section 402 of Title 23) and several smaller incentive grant programs. These programs support state efforts to improve traffic safety data collection systems, reduce speeding, increase the use of seat belts and child restraint systems, reduce drunk and drugged driving, reduce motorcycle crashes, reduce school bus crashes, and discourage unsafe driving behavior (including aggressive driving, fatigued driving, and distracted driving caused by the use of electronic devices in vehicles). FMCSA promotes the safety of commercial motor vehicle operations through regulation, enforcement, training, and technical assistance. It also administers motor carrier safety grant programs that assist states in ensuring the safety of truck and motor coach operations, including inspection of vehicles and licensing of commercial drivers. HSIP, one of the core federal-aid highway funding programs, is intended to reduce traffic fatalities and serious injuries by making improvements to the design or operation of roadways. Each state receives funding according to a formula based on road lane-miles, vehicle miles traveled, and traffic fatalities. Each state receives at least 0.5% of the program's funding. HSIP includes a dollar set-aside for the Railway-Highway Grade Crossing Hazard Elimination Program, and there is also a dollar set-aside within the formula funds distributed to the states for the purpose of construction and operational improvements on high-risk rural roads. SAFETEA extended mechanisms that were put in place in earlier years to guarantee certain annual funding levels below which appropriators could not constrain funding. This was done by amending the Budget Enforcement Act of 1990 to create highway and mass transit budget categories ("fire walls") that protected these funds from being tapped to increase spending elsewhere. SAFETEA also guaranteed the annual ObLim set for FY2005 through FY2009 by amending the Balanced Budget and Emergency Deficit Control Act of 1985 to specify the SAFETEA ObLim levels, thereby preventing appropriators from setting a lower ObLim. Although the budget firewalls set in the Budget Enforcement Act ended in 2002, appropriators honored those guarantees over the life of SAFETEA. The guarantees retained a second level of protection via a change in the House rules that specified it would be out of order to consider any bill that would set a lower level of funding than set in Section 8003 of SAFETEA. Early in the 112 th Congress, however, the House eliminated the rule, removing the last vestige of the guarantees. RABA is a means of raising or lowering the firewall and guaranteed funding levels if any year's annual highway account receipts are either higher or lower than expected. Although adherence to RABA calculations can lead to either additional funding or cuts in funding, Congress has never allowed a negative RABA calculation to lead to a reduction in spending. Despite the fact that revenues in recent years have consistently fallen below the guarantee levels, which under RABA would have led to funding reductions, in recent years the RABA issue has been considered a moot point, because the HTF has been supplemented by general fund transfers. However, some mechanism to bring spending into alignment with receipts might still be considered in reauthorization. (See " Ratchet Mechanism " in the " Highways " section of this report.) The Budget Control Act requires sequestration of certain funding authorizations in the event a special joint committee fails to reach an agreement on spending reductions. The Budget Control "Super Committee" announced in November 2011 that it had failed to reach such an agreement. However, exemptions to the sequester process under the Balanced Budget and Emergency Deficit Control Act of 1985, as amended (Codified in 2 U.S.C. §905 (j)), likely mean that sequestration would not significantly reduce any surface transportation spending authorized for years beyond FY2012. The surface transportation programs and activities exempted, to the extent that their budgetary resources are subject to appropriations bill obligation limitations, are the following: Federal-Aid Highways Highway Traffic Safety Grants NHTSA operations and research and National Driver Register Motor Carrier Safety Operations and Programs Motor Carrier Safety Grants Transit Formula and Bus Grants The $739 million of annual contract authority that is typically exempt from the obligation limitation appears to be subject to sequester. The Federal Transit Administration's New Starts program, which is supported with general fund revenues, also appears to be subject to sequester. SAFETEA expired on September 30, 2009. Surface transportation programs and activities have been operating on the extension legislation set forth in Table 2 . Outwardly, House-passed STEA-II is an authorization extension of the HTF, its supporting taxes, and the federal surface transportation programs through the end of September 30, 2012. The bill also includes several new or reiterated legislative provisions. On April 24, 2012, the Senate agreed by unanimous consent to an amendment that struck the House-passed language and substituted the full text of MAP-21. This action enabled the House and Senate to send the measure to conference. Formally, the text before the conference would be the two-year Senate surface transportation bill and the House extension legislation, MAP-21 and STEA-II, respectively. Transportation and Infrastructure Committee Chairman John Mica has publicly taken the position that negotiation will also involve the entire substance of H.R. 7 . The rules of both the House and Senate require that provisions in conference proposals must fall within the "scope of the differences" between the House and Senate versions. Because the substance of H.R. 7 provisions, which are in neither the Senate nor House versions, is expected to be proposed in conference, Members may raise issues of what is within the allowable scope for conference on H.R. 4348 . Conference reports containing provisions that are out of scope may be subject to points of order in both the House and Senate. In the House, a majority can waive the rule restricting the content of conference reports (through the approval of a simple resolution reported by the Rules Committee). Senate rules provide a means for waiving points of order on the content of conference reports with the support of 60 Senators (assuming no more than one vacancy). Several provisions that have nothing to do with extending the authorization of surface transportation programs and activities are included in STEA-II. This title contains the text of the proposed North American Energy Access Act ( H.R. 3548 ), which includes provisions to transfer the permitting authority for the Keystone XL pipeline from the Department of State to the Federal Energy Regulatory Commission, and requires the commission to issue a permit for the project within 30 days of enactment. Title II also includes a provision that states that the final environmental impact statement issued by the Secretary of State on August 26, 2011, satisfies all requirements of the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.). This title includes provisions similar to those in the Resources and Ecosystems Sustainability, Tourist Opportunities, and Revived Economies (RESTORE) of the Gulf Coast States Act of 2011 ( S. 1400 ). The bill would establish the Gulf Coast Restoration Trust Fund, which would be financed by 80% of the amounts collected from any Deepwater Horizon -related penalties, settlements, and fines under Section 311 of the Clean Water Act, as amended (33 U.S.C. Sections 1251 et seq.). The Secretary of the Treasury is directed to administer the fund and distribute the revenues as follows: 35% to the Gulf Coast states in equal shares; 60% to the Gulf Coast Ecosystem Restoration Council; and 5% for research. Unlike S. 1400 , however, the House-passed H.R. 4348 would require a future act of Congress to initiate this revenue distribution: the Senate-passed version of H.R. 4348 , which includes the language similar to that of S. 1400 , would not. This title would require that the total level of budgetary resources provided for a fiscal year equal the level of receipts credited to the Harbor Maintenance Trust Fund. The provision would restrict the use of such amounts to harbor maintenance programs. Title V adds the text of the Coal Residuals Reuse and Management Act ( H.R. 2273 ) to the bill. The provisions in Title V would amend the Solid Waste Disposal Act to authorize states to adopt and implement coal combustion residuals permit programs. Title VI is the text of Title III of H.R. 7 . See " Accelerating Transportation Project Delivery " later in this report. The House and Senate bills differ in the number of years authorized, programmatic reauthorization, and regulatory changes. Both bills are free of earmarks, aim to expedite project delivery, and reduce the number of highway programs by roughly two-thirds. MAP-21 is a two year reauthorization bill that basically funds the Federal-Aid Highway Program at the baseline level, adjusted for inflation. However, it would make substantial changes to the structure, formulas, and funding distribution of the federal highway program. A total Federal-Aid Highway Program authorization of $39.5 billion for FY2012 and $40.5 billion for FY2013 (reflecting rescissions), and $400 million for research and education in each fiscal year (see Table 3 ). In a major change, MAP-21 would eliminate all the formula factors under the individual formula programs. Each state would be apportioned a share of the bill's authorized contract authority based on its share of total apportionments and allocations during FY2005-FY2009. These state shares (guaranteed to provide a 95% return on each state's payments to the HTF) would then be used to calculate the MAP-21 apportionments. The replacement of individual program formulas with an initial calculation across all states based on SAFETEA share, the change in the programmatic structure, and the broad eligibility across programs lessen the federal and congressional influence on program direction and project selection. In the past, some Members of Congress influenced surface transportation by pressing for changes in the program formulas or through earmarking. MAP-21 has neither program formulas nor congressional designation of projects. National interests and needs would be increasingly driven by federal planning, performance management, project delivery, and project eligibility requirements. Transferability between core programs, however, would be restricted to 20% of each formula program's apportionment. MAP-21 would reduce the number of programs by roughly two-thirds. This would be accomplished mostly by shifting program eligibility to the core programs. Nearly all discretionary grant programs nominally under the control of FHWA would be eliminated. The Transportation Enhancements Program (TE) is rolled into the CMAQ program. The bill eliminates some controversial TE uses and, beginning in FY2013, allows states to spend TE funds on a range of non-TE CMAQ uses if they build up an unspent balance for one and a half years. Some TE-type projects are also made eligible for funding in other proposed programs. A National Freight Program (NFP) should increase the funding of freight projects by eliminating competition with non-freight projects, at least within the new program. The Senate bill increases Transportation Infrastructure Finance and Innovation Act (TIFIA) program funding nearly ten-fold. However, the bill is generally silent on tolling of federally funded roads and bridges. Tolls often provide the revenue streams needed for TIFIA and other alternatively financed projects. H.R. 7 is a five year reauthorization bill if the already appropriated FY2012 funding is counted. For detailed funding data, see Figure A-2 . The House bill would provide modest increases for federal-aid highways from $40.4 billion in FY2013 to $41.0 billion in FY2016 (with no rescissions), and $440 million annually for research and education (see Table 4 ). The existing Interstate Maintenance and Highway Bridge programs would be folded into the National Highway System and Surface Transportation Programs. The Congestion Mitigation and Air Quality program and the Highway Safety Improvement programs would be retained. The overall number of distinct programs would be reduced by about two-thirds, to approximately 30. The Equity Bonus program would provide a 94% state rate of return guarantee on payments to the HTF. The Mass Transit Account of the HTF would be renamed the Alternative Transportation Account, which in addition to funding mass transit (see below) would provide $2.267 billion annually for FY2013-FY2016 for highway programs. The 2.86 cents per gallon of the fuel taxes that are now credited to the Mass Transit Account would be redirected to the Highway Account. Provisions under the streamlining title would extensively change the requirements in the National Environmental Policy Act (NEPA) applicable to federal highway and transit projects. NEPA would no longer apply to highway or transit projects that cost less than $10 million or for which federal funding constitutes 15% or less of total project costs. The House bill would also increase TIFIA funding nearly ten-fold. MAP-21 would fund the Federal Transit Administration (FTA) and its programs at the current level (see Table 6 ). The HTF would provide 79.9% of the funding and the general fund would provide 20.1%. MAP-21 provisions include $10.458 billion annually for FY2012-FY2013, for transit programs; Creation of the State of Good Repair (SGR) program, which would replace the Fixed Guideway Modernization Program; Elimination of the Bus and Bus Facilities program, although a remnant of the program, called the Bus and Bus Facilities SGR program, would provide competitive grants for the upkeep of buses and bus facilities. Funding for the program, $75 million, would be set aside from the New Starts program; Modification of the New Starts process, including elimination of the alternatives analysis that is currently required in addition to that required by NEPA. H.R. 7 would authorize $10.458 billion for FY2012 and $10.498 billion annually for FY2013 through FY2016 (see Table 7 ). H.R. 7 provisions include Renaming the Mass Transit Account of the Highway Trust Fund as the Alternative Transportation Account (ATA) and redirecting the motor fuel taxes to the Highway Account. The ATA would be funded by transferring $40 billion from the general fund. Eliminating the Clean Fuels Grant Program, the Transit in Parks Program, and the Growing and High Density State Formula. Combining into a single program the New Freedom Program, the Elderly Persons and Persons with Disabilities Program, and the Jobs Access and Reverse Commute Program. Distributing funding for the Bus and Bus-related Facilities Program by formula. MAP-21 includes provisions that call for the development of a national rail plan (including both passenger rail and freight), for the development of a rolling stock equipment pool for corridor intercity passenger services, and for the implementation of positive train control. For freight rail, the bill would amend the Railroad Rehabilitation and Improvement Financing Program (RRIF), which provides government loans for freight and passenger railroads, to accept state or local subsidies or dedicated revenue stream as collateral. The bill would also make modest changes to laws affecting rail freight enforced by the Surface Transportation Board. The House bill contains provisions affecting Amtrak funding, the RRIF program, and positive train control implementation. Most of the provisions of the finance titles are intended to close the gap between projected HTF revenues and the total authorizations included in the bills. The finance title of the Senate bill extends highway-related taxes, at their current rates, through FY2015 and extends highway trust fund expenditure authority through FY2013. The bill includes provisions to raise revenue or provide offsets for $13.872 billion over ten-and-a-half fiscal years for the HTF, $9.279 billion of which is to be transferred in FY2012-FY2013. The deposits include $3 billion from the Leaking Underground Storage Tank (LUST) trust fund balance would be transferred immediately, as well as $685 million of projected LUST fund revenues over the next 10 years; $697 million (over 10 years) from the transfer of the Gas Guzzler Tax from the general fund to the HTF; $743 million (over 10 years) consequent of the revocation of passports of tax delinquents; $841 million (over 10 years) consequent of allowing the Treasury to levy up to 100% of the payment to a Medicare provider to collect unpaid taxes; $4.52 billion from the transfer of future import tariffs on automotive products (FY2012-FY2016); $244 million (over 10 years) from a change in tax treatment of securities of a controlled corporation that are exchanged for assets as part of certain types of corporate reorganizations; $25 million (over 10 years) from the clarification that the Internal Revenue Service may levy a federal employee's Thrift Savings Account to satisfy tax liabilities; $363 million (FY2014-FY2022) from the extension for transfers of excess pension assets to retiree health accounts and allowing Section 420 of the U.S. tax code to apply to life insurance benefits; $9.467 billion (over 10 years) from pension funding stabilization, based on the revenue increases from the stabilization of the fluctuation of interest rates attributable to concomitant changes in Pension Guarantee Benefit Corporation premiums; $4.970 billion transfer from the Treasury general fund to the HTF ($2.183 billion in FY2012, $2.277 billion in FY2013, and $510 million in FY2014); $459 million (over 10 years) from allowing federal agencies to offer phased retirement; $244 million (over 10 years) from the reporting of the sale of life insurance policies to third parties; $99 million (over 10 years) from extending taxes on cigarette manufacturers to entities operating roll-your-own machines; $3.627 billion (over 10 years) from delaying the use of worldwide interest expense allocation by one year; $1.022 billion (over 10 years) from authorizing special measures against foreign jurisdictions and financial institutions that significantly impede enforcement of regulations against money laundering. Since passage, these offsets and revenue provisions have raised comments, in part, because they total more than is needed to offset the difference between the HTF revenue and the MAP-21 spending levels. This could be seen as an opportunity for deficit reduction or as making room for spending. The Finance Committee also reported favorably on provisions that cost money. -$761 million (over 10 years) from changing the Small Issuer Exception to extend the special rules providing modifications to bonds issued after the date of enactment and before January 1, 2013; -$215 million (over 10 years) from providing that bonds issued after the date of enactment and before January 1, 2013, not be treated as a tax preference for purposes of the alternative minimum tax; -$139 million from extending the parity of the monthly exclusion for employer-provided vanpool and transit pass benefits and the exclusion for employer-provided parking; -$305 million from incorporating S. 939 , the Sustainable Water Infrastructure Act (as modified), providing that the state volume cap on private activity bonds would not apply to bonds for water and sewage treatment facilities. The Senate bill includes a provision to authorize states to issue TRIP (Transportation and Regional Infrastructure Project) bonds through state infrastructure banks. The Joint Committee on Taxation determined the provision had no revenue effect. The bill also includes a modified version of S. 836 , the Transportation Access for All Americans Act (as modified), which would amend the Internal Revenue Code to change the depreciation period for long-term highway leases from 15 to 45 years. This might make highway privatization less attractive to private-sector investors. The bill also would provide that the amortization period of the franchise right to collect tolls be not less than the term of the lease or 15 years, whichever is greater. The report language expresses the Finance Committee's concern that under current law the amortization period (15 years) for amounts paid for the right to operate and maintain the public highway and collect tolls is usually significantly shorter than the term of lease under which the right to toll is exercised. The Joint Committee on Taxation table of revenue provisions for MAP-21, as amended, also includes a placeholder for the RESTORE Act. But no figures are provided. The finance provision would establish a "solvency account" into which the Secretary of the Treasury would transfer any excess of amounts, appropriated to the HTF before October 1, 2013, under MAP-21, over the amount necessary to meet the needs of the HTF for the period ending October 1, 2013. These amounts would then be made available for transfers to both the highway account and the mass transit account in a manner that would assure that each account maintains a financial cushion of $2.8 billion on September 30, 2013. The Senate bill proposes to draw heavily on the LUST trust fund to provide a new revenue source for the highway trust fund. Congress established the LUST trust fund in 1986 to address a nationwide problem of groundwater contamination caused by releases from leaking underground storage tanks (USTs) containing petroleum. The LUST trust fund receives revenues primarily from a 0.1 cent per gallon excise tax on gasoline and diesel fuels. Annual discretionary appropriations from the fund support the LUST environmental contamination investigation and cleanup program and the UST leak prevention program authorized in the Solid Waste Disposal Act. Historically, the states used the annual LUST trust fund appropriation mainly to help oversee and enforce corrective actions performed by responsible parties, and also to conduct corrective actions where no responsible party has been identified, where a responsible party fails to comply with a cleanup order, and in the event of an emergency. The Energy Policy Act of 2005 expanded state and U.S. Environmental Protection Agency (EPA) responsibilities and authorized the use of trust fund monies for the federal UST leak prevention and detection program as well as the LUST cleanup program. Of some 501,000 releases from leaking petroleum tanks reported since the beginning of the LUST program, more than 413,000 (or 85%) have been addressed, leaving a backlog of 88,000 releases requiring cleanup. The LUST trust fund had an unobligated balance of $3.392 billion at the beginning of FY2012. In FY2012, absent legislative changes, the fund is estimated to receive $117 million in interest payments on its unobligated balance and $181 million in tax receipts. For each of the past several fiscal years, Congress has appropriated approximately $113 million from the trust fund. States receive, as grants, a minimum of 80% of the annual appropriation. EPA uses the remainder to carry out its responsibilities, including implementing the program on Indian lands. Partly because of the relatively low appropriations through the history of the program, states' LUST programs have relied primarily on nonfederal fund sources, including fees and appropriations, as well as state insurance programs. Section 40301 of the Senate bill would transfer $3.0 billion from the LUST trust fund into the highway trust fund in FY2012. Section 40302 would appropriate to the highway trust fund one-third of future LUST trust fund receipts from the 0.1 cent-per-gallon tax on gasoline and diesel fuel. The Joint Committee on Taxation projects that these future transfers would range from $62 million to $67 million annually, and that over ten years, the appropriations and transfers together would provide $3.685 billion to the highway trust fund. The LUST trust fund expenditure authority is set to expire on March 31, 2012. Section 40101 of the Senate bill would extend the authority through September 30, 2013. The finance provisions of H.R. 7 were included in the American Energy and Infrastructure Jobs Financing Act of 2012, which was reported by the Committee on Ways and Means on February 9, 2012. The bill would reauthorize HTF expenditure authority through FY2016 (Section 15002). Existing highway taxes, including motor fuel taxes, would be extended through FY2018 (Section 15003). H.R. 7 includes a provision requiring that all future transfers from the general fund of the Treasury to the HTF be fully offset in both budget authority and outlays. Under current law transfers from the general fund to the HTF are scored by CBO as having no cost. The finance provisions of H.R. 7 reconfigure the highway trust fund. Within this context, there are two gaps the bill seeks to fill with revenue increases or offsets. One gap is the difference between highway account revenues and balances and the authorized levels in the bill. The other is the $40 billion of general fund resources for the proposed alternative transportation account. Unlike the Senate bill, H.R. 7 would not allocate balances or revenues from the LUST trust fund to the Highway Trust Fund; instead, Section 15002(c) would amend the Internal Revenue Code to extend the LUST trust fund from April 1, 2012, until October 1, 2016. H.R. 7 originally sought to direct increases in federal revenues from onshore and offshore domestic energy leasing and production generated by the enactment of Title XVII of H.R. 7 into the highway account of the Highway Trust Fund. This would establish a new allocation of government receipts from newly authorized leasing and drilling activities. The House approved the energy leasing and production provisions as separate bills on February 16, 2012, under a rule specifying that they would be incorporated into H.R. 7 should H.R. 7 pass the House. The statutory basis for offshore energy development is the Outer Continental Shelf Lands Act, which is administered primarily by the Department of the Interior. The basic structure of the offshore program allows the Department of the Interior to lease the right to develop oil and gas resources in federal ocean areas in exchange for upfront payments, rental payments, and royalties. According to the department's Office of Natural Resources Revenue, federal receipts from offshore oil and gas came to $6.5 billion in FY2011. Under current law, receipts from existing offshore lease programs are allocated to a variety of programs by statute. The Land and Water Conservation Fund (established under P.L. 90-401) receives a $900 million annual allocation, and the National Historic Preservation Fund (established under P.L. 94-422 ) receives a $150 million allocation annually. In addition, portions of federal receipts from certain submerged acreage are permanently appropriated to the states, with the Gulf Coast states (Alabama, Louisiana, Mississippi, and Texas) receiving additional funds from specified leases. H.R. 7 renames the mass transit account of the HTF the alternative transportation account, and provides the account with a one-time appropriation of $40 billion. It transfers to the highway account, beginning on the date of enactment, the 2.86 cents per gallon of motor fuels taxes currently transferred to the mass transit account. Title XVI, Federal Employee Retirement, appears to be included to provide offsetting revenues for the $40 billion in general fund revenues provided to the alternative transportation account over the life of the bill. MAP-21 proposes total authorizations of $80.8 billion (after rescissions) over two years ($39.9 billion for FY2012 and $40.9 billion for FY2013), under the Highway and Research titles of the bill. (See Table 3 ) The Senate bill does not reinstate the TEA-21 or SAFETEA funding firewalls or spending guarantees. MAP-21 eliminates the Equity Bonus Program. Instead the bill guarantees a state share based on SAFETEA and a 95 cent return on each dollar that a state's highway users pay to the highway account of the HTF. MAP-21 does not include highway program earmarks. Section 4001, Highway Spending Controls, includes a provision designed to assure the solvency of the highway account of the HTF. Referred to as the "ratchet mechanism," it requires that within 60 days of enactment, DOT and the Department of the Treasury estimate whether the highway account balance will fall below $2 billion in FY2012 or $1 billion in FY2013. If either of these conditions is expected to occur, DOT will calculate the amount to which the FY2012 ObLim would have to be reduced to prevent this occurrence and then adjust the distribution to the states to reflect the reduction. Any withdrawn ObLim would immediately lapse and a proportionate amount of contract authority would be rescinded. For the years after FY2012 a similar calculation is to be made. The calculation is, however, only to be made under the year-long appropriations bills and not under short-term continuing resolutions. This provision appears to be related to the pending HTF shortfall under MAP-21 spending levels, as it apparently commits the Senate Environment and Public Works Committee to keeping the bill's spending within the means (revenues and off set transfers) of the HTF. It may also increase the pressure to identify additional revenue options for the HTF to make up the shortfall. Implementing the ratchet mechanism, if the trigger HTF balances were to be breached, could face resistance in Congress, given the history of negative RABA calculations. For FY2003 the RABA calculation called for a $4.4 billion downward adjustment in the guaranteed funding levels for the highway program. However, despite the negative RABA calculation, Congress chose to override the reductions by drawing down the then positive balance in the HTF. H.R. 7 proposes a total federal-aid highway program authorization of $205 billion over five years, counting the current appropriated year. The HTF obligation limitations for the four full years of the bill are, $37.366 billion for FY2013, $37.621 billion for FY2014, $37.676 billion for FY2015, and $38 billion for FY2016. Under H.R. 7 some highway programs would be funded from a proposed Alternative Transportation Account, which would provide an additional obligation limitation of $2.7 billion annually for FY2013-FY2016 (see Table 4 ). As is true with the Senate bill, H.R. 7 does not include spending guarantee mechanisms such as those in SAFETEA. H.R. 7 includes a modified version of the existing Equity Bonus Program with a guarantee that each state's total highway grants each year will equal at least 94% of the motor fuel taxes the state pays into the HTF. The program authorization is capped at $3.9 billion per year. The alternative transportation would fund several highway programs, including the Congestion Mitigation and Air Quality Program (CMAQ), Ferry Boats and Terminals, Puerto Rico Highways, and Territorial Highway Program. The obligation limitation for these programs is $2.707 billion for each of the fiscal years 2013 through 2016. The House bill would also allow expanded tolling of the Interstate system. Subject to certain restrictions, the federal government could participate in projects to add lanes to increase the capacity of a highway and its conversion to a toll facility, so long as the same number of free lanes as existed before the project remain toll free. H.R. 7 does not include earmarks. For details of the highway authorizations under H.R. 7 , see Figure A-2 . Unlike SAFETEA and earlier authorization acts, MAP-21 does not set the core programs' authorization levels and then run the funding through their individual program formulas to determine each state's apportionments. Instead, MAP-21 determines the state apportionments for all the major programs according to a single methodology, as follows: First, each state's "initial amount" is determined by multiplying the total amount available for apportionment ($39.143 billion for FY2012 and $39.806 billion for FY2013) by each state's share of total nationwide apportionments and allocations received for FY2005-FY2009. Second, these initial amounts are adjusted (if needed) to ensure that each state's combined apportionments in each year will not be less than 95% of the estimated tax payments made by its highway users to the highway account of the HTF. Given the excess of federal highway spending over HTF revenues for FY2005-FY2009, it is unlikely that any adjustments will have to be made, if MAP-21, as reported, is enacted and fully funded. Third, an amount based on each state's CMAQ percentage of its total apportionments for FY2009, plus 10% of the state's Surface Transportation Program funding for FY2009 (to account for the transfer of Transportation Enhancements to CMAQ), are set-aside for the new CMAQ program, from the adjusted initial amount determined in the first two steps. Then the metropolitan planning amount is determined by multiplying the ratio of a state's apportionment under Title 23 Section 134 for FY2009 to its total apportionments for that year, times the adjusted initial amount calculated in the first two steps. Fourth, the remaining amount of each state's "initial amount" is divided among the four remaining core programs as follows: 58% is apportioned to the National Highway Performance Program (NHPP), 29.3% for the Transportation Mobility Program (TMP), 7% for the Highway Safety Improvement Program (HSIP), and 5.7% for the National Freight Program (NFP). A further adjustment to state apportioned amounts would be based on the privatized highway lane miles and vehicle miles traveled on privatized highways. The provision would only apply to formerly publicly operated toll roads that have been privatized. Any state with such a privatized road would have its apportionment reduced according to a percentage based on one half on the privatized lane mileage in a state relative to the total National Highway System (NHS) miles in the state and one half determined by total vehicle miles traveled on the privatized highway lanes relative to the total vehicle miles traveled on the NHS roads in the state. The reduced apportionment amounts would then be apportioned among all the other states. According to FHWA, currently this would reduce the apportionments of three states—Illinois, Indiana, and Colorado—and increase the apportionments of all other states. Compared to the apportionments prior to adjustment the apportionments are reduced: 0.087% for Illinois; 4.375% for Indiana; and 0.045% for Colorado. Apportionments for all other states increase 0.115% (see Figure A-7 ). Table 5 shows the dollar amounts of the aggregate programmatic split. Historically, concerns about receiving federal highway spending proportionate to the highway taxes paid by each state's highway users were resolved through programs such as SAFETEA's Equity Bonus Program, which adds funds across all the formula programs to bring all states up to a minimum percentage return on tax payments. MAP-21 has no overt equity program. MAP-21's determination of the "initial amount" for each state, based on each state's share of total funding during FY2005-FY2009, is designed to resolve the "donor-donee" issue up front. Although there is an adjustment mechanism to assure that all states receive at least a 95% rate of return on their payments to the HTF, it is unlikely that adjustments will have to be made. The nationwide rate of return for FY2005-FY2009 was $1.23 on the dollar. Using this base level would likely lift all donor states above the 95% level. If, however, Congress does not provide sufficient funding for the program authorized in MAP-21, the adjustment process to guarantee a 95% return might have to be implemented. Also, some states may prefer that state return on payments to the HTF be used to determine the "initial amount," rather than the state share of total FY2005-FY2009 funding, largely because of earmarking legacy issues. SAFETEA included 6,372 earmarks, more than any previous surface transportation authorization bill, valued at $24.3 billion. Of the $22.1 billion of funding for highway earmarks, 67% of this amount was "below the line," which meant the earmarks did not bring additional money to the receiving state because the state's Equity Bonus distribution was reduced by a like amount. The other 33% of earmark funding was for "above the line" earmarks and increased the amount of funds flowing to the receiving states, in most cases increasing those states' shares of total highway program funding. This became an issue in extension legislation. Although individual earmarks were not extended, the states that previously did well in obtaining above-the-line earmarks have benefited from higher base amounts under extensions. MAP-21 is free of project earmarks. However, because under MAP-21 the apportionment calculation to the states is based on the state share of both apportioned and allocated funding for the SAFETEA years (FY2005-FY2009), states that did well in terms of "above the line" earmarks under SAFETEA would receive apportionment shares under MAP-21 that reflect these increased amounts. SAFETEA's unequal distribution of earmarking both among Members of Congress and among the states was very controversial. Continuing the crediting of these "above the line" earmarks in MAP-21's initial state share calculation could continue to favor states which fared well during the SAFETEA earmarking process. MAP-21 reduces the number of discrete funding programs by two-thirds to roughly 30 programs. Most of this reduction is accomplished by absorbing the programs' eligibilities into the new core programs discussed below. The core programs also have many areas of overlapping eligibility. Under MAP-21, the five core programs plus metropolitan transportation planning would be authorized at $39.143 billion for FY2012 and $39.806 billion for FY2013 (see Figure A-5 and Figure A-6 ). This program would be the largest of the programs within the restructured Federal-Aid Highway program. The NHPP would receive $20.5 billion for FY2012 and $21 billion for FY2013. The program would provide support for improvement of the condition and performance of the National Highway System. Three SAFETEA core programs, the Interstate Maintenance Program, the National Highway System Program, and the Highway Bridge Program's NHS component, would be combined to create most of NHPP. The program would include projects to achieve national performance goals for improving infrastructure condition, safety, mobility, or freight movement, consistent with state or metropolitan planning; construction, reconstruction, or operational improvement of highway segments; construction, replacement, rehabilitation, and preservation of bridges, tunnels, and ferry boats and ferry facilities; inspection costs and the training of inspection personnel for bridges and tunnels; bicycle transportation infrastructure and pedestrian walkways; traffic and traveler information monitoring; intelligent transportation systems; and environmental restoration, as well as natural habitat and wetlands mitigation within NHS corridors. The program focus would be on system maintenance. States would not be allowed to spend more than 40% of their three-year NHPP apportionment average on new capacity. States would have to develop National Highway System asset management plans with performance metrics and targets. If Interstate System and NHS bridge conditions in a state were to fall below the minimum conditions established by the Secretary of Transportation, certain amounts of funds would be transferred from other specified programs in the state. This program would assist states and localities in improving the conditions and performance of federal-aid highways and of bridges on any public road. Essentially, it would replace SAFETEA's Surface Transportation Program, less its 10% Transportation Enhancement (TE) set-aside and the off-NHS system component of the Highway Bridge Program. The TE shifts to the enhanced CMAQ program. TE type projects, however, also maintain TMP eligibility. The authorization for TMP is roughly $10.5 billion annually for FY2012 and FY2013. TMP funds would be eligible for transit uses, carpool programs, traveler information, congestion pricing, transportation planning, transportation enhancement activities, recreational trails, ferryboats and ferry facilities, border infrastructure projects, scenic roads, truck parking facilities, safe routes to school projects, as well as eligibilities from discontinued SAFETEA programs. TMP funds would also be eligible for state participation in natural habitat and wetlands mitigation efforts related to projects under Title 23 U.S.C., including statewide and regional natural habitat and wetlands conservation and mitigation plans. Improvement to a freight railroad, marine highway, or intermodal facility would be eligible under specified conditions. TMP funds could be used for maintenance and improvement of all public roads within 10 miles of international borders on which federally owned vehicles comprise more than 50% of the traffic. States would be subject to penalties if the total deck area of deficient bridges increased in the two most recent years. TMP funds are to be sub-apportioned within states. Fifty percent of each state's apportionment is to be apportioned within the state based on the relative share of a state's population residing within three categories of areas: (1) urbanized areas with populations over 200,000; (2) areas within the state other than urban areas with populations above 5,000; and (3) other areas in the state. The other 50% could be apportioned to any area in the state. The Appalachian Development Highway System (ADHS) program would be eliminated but its routes and access roads would be eligible under TMP. This change would give states more flexibility to determine spending on the ADHS. CMAQ as it exists under SAFETEA would be expanded, in part, by absorbing the eligibilities of discontinued programs including Transportation Enhancements, Safe Routes to Schools, and Recreational Trails. Under MAP-21, CMAQ would receive roughly $3.3 billion annually for FY2012 and FY2013 (under SAFETEA, CMAQ received $1.7 billion for FY2009). Eligibility for CMAQ funding would be expanded to include demand-shifting projects such as telecommuting, ridesharing, and road pricing. For further discussion of CMAQ, see the " Amendments to the CMAQ Program " section of this report. HSIP would remain largely as it is under SAFETEA. It would continue to support projects that improve the safety of road infrastructure by correcting or improving hazardous road locations, such as dangerous intersections, or road improvements such as adding rumble strips. HSIP would be funded at roughly $2.5 billion annually for FY2012 and FY2013. The High Risk Rural Roads Program and the Rail-Highway Grade Crossing Program would be abolished, although their project eligibilities would be retained. The NFP would be an entirely new program intended to improve the condition and performance of a newly designated national freight network. The program would be funded at roughly $2 billion annually for FY2012 and FY2013. This program is discussed in detail in the " Freight Initiative " discussion in this report. MAP-21 would reduce from 50% to 20% the maximum percentage of funding that a state can transfer from any one of its apportioned (mostly core formula) programs to another. Section 1507 of the bill would, however, prohibit the transfer of any TMP funding suballocated by population. The restriction on transfers among programs may be less limiting than it appears, as the core programs under MAP-21 would have many areas of overlapping eligibility, potentially reducing the need for inter-program transfers by the states. H.R. 7 would consolidate or eliminate many programs, but differently than proposed in MAP-21. H.R. 7 would retain more of the existing core program structure but expand both the National Highway System Program (NHS) and the Surface Transportation Program (STP) to include the present Highway Bridge Program. The existing Interstate Maintenance program would be folded into the National Highway System Program, and the Highway Safety Improvement Program would be retained. The 10% STP set-aside for Transportation Enhancements, such as bike trails and streetscape improvements, is eliminated. As is true with the Senate bill, the eligibilities of many of the absorbed or eliminated programs continue but under the auspices of other programs. The obligation limitations supported by the highway account of the HTF for the core highway programs for FY2013 through FY2016 total $150.7 billion. An additional $8 billion from the alternative transportation account is provided for the Congestion Mitigation and Air Quality Improvement Program (CMAQ). (For the state-by-state apportionments under H.R. 7 , as reported, see Figure A-8 and Figure A-9 ). H.R. 7 , the largest of the bill's formula programs ($70.4 billion for FY2013-FY2016), would expand the funding of the existing NHS program to help pay for the maintenance and repair of the Interstate Highway system (the existing Interstate Maintenance Program would be eliminated) and the construction, inspection, maintenance, and repair of bridges on the NHS (the existing Highway Bridge Program would be eliminated). Only facilities located on the NHS would be eligible for NHS program funding. Projects would have to support progress toward national performance goals and states would have to participate in the development of state asset management plans for the NHS. During the nearly 30-year history of STP, it has been the federal-aid highway program with the broadest eligibility criteria. H.R. 7 would authorize $42.4 billion for FY2013-FY2014 for STP. Under the bill, the program's purpose would in some ways be broadened, for example, to include the construction, inspection, rehabilitation, and replacement of bridges and tunnels of all classifications (to compensate for the impact of the elimination of the Highway Bridge Program on non-NHS roads). On the other hand, the bill would eliminate the requirement that 10% of STP funds be set aside for transportation enhancement purposes. In addition, it reiterates the prohibition against projects on roads functionally classified as local or rural minor collectors unless the roads were on the federal-aid highway system in 1991. The bill, however, also allows up to 15% of the STP amounts that are set aside for use in areas with populations under 5,000 to be used on roads classified as minor collectors. H.R. 7 would reduce, from 62.5% to 50%, the percentage of funds required to be spent on urbanized areas with populations over 200,000. States must consult with local or rural planning organizations before obligating funds for projects in population areas of 5,000 to 200,000. H.R. 7 would provide $10.4 billion for FY2013-FY2014 for HSIP. States would be required to have their own highway safety improvement programs and state safety plans to receive HSIP funds. The plans would have to be developed in consultation with stakeholders and set safety goals, identify safety projects, and be consistent with performance measures. Each plan would identify the 100 most dangerous roads in the state and would evaluate the progress made each year in achieving state safety goals. Federal cost share would continue to be 90%. H.R. 7 would provide $8 billion over FY2013-FY2014 ($2 billion annually) from the proposed alternative transportation account for CMAQ. See also CMAQ discussion under " Amendments to the CMAQ Program " later in this report. H.R. 7 would amend the existing program to guarantee that each state would receive a minimum 94% return in core program apportionments on its state's highway users' payments of highway taxes to the highway trust fund (the current guarantee is 92%). H.R. 7 authorizes a total of $15.6 billion in equal annual portions over FY2013-FY2014. This limits the amount that can be used to fulfill the guarantee to $3.9 billion per year. Under SAFETEA the EB authorization was for "such sums as necessary." The estimate at the time of passage was that the program would need $40.9 billion in contract authority. If the $3.9 billion annual amount is insufficient to bring all states up to 94%, the STP authorization would be decreased to provide the needed additional funds. The Senate bill, Section 1107, would clarify eligibility criteria regarding roads and bridges damaged by natural disasters or catastrophic failures from an external cause. Roads already closed to traffic or already scheduled for the construction phase in the approved statewide transportation improvement plan at the time of the disaster would not be eligible for ER funds. It would also reiterate that ER funds can only be used on federal-aid highways. The U.S. territories would not receive more than $20 million in a single fiscal year. The $100 million ceiling on a single natural disaster or a single catastrophic failure in a single state would be eliminated. Section 1506 allows the 180-day emergency period during which the federal government pays 100% of repair costs to be adjusted for time lost due to lack of access to damaged facilities. Also, 100% federal share may be allowed at the discretion of the Secretary of Transportation if the cost to repair exceeds the annual state apportionment under 23 U.S.C. 104. H.R. 7 , Section 1111, defines "comparable facility" in regard to allowable "maximum total project costs" as being a facility that meets the current geometric and construction standards required for the types and volume of traffic that the facility will carry over its design life. Reimbursement for debris removal costs would be limited to costs not covered by the Robert T. Stafford Disaster Relief and Emergency Assistance Act. The U.S. territories would not receive more than $20 million in a single fiscal year. The governor or President must declare an emergency in order for assistance to be provided, and states would have to provide a list of projects and costs within two years. ER funding would be allowed for federal lands highways and tribal roads even if they are not on the federal-aid highway system. The Senate bill, Section 1116, would restructure the Federal Lands Highways Programs (Public Lands Highways, Indian Reservation Roads, Park Roads and Parkways, and Refuge Roads) by creating the Federal Lands and Tribal Transportation Program. The new program would have three main components: the Tribal Transportation Program; the Federal Lands Transportation Program; and the Federal Lands Access Program. MAP-21 proposes to fund the Tribal Transportation Program at $450 million annually. Funding for other federal lands programs would be $550 million annually. Among the changes in the Tribal Transportation Program is a new statutory formula for distributing funds among tribes based on road mileage and tribal population. Funding from the Federal Lands Access Program would be allocated among the states by a formula that takes into account the amount of federal land, the number of recreational visitors, the number of miles of federal roads, and the number of federally owned bridges. H.R. 7 authorizes the Tribal Transportation Program (Subtitle E) at $465 million annually for FY2013-FY2016. The Federal Lands Transportation program is authorized at $535 million annually for FY2013-FY2016. The Senate bill, Section 1114, would combine the Puerto Rico and Territorial Highway (THP) programs, funding them at $180 million annually for FY2012 and FY2013. The THP would receive a 25% set-aside each year, amounting to $45 million annually for Guam, American Samoa, the Northern Marianas, and the U.S. Virgin Islands. Puerto Rico would receive a 75% per year set-aside, or $135 million annually. Puerto Rico's set-aside is limited to certain program eligibilities: 50% for purposes under NHPP, 25% for purposes under HSIP, and the remainder for purposes eligible under 23 U.S.C. Chapter 1 (Highways). H.R. 7 retains the Puerto Rico Highway Program and authorizes it at $150 million annually from the alternative transportation account for FY2013-FY2016. The Territorial Highway Program is also retained and authorized from the alternative transportation account, but at $50 million annually for FY2013-FY2016. The Senate bill eliminates the ADHS as a freestanding program and incorporates its eligibilities into the new Transportation Mobility Program. Section 1530 would raise the federal share payable for the cost of constructing highways and access roads on the Appalachian Development Highway System to 95% under certain conditions. H.R. 7 would retain the program, authorizing it at the SAFETEA level of $470 million per year for FY2013-FY2016. As has been true in the past, these funds would available until expended. States would be allowed to use toll credits for the local matching share. Under H.R. 7 , Section 118, funds are to be apportioned based on the latest cost to complete estimate with no state receiving less than 1% of the funds apportioned and no state receiving more than 25%. The Senate bill, Section 1118, establishes a program similar to the program of the same name in SAFETEA. Budget authority, not contract authority, of $1 billion is provided for FY2013. This program would require an appropriation before funds could be made available. The purpose of this discretionary program is to fund critical high-cost surface transportation infrastructure projects that are difficult to complete with existing funding but would generate national and regional economic benefits and increase global competitiveness, reduce congestion, improve roadways vital to national energy security, improve the movement of freight and people, and improve transportation safety. No later than three years after the date of enactment, the Government Accountability Office (GAO) is to report on the process of selection, the factors that went into the selection, and the justification under these factors for the selection of each project. H.R. 7 would repeal the SAFETEA PNRS provision. The Senate bill, ( H.R. 4348 as amended by MAP-21, Section 1119) would create a general fund program for Ferries and Ferry Terminal Facilities. Unlike the existing program, the states that would receive the funds are not designated. Instead the funding would be distributed via the following formula: 20% based on the system's total passengers for the most recent fiscal year relative to the number of passengers carried by all ferry systems; 50% based on the number of vehicles carried per day by the system relative to the number of vehicles carried by all systems; and 30% based on the total route miles serviced by the ferry system relative to the total route miles serviced by all ferry systems. MAP-21 authorizes $67 million for each fiscal year FY2012 and FY2013. These funds would require an appropriation to be made available. Ferry boats and ferry facilities would also be eligible for formula funds under the proposed National Highway Performance Program. The House bill ( H.R. 7 , Section 1113) would modify the existing Ferry Boat and Ferry Terminal Facilities Program under 23 U.S.C. 147. The program would be funded at $67 million for each fiscal year FY2013-FY2016 via the proposed Alternative Transportation Account. H.R. 7 would also provide for distribution of the funds via a formula that differs from the Senate bill proposal. Under the House bill the program funds would be distributed to states that have eligible ferry systems as follows: 35% based on the total annual number of vehicles carried by ferry systems operating in each state; 35% based on the total annual number of passengers carried by ferry systems operating in each state; and 30% based on the total nautical route miles serviced by ferry systems operating in each state. Under H.R. 7 (Section 1106) ferry boats and ferry boat facilities on the NHS would also be eligible for formula funds under the National Highway System Program. An existing federal program supporting large transportation projects is the Transportation Infrastructure Finance and Innovation Act (TIFIA), enacted in 1998 as part of the Transportation Equity Act for the 21 st Century (TEA-21) as amended ( P.L. 105-178 ; P.L. 105-206 ). Currently, TIFIA provides federal credit assistance, up to a maximum of 33% of project costs, in the form of secured loans, loan guarantees, and lines of credit. Loans must be repaid with a dedicated revenue stream, typically a project-related user fee. MAP-21 proposes several significant changes to TIFIA. Perhaps most importantly, the bill proposes to greatly enlarge the TIFIA program by authorizing $1 billion annually from the highway trust fund, up from the $122 million annually in SAFETEA. These funds would be available to pay the administrative and subsidy costs of the program. Administrative costs would be capped at 1% of this amount, leaving about $990 million to pay loan subsidy costs. Assuming an average subsidy cost of 10%, this may provide DOT with the capacity to make loans totaling $9.9 billion per year. At the same time, MAP-21 also proposes to increase the share of project costs that TIFIA may provide from 33% to 49%, potentially lowering the share of nonfederal resources leveraged with federal loans. Another significant change in MAP-21 would allow credit assistance to be provided for a program of projects secured by a common security pledge. This would be accomplished through a "master credit agreement." Currently, TIFIA only allows agreements on a project-by-project basis. The Los Angeles County Metropolitan Transportation Authority (Metro), for one, has sought this change to accelerate the financing of 12 transit projects (known as the 30/10 Initiative). The existing TIFIA threshold for eligible projects of $50 million generally or $15 million for intelligent transportation system projects remains, except that MAP-21 proposes a threshold of $25 million for rural infrastructure projects. Rural infrastructure projects are defined as those "(A) located in any area other than an urbanized area that has a population of greater than 250,000 inhabitants or (B) connects a rural area to a city with a population of less than 250,000 inhabitants within the city limits" (Section 2002). Additionally, whereas loans for urban projects must charge interest not less than the Treasury rate, rural projects are to be offered loans that are half the Treasury rate. Furthermore, 10% of TIFIA funds made available in MAP-21 are set aside for rural projects. Currently, projects seeking TIFIA assistance are evaluated on eight criteria. These criteria would be abolished, and projects (or programs involving multiple projects) would be evaluated solely on their eligibility on a first-come, first-served basis. Once funding is exhausted for a year, a project sponsor could enter into a master credit agreement for future credit assistance or it could decide to pay its own credit subsidy to permit an immediate loan. MAP-21 would permit the payment of the credit subsidy from federal surface transportation apportionments. Alternatively, if not all TIFIA funding is used it may be apportioned to the states for the purposes of the Transportation Mobility Program. Like MAP-21, H.R. 7 authorizes $1 billion annually for TIFIA from the highway trust fund. These funds will be available to pay the administrative and subsidy costs of the program. Administrative costs are capped $3.250 million in H.R. 7 . The bill also contains provisions to establish master credit agreements to provide credit assistance for programs of related projects. As with MAP-21, H.R. 7 eliminates the evaluation criteria for TIFIA assistance and provides assistance on a first-come, first-served basis if a project or program of projects is eligible. H.R. 7 maintains the $50 million threshold for non-ITS projects and $15 million threshold for ITS projects. But it also adds a $25 million threshold for rural projects, consistent with MAP-21, and a $1 billion threshold for assistance provided under a master credit agreement. H.R. 7 also raises the maximum amount of federal assistance to 49%. In addition to enlarging TIFIA, H.R. 7 proposes to authorize $750 million per year specifically for capitalizing state infrastructure banks. Currently, each state is allowed to use a portion of its federal surface transportation funds to capitalize a state infrastructure bank if it so chooses. There is no separate federal freight transportation program in SAFETEA, only a loose collection of freight-related programs that are embedded in a larger surface transportation program aimed at supporting both passenger and freight mobility. Most of the freight-related funding authorized by SAFETEA is provided to the states through the regular highway programs, such as the Surface Transportation Program (STP). SAFETEA specifically dedicates minor funding to freight transportation improvements, leaving state DOTs and metropolitan planning organizations to make most decisions about the priority to be accorded freight. A large, well-defined federal freight program would be a significant departure from SAFETEA. Whether the federal government should make a more focused effort towards funding freight improvements has been one of the policy questions leading up to the reauthorization debate. The Senate bill (MAP-21) would create a new dedicated funding program for freight transport. While the House bill ( H.R. 7 ) does not create a similar program, it does contain a number of provisions that significantly affect freight transport. Both the Senate and House bills require the U.S. Department of Transportation to prepare and update a national freight transport plan, in consultation with stakeholders, that is intended to articulate the nation's priorities with respect to freight improvements. Also, provisions in both bills seeking to increase private-sector participation in financing transportation improvements, such as expanding the TIFIA program, could enhance freight carriers and shippers' roles in project planning and development. MAP-21 proposes a new core program intended to direct funds to infrastructure segments that are particularly critical to freight movement. The Secretary of Transportation would designate such segments, based primarily on freight volume and in consultation with shippers and Section 1115 of carriers, as the "primary freight network" (PFN), consisting of 27,000 centerline miles of existing roadways. (For comparison, the existing Interstate Highway System consists of approximately 47,000 centerline miles.) Through a formula allocation, states would be guided to spend their freight program apportionment on the PFN first before spending funds on other freight-related infrastructure. The Secretary of Transportation could designate up to an additional 3,000 centerline miles of existing or planned roads as part of the PFN based on their future importance to freight movement. Every decade, the Secretary of Transportation would re-designate the PFN based on the same process. States would be able to designate "critical rural freight corridors" based on the density of truck traffic if the roadway connects the PFN or Interstate System with sufficiently busy freight terminals. States would be able to spend a maximum of 20% of their freight program apportioned funds on these roads. The critical rural freight corridors, portions of the Interstate System not designated as the PFN, and the PFN would be designated as the "national freight network (NFM)." States could spend freight program funds on non-Interstate highways or transit system projects if those projects would improve freight flows on nearby or parallel interstate highways more cost-effectively than improving an Interstate segment. A state could also spend up to a maximum of 10% of its freight program apportionment for public or private freight rail or maritime projects, but only if the Secretary of Transportation determines that a project would make significant improvement to freight flow, that the public benefit exceeds the federal cost, and that the project provides a better return than a highway project on the PFN. Creating a specific funding program for freight movement, as well as requiring states to develop performance measures, will likely elevate consideration of freight needs in the project selection process. The designation of a PFN consisting of about 30,000 miles of highway would concentrate funds on segments most critical to freight movement. DOT has estimated that on 4,700 miles of highway with volume exceeding 8,500 trucks per day, trucks have to travel below the speed limit during rush hours due to congestion, and that on 3,700 additional miles of highway trucks experience stop-and-go conditions during rush hours. Most of these congested segments are at urban interchanges. Because the freight program would rely on apportioned funds, states could still be reluctant to address bottlenecks that are costly to alleviate and would primarily benefit through trucks (as opposed to trucks serving local shippers). Programs such as TIFIA, Projects of National and Regional Significance (PNRS), and CMAQ may be more suitable to funding these types of projects under MAP-21. The Senate bill would not alter truck size and weight limits, but Sections 32801 and 32802 require DOT to conduct a study of possible changes to the limits. The House bill also appears to concentrate funding for freight transport, but does so by reducing funding for programs not relevant to shippers rather than by creating a separate freight program. Terminating the transfer of federal gas taxes to the mass transit trust fund in the House bill also would leave additional funds for roadway maintenance and construction, potentially benefiting truck transportation. The House bill seeks greater reliance on tolling to finance highway construction, an approach opposed by trucking organizations that prefer fuel tax increases over tolling to boost revenues. As introduced, H.R. 7 would have increased federal limits on truck weight from 80,000 pounds to 97,000 pounds with the addition of a sixth axle. This was not approved in the Transportation and Infrastructure Committee; instead, the committee approved an amendment calling for a DOT study of the issue. H.R. 7 does contain a provision increasing the permitted length of double trailers that less-than-truckload (LTL) carriers typically use from 28 feet to 33 feet and increasing the permitted length of trailers that truckload carriers typically use to 53 feet. The House bill also increases the permitted length of auto transporters to 80 feet. The bill calls for a four year pilot program to allow up to three states to increase truck weights to 126,000 pounds on 25-mile Interstate Highway segments under certain conditions. The committee report mentions coal transport in West Virginia and timber trucking in Minnesota as participants in this pilot. Also, a weight exemption for idle reduction equipment was increased from 400 pounds to 550 pounds. For freight provisions related to rail and maritime modes, see the "Rail Provisions" and "Harbor Maintenance Expenditures" sections of this report. MAP-21 would make substantial changes to transportation planning requirements at the national, state, and local levels. Arguably the biggest change is a requirement for the use of performance management throughout the planning process (Subtitle B, "Performance Management"), an idea that has gained wide currency over the past few years. MAP-21 proposes that state and metropolitan planning include performance measures and targets. Although the bill includes a set of five national goals (Section 1203), for the most part the specific performance measures would be developed and performance targets set by the states and metropolitan planning organizations (MPOs) themselves. The consequences of failure to meet the targets are relatively mild, typically requiring a remedial plan of action on the part of the state or MPO. At the national level, as part of the new National Freight Program, MAP-21 would require the development of a national freight strategic plan by DOT (Section 1115). Among other things, the plan would have to establish "quantifiable performance measures for freight movement on the primary freight network." In order to obligate funding from the new freight program, moreover, each state would be required to set performance targets for freight movement. If a state were to fail to make significant progress toward meeting its performance targets it would be required to submit a freight performance improvement plan to the Secretary of Transportation. Another part of MAP-21, the Surface Transportation and Freight Policy Act (Division C, Title III), includes yet more provisions for the establishment of a national surface transportation and freight policy (Section 33002) and the development and implementation of a national surface transportation and freight strategic plan (Section 33003). These provisions sometimes repeat, in a general way, and sometimes conflict with those in Division A, Title I. An example of repetitive provisions is Section 1203, which says a national goal is "to achieve a significant reduction in traffic fatalities and serious injuries on all public roads," and Section 33002, which says "to reduce national motor vehicle-related and truck-related fatalities by 50% by 2030." An example of conflicting provisions is Section 1115, which calls for the development of a national strategic freight plan within three years of enactment, and Section 33003, which calls for the development of a national surface transportation and freight performance plan within two years of enactment. As part of the new National Highway Performance Program (Section 1106), each state would be required to develop a risk-based asset management plan that includes performance targets and an investment strategy. A state that fails to make significant progress toward achieving its targets would have to submit a description of actions it will undertake to achieve them. As part of the planning, the Secretary would have to, among other things, set minimum standards for the condition of pavement on the Interstate System and the condition of bridges on the NHS. If the condition of Interstates and NHS bridges were to fall below that minimum, a state could be required to redirect its federal apportionments to bring those facilities up to par. In some respects, MAP-21 would leave state planning requirements as they are. Each state would still be required to develop a statewide transportation plan and a statewide transportation improvement program. However, there are some changes (Section 1202). Statewide plans and improvement programs would have to incorporate metropolitan transportation plans and transportation improvement programs without change. Currently, statewide plans need only to be developed in cooperation with the MPO. Similarly, MAP-21 would require states to develop their plans in cooperation with nonmetropolitan areas, a stronger requirement than the current need for "consultation." As with many other elements of MAP-21's planning provisions, states would be required to incorporate a performance-based approach into transportation planning. Performance measures and targets would have to be coordinated with those developed in other planning efforts, such as the national freight strategic plan. The performance plan would have to include a financial plan. In terms of metropolitan transportation planning (Section 1201), MAP-21 proposes to create two tiers of MPOs, Tier I in areas with populations of 1 million or more and Tier II in areas of less than 1 million. Tier I and Tier II MPOs would have to meet certain, but presumably different, minimum technical requirements having to do with modeling, data, staffing, and other planning elements. The Secretary would be required to issue regulations establishing these minimum requirements one year from the date of enactment. For Tier I MPOs, MAP-21 will require performance-based planning and targets, elements that will be evaluated by DOT as part of an MPO's certification. According to MAP-21, requirements for Tier II MPOs will be more at the discretion of the Secretary and may include performance measures. MAP-21 also includes provisions for the optional development of multiple scenarios, sometimes known as blueprint planning. MAP-21 provides that both Tier I and Tier II MPOs are allowed to select projects from their TIPs in consultation with states, as is the case now, but MAP-21 adds that it must also be done with the concurrence of the facility owner. As part of the rewriting of the metropolitan planning provisions, MAP-21 proposes to require the designation of MPOs only in urbanized areas of 200,000 population or more, up from 50,000 or more as required in current law. Nevertheless, MPOs in urbanized areas below 200,000 could be designated by agreement between the governor and local officials, although these MPOs would have to meet the minimum technical requirements as determined by the Secretary for Tier II MPOs. Existing MPOs in areas under 200,000 population, unless reaffirmed by the MPO and governor, and approved by the Secretary, are to be terminated three years after regulations are promulgated for Tier II MPOs. One other intent of MAP-21 appears to be consolidating metropolitan planning within a single MPO in each urban region. However, the proposed legislation provides that more than one MPO can co-exist if the governor and an existing MPO decide that it is appropriate for an area. Like MAP-21, H.R. 7 contains a number of provisions pertaining to national transportation planning, performance measurement, and statewide and metropolitan transportation planning. H.R. 7 would require the development of a national strategic transportation plan by DOT, which would be required to solicit a list of projects of national and regional significance from states for inclusion in the plan. The national plan is to include an estimate of costs and is to be updated every two years. H.R. 7 also would require the development of a national performance management system to "track the Nation's progress toward broad national performance goals for the Nation's highway and public transportation systems" (Section 5206). This system is to include national performance measures and targets, and a state performance measurement system including performance targets, strategies, and reporting requirements. States would be required to report annually on their progress toward meeting the performance targets. In the statewide transportation planning process, H.R. 7 would require the identification of projects of national and regional and statewide significance in the long range plan. H.R. 7 also includes requirements for including measures aimed at solving congestion problems at airports and in freight rail corridors, and considerations having to do with ports and inland waterways. H.R. 7 adds a requirement for planning to consider the role intercity buses might play in reducing congestion, pollution, and energy consumption, and the ways in which investment might maintain and improve the existing intercity bus system, including buses that are privately owned and operated. H.R. 7 would also create a role in project selection for regional transportation planning organizations in areas that do not have a designated MPO. In the metropolitan transportation planning process, H.R. 7 proposes to increase the urbanized population threshold for the designation of an MPO from 50,000 to 100,000 (Section 4001). Existing MPOs in areas under 100,000 may continue to be designated unless the governor and localities agree to terminate the designation. H.R. 7 also adds a requirement for metropolitan planning to consider the role of intercity buses. Budgetary pressures at all levels of government have increased concern about using resources for transportation projects as effectively as possible. The speed with which transportation projects are delivered, and the role the federal government plays in the project delivery process, have received particular attention. (See CRS Report R41947, Accelerating Highway and Transit Project Delivery: Issues and Options for Congress , by [author name scrubbed] and [author name scrubbed].) Both the House and Senate proposals include provisions intended to expedite project delivery by changing elements of the environmental review process. For individual highway and transit projects, activities included within that process may begin during the planning stage of project development and are generally concluded during the preliminary engineering and design stage. The process involves preparing documentation and analysis necessary to demonstrate that all potential project-related impacts to the human, natural, or cultural environment are identified; the effects of those impacts are taken into consideration among other factors considered during the decision-making process (e.g., economic or community benefits); and compliance with all state, tribal, or federal requirements, applicable as a result of those impacts, is met. Depending on project-specific impacts, various environmental requirements may apply to a given transportation project. Those requirements may involve activities such as obtaining necessary permits from the Army Corps of Engineers or the U.S. Coast Guard for a bridge reconstruction project; determining activities necessary to mitigate project effects on a historic site in consultation with a State Historic Preservation Office; or identifying a project alternative that avoids adverse impacts to parks, recreation areas, wildlife refuges, or historic sites or structures. For all proposed federal-aid highway or transit projects, some level of documentation, analysis, and review will be required pursuant to NEPA. Under NEPA, among other requirements, federal agencies must identify and consider the environmental impacts of a proposed action before proceeding with it. Before final design activities, property acquisition, or project construction can proceed, the FHWA or FTA must approve the NEPA documentation. Further, it is DOT policy that all environmental investigations, reviews, and consultations be coordinated as a single process, and compliance with all applicable environmental requirements be reflected in the NEPA document. Under this umbrella compliance process, the distinction between what is required by NEPA and requirements identified during the NEPA compliance process may be blurred. Recognizing that distinction is relevant in identifying root causes of project delay associated with, or effective solutions that may expedite, the environmental review process. Recent legislative efforts intended to expedite environmental reviews (enacted under SAFETEA and TEA-21) focused primarily on elements of NEPA compliance, particularly requirements applicable to major, new highway and transit projects. Provisions applicable to the environmental review process in H.R. 7 and MAP-21 also focus primarily on NEPA compliance, but extend beyond NEPA. Generally, the House proposal would involve more sweeping changes to the existing process than proposed in MAP-21. Provisions in both bills are broadly intended to expedite highway and transit project delivery by changing existing environmental compliance requirements. A complex range of factors would affect the degree to which the proposed changes may accelerate environmental reviews, and ultimately project delivery, or may result in procedural changes that may actually slow project delivery (e.g., by removing mechanisms to coordinate the potentially complex environmental compliance process or by adding requirements to that process). The environment-related provisions in MAP-21 apply to activities associated with the environmental review phase of transportation project development. The "environmental review process" is the phase in overall project development in which applicable state, tribal, and federal environmental compliance requirements, including those established under NEPA, are identified and documented. Compliance with those requirements may require input or cooperation from federal, state, or tribal agencies. Before final design activities, property acquisition, purchase of construction materials or rolling stock, or project construction can proceed, FHWA or FTA must ensure that the environmental review process for that project is complete. Under NEPA, that review process must include an environmental impact statement if the project may "significantly" affecting the environment. If the significance of a project's environmental impacts is unclear, an environmental assessment (EA) must be prepared to make that determination. Projects that do not individually or cumulatively have significant environment impacts are categorically excluded from the requirement to prepare an EIS or EA. Hence, they are referred to as categorical exclusions (CEs). DOT's NEPA regulations list two groups of actions that are generally CEs—those that require no additional DOT approval and those that may be processed as CEs when appropriately documented and approved by DOT. Since 1998, approximately 90% of highway projects approved annually by FHWA were processed as CEs and approximately 6% required an EA. While such projects may have "no significant environmental impact under NEPA," they may still be subject to other environmental requirements pursuant to the National Historic Preservation Act, the Clean Water Act, the Endangered Species Act, or other laws. The most significant changes to the environmental review process in MAP-21 are those that would be established under Section 1313, "Accelerated Decisionmaking," and Section 1316, "Review of Federal Project and Program Delivery." Under Section 1313, MAP-21 would amend existing environmental review procedures to establish new requirements applicable to "issue resolution." The provisions would establish criteria intended to ensure that all parties to the environmental review process are on schedule to meet project deadlines and to resolve disputes that may delay completion of that process or result in denial of any approval required under applicable law. Under Section 1313, MAP-21 would also establish "financial transfer provisions" applicable to an agency that fails to issue or deny a permit, license, or other approval required under any federal law. Under certain conditions, the applicable office of the head of the agency responsible for the delay would be required to transfer $10,000 or $20,000, once a week, to the agency or divisions charged with rendering a decision regarding an application. A transfer would be required on the later of 180 days after an application for a permit, license, or approval is complete; or 180 days after a final project decision is made, pursuant to NEPA. The transfer would not be required if the delay is of no fault of the agency. Agencies responsible for issuing approvals or permits for DOT projects vary depending on the impacts of a project, but may include EPA, the U.S. Army Corps of Engineers, or the Department of the Interior's U.S. Fish and Wildlife Service. A given divisional, regional, or local program office within one of these agencies may process hundreds of permit applications annually for a range of regulated activities—for projects beyond those applicable to transportation project development (e.g., private land development, mining operations, oil and gas development, cattle grazing). Agency under-staffing or lack of funds is sometimes cited as a cause of delay in issuing necessary approvals or permits. A requirement to redirect limited agency funds for the purpose of expediting a single transportation project approval may have the unintended affect of slowing other applications being processed by that office. Under Section 1316, MAP-21 would require DOT to prepare assessments that compare the completion times of CEs, EAs, and EISs initiated after calendar year 2005 to those initiated during a period prior to calendar year 2005; and to compare the completion times of CEs, EAs, and EISs initiated during the period beginning on January 1, 2005 and ending on the date of enactment of MAP-21 to those initiated after MAP-21's enactment. DOT would be required to report this information to Congress within one year after enactment. No specific funding is authorized to complete the required assessments. Determining the time it takes to complete the various NEPA documents, as directed under Section 1316, will likely be challenging. Information indicating when individual EIS preparation begins and ends is available, but is not necessarily an accurate reflection of the time it takes to complete the NEPA process. Little or no data are available for projects processed with EAs or CEs. State DOTs generally do not attempt to track the time it takes to complete the NEPA process or any other environmental compliance obligations. Also, NEPA compliance fits into the overall project delivery process as a subset of one or more major elements of project development. Extracting accurate information about the time it takes to complete activities specific to the NEPA process may not be possible. To meet Congress's directive, DOT may require states to begin tracking this information and report it to DOT. Such a requirement would be an addition to the existing environmental clearance process. MAP-21 provisions applicable to CEs generally involve directives to DOT to change existing regulatory requirements applicable to such projects. The most significant provisions applicable to CEs, "Programmatic Agreements and Additional Categorical Exclusions" (Section 1310), would direct DOT to survey state agencies for suggested new CEs. From those suggestions, DOT would be required to promulgate regulations adding projects to the existing regulatory list of CEs. Also, DOT would be directed to change existing CE regulations by moving specific projects listed as requiring documentation and approval from DOT to the list of projects for which no additional DOT approval is required (i.e., to move certain projects from 23 C.F.R.§771.117(d) to §771.117(c)). Other CE-related provisions would specify DOT agency roles in meeting NEPA compliance requirements for multimodal projects (Section 1306) and direct DOT to promulgate regulations specifying criteria under which specific projects located solely within the right-of-way of an existing highway may be designated as categorical exclusions (Section 1309). Provisions that would continue or amend environment-related programs or procedures established under SAFETEA include the following: Assistance to Affected State and Federal Agencies —would continue to authorize the use of federal transportation funds for dedicated staff at a federal agency that would support activities that directly contribute to expediting and improving transportation project planning and delivery. However, under this section, before DOT funding approval, the agency receiving DOT funds and the state (e.g., project sponsor) would have to enter into a memorandum of understanding establishing project priorities to be addressed by using those funds (§1305). State Assumption of Responsibilities for Categorical Exclusions —would allow states to use apportioned transportation funds for attorneys' fees directly attributable to activities associated with eligible activities under this section (§1307). Surface Transportation Project Delivery Program —would make permanent the "surface transportation project delivery pilot program" that allowed five specific states to assume federal responsibilities for environmental reviews required under NEPA or any other federal law. Under the new program, any state could participate and DOT would be required to make certain determinations regarding a state's ability to implement the program. Additional environment-specific provisions under MAP-21's Subtitle C generally identify certain activities as being of importance to Congress, reinforce the importance of activities DOT is currently implementing, or clarify existing requirements applicable to NEPA compliance. In the House bill, provisions applicable to the environmental review process are largely included under Title III, "Environmental Streamlining" (these provisions would generally amend federal-aid highways requirements, but may also apply to transit projects), and Subtitle C, "Project Development and Review," under Title VIII, Railroads (which would amend Title 49 requirements applicable to "Rail programs"). Provisions included under these titles would extensively change the NEPA requirements applicable to federal highway and transit projects. As proposed, NEPA would no longer apply to highway or transit projects that cost less than $10 million or for which federal funding constitutes 15% or less of total project costs. For projects still subject to NEPA, H.R. 7 would significantly change the NEPA compliance process by, among other requirements, changing the range of potential project alternatives that must be considered; the format of and analysis required in certain NEPA documents; and the level of evaluation required to determine cumulative project impacts. The House bill would also require agencies outside DOT to adhere to specific timeframes to provide necessary permits or approvals; establish a 270-day deadline for completing the overall environmental review process; and establish limits to judicial review and to legal sufficiency standards applicable to environmental documents. Provisions in the House proposal would also significantly amend requirements applicable to parks, wildlife refuges, recreation areas, and historic sites or properties. The environmental streamlining title (Title VI) of H.R. 4348 includes the environmental streamlining title (Title III) of H.R. 7 . The Senate has agreed to an amendment that substitutes the language of MAP-21 for the House-passed language of H.R. 4348 , and called for conference with the House. The inclusion of the H.R. 7 streamlining provisions in House-passed H.R. 4348 assures that the House streamlining provisions will not be subject to challenge as being out of the "scope of the differences" between the House and Senate versions of the bill. Outside of the environmental review process, MAP-21 would make three main changes to existing law in an attempt to speed project delivery. First, in Section 1303, MAP-21 would add specific authority for state DOTs to enter into construction manager/general contractor (CM/GC) contracts. According to FHWA, CM/GC contracts occupy a middle ground between the traditional design-bid-build construction method and the more innovative design-build method in which a single contractor is responsible for all the design and construction work. With a CM/GC contract, a state DOT employs a general contractor to provide advice during the design phase. If agreement can be reached on price and other details, the same firm may then be employed to build the project. With intimate knowledge of the project, it is believed the contractor is able to enter into such an agreement and can begin construction tasks before the design work is complete, thereby accelerating the delivery of the project. H.R. 7 also provides specific authority for state DOTs to enter into CM/GC contracts. Second, MAP-21 would increase the federal funding share (normally 90% for Interstate Highway projects and 80% for other projects) by 5% on highway projects that demonstrate some kind of innovative project delivery method or technology (Section 1304). This applies to projects funded from the National Highway Performance Program, the Transportation Mobility Program, and the National Freight Program (the increased federal share is limited to 10% of a state's apportionments under these programs). Examples of innovations listed in MAP-21 include prefabricated bridge elements, digital three-dimensional modeling technologies, and design-build and CM/GC contracting methods. Third, MAP-21, in Section 1315, would create a pilot program, limited to not more than five states, permitting advance payment of moving costs for people and businesses forced to relocate because of a highway project. H.R. 7 has a similar provision, but one that does not limit the number of states that can participate. These advance payments may be combined with payments to compensate for the acquisition of real property. Currently, moving costs are reimbursable. Presumably, this "Alternative Relocation Payment Demonstration Program" is intended to speed the removal of people from the project right-of-way. However, it is a relatively minor change compared with other suggested alternatives to laws governing the acquisition of property and relocation of those displaced. For example, state transportation officials have recommended allowing states to substitute their own property acquisition and relocation laws if they meet federal requirements. Under Section 1113 of MAP-21, the Congestion Mitigation and Air Quality Improvement Program (CMAQ) would be essentially re-written. The CMAQ program was established to provide funds for projects and programs which may reduce the emissions of transportation-related pollutants that may cause an area within a state to exceed certain air quality standards. Under the Clean Air Act, the Environmental Protection Agency (EPA) was directed to set air quality standards for certain pollutants. Of relevance to transportation planning agencies were the resulting National Ambient Air Quality Standards (NAAQS) established for ozone, carbon monoxide, and particulate matter (distinguished as coarse and fine particulate, referred to as PM 10 and PM 2.5 , respectively). A geographic area that meets or exceeds NAAQS for a particular pollutant is considered to be in "attainment"; an area that does not meet a standard is in "nonattainment." A "maintenance" area is one that was previously in nonattainment, but is currently attaining the NAAQS subject to a maintenance plan. The CMAQ program was established to provide funds particularly for projects in nonattainment and maintenance areas. Under MAP-21, CMAQ program goals, criteria specifying project eligibility, and requirements regarding partnerships with private entities would be largely unchanged. However, proposed amendments to the CMAQ program would significantly change how program funding levels are established and how those funds would be apportioned to and distributed within individual states. Since the early 1990s Congress authorized specific annual CMAQ program funding levels. Those funds have been apportioned to each state according to a formula based on the state's population and regional pollution levels (e.g., depending on an area's level of nonattainment for a particular pollutant). MAP-21's CMAQ apportionment for FYs 2012 and 2013 would not be a specific dollar amount. Instead, as discussed in " Senate Bill Highway Formula Programs ," CMAQ funds apportioned to each state would be tied to the amount of CMAQ funds apportioned to that state in FY2009 plus 10% of the apportioned amount to STP funds for that year. CMAQ funds apportioned to each state would then be distributed within each state based on certain limitations and suballocations established under the new CMAQ program. Of the CMAQ apportioned funds, a state would be required to reserve the amount attributable to the 10% of previously-apportioned STP funds for any of the following projects or activities: transportation enhancements the recreational trails program specific activities associated with planning, designing, or constructing "boulevards, main streets, and other roadways" projects that involve "providing transportation choices," such as on-road and off-road trail facilities for pedestrians and for bicycles and other nonmotorized forms of transportation Of the remaining CMAQ funds apportioned to each state, half would be "suballocated" for projects within each designated nonattainment or maintenance area. Those funds would be distributed in accordance with a formula developed by the state. However, that formula would have to be approved by DOT and be weighted by population and the severity of pollution in each nonattainment or maintenance area (in accordance with factors established in MAP-21). Also, half of the suballocated funds would have to be obligated based on the population of areas in nonattainment or maintenance areas for fine particulates. Further, 30% of the suballocated funds would have to be set aside to purchase low-emissions construction equipment and vehicles. The remaining CMAQ funds apportioned to a state (e.g., not suballocated or reserved) would be available to the state for eligible projects in any nonattainment or maintenance areas. States in attainment for NAAQS may use their apportioned funds for CMAQ-eligible projects. Additional provisions in MAP-21 may significantly change how the CMAQ program is implemented in individual states. Those provisions include the following: Proposed Section 149(f), Priority Considerations. In nonattainment or maintenance areas for fine particulates, PM 2.5 , states and MPOs would be directed to prioritize CMAQ fund distribution for projects proven to reduce those pollutants, including diesel retrofits. Proposed Section 149(h), Evaluation and Assessment of Projects. DOT and EPA would be directed to develop a table illustrating the cost-effectiveness of a range of projects. States and MPOs would be required to consider this information in developing performance plans for CMAQ-funded projects. Proposed Section 149(i), Optional Programmatic Eligibility. Technical assessment of a selected program or projects, conducted at the discretion of MPOs, would be allowed to demonstrate emissions reductions. Those data could be used to show that similar projects meet CMAQ eligibility requirements. Proposed Section 149(k), Performance Plan. Requires MPOs to prepare performance plans for CMAQ-funded projects. H.R. 7 also includes provisions that would amend CMAQ program requirements. However, the provisions in the House bill are not as sweeping as those in the Senate bill. Provisions included under Section 1108 of the House bill would amend the project eligibility requirements specified under 23 U.S.C. §149(b). Current laws provide incentives to promote the use of alternative fuels and advanced technology vehicles. These incentives include tax credits for the purchase of plug-in vehicles and for the production of biofuels from cellulose. (Other credits, including a credit of 45 cents per gallon to blend ethanol into gasoline and a credit for the purchase of alternative fuel vehicles, have expired.) Non-tax incentives include credits automakers receive under the Corporate Average Fuel Economy (CAFE) program for the production and sale of alternative fuel vehicles. Various highway programs also provide non-tax incentives. For example, SAFETEA allowed states to permit low-emission and energy-efficient vehicles to travel in high occupancy vehicle (HOV) lanes, although this authority expired at the end of FY2009. H.R. 7 would extend this authority through the end of FY2016; MAP-21 would extend this authority indefinitely. However, H.R. 7 (Section 1205) and MAP-21 (Section 1510), would also limit states' authority to exempt these vehicles if the HOV lanes become "degraded" to the point that vehicles fall below minimum average speed—generally 45 mph—over 90% of the time during peak travel hours. Under current law, states must limit exemptions if the exempted vehicles cause the degradation, while under both the House and Senate bills, actions to address degradation include limits to access regardless of the cause of the degradation. To support the expansion of electric vehicle infrastructure, H.R. 7 (Section 1720) and MAP-21 (Section 1509), would allow highway funds to be used for new charging stations at existing or new parking facilities funded through the law. MAP-21 (Section 20009) would also amend the existing Clean Fuels Grant Program. The current program authorizes grants to states and public transportation authorities to purchase alternative fuel, advanced diesel, and other low-emission buses. MAP-21 would amend definitions to include both buses and other vehicles, although at least 65% of the funds would be used for clean fuel buses and at least 10% for clean fuel bus facilities. MAP-21 would also explicitly include "zero emission buses" that do not directly emit carbon or particulate matter. H.R. 7 has no comparable provisions. The Senate's public transit provisions are contained in Division B of MAP-21 and titled the Federal Public Transportation Act (FPTA) of 2012. The bill authorizes $10.458 billion for federal transit programs annually for FY2012 and FY2013, the current funding level, with $8.361 billion coming from the mass transit account of the highway trust fund and $2.098 billion from the general fund (see Table 6 ). The revenue section of the House surface transportation reauthorization ( H.R. 7 ) would rename the mass transit account of the highway trust fund as the alternative transportation account. H.R. 7 would authorize $10.458 billion for FY2012 and $10.498 billion each year for FY2013 through FY2016, with $8.4 billion from the alternative transportation account and $2.098 billion from the general fund (see Table 7 ). The legislation would also eliminate the use of motor fuel taxes for mass transit. Revenue in the mass transit account collected in FY2012 would be transferred to the highway account. In place of revenue from the fuels tax, the bill would transfer $40 billion from the general fund into the alternative transportation account. The FPTA in MAP-21 contains some significant restructuring of the federal transit program. The existing Fixed Guideway (Rail) Modernization Program would be replaced with a new State of Good Repair (SGR) Grant Program. This proposed program has four components: The High Intensity Fixed Guideway SGR Formula Program would distribute funding by formula for the maintenance, repair, and replacement of fixed guideway public transit defined as: using and occupying a separate right of-way for the exclusive use of public transportation; rail; using a fixed catenary system; a passenger ferry system; or a bus rapid transit system. The facility must be at least seven years old. Funding for this program would come from the mass transit account of the highway trust fund, and would be distributed by a new formula that uses vehicle miles and route miles. The Fixed Guideway SGR Grant Program would distribute competitive grants for the upkeep of fixed guideway systems. Funding for this program would come from the general fund. The High Intensity Motorbus SGR program would distribute funds by formula for public transportation provided on a facility with access for other high-occupancy vehicles. The facility must be at least seven years old. Funding comes from the mass transit account, and would be distributed by a formula that uses fixed-guideway motor bus vehicle miles and route miles. The Bus and Bus Facilities SGR program would distribute competitive grants for the upkeep of buses and bus facilities. Funding for this program, $75 million, would be set aside from the New Starts program (Capital Investment Grants). Another major change in the FPTA from current law would be the elimination of the heavily earmarked discretionary Bus and Bus-Related Facilities program. It appears that some of the funding for this program, currently almost $1 billion per year, is added to some of the other formula programs, particularly the Urbanized Area and Non-Urbanized Area Formula programs. Another significant change would be to combine the Formula Grants for Elderly Individuals and Individuals with Disabilities Program and the New Freedom Program, which provides formula funding for the disabled, into a single program to be called Formula Grants for Enhanced Mobility of Seniors and Individuals with Disabilities. The current Jobs Access and Reverse Commute program is shifted to be part of the Urbanized and Non-Urbanized Area Formula programs. The renamed Access to Jobs program would require that recipients spend at least 3% of their Urbanized Area apportionments on projects that are designed to help low-income individuals travel to and from jobs. Under the Non-Urbanized Area program, Access to Jobs is an eligible expense. The Senate bill also would create two new programs that mirror existing highway programs. These are the Appalachian Development Public Transportation Assistance Program, with $20 million set aside from the Non-Urbanized Area funds, and the Public Transportation Emergency Relief Program. This emergency relief program, akin to the existing Highway Emergency Relief Program, would provide funding for capital and operating costs in the event of a natural or man-made disaster. The bill authorizes such sums as may be necessary to carry out this new program. As is currently the case, funds from the Non-Urbanized Area Formula Program are also set aside for transit on Indian reservations. This legislation would double the amount set aside from $15 million to $30 million annually. Of the $30 million, $20 million would be distributed by formula and $10 million competitively. Although it eliminates some programs, the House bill ( H.R. 7 ) largely maintains the current structure of the federal transit program. Among other things, the House bill eliminates the Clean Fuels Grant Program, the Transit in Parks Program, and the Growing and High Density State Formula. The House bill also combines into a single program the New Freedom Program, the Elderly Persons and Persons with Disabilities Program, and the Jobs Access and Reverse Commute Program. H.R. 7 proposes to distribute funding for the Bus and Bus-Related Facilities Program by formula. In SAFETEA this program was a heavily earmarked discretionary program. Program funding would only go to providers of bus transit in urbanized areas that do not provide heavy rail, commuter rail, or light rail. Currently, funding from this program is available to all types of transit agencies, providers of bus and rail as well as bus-only providers, in both urbanized and non-urbanized areas. Another significant change proposed by H.R. 7 is to provide an incentive to contract out bus service. H.R. 7 provides that if at least 20% of fixed route bus service is contracted out, then the provider can lower its cost share of bus and bus facilities capital projects from a minimum of 20% to a minimum of 10%. H.R. 7 also adds that private intercity and charter operators cannot be barred from federally funded facilities. The Senate bill would make substantial changes to the New Starts program. It would allow New Starts program funds for substantial investments in existing fixed guideway systems that add capacity and functionality. These types of projects are termed "core capacity improvement projects." It also authorizes the evaluation and funding of a program of interrelated projects. The bill also attempts to simplify the New Starts process by reducing the number of major stages from four to three. The new stages are termed project development, engineering, and construction. To enter the project development phase, the applicant would be required to apply in writing to the Secretary of Transportation and initiate the NEPA process. (For more on the NEPA process, see Accelerating Transportation Project Delivery above.) The bill would eliminate the alternatives analysis that is separate from the alternatives analysis in NEPA as currently required by law. Along with the NEPA work, during project development the project sponsor would have to develop the information needed by the Secretary to review the project justification and the local financial commitment. Generally, the project applicant would have two years to complete project development. The project is permitted to enter into the Engineering Phase once the NEPA process is concluded with a Record of Decision (ROD), a Finding of No Significant Impact (FONSI), or a Categorical Exclusion, the project is selected as the locally preferred alternative, the project is adopted into the metropolitan plan, and is justified on its merits. After Engineering, if successful, a project would then be eligible to enter into a full funding grant agreement with the Secretary for federal funding assistance and to move into the construction phase. The Senate bill also tries to advance projects more quickly using special warrants for projects of which the federal share is $100 million or less or 50% or less of the total project cost. But the bill would eliminate the Small Starts program that provided dedicated funding to projects requesting $75 million or less in federal assistance and costing in total $250 million or less. The act also would create a pilot program for expedited project delivery for three projects, as the bill states, "to demonstrate whether innovative project development and delivery procurement methods or innovative financing arrangements can expedite project delivery for certain meritorious new fixed guideway capital projects and core capacity improvement projects." The House bill ( H.R. 7 ) would also make some changes to the New Starts program. Unlike the Senate bill, the House bill would maintain the distinction between New Starts and Small Starts projects. The House bill allocates $150 million of the total New Starts funding for Small Starts projects. As with the Senate bill, H.R. 7 would eliminate the alternatives analysis, although the evaluation of a project must still be made against a no-action alternative. H.R. 7 also includes some other project expediting provisions, including the use of special warrants to speed up projects that may not need a full evaluation, such as new urban circulator service. H.R. 7 would change, to some extent, the project justification criteria used to evaluate projects. For example, it drops the costs of sprawl, including infrastructure costs, and supportive land use as specific evaluation factors, but adds as factors private contributions to the project and intermodal connectivity. H.R. 7 also would add private contributions as a factor in the local financial commitment criteria. For the most part, the Senate bill would maintain the prohibition on the use of federal funds for operating expenses in urbanized areas of 200,000 or more people. However, it adds some exceptions to this general prohibition. For small bus transit systems in urbanized areas of 200,000 or more people, those operating 75 or fewer buses in peak service would be allowed to use up to 50% of their Urbanized Area apportionments for operating expenses. For transit systems operating 76 to 100 buses in peak service the allowable amount would be 25% of their Urbanized Area apportionment. In addition, the bill would allow the use of Urbanized Area formula funds for operating expenses in urbanized areas of 200,000 or more people with high unemployment rates for up to three years. The maximum allowable amount would be 25% of an area's apportionment in the first year and 20% for years two and three. Like the Senate bill, the House bill ( H.R. 7 ) would make some modification to the prohibition of using federal funds for operating expenses in urbanized areas of 200,000. However, the way in which this is done in the House bill differs from the Senate bill. H.R. 7 would allow transit bus systems in urbanized areas of 200,000 or more that operate 100 buses or fewer in peak service to use federal funding for operating expenses. If the system operates between 76 and 100 buses, federal funds could be used for operating expenses with a cost share of 25% federal, 75% local. If the number of buses operated in peak service is 75 or less then the cost share would be 50% federal, the same cost share provided to transit agencies in urbanized areas of 200,000 or less and nonurbanized (rural) areas. H.R. 7 also would increase the share of urbanized and nonurbanized formula funds that may be used for Americans with Disabilities Act (ADA) paratransit from 10% to 15%. These funds may be used for capital and operating expenses. Both the Senate and House bills contain provisions related to passenger rail (intercity and commuter) and freight rail. Section 35101 calls for development of a national rail plan, including passenger and freight, to guide future investments and illustrate on a map priority routes to be served. It also calls for DOT, in coordination with states and others, to develop regional rail plans, excluding the Amtrak-owned Northeast Corridor (NEC), to refine the national plan with respect to each region. The regional plans would include maps identifying rail alignments and station stops, among other things. Finally, states may also create state rail plans that further refine the appropriate regional plan with respect to a state. These plans would be relevant to the approval process for federal capital grants for intercity passenger service. Regarding the NEC, the bill makes amendments to the NEC advisory commission created by the Passenger Rail Investment and Improvement Act of 2008 ( P.L. 110-432 ) and would require Amtrak to submit a new plan for high-speed service (200 mph or greater) in the corridor. The bill would require DOT, within one year of enactment, to develop guidance on how to better measure train delays, including automatic measurement. It would require DOT to conduct a data needs assessment to support development of intercity passenger rail, including cost-benefit analysis and modeling of estimated ridership. Within two years, DOT would be required to survey and report on track access arrangements for intercity passenger rail operating on other railroads' tracks and the processes for resolving disputes over that access. The bill furthers development of an equipment pool of standardized cars for corridor intercity passenger services (with endpoints less than 750 miles apart) by creating a corporate or cooperative entity that is controlled by Amtrak and states funding corridor services. The entity would serve as the equipment supplier and manager of the standardized cars to be used in corridor service. The bill also would amend the capital grant program for corridor passenger service to include Amtrak, not just states, as an eligible recipient. The intent of the equipment pool is to achieve economies of scale in car production and maintenance but a drawback is that it could discourage innovation in car design. Implementation of positive train control (discussed below) could have a significant impact on domestic car design. Federal Railroad Administration (FRA) regulations require passenger cars be designed to limit damage in a collision. This requirement distinguishes U.S. from foreign passenger cars whose rail systems put more emphasis on crash avoidance than crash survival. As a result, U.S. cars are much heavier due to more robust bulkhead requirements. However, the implementation of positive train control (a crash avoidance system) could lead the FRA to modify its requirements to be more in line with foreign requirements. Notwithstanding "Buy America" requirements, this has the potential to facilitate a global market for passenger car equipment. H.R. 7 would repeal the congestion grant program, which authorizes grants to states or Amtrak to reduce congestion or facilitate ridership growth on high-priority rail corridors. This program was folded into Track 1 of the Federal Railroad Administration's High-Speed and Intercity Passenger Rail Grant Program in 2009, and although the congestion grant program was authorized at $100 million annually through FY2013, Congress provided no funding for this program—or any other intercity passenger rail grant program—in FY2011 or FY2012. H.R. 7 would also reduce the authorized funding level for Amtrak's operating assistance grants, a subject not addressed in MAP-21 (see Table 8 ). H.R. 7 would also amend the law covering food and beverage service on Amtrak trains. Currently Amtrak is prohibited from providing food and beverage service on any train unless the revenues at least equal the costs. Nonetheless, Amtrak has continued to provide food and beverage service, although the service is not self-supporting (as is the practice of most airlines), contending that such service is an expectation, if not a requirement, on the part of many passengers. H.R. 7 would repeal the self-supporting requirement, would require that the Federal Railroad Administration put the provision of food and beverage service on Amtrak's trains out to competitive bidding, and would allow the service to be subsidized only to the extent that a net loss on the service was foreseen in the bid selected. Section 36401 would amend a federal grant program, created in SAFETEA-LU, for relocating railroad lines having adverse affects on traffic flow or economic development to include the lateral or vertical relocation (e.g., an overpass or underpass) of a road, not just the rail line. Section 36408 would amend the Railroad Rehabilitation and Improvement Financing (RRIF) Program, a government loan program for freight and passenger railroads, to accept as collateral a state or local subsidy or dedicated revenue stream. It also would expand eligible uses of a RRIF loan to include pre-construction activities such as preliminary engineering, environmental review, and permitting. The Senate bill proposes some modest changes to laws governing the Surface Transportation Board (STB), which regulates certain aspects of the rail industry. It would raise the ceiling on the maximum total dollar value of freight charges that shippers (railroad customers) can bring before the STB under its simplified rate case procedures, from $1 million to $1.5 million in rate relief under the "three-benchmark" procedure, and from $5 million to $10 million under the "simplified stand-alone-cost" procedure. The bill would impose shorter procedural deadlines for rate relief cases brought under the more complex "stand-alone cost" methodology. The STB would be required to study whether to incorporate railroad asset replacement costs in its annual examination of railroad revenue adequacy, a change advocated by railroads but rejected by the STB in 2008. The bill would require the STB to compile and report on its website railroad service complaints and conduct a review of the agency's staffing needs. H.R. 7 would repeal a capital grant program for class II and III freight railroads (smaller, regional and shortline railroads). The bill contains provisions intended to facilitate access to the RRIF loan program. Congress mandated positive train control (PTC) in 2008 in response to a deadly collision between a commuter and freight train in the Los Angeles area and releases of poisonous chemicals from rail tank cars after derailments in other parts of the country. Passenger railroads (intercity and commuter) and freight railroads on routes carrying toxic-by-inhalation products are required to install PTC. PTC relies on radio signaling between devices along the track and in the locomotive that is supposed to override human error in train control. Railroads and others have objected to PTC as a high-cost remedy for relatively rare types of accidents. Lack of adequate spectrum in urban areas to carry the radio signals has been cited as an obstacle to implementation. The Senate bill would allow DOT to extend the deadline beyond December 31, 2015, for implementing PTC technology, upon application by a railroad, if it is determined to be infeasible. DOT could extend the deadline by one year increments but not beyond December 31, 2018. The Senate bill would also make PTC implementation an eligible use of RRIF funding (see below) and requires a joint DOT/FCC study of the spectrum needs for PTC. The House bill ( H.R. 7 ) would extend the deadline for implementing PTC to 2021 for routes with passenger traffic and essentially eliminates the deadline for routes carrying certain toxic chemicals. H.R. 7 would allow railroads the option of implementing equivalent safety measures and adjusting the routes over which the technology would be installed. Highway safety programs are the responsibility of the National Highway Traffic Safety Administration (NHTSA). The Senate bill would retain most of the existing NHTSA grant programs and would create another: an incentive grant program to encourage states to make texting while driving, and the use of a cell phone by drivers under age 18, primary traffic offenses. It would promote greater awareness of motor vehicle defect reporting, and would increase the maximum civil penalty for violations of vehicle safety defect rules from $15 million to $230 million (see Figure A-10 ). And it would require, beginning with model year 2015, that passenger motor vehicles be equipped with event data recorders. NHTSA currently has 10 programs making grants to states—one formula program and nine incentive grant programs—plus several other programs promoting highway safety. The House bill, H.R. 7 , would consolidate all of these into one general highway safety grant program, at a reduced level of funding. The House bill would prohibit the use of federal funding to measure the rate of motorcycle helmet usage or to create checkpoints for motorcyclists. The Senate bill would authorize significantly higher highway safety grants in FY2012 and FY2013 than the House bill (see Table 9 ). Both the House ( H.R. 7 ) and Senate bills would create a clearinghouse of drug and alcohol test results by commercial drivers in order to prevent drivers who have failed a test from avoiding penalties by switching employers. Both bills would also strengthen DOT's ability to act against "reincarnated carriers"—bus companies whose operations have been suspended due to safety violations which then resume operations under a new name. The two bills provide similar levels of funding for truck safety grants to states in FY2013 (see Table 10 and Figure A-11 ). Currently, DOT is prohibited from setting standards for transit agency operations. Although transit is among the safest modes of transportation, several fatal rail transit incidents in 2009 and 2010 led to questions about the effectiveness of state oversight of transit safety. The transit safety section in MAP-21 (§20021) is similar to a proposal made by the Administration in 2009, and to the Public Transportation Safety Act of 2010 ( S. 3638 ), which was reported out of the Senate Committee on Banking, Housing, and Urban Affairs in 2010. It would authorize DOT to establish and enforce minimum safety standards for rail transit systems that are not otherwise regulated by DOT (e.g., commuter rail operations are regulated by FRA); direct DOT to establish a safety certification program, under which states could receive assistance from FTA in overseeing rail transit operations; and require that state safety oversight agencies be financially independent of the transit system(s) they oversee, to avoid the moral hazard of a transit agency having influence over the pay or staffing of its oversight agency. It would authorize "not less than $10 million" for grants to states to carry out this program. H.R. 7 would not authorize DOT to set safety standards. It would amend current law to allow DOT to require that the federal urbanized area formula grant funds for a transit agency be spent on safety and state of good repair projects before any other projects received funding. It would also direct DOT to certify whether state safety oversight organizations have the technical capacity, resources, and authority to carry out their oversight responsibilities. It would authorize $4.6 million annually for financial assistance to state safety oversight organizations. MAP-21 would authorize $400 million for each of FY2012 and FY2013 for transportation research and education; H.R. 7 would authorize $440 million annually (see Table 11 ). Both bills would direct the Secretary of Transportation to carry out a technology deployment program; MAP-21 includes a competitive grant program to accelerate ITS deployment. Both bills would authorize the Secretary to conduct prize competitions to promote surface transportation innovations. Both bills would direct DOT to conduct studies on improving many aspects of transportation, including safety, lifecycle cost analysis, reducing congestion, assessing infrastructure investment needs, and options for financing. MAP-21 would authorize 35 grants to be awarded on a competitive basis annually to university transportation centers for transportation research; H.R. 7 would authorize 30 such grants annually. Both MAP-21 and H.R. 7 contain a provision stating that it is the sense of Congress that revenues in the Harbor Maintenance Trust Fund should be fully spent by the Army Corps of Engineers for maintenance of waterside infrastructure (such as channel dredging and maintenance of jetties and breakwaters). Currently, Congress appropriates just over half of the cargo tax collected for this purpose. House-passed H.R. 4348 , however, includes language that would require that the total level of budgetary resources provided for a fiscal year equal the level of receipts credited to the Harbor Maintenance Trust Fund. The provision would restrict the use of such amounts to harbor maintenance programs. This Appendix contains 11 figures.

The federal government's highway, mass transit, and surface transportation safety programs are periodically authorized in a multi-year surface transportation reauthorization bill. The most recent reauthorization act, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU or SAFETEA; P.L. 109-59), expired at the end of FY2009. Since then, the surface transportation programs have been funded under extension acts. The main obstacle to passage of a new multi-year bill during the past two years has been the disparity between projected spending and the much lower projections of the revenue flows to the highway trust fund (HTF). Taxes on gasoline and diesel provide 90% of the revenues for the HTF, which historically has funded the entire highway program and roughly 80% of the mass transit program. The rates on these taxes, which are on a cents-per-gallon basis, have not been increased since 1993. In addition, the condition of the economy and improvements in fuel economy have held down fuel consumption and as a result are adversely affecting HTF revenues. Consequently, authorizers face a dilemma: how to pass a bill without cutting infrastructure spending, raising the gas tax, or increasing the budget deficit. The Senate has passed the Moving Ahead for Progress in the 21st Century Act (MAP-21, S. 1813, H.R. 4348, as amended), which would authorize surface transportation programs through September 30, 2013. MAP-21 proposes: A total Federal-Aid Highway Program authorization of $39.5 billion for FY2012 and $40.5 billion for FY2013 (reflecting rescissions), and $400 million for research and education in each fiscal year. To reduce the total number of highway programs from roughly 90 to 30. The overall Federal-Aid Highway Program would be structured around five large "core" programs. The existing Equity Bonus Program would be discontinued. To accelerate project completion and speed up the environmental review process. $10.458 billion, annually, for FY2012-FY2013, for transit programs. The House bill, the American Energy and Infrastructure Jobs Act (H.R. 7), links the usual surface transportation reauthorization components with provisions designed to increase oil and gas production, the revenues from which would be provided for highway infrastructure. H.R. 7, counting the already-appropriated FY2012, is a five-year bill providing for a total authorization of roughly $260 billion. The House and Senate bills differ significantly in programmatic content and treatment of the HTF. Both, however, would reduce the number of programs by roughly two-thirds, would accelerate project delivery, and are free of program earmarking. H.R. 4348, the Surface Transportation Extension Act of 2012, Part II, as passed by the House, would extend surface transportation authorizations through the end of FY2012. The Senate, on April 24, 2012, agreed to an amendment to H.R. 4348, striking the House-passed bill text and substituting the language of MAP-21. This action enabled the House and Senate to send the measure to conference.

T he North American Free Trade Agreement (NAFTA) entered into force on January 1, 1994, establishing a free trade area as part of a comprehensive economic and trade agreement among the United States, Canada, and Mexico. Currently, the United States is renegotiating the agreement. However, repeated threats from President Trump to abandon NAFTA and other actions by the Administration as part of ongoing efforts to "modernize" NAFTA have raised concerns that the United States could withdraw from the agreement altogether. Although some U.S. agricultural industries support NAFTA renegotiation and efforts to address certain outstanding trade disputes—especially regarding milk, potatoes, some fruits and vegetables, cheese, and wine—many continue to express strong support for NAFTA and oppose outright withdrawal. Possible disruptions in U.S. export markets and general uncertainty in U.S. trade policy also continue to be a concern for U.S. food and agricultural producers. Similar concerns have been raised by some in Congress who have oversight authority on industry and trade activities and who continue to monitor the ongoing NAFTA renegotiations. This report examines some of the potential consequences to U.S. agricultural markets of a U.S. withdrawal from NAFTA, focusing on the possibility that higher tariffs could be imposed on U.S. imports and exports. In particular, under a NAFTA withdrawal, it is likely that most-favored-nation (MFN) tariffs would be imposed on agricultural products traded among the NAFTA countries instead of the current zero tariff (i.e., duty-free trade) for most agricultural products. In general , MFN tariffs on U.S. agricultural imports would likely raise prices both to U.S. consumers and other end users, such as manufacturers of value-added food products. Applying general principles of supply and demand, it is possible to anticipate the effect that sustained higher prices due to higher MFN tariffs could have on the volume (quantity) of goods traded. Specifically, as prices increase, the quantity demanded for a product tends to decrease. Assuming MFN tariffs could apply in the event of a U.S. NAFTA withdrawal, imported products could become more expensive, which could lower the demand for some U.S. agricultural imports. Similarly, if higher MFN tariffs were applied to U.S. goods exported to Canada and Mexico, this could make some U.S. agricultural products more costly to buyers in those markets, which could lower U.S. exports—such as meat products, grains and feed, and processed foods. As part of a formal free trade agreement (FTA) negotiation, the Office of the United States Trade Representative (USTR) will often request a "probable economic effects" study of a trade agreement, which is usually conducted by the United States International Trade Commission (USITC). The Administration has asked USITC to conduct only an investigation into the probable economic effect of eliminating tariffs on certain dutiable NAFTA imports currently under a tariff rate quota (TRQ). This analysis was expected to have been completed in August 2017 but is confidential and not publicly available. USTR has confirmed that, to date, a comprehensive review of a possible U.S. withdrawal from NAFTA has not yet been conducted. Comprehensive analysis of a possible U.S. NAFTA withdrawal focused exclusively on agricultural markets is also not available. Researchers at the U.S. Department of Agriculture (USDA) have not yet conducted such an analysis. University researchers often also contribute to studies of the effects of a range of market and trade policy actions. CRS communications with researchers that typically conduct such studies indicate that an assessment of a possible U.S. NAFTA withdrawal on agricultural markets has not been initiated at this time. An extensive amount of data would be needed to conduct such an analysis, including quantity produced and traded for a wide range of products, domestic and international prices, production costs and inputs, measures of price response by product and market, and other modeling data. The text box below provides a qualitative summary of some of the potential ways that U.S. agricultural markets could be affected if the United States were to withdraw from NAFTA. A recent economy-wide study by a private research firm, ImpactECON, concluded that a "NAFTA reversal" would likely raise U.S. tariffs on Canada and Mexico imported products to current MFN rates, which could cause all NAFTA parties to experience declines in real gross domestic product (GDP), trade, investment, and employment. The study examined trade and economic changes assuming both reciprocation and no reciprocation in terms of Canada's and Mexico's applied tariffs. According to the study, if Canada and Mexico were to also impose higher MFN tariffs, this could result in additional overall trade declines among the NAFTA countries, resulting in the loss of 256,000 low-wage workers in the short term (three to five years) as well as additional relocation of workers throughout the United States. The ImpactECON study concluded that a NAFTA reversal could especially impact the meat, food, textiles, auto, and services sectors. Impacts are likely to be greatest for those industries where production is highly integrated. The ImpactECON study and its conclusions regarding the potential impacts to the food and agricultural sectors have been highly commended and cited by some agricultural economists. For example, Dermot Hayes of Iowa State University notes that imposing MFN duties will have a price effect on traded goods that will lead to eventual market adjustment, forcing the United States to seek alternative export markets or be forced to downsize the domestic industry. For example, he estimates that MFN duties of 20% on U.S. pork exports to Mexico could cause a 5% contraction of the U.S. pork sector and stimulate additional production in Mexico and/or require Mexican buyers to find additional suppliers outside the United States. Contraction in the U.S. pork industry would result in a loss of U.S. jobs and have a disproportionate effect on specific counties that are dependent on farming, input markets, and value-added production in the sector. Trade under NAFTA underpins an important market for U.S. food and agricultural producers. Canada and Mexico are the United States' two largest trading partners, accounting for 28% of the total value of U.S. agricultural exports and 39% of its imports in 2016. Over the past 25 years under NAFTA, the value of U.S. agricultural trade with Canada and Mexico has increased sharply. Exports rose from $8.7 billion in 1992 to $38.1 billion in 2016 ( Figure 1 ), while imports rose from $6.5 billion to $44.5 billion over the same period ( Figure 2 ). Adjusted for inflation, the value of agricultural exports and imports between the United States and its NAFTA partners has increased roughly threefold since 1990, growing at an average rate of about 5%-6% annually. This growth resulted in a $6.4 billion trade deficit for U.S. agricultural products in 2016, reversing the trend in previous years when there was a trade surplus. In 2016, U.S. agricultural exports to Canada were valued at $20.2 billion. The leading exports were grains and feed, animal products, fruits and vegetables and related products, nuts and other horticultural products, sweeteners, oilseeds, beverages (excluding fruit juice), and essential oils. U.S. agricultural exports to Mexico were valued at $17.8 billion in 2016. The leading exports were animal products, grains and feed, oilseeds, sweeteners, fruits and vegetables and related products, nuts and other horticultural products, cotton, seeds, and nursery crops. Mexico is also the largest or second-largest market for U.S. beef, pork, poultry, dairy, wheat, and corn exports. For more information about U.S. agricultural trade under NAFTA, see CRS Report R44875, The North American Free Trade Agreement (NAFTA) and U.S. Agriculture , and CRS In Focus IF10682, NAFTA Renegotiation: Issues for U.S. Agriculture . Under NAFTA, tariffs and quantitative restrictions were eliminated on most agricultural products, with the exception of some that may be subject to TRQs and high out-of-quota tariff rates. Under NAFTA, Canada excludes dairy, poultry, and eggs for tariff elimination. The United States excludes dairy, sugar, cotton, tobacco, peanuts, and peanut butter. Because Canada was able to exclude certain products from tariff elimination in NAFTA, Canada is able to limit imports through restrictive TRQs. For example, according to USTR, imports of U.S. products above quota levels may be subject to out-of-quota tariffs as high as 245% for cheese and 298% for butter under NAFTA. Aside from these exempted products, most agricultural products are traded duty-free (i.e., zero tariff) and receive other types of trade preferences intended to facilitate trade. Under an FTA, preferential tariffs are charged to member countries and are lower than a country's MFN tariff rates. MFN rates generally reflect the highest (most restrictive) rates that World Trade Organization (WTO) members can charge each other on imported goods and services. The text box below describes the different types of tariffs. Trade data presented here are by selected agricultural commodity groupings, as defined by USDA. In some cases, trade data are grouped according to tariff chapters under the Harmonized Commodity Description and Coding System (HS). The HS refers to a hierarchical structure for describing all goods in trade for duty, quota, and statistical purposes. The primary two-digit HS product categories are further subdivided into four-digit HS product categories. The first 24 chapters of most tariff schedules worldwide cover most agricultural and fisheries products. Product groupings by HS chapter exclude some agricultural commodities including cotton, essential oils, starches, hides, and skins. MFN tariffs presented here for all NAFTA countries were compiled by CRS from WTO's database and summarize available country tariff information at the HS-2 and HS-4 levels. WTO's tariff database includes MFN tariffs for products at the HS-2, HS-4, and HS-6 levels for all traded goods for most countries. This database documents both ad valorem (AV) tariffs—or the rate charged as a percentage of the price—and non-AV tariffs, such as specific tariffs. WTO's database does not extend beyond the HS-6 level. Average MFN tariffs reported by the WTO include tariffs expressed as AV. Tariffs expressed in terms of AV facilitate a comparison across different countries and are also useful for interpreting potential economic effects. For example, in general, a 10% tariff on a traded product roughly translates into a 10% price increase for that product, often paid for by the buyer of that product. However, average MFN tariff rates reported by the WTO do not include non-AV tariffs, such as specific tariffs or tariffs charged as a fixed amount per unit of quantity (e.g., $7 per 100 kg). It is important to note that the WTO tariff database does not translate non-AV tariffs to an ad valorem equivalent (AVE) basis. Accordingly, non-AV tariffs are not included as part of the WTO database's calculation of average AV tariff rates. This may exclude tariffs for certain agricultural products under a TRQ or where seasonal tariffs might apply (e.g., higher import tariffs for certain fruits and vegetables imported during U.S. peak season). Tariffs for agricultural products under a TRQ or where seasonal tariffs apply are often expressed as specific tariffs and/or at the HS-6 level or higher (HS-8 or HS-10 level) and are excluded from most reported average tariff rates. For reasons described in the text box below, WTO-reported average AV tariffs may therefore provide an incomplete picture of MFN duties for certain types of agricultural products. Despite these data limitations, tariff data provided in this report cover the WTO-reported average AV duties for each of the NAFTA partner countries at the HS-4 level only. As this provides for a subset of all MFN tariffs for agricultural products—excluding non-AV rates for some products—it provides an incomplete picture of actual tariff rates for some agricultural imports. Since average AV tariffs for agricultural products may be lower than actual applied rates, tariff rates discussed in this report likely understate actual applied rates for some agricultural imports. Accordingly, MFN rates described in this report are intended to provide an initial glimpse of the types of potential impacts in the event of a possible U.S. NAFTA withdrawal. Figure 3 summarizes the agricultural and fisheries tariffs by country for each of the 24 HS chapters at the HS-2 level. Figure 3 shows the minimum and maximum AV MFN tariffs (gray bar) and the average AV MFN tariff (red marker) for selected products (expressed at the HS-2 level) for the United States, Canada, and Mexico. Appendix A provides more detailed tariff information at the HS-2 level for each of the three NAFTA countries. Appendix B summarizes nearly 200 categories of agricultural and fisheries tariffs at the HS 4- level for each of the three countries. Additional analysis is needed to fully capture the full extent of the potential market impacts of possibly higher MFN tariffs rates, especially for products under a TRQ or seasonal tariff. Ideally, such an analysis would be conducted in conjunction with economic modeling to simulate potential changes of higher tariffs on the quantity of products traded among the NAFTA countries under different scenarios. Such an analysis would also need to fully account for all other non-AV tariff rates that have not been converted to AVE. Calculating AVE rates for each of the roughly 2,700 individual tariff lines at the HS-6 level for each of the NAFTA partner countries is beyond the scope of this analysis due to time and resource constraints. Complete tariff information is further not readily available to calculate AVE tariffs for each of the individual tariff lines for products at the HS-8 and HS-10 levels for each country. Following is a discussion of possible tariff changes to both U.S. agricultural imports and exports in the event of a possible U.S. NAFTA withdrawal. With few exceptions, under NAFTA, agricultural products are imported duty-free (zero tariff), and U.S. agricultural products also generally face zero tariffs when exported to Canada and Mexico. In lieu of preferential trade policies under NAFTA, tariffs charged on U.S. imports and exports could revert to generally higher MFN tariffs. Other types of trade effects are not examined, such as the effects of trade on the possible removal of other types of NAFTA-related trade preferences (e.g., policies regarding SPS measures, customs charges, permits, quotas, trade regulations, import licenses, and border restrictions). Figure 3 shows MFN tariffs on U.S. agricultural imports. As shown, while the minimum MFN tariff on U.S. imports can be zero for many agricultural products, the maximum AV tariff varies widely and can be prohibitively high for some products, such as tobacco, oilseeds, and some processed fruit and vegetable products. As noted previously, in general, higher MFN tariffs on U.S. agricultural imports would likely raise prices both to U.S. consumers and other end users, such as manufacturers of value-added food products. Accordingly, if higher MFN tariffs apply, some U.S. imports could become more costly to U.S. end users. For example, the maximum MFN tariff is 29.8% for certain tropical fruit imports, which could raise the cost of some products to U.S. consumers ( Appendix B , see HS 0804). Applying MFN tariff rates could also raise the cost to food processors who import cereal flours for use in further value-added food production. The maximum MFN tariff is 12.8% on cereal flour imports to the United States ( Appendix B , see HS 1102). Alternatively, some U.S. imports that currently compete with U.S.-produced products might experience a reduction in trade as imported products drop in response to higher U.S. tariffs. This could create a competitive advantage for U.S. producers as potential domestic suppliers. For example, tariffs for U.S. melon and watermelon imports carry a relatively high maximum MFN tariff of 29.8% ( Appendix B , see HS 0807), suggesting that imports could slow given higher prices due to possible prohibitive tariff rates, thus giving U.S. producers a competitive advantage. However, not all imported products would face higher tariffs if MFN tariffs were imposed. Some produce imported from Mexico that has been of concern to U.S. producers —such as tomatoes (HS 0702) and berries (HS 0810)—carries a zero to low MFN tariff ( Appendix B ). In this case, a possible NAFTA withdrawal might not slow imports from Canada and Mexico on the basis of price changes based on changes in import tariffs. Figure 3 shows MFN tariffs on Canadian and Mexican agricultural imports that could be charged on U.S. products if these countries were to reciprocate and charge MFN tariffs in the event of a possible NAFTA withdrawal. Similar to in the United States, while the minimum MFN tariff on imports to these countries can be zero or low for many agricultural products, the maximum AV tariff varies widely and can be prohibitively high for some products. For example, in Canada, the maximum AV tariff is 27% for some meat products and 95% for some imported grains. In Mexico, the maximum AV tariff is 75% for some meat products and 20% for some imported grains. Again, the maximum AV tariff varies widely depending on the product ( Figure 3 ). As noted previously, in general, the imposition of higher MFN tariffs on U.S. agricultural exports would likely make U.S. products in those markets less price-competitive and more costly to foreign buyers, which could result in reduced quantities sold. Accordingly, if higher MFN tariffs apply, some U.S. products could become more costly to Canadian and Mexican end users. For example, Mexico's maximum MFN tariffs on its corn (maize) imports can be as high as 20% ( Appendix B , see HS 1005). This suggests that certain U.S. corn exports to Mexico could become up to 20% more expensive for buyers in that market. This could give other global corn suppliers an opportunity to gain additional import share in Mexico. Similarly, the maximum MFN tariff for pork meat imports to Mexico could raise tariffs on some pork products from current duty-free levels under NAFTA to a maximum MFN tariff of 20% ( Appendix B , see HS 0203). This could give an advantage to other global suppliers. MFN tariffs on U.S. corn and pork meat imports would remain duty-free (i.e., zero tariff). As higher MFN tariffs in Canada and Mexico could make U.S. agricultural products relatively more costly compared to other competing global suppliers, this could impact U.S. market share for some agricultural products in these two markets. Figure 4 and Figure 5 illustrate the importance of Canada and Mexico to U.S. agricultural trade for selected agricultural commodity groupings, as defined by USDA. Figure 6 and Figure 7 illustrate the importance of products from the United States to Canada's and Mexico's agricultural markets. Figure 4 shows selected U.S. agricultural exports to Canada and Mexico compared to exports to all other non-NAFTA countries in 2016. While Canada and Mexico accounted for 28% of the value of total U.S. agricultural exports, NAFTA countries accounted for a larger share of some U.S. exports—for example, 62% of U.S. sugar and tropical products and 51% of fresh and processed vegetables. Figure 5 shows selected U.S. agricultural imports from Canada and Mexico compared to imports from all other non-NAFTA countries in 2016. As shown, while Canada and Mexico accounted for 39% of total U.S. agricultural imports, NAFTA country suppliers account for a larger share of total imports for some commodities—for example, 58% of U.S. grains and feeds and 70% of fresh and processed vegetables. Figure 6 shows the U.S. market share of Canada's agricultural imports as a share of the value of total imports from all countries. In 2016, U.S. agricultural products accounted for 59% of the value of all Canadian agricultural imports. Some U.S. products, such as grains/feed and meat products, account for a larger share of total imports (more than 70%, on average). Figure 7 shows the U.S. market share of Mexico's agricultural imports in 2016 as a share of total imports from all countries. In 2016, U.S. agricultural products account for 72% of the value of all of Mexico's agricultural imports. Some U.S. product categories, however, account for an even greater share of total imports, such as grains and feed, meat products, sugar and related products, and processed foods, which accounted for more than 80% of the total value of Mexico's imports in 2016. These market share data highlight those U.S. agricultural products that may be considered more heavily reliant on NAFTA trade, suggesting the importance of the agreement to U.S. sales of grains and feed, oilseeds, meat and dairy products, processed foods, fresh and processed fruits and vegetables, tree nuts, and sugar products. These market share data—together with MFN tariff information—further suggest that these products may become more costly and less competitive in these markets as higher tariffs, mostly duty-free access, and other types of trade preferences are removed under a possible U.S. NAFTA withdrawal. When President Trump announced in April 2017 that he was considering withdrawing the United States from NAFTA, many U.S. agricultural groups expressed strong opposition to withdrawal. Many in Congress also voiced opposition to outright withdrawal from NAFTA. The National Pork Producers Council stated that NAFTA withdrawal could be "cataclysmic" and "financially devastating" to U.S. pork producers. The National Corn Growers Association said that "withdrawing from NAFTA would be disastrous for American agriculture" and would disrupt trade with the sector's top trading partners. The American Soybean Association said withdrawing from NAFTA is a "terrible idea" and would hamper ongoing recovery in the sector. The U.S. Grains Council highlighted that withdrawal would have an "immediate effect on sales to Mexico." The National Association of Wheat Growers (NAWG) noted that Mexico is the largest U.S. wheat buyer and claimed that NAFTA withdrawal would be a "terrible blow to the U.S. wheat industry and its Mexican customers." Cargill, Inc., a major privately held U.S. grain distributor and global agricultural supplier, claims that sales to Canada and Mexico account for an estimated 10% of the company's annual revenues. Most fruit and vegetable growers did not support NAFTA withdrawal, citing the benefit of exports to Mexico. The Administration did not withdraw from NAFTA at that time, deciding instead to formally renegotiate and "modernize" NAFTA. Although many in Congress and in the U.S. agricultural sectors support NAFTA renegotiation and efforts to address certain outstanding trade disputes—such as disputes involving milk, potatoes, some fruits and vegetables, cheese, and wine—most U.S. agricultural groups are unified in their opposition to outright NAFTA withdrawal. An October 2017 letter from nearly 90 farm and agriculture groups states that "NAFTA withdrawal would cause immediate, substantial harm to American food and agriculture industries and to the U.S. economy as a whole." Agriculture groups also remain concerned about growing uncertainty in U.S. trade policy and its potential to disrupt U.S. export markets. Some also worry that the Administration is actively seeking to exit NAFTA. Among the concerns of U.S. agricultural groups related to a withdrawal is fear that the nation's NAFTA trading partners could seek alternative markets for U.S. corn, soybean, dairy, pork, beef, and rice. For example, media reports indicate that Mexico is looking to find alternative suppliers for some imported products, such as rice (which could be supplied by Vietnam and Thailand), corn and soybeans (Argentina and Brazil), wheat (Argentina and the Baltic States), and dairy products (New Zealand and Europe). The U.S. pork industry continues to claim that a NAFTA withdrawal would be catastrophic to the sector. Meanwhile, reports also indicate that Mexico is not worried about finding alternative consumer markets for some of its exported products, such as avocados, which are now mostly sold to the United States. Other reports suggest that Mexico's efforts to diversify its agricultural suppliers and markets may be in retaliation for certain U.S. proposals tabled during the NAFTA renegotiation. Others suggest that the general tone of the ongoing renegotiation has had a negative impact on the relations among the NAFTA partners. An economy-wide survey of investors by the industry-supported Trade Leadership Coalition reports that 72% of agricultural investors surveyed believe that the near-term (one to two years) business impacts of ending NAFTA would be negative (56% of businesses surveyed) or very negative (16%). Also, 78% of agricultural investors surveyed believe that the risks of NAFTA withdrawal have not been fully priced into stock valuations. Members of the International Chamber of Commerce have also warned that U.S. withdrawal from NAFTA or other critical changes to the agreement would "greatly restrict, rather than enhance, cross-border commerce." The Trump Administration has generally downplayed these types of concerns. However, USDA is reportedly developing a contingency plan to protect against potential agricultural losses if the United States withdraws from NAFTA. Again, in August 2017, President Trump and other Administration officials suggested the United States would likely withdraw from the agreement. Most states continue to express their support for NAFTA. The National Association of State Departments of Agriculture and the American Farm Bureau Federation, among other industry coalition groups, also continue to emphasize the importance of NAFTA to the U.S. agricultural sectors and the need to maintain a preferential trade relationship with Canada and Mexico. Many in Congress representing states with agricultural interests continue to express opposition to NAFTA withdrawal. In November 2017, the leadership of the House Agriculture Committee, Chairman K. Michael Conaway and Ranking Member Collin C. Peterson, joined several U.S. agriculture groups in opposing withdrawal and supporting a quick end to the ongoing NAFTA renegotiations. In October, 2017 Chairman Pat Roberts of the Senate Agriculture Committee expressed support for NAFTA and emphasized the need for industry leaders to present their support to the Administration. Senator Debbie Stabenow, Ranking Member of the Senate Agriculture Committee, has also expressed support for NAFTA. Reportedly, some agricultural groups believe that Congress has the ability to intervene, if President Trump withdraws the United States from NAFTA. Congress maintains oversight authority on industry and trade activities and has continued to monitor and conduct hearings on the ongoing NAFTA renegotiations. For additional information on the role of Congress in the ongoing negotiation, see CRS Report R44981, NAFTA Renegotiation and Modernization . For additional information on the legal aspects of congressional action in this area, see CRS Legal Sidebar WSLG1724, Renegotiation of the North American Free Trade Agreement (NAFTA): What Actions Do Not Require Congressional Approval? Appendix A. Most-Favored-Nation (MFN) Tariff, HS-2, Agricultural and Fisheries Products (United States, Canada, Mexico) Appendix B. Most-Favored-Nation (MFN) Tariff, HS-4, Agricultural and Fisheries Products (United States, Canada, Mexico)

The North American Free Trade Agreement (NAFTA) entered into force on January 1, 1994, establishing a free trade area as part of a comprehensive economic and trade agreement among the United States, Canada, and Mexico. Currently, the United States is renegotiating the agreement. However, repeated threats by President Trump to abandon NAFTA and other actions by the Administration as part of ongoing efforts to "modernize" NAFTA have raised concerns that the United States could withdraw from NAFTA. Although some U.S. agricultural sectors support NAFTA renegotiation and efforts to address certain outstanding trade disputes—regarding milk and dairy products, potatoes, some fruits and vegetables, and wine—many continue to express strong support for NAFTA and oppose outright withdrawal. Possible disruptions in U.S. export markets and general uncertainty in U.S. trade policy also continue to be a concern for U.S. food and agricultural producers. Similar concerns have been raised by some in Congress who have oversight authority on industry and trade activities and who continue to monitor and conduct hearings on the ongoing NAFTA renegotiations. Trade under NAFTA provides an important market for U.S. agricultural producers and a broader choice of food products for U.S. food processors and consumers. Canada and Mexico are the two largest U.S. agricultural trading partners (combining imports and exports), accounting for 28% of the total value of U.S. agricultural exports and 39% of U.S. imports in 2016. Under NAFTA, U.S. agricultural trade with Canada and Mexico has increased significantly. Agricultural exports rose from $8.7 billion in 1992 to $38.1 billion in 2016, while imports rose from $6.5 billion to $44.5 billion over the same period. Adjusted for inflation, growth in the value of total U.S. agricultural exports and imports with its NAFTA partners has increased roughly threefold, growing at an average rate of 5%-6% annually. To date, comprehensive quantitative analysis of a possible U.S. NAFTA withdrawal focused exclusively on agricultural markets is not yet available. This report looks at the potential economic effects to agricultural markets of a possible U.S. NAFTA withdrawal assuming the application of most-favored-nation (MFN) tariffs on traded agricultural products instead of the current zero tariff (i.e., duty-free trade) for selected agricultural products. MFN rates generally reflect the highest (most restrictive) rates that World Trade Organization (WTO) members can charge each other on imported goods and services. In general, the application of MFN tariffs on U.S. agricultural imports would likely raise prices both to U.S. consumers and other end users, such as manufacturers of value-added food products. MFN tariffs on U.S. agricultural exports would, in turn, likely make U.S. products in those markets less price-competitive and more costly to foreign buyers, which could result in reduced quantities sold. Given that certain agricultural products dominate U.S. trade with Canada and Mexico—such as meat products, grains and feed, and processed foods—these products could become more costly and less competitive as MFN tariffs are imposed and other trade preferences are removed under a NAFTA withdrawal. This could result in reduced market share for U.S. products in these markets. This report looks at a subset of MFN tariffs for certain products that could impact U.S. agricultural markets in the event of a possible U.S. NAFTA withdrawal. Other potential trade impacts under a U.S. withdrawal from NAFTA could include (but are not limited to) higher prices for imported products from Canada and Mexico, reductions in agricultural imports that compete with U.S. products, disruption of integrated supply chains, general market disruption and uncertainty, economic impacts to some agricultural-producing states (both positive and negative), and a decrease of future negotiating leverage of the United States (e.g., to review and resolve disputes regarding a range of non-tariff barriers to trade).

The potential outcome of the resignation of long-time Egyptian President Hosni Mubarak is unknown and any ramifications for the oil and natural gas sectors are uncertain. This paper examines the impact of a disruption of Egypt's oil and natural gas sector or a complete halt to exports of either oil or natural gas and closure of the Suez Canal and the Suez-Mediterranean (SUMED) oil pipeline, and the impact of those actions on world oil and natural gas markets. It is important to keep in mind that even the most nationalistic, isolationist, or anti-Western government would most likely not undertake all these measures. Oil, natural gas, and transit generate large amounts of revenue for Egypt and taking these measures could precipitate outside intervention, particularly closing the Suez Canal. Additionally, the timing of these actions would also change the impact on oil and natural gas markets, i.e., whether they occurred during the summer driving season or the winter heating season. An additional factor mitigating the impact on world oil and natural gas markets is that in 2009, Egypt consumed much of the energy it produced and had to import coal, highlighting the limited importance of Egypt as a global energy producer; see Figure 2 . Closing the Suez Canal would be one of the most visible actions a new government could take, particularly for the oil and natural gas industry. Although it would probably take only several weeks to re-route and re-size oil and natural gas tankers along with a possible drawdown of inventories, a closure of the canal would cause an immediate and most likely short-lived rise in global oil prices. Despite there being adequate spare production capacity in the world, oil prices tend to react quickly to market disruptions before settling back to their pre-existing price range. However, if the canal remained closed indefinitely, shipping costs would likely increase, adding upward pressure on oil prices. The same would likely be true for liquefied natural gas (LNG), but the effect would be less. Most LNG is sold under long-term contract, and there is currently a glut of LNG around the world to make up for any disruption. In 2009, an estimated 1.8 million barrels per day of oil (Mb/d) (of the world's roughly 80 Mb/d of production) moved through the canal—almost 1 Mb/d northbound and 0.85 Mb/d southbound. This is down from 2.4 Mb/d in 2008. The decline is mostly attributed to lower global demand for oil; production cuts by the Organization of the Petroleum Exporting Countries (OPEC), particularly from the Persian Gulf producing countries; and piracy. More oil is also flowing to Asia from the Middle East, while more West African oil is going to Europe and North America, and does not have to traverse the canal. 2010 data shows an increase in cargos, but is incomplete for the year. The last time the canal was closed, in 1967 until 1975, approximately 60% of Europe's oil supplies had been passing through the canal. Currently, only about 15% is shipped through the canal. Similar to the decrease in cargos through the canal, the SUMED oil pipeline—which is owned through state companies by Egypt (50%), Saudi Arabia (15%), the United Arab Emirates (15%), Kuwait (15%), and Qatar (5%)—is operating below its capacity of 2.5 Mb/d. In 2009, approximately 1.1 Mb/d moved through the pipeline, a decrease of about 50% compared to 2008. The reduction resulted from many of the same causes as the canal's drop-off in oil transportation. In 2009, 331 billion cubic feet (bcf) of LNG traversed the canal, which represents 4% of global LNG trade and less than 1% of natural gas consumed globally. Unlike oil, LNG cargos through the Suez Canal have been steadily rising. Between 2008 and 2009, the volume of LNG passing through the Suez Canal increased over 40%, more than doubling northbound cargos. Data for the first 10 months of 2010 show a 66% increase in LNG shipments through the canal compared to the 2009 total. The rise in LNG cargos is mostly attributable to the large increase in Qatar LNG exports. Nevertheless, there is ample supply of LNG in the global market, and rerouting LNG cargos to demand centers could be accomplished in a relatively short time frame. While Egypt is a relatively small player in the global natural gas industry, it can have a larger impact on regional natural gas supply. Egypt produces all the natural gas consumed in Lebanon, almost all the natural gas consumed in Jordan, and more than half the natural gas consumed in Israel. On a world scale, Egypt accounted for only 2.1% of global natural gas production and 2.1% of global natural gas trade in 2009. Egypt holds 77 trillion cubic feet or 1.2% of the world's proved gas reserves. Egypt exports natural gas through two pipelines and two LNG facilities. Currently, the Arab Gas Pipeline connects Egypt to Jordan, Lebanon, and Syria. There are plans to expand the pipeline further, enabling Egypt to export natural gas through Turkey to Europe. In 2008, Egypt opened an export pipeline to Israel. There was an explosion in early February that shut down both pipelines for a short time although the damage was primarily to the Arab Gas Pipeline. Egypt has almost 600 bcf of LNG export capacity, with one facility in Damietta and one in Idku. Egypt accounted for approximately 5% of global LNG trade last year, with most cargos going to Europe. At the end of April 2011 the natural gas terminal near El-Arish in Egypt (see Figure 1 above) was attacked for the second time since protests erupted in that country in January. Natural gas from the terminal supplies the Arab Gas Pipeline to Jordan, Syria, and Lebanon, and a separate pipeline to Israel. There is no estimate for how long natural gas will not be exported. The pipeline was also attacked and disabled in February causing natural gas supplies to be stopped for about a month. The terminal has been a target for Bedouins who feel neglected and oppressed by Cairo. Aside from its role as a transit center, withdrawal of Egypt's own oil production from the global market would likely have limited impact on world oil prices. In 2010, Egypt was a small net importer of oil, producing approximately 0.66 Mb/d while consuming close to 0.71 Mb/d. Egypt's oil production has been in decline since the early 1990s, a trend not likely to be reversed. The country—which has the largest refining capacity in Africa, with 975,000 barrels of processing capacity—did export some refined products, such as naptha, but imported others. Cutting off exports of naptha, an oil product that can be used in making petrochemicals and gasoline, could put minor upward pressure on European prices, which is a main market for Egyptian exports. Global oil prices have already reacted to the unrest in Egypt despite no disruption to Egyptian production. The reaction comes from two concerns: (1) the near-term risk that any disruption to oil transit through Egypt could delay oil shipments for several weeks (as they are rerouted around the Cape of Good Hope, adding extra shipping time) and (2) the more significant concern that political unrest could spread to other, more important energy exporters in the region, such as Saudi Arabia, Iraq, or Kuwait. There has been some upward pressure on natural gas prices as companies scramble to hedge against a disruption of Egyptian exports, but the benchmark natural gas price in the United Kingdom is actually down. Should the scenario described above come to pass, there would likely be little impact on the global oil and natural gas market in the long term. Both industries will take some time to recalibrate flows, but should be able to accomplish that with minor or no disruptions. Additionally, the strategic petroleum reserves of member countries of the International Energy Agency, which are mostly from the Organization for Economic Cooperation and Development (OECD), could also be utilized to bridge any gap in oil flows should a disruption prove to be significant.

The change in Egypt's government will likely not have a significant direct impact on the global oil and natural gas markets. There may be some short-term movements in price, mostly caused by perceived instability in the marketplace, but these would most likely be temporary. However, prolonged instability that raises the specter of spreading to other oil and natural gas producers in the region would likely add to upward price pressures. Although Egypt is considered an energy producer or net exporter overall, its oil and natural gas exports are not large enough to affect regional or global prices. The most serious impact would be on regional recipients of its natural gas exports. Egypt's main influence on energy markets is its control of the Suez Canal and the Suez-Mediterranean oil pipeline (SUMED). The current low utilization of these two pieces of infrastructure would likely limit any effect of their closure in the near term. Both the oil and natural gas industry would, over time, find alternative routes to circumvent the canal and pipeline if necessary.

A question of the privileges of the House is a formal declaration by a Member of the House asserting that a situation has arisen that affects "the rights of the House collectively, its safety, dignity, and the integrity of its proceedings." When making the declaration, the Member submits a resolution providing detail on the situation and typically urging action of some sort. A question of privilege has been held to take precedence over all questions except a motion to adjourn. In explaining this unique privilege, House Speaker Thomas Reed said: The rights and privileges of all the Members of the House, in the discharge of their functions, are sacred, and the House can undertake no higher duty than the conservation of all those rights and privileges intact. And even if the case arises under dubious circumstances, it is proper for the House to pause and give suitable heed to any question which any Member raises with regard to his rights and privileges as a Member. It is for the House alone to determine what they are. Once a question of the privileges of the House is raised, the Speaker must, at some point, entertain the question and rule on its validity. The Speaker makes a ruling regarding whether a question constitutes a valid question of the privileges of the House with guidance from the House Parliamentarian based on House Rule IX and House precedent. If valid, a question of the privileges of the House will be considered on the House floor. The first section of this report provides information on raising and considering such questions to provide assistance in anticipating potential House action. Information is provided on restrictions governing when a question can be raised and when the Speaker must rule on the question's validity. Further information is provided on actions the House may take after the Speaker's ruling on the question's validity, including how the House may consider and dispose of a valid question. Appendix A provides scripts of parliamentary language used on the House floor when such a question is raised. The second section of this report focuses on the content of questions in an effort to provide guidance as to what the Speaker may determine constitutes a valid question. It includes information on, and examples of, types of questions that have been ruled valid and not valid. Appendix B provides a list of all valid questions offered in the past two decades. The final section of the report provides extensive data on questions raised in the past two decades, such as the number of valid questions raised per Congress and the proportion of questions offered by the minority party. In addition, this section provides data on how valid questions were disposed of, which varied significantly depending on whether the Member offering the question belonged to the majority or the minority party. This section also includes information on the categories of questions offered, as well as the categories of questions ultimately agreed to by the House. House Rule IX states that under most circumstances, a Member must give notice of his or her intention to raise a question of the privileges of the House. Within two legislative days of giving such notice, the Member will be recognized to offer the resolution. In practice, the Member will be notified of the date and time when he or she should rise to offer the resolution after having given notice. Under specific circumstances, however, a question of the privileges of the House has precedence to interrupt the daily flow of business. In these situations, the Speaker will make an immediate ruling as to the validity of the question, and if valid, the question is privileged for immediate floor consideration. The three circumstances comprise: 1. A resolution that has been reported from committee; 2. A resolution that has been offered on the floor by the majority leader or the minority leader; or 3. A resolution that has been offered as privileged under the Origination Clause, which is the House's constitutional right to originate all revenue measures (Article I, Section 7, clause 1, of the Constitution). Despite this privilege, under House precedent some restrictions govern when a question can be raised on the floor. For example, a question of the privileges of the House cannot be raised in Committee of the Whole. Also, a Member rising to a question of privilege is not permitted to take the floor from another Member who has already been recognized for debate. Likewise, a question of privilege may not interrupt a roll call or yea-or-nay vote, and a Member may not rise to a question of privileges during a call of the House in the absence of a quorum unless it relates to the immediate proceedings. Moreover, in the event that a question of privilege is pending, another Member will not be recognized to raise a different question of the privileges of the House. If the Speaker rules that the question does not qualify as a valid question of the privileges of the House, the House may move to different business. Any Member who disagrees with the ruling, however, may appeal, allowing the House to decide if the decision of the Speaker will stand as the judgment of the House. If the appeal is successful, the House would consider the question of the privileges of the House. Very often, however, a motion is made to table the appeal, and the House votes instead on the motion to table. In the event that a question has been ruled not valid, a Member may attempt to introduce a different resolution that may meet the criteria of a valid question of the privileges of the House. Alternatively, the Member may instead use other means of communicating concern, such as periods designated for non-legislative debate (special order speeches, one-minute speeches, and morning hour debate). Information on the content of questions ruled valid and not valid can be found below. Once the Speaker rules the question to be valid (or the House overrules the Speaker's ruling that the resolution is not valid), the House may take any number of actions on the resolution, either immediately or after debate occurs. A question of the privileges of the House is considered under the "hour rule," which means generally that a maximum of one hour of debate may occur on the resolution. Debate time is divided between (a) the proponent of the resolution and (b) the majority leader, the minority leader, or a designee, as determined by the Speaker. Each controls 30 minutes of time and may yield portions of that time to Members wishing to speak on the resolution. Members must confine remarks in debate to the question raised. While uncommon, during consideration of the resolution, amendments may be offered but only (1) if the amendment is offered by the Member raising the question of privilege, (2) if the Member raising the question yields to a Member for the purpose of offering an amendment, or (3) in the event that the previous question (described below) is not successful. At the end of the hour (or before), a Member may "move the previous question," which is a non-debatable motion that seeks to bring debate on the resolution to a close. If the House defeats the previous question, another hour of debate would occur, and amendments could be offered. If the House votes to agree to the previous question, a vote on agreeing to the resolution typically follows. To prevent further consideration of the resolution and/or a vote on agreement, a Member may make a motion to lay the resolution on the table. While the motion to table may be offered while the resolution is under debate, it is often made immediately after consideration begins. While tabling a resolution is considered a final adverse disposition of that particular resolution, the question may be rephrased and presented anew on a subsequent day. Instead of voting on the resolution, the House may choose to refer the resolution to a committee. A Member may offer this motion, which is debatable for up to an hour, in an attempt to send the resolution to committee for further work or consideration and may even include specific instructions to the underlying committee. The motion may refer the resolution to one or more standing committees without regard to the usual rules governing committee jurisdiction, or it may seek to refer to a committee that is established pursuant to the motion. A Member could make a motion to postpone consideration of the resolution, although this is uncommon for questions of the privileges of the House in the modern Congress. A motion to postpone is debatable for up to an hour. If agreed to by the House, a motion to postpone the resolution would suspend consideration of the measure either indefinitely or until a specific time, depending on the language used in the motion. Additionally, a sponsor may choose to withdraw a resolution after it has been offered. This does not require unanimous consent; the Member has the right to withdraw the resolution offered even after debate has occurred. By their nature, questions of the privileges of the House address perceived threats to the dignity or integrity of the chamber that have the potential to be controversial and contentious. House rules and precedents require that decorum be maintained during debate. Rule XVII, clause 1(b) states that remarks in debate shall be confined to the question under debate. The Speaker often states that Members should refrain from references in debate to conduct of other sitting Members and, in addition, specifies that indecent language either against the proceedings of the House or its membership is out of order. When a question of the privileges of the House is raised, the prohibition on debate referencing the conduct of a Member or the House may become complicated. Because of this, the Speaker often states that an exception to the general rule is in order but that it is closely limited. Specifically, the Speaker states that, while a wide range of discussion is permitted during debate on such a resolution, the rule still "prohibits the use of language which is personally abusive." The Speaker states that this extends to language that is "profane, vulgar, or obscene and to comportment which constitutes a breach of decorum." Once a question of the privileges of the House is no longer pending, the House prohibition against references in debate to the official conduct of other Members where such conduct is not under consideration is restored, and the prohibition applies to debate that includes reciting the content of a resolution raising a question of the privileges of the House that is no longer pending. Debate on questions of the privileges of the House has sometimes become more raucous than is typical on the House floor. One example occurred during debate on a question of privileges of the House related to the actions of a committee chairman who had requested that the Capitol Police remove minority-party committee Members from a committee room. A Member objected to the remarks of another Member and demanded that the "words be taken down" because they violated the House's rules on decorum. The offending Member then asked unanimous consent to withdraw his remarks. Another example occurred in the 113 th Congress when a Member raised a question condemning the behavior of a committee chairman during a hearing. Dozens of Members gathered behind the Member raising the question, holding electronic devices displaying pictures of the specified committee chairman during the hearing. The presiding officer suspended consideration several times, informing Members that consideration would be delayed until Members lowered their displays and decorum was restored, and he reminded Members that under House precedent, Members may not stage an exhibition. House precedent states, "The tradition of Anglo-American parliamentary procedure recognizes the privileged status of questions related to the honor and security of a deliberate body and its Members." While the notion of questions of privilege predates Congress, the House demonstrated a historical reluctance to define such a question as early as 1795. The principle was not articulated in House rules until 1880, and even then, it was only to restrict the process of considering such questions. According to the House rules manual, the rule governing questions of the privileges of the House was adopted to "codify long established practice that the House had hitherto been unwilling to define." The manual goes on to say that the rule "was adopted 'to prevent the large consumption of time which resulted from Members getting the floor for all kinds of speeches under the pretext of raising a question of the privileges of the House.'" House Rule IX states simply that valid questions shall be those "affecting the rights of the House collectively, its safety, dignity, and the integrity of its proceedings." House precedent can provide guidance as to what the Speaker may determine constitutes a valid question of the privileges of the House, and several categories of examples are provided below to assist in determining what may be ruled valid. This information may be helpful when crafting a resolution or when anticipating whether questions noticed might be ruled valid. The Office of the Parliamentarian of the House should be consulted for specific and authoritative guidance. At the outset, it is important to note a few general requirements for valid questions of the House. To begin with, when presenting a matter, the text in the resolution must "show on its face an invasion of those rights" articulated in the House rule and so presumably may not rely on argument made verbally. Second, the situation that has affected the rights of the House must be actual events and not potential forthcoming events. Listed below in the section Categories of Questions Held N ot to B e Valid are general categories of questions that have historically been found not to be valid. Questions may relate to the organization of the House and the rights of Members to their seats or their leadership positions. For example, a resolution providing for an investigation into the election of a Member presented a question of privilege, as did a resolution proposing the exclusion of a delegate from his seat. Valid questions have also included a resolution declaring a vacancy in the House because a Member-elect is unable to take the oath of office or to expressly resign because of an incapacitating illness, as well as questions dismissing an election contest. Questions have also related to removal of a committee chairman pending an investigation. Matters related to the House's constitutionally granted powers have been recognized as valid questions of the privileges of the House. Often, Members raise questions related to the Origination Clause (which requires that revenue bills originate in the House) and typically state that the Senate has infringed on the House's privilege to originate revenue measures. Such questions are typically presented by the chairman of the Ways and Means Committee (since that committee has jurisdiction over revenue measures). Questions have also involved constitutional functions such as impeachment, as well as the power to expel Members. The House merely having a constitutional power or duty, however, does not allow any matter related to those duties to be raised as a question of the privileges of the House. For example, a question of the privileges of the House raised in 1996, stating that the House ought to pass an adjustment to the public debt limit, was found not to be valid. The presiding officer quoted an earlier ruling that a resolution presenting a legislative proposition as a question of constitutional privilege under the 14 th Amendment did not qualify as a question of the privileges of the House and stated: It is a strained construction to say that because the Constitution gives a mandate that a thing shall be done, it therefore follows that any Member can insist that it shall be brought up at some particular time and in the particular way which he chooses. If there is a constitutional mandate, the House ought by its rules to provide for the proper enforcement of that, but it is still a question for the House how and when and under what procedure it shall be done. Certain questions relating to the conduct of Members, officers, and employees have been held to be valid. For example, a proposition to remove an officer of the House for misconduct has been recognized as a valid question, as have resolutions directing investigations into Member misconduct such as illegal solicitation of political contributions in the House office building by unnamed sitting Members and improper conduct by a former Member with regard to the House page program and insufficient response thereto by the House leadership. Questions also commonly seek the release of information gathered by the House Committee on Ethics during a pending or completed investigation into Member or staff conduct. Questions of the privileges of the House have included matters related to the integrity of the legislative process, both in committee and on the House floor. Questions related to alleged improprieties in committee procedure have dealt with the use of an allegedly forged document at a committee hearing, as well as the unilateral release of committee records in violation of its adopted rules. A question was ruled valid that condemned a committee chairman for adjourning a hearing before allowing the ranking Member to make a statement or ask questions. While a charge of unfair and improper action on the part of a committee has been held to involve a question of privilege, this does not extend to any committee action considered objectionable. For example, an allegation that a committee had refused either to give hearings or to allow petitions to be read before it was not considered a valid question of the privileges of the House. Questions addressing improprieties on the House floor have dealt with the presence on the floor of unauthorized persons, the conduct of those in the press gallery, and the integrity and regularity of an electronic vote. These have also extended to the integrity and accuracy of House documents and messages, as well as entries in the Journal and the Congressional Record . For example, a resolution providing for the correction in the Congressional Record of an exchange between two Members was considered valid. A question alleging factual inaccuracy in the contents of a speech recorded in the Congressional Record (without alleging an error in the Congressional Record , however) was not recognized as a valid question. Certain matters related to the comfort and conveniences of Members have constituted valid questions of the privileges of the House. A proposition concerning the comfort and convenience of Members in relation to the construction of an elevator for the House, as well as a proposal for the removal of desks from the hall, were held to be valid. A resolution directing that the clerk employ additional laborers in the bathroom, however, was not recognized as a valid question, nor was a resolution relating to a new House restaurant. Matters relating to Members' physical safety have constituted valid questions, such as resolutions directing investigations into structural deficiencies in the Capitol, the ceiling in the hall, and alleged fire safety deficiencies. This category of Members' safety expands beyond physical safety to cybersecurity. For example, a resolution alleging that computers were compromised directed the Sergeant at Arms to ensure that House personnel be alerted to the dangers of electronic security breaches. House precedent demonstrates that certain categories of questions have been held not to constitute valid questions of the privileges of the House. A motion to amend the rules of the House does not present a question of privilege. For example, a resolution to permit the delegate of the District of Columbia to vote on a specific legislative matter was held to be tantamount to a change in the rules and therefore determined not to constitute a question of the privileges of the House. Also, a question of the privileges of the House may not be invoked to alter or prescribe a special order of business for the House (also referred to as a special rule). For example, in 2010 the presiding officer ruled that a resolution prescribing House consideration of specific legislation was not a valid question of the privileges of the House: Under such an approach, each individual Member of the House could constitute himself or herself as a virtual Rules Committee. Any Member would be able to place before the House at any time whatever proposed order of business he or she might deem advisable, simply by alleging an insult to dignity or integrity secondary to some action or inaction. In such an environment, anything could be privileged, so nothing would enjoy true privilege. A resolution that alleges the failure of the House to take specified legislative actions brings it discredit, impairs its dignity and the integrity of its proceedings, and lowers it in public esteem does not present a question of the privileges of the House. The presiding officer stated: To rule that a question of the privileges of the House under rule IX may be raised by allegations of perceived discredit brought upon the House by legislative action or inaction, would permit any Member to allege an impact on the dignity of the House based upon virtually any legislative action or inaction. A resolution expressing legislative sentiment does not present a question of the privileges of the House. In response to such a resolution, the presiding officer stated: A resolution expressing the legislative sentiment that the President should take specified action to achieve desired public policy end does not present the question affecting the rights of the House, collectively, its safety, dignity, or integrity of its proceedings as required under rule IX. Similarly, in response to a question raised that made several assertions about a governor and called upon that governor and others to take action, the presiding officer stated: A resolution merely asserting the position of the House with regard to an external issue cannot be the basis of a question of privilege.... According privilege to such a resolution would allow any Member to place before the House at any time whatever topic he or she might deem advisable. In such an environment, anything could be privileged, so nothing would enjoy true privilege. From the 104 th Congress through the 113 th Congress (1995-2014), Members offered 140 questions of the privileges of the House. Of the total number offered, 102 of the questions (73%) were ruled valid and were therefore considered by the House. The number of valid questions offered each Congress varied significantly, with some Congresses considering as few as two and others considering more than 20. The minority party offered 72% of the total number of valid questions, and the proportion of questions offered by the minority remained consistent during most of the period, as illustrated in Figure 1 . How valid questions were disposed of varied significantly depending on whether the Member offering the question belonged to the majority or the minority party. Of the questions offered by majority Members, 69% were agreed to, 14% were referred to committee, 10% were tabled, and 7% were withdrawn. All questions offered by the majority party that were voted on were agreed to, perhaps suggesting that in some cases if a majority party resolution was not likely to receive an affirmative vote, it did not receive a vote but was disposed of alternatively (e.g., by referring the resolution to committee). Of the valid questions offered by the minority party, a large majority (82%) were tabled, meaning that the House chose to dispose of the resolution adversely but without taking a vote on the resolution. This may be done to avoid either political or practical situations that are inopportune for the majority party. For example, it prevents a vote that might be used by the minority as a "messaging vote." Also, a motion to table may be made in order to stop consideration of the resolution so that the House may engage in the business previously planned by the majority party. Of the other questions offered by the minority, 12% were referred to committee, 4% were agreed to, and 2% were not agreed to. As mentioned above, from the 104 th Congress through the 113 th Congress (1995-2014), Members offered 102 questions that were ruled valid. As displayed in Figure 4 , the greatest number of questions related to conduct (39%) and to the House's constitutional prerogatives (23%), followed by questions related to the integrity of proceedings (19%) and questions relating to organization (17%). One question dealt with comfort, convenience, and safety, and two did not fit into any of these general categories. Of the 102 questions considered by the House in the period between the 104 th Congress and the 113 th Congress, 23 of those were agreed to by the House, as shown in Figure 5 . Of those 23 questions, 18 (78%) related to the House's constitutional prerogatives. (Thirteen related to the House's constitutional authority to originate revenue measures, four dealt with impeachment, and one was to expel a Member.) Two of the measures agreed to were related to conduct, two related to integrity of proceedings, and one related to comfort, convenience, and safety. An examination of questions of the privileges of the House illuminates several characteristics of their use, content, and consideration. Questions possess several distinctive features. The notion of questions of privilege predates Congress. The House, however, demonstrated a historical reluctance to define such a question for over a century until the chamber found it necessary to create a definition as part of a rule that would "prevent the large consumption of time which resulted from Members getting the floor for all kinds of speeches under the pretext of raising a question of the privileges of the House." Despite the creation of the rule, raising a question of the privileges of the House allows any Member to be recognized and to have a resolution read on the floor, even if the question is later ruled not to be valid. This represents an uncommon opportunity, particularly for Members of the minority party, to draw attention to a specific matter in a chamber where the majority party leadership characteristically sets the floor agenda. Also unique is that, by their nature, questions of the privileges of the House allow potentially controversial assertions to be read on the floor, such as criticisms of another Member's conduct. The combination of these characteristics (the question's potential use by any Member, its reading requirement, and the subject matter's potentially controversial nature) make such resolutions exceptional in the House. There is a contrast between the types of questions raised and the types of questions agreed to. The ratios of the types of questions offered and the types of questions agreed to by the House varied. As displayed in Figure 4 , the greatest number of questions raised related to conduct (39%) and to the House's constitutional prerogatives (23%). Of the resolutions agreed to, however, most (78%) related to the House's constitutional prerogatives, while a relative few (9%) related to conduct. This might reflect a general disinclination to agree to conduct-related resolutions. Consideration of questions reflect the roles and relations of the majority and the minority. An examination of questions of the privileges of the House might offer insights into the roles and relationship of the majority party and the minority party in the House. First, recall that the minority party offered a majority (72%) of the total number of valid questions, and the proportion of questions offered by the minority remained consistent during most of the period, as illustrated in Figure 1 . Second, the manner in which questions were disposed of varied significantly depending on whether the Member offering the question belonged to the majority or the minority party. Of the questions offered by majority Members, a majority (69%) were agreed to. In fact, all questions offered by the majority party that were voted on were agreed to, perhaps suggesting that if a majority party resolution was not likely to receive an affirmative vote, it did not receive a vote but was disposed of alternatively (e.g., by referring the resolution to committee). Of the questions offered by the minority party, a large majority (82%) were tabled, meaning that the House chose to dispose of the resolution adversely but without taking a vote on the resolution. This may be done to avoid political and/or practical situations that are inopportune for the majority party. For example, a motion to table prevents a vote that might be used by the minority as a messaging vote and, in addition, halts consideration of the resolution so that the House may engage in the business previously planned by the majority party. Appendix A. Scripts of Parliamentary Language Used on the Floor Parliamentary Language Used When a Member Gives Notice of a Resolution In most cases, a Member (other than the majority leader of minority leader) must first give notice of his or her intention to offer the resolution. The parliamentary language used in such situations is generally some variation of the following: Member: Mr. Speaker, pursuant to clause 2(a)(1) of Rule IX, I rise to give notice of my intent to raise a question of the privileges of the House. The form of my resolution is as follows: ( At this point, the Member reads the resolution in its entirety, although he or she may also ask unanimous consent to dispense with the reading . ) Speaker: Under Rule IX, a resolution offered from the floor by a Member other than the majority leader or the minority leader as a question of the privileges of the House has immediate precedence only at a time designated by the chair within two legislative days after the resolution is properly noticed. Pending that designation, the form of the resolution noticed by the gentlelady (or gentleman) from (Member's home state) will appear in the Record at this point. The chair will not at this point determine whether the resolution constitutes a question of privilege. That determination will be made at the time designated for consideration of the resolution. ( W ithin two legislative days the Member will be notified of the date and time when he or she should rise to offer the resolution.) Parliamentary Language Used When a Member Offers the Resolution When the resolution is offered, the parliamentary language used in such situations is generally some variation of the following: Member: Mr. Speaker, I rise to a question of the privileges of the House and offer the resolution previously noticed. Speaker: The Clerk will report the resolution. ( The C lerk reads the resolution. ) Does the gentlelady (or gentleman) from (Member's home state) wish to present argument on the parliamentary question whether the resolution presents a question of the privileges of the House? Member: Yes. Speaker: The gentlelady (or gentleman) from (Member's home state) is recognized for that purpose. Member: I rise today to ... ( In the event that a Member's remarks deviate from the subject of a question of the privileges of the House, the Speaker pro tempore will remind the Member to confine his or her remarks to the question .) Speaker: Are there any other Members that want to be heard on this point? Speaker: The resolution does not qualify ( with explanation ). —or— Speaker: The resolution qualifies. The Clerk will report the resolution. ( T he Clerk reads the resolution . ) The resolution presents a question of the privileges of the House. Pursuant to clause 2 of Rule IX, the gentlelady (or gentleman) from (Member's home state) and the gentlelady (or gentleman) from (Member's home state) each will control 30 minutes. The chair recognizes the gentlelady (or gentleman) from (Member's home state). Appendix B. Questions of the Privileges of the House (105 th Congress-113 th Congress [1995-2014])

A question of the privileges of the House is a formal declaration by a Member of the House asserting that a situation has arisen affecting "the rights of the House collectively, its safety, dignity and the integrity of its proceedings." Once a question of the privileges of the House is raised, the Speaker must, at some point, entertain the question and rule on its validity. The Speaker makes such a ruling with guidance from the House Parliamentarian based on House rule and precedent. If it is ruled to be valid, a question of the privileges of the House will be considered and possibly voted on by the House. The notion of questions of privilege predates Congress, but the House demonstrated a reluctance to define such a question for over a century. The chamber eventually found it necessary to create a definition as part of a rule that would prevent Members from consuming floor time under the pretext of raising a question of the privileges of the House. Despite the creation of the rule, however, raising a question of the privileges of the House continues to allow any Member to be recognized and to have a resolution read on the floor, even if the question is later ruled not to be valid. Questions recognized as valid comprise several categories, such as: questions related to the organization of the House and the rights of Members to their seats or leadership positions, questions related to the House's constitutional prerogatives, such as their power to originate revenue legislation, questions related to the conduct of Members, officers, and employees of the House, questions related to the integrity of the legislative process, both in committee and on the House floor, and questions related to the comfort, convenience, and safety of Members. Certain categories of questions have been held not to constitute valid questions of the privileges of the House, such as questions that are tantamount to a change in House rules, questions that seek to alter or prescribe a special rule reported from the House Rules Committee, and questions expressing legislative sentiment. From the 104th Congress through the 113th Congress, Members offered 140 questions of the privileges of the House, 73% of which were ruled valid. The number of valid questions offered each Congress varied significantly, with some Congresses considering as few as two and others considering more than 20. The minority party offered 72% of the total number of valid questions, and the proportion of questions offered by the minority remained consistent during most of the period. How valid questions were disposed of during this time period varied significantly depending on whether the Member offering the question belonged to the majority or the minority party. A majority of questions offered by the majority party were agreed to, while a majority of the questions offered by the minority party were tabled, meaning that the House chose to dispose of the resolution adversely but without taking a vote on the resolution. A contrast exists between the types of questions raised and the types of questions agreed to by the House. The greatest number of valid questions raised related to the conduct of Members, officers, and employees of the House (39%) and to the House's constitutional prerogatives, such as their power to originate revenue legislation (23%). Of the resolutions agreed to, however, most (78%) related to the House's constitutional prerogatives, while a relative few (9%) related to conduct.

The 113th Congress, in exercising both its legislative and oversight responsibilities, faces numerous international trade and finance policy issues. They are important to Congress because they can affect the health of the U.S. economy, the success of U.S. businesses and their workers, and the standard of living of Americans. A list of CRS reports covering in detail each of the issues addressed is provided at the end of the report. International trade and finance issues are complex, and policy deliberation is often made more challenging by developments in the global economy. First, the world continues to recover unevenly from the 2008 global financial crisis, with many developed countries experiencing weak growth and the large emerging economies, such as China, India, and Brazil experiencing slower growth. The sovereign debt crisis in Europe and increased vulnerability of the Eurozone are among the most visible examples. Second, developing country influence and role in the global economy are growing, as witnessed by changing trade and investment patterns, as well as the ascendance of the Group of 20 (G-20) economies as a major forum for international economic cooperation. The rise of Brazil, India, and China, among other emerging economies, presents new challenges in U.S. trade policy and in developing global trade and finance agreements. Third, economic tensions emanating from large international imbalances have not eased. The U.S. economy is recovering slowly from its worst recession in eight decades. Although the economy is experiencing productivity gains and moderate expansion in output, it nonetheless continues to struggle with declining, but still high unemployment and a large federal debt. These domestic imbalances are connected to international ones, including the large U.S. trade deficit, rising holdings of U.S. debt by foreign countries, and downward pressure on the dollar. The United States has long consumed more than it has produced, giving rise to the expanding trade deficit, which is financed by capital inflows. The counterpart is large saving balances, trade surpluses, and capital outflows in other countries, including China, Japan, and Germany. The call for "global rebalancing" implies a reversal of these trends, which would require national and foreign responses. For the United States, this would involve increased saving (less spending) relative to investment that would produce a rise in net exports (reduction in trade deficit). Implicit in this mix, particularly given steady de-leveraging of U.S. firms and households since 2008, is a reduction of the fiscal deficit, the major source of U.S. dissaving since 2000. For trade surplus countries, it implies the opposite—an increase in domestic demand and decrease in saving relative to investment that would lead to a fall in net exports (reduction in trade surplus). Rebalancing also implies changes in relative exchange rates, including a likely depreciation of the dollar against major U.S. trade partner currencies, and appreciation of China's currency. On the trade policy side, the 113th Congress during the second session will likely exercise its oversight responsibilities and possibly take up legislation that would lead to reauthorization of trade promotion authority. It may also take up implementing legislation for reciprocal trade agreements including the negotiations for the Trans-Pacific Partnership (TPP) agreement, with the European Union for the proposed Transatlantic Trade and Investment Partnership (TTIP) agreement, and the Trade in Services Agreement (TISA). Some of these agreements address new issues, such as cross-border data flows, state-owned enterprises, and international supply chains. President Obama's National Export Initiative (NEI) continues to promote the goal of doubling U.S. exports in five years, which given that 95% of the world's population lives outside U.S. borders, some view as one solution to the challenge of generating faster economic and employment growth. In addition to supporting U.S. economic growth, the rationale for promoting exports is based on the view that foreign demand is needed to supplement an American consumer still dealing with a residual debt overhang and a federal government facing persistently large fiscal deficits. U.S. exports have recovered briskly since 2009. Meeting the goal of doubling exports, however, will be difficult because trade policy by itself is limited in its ability to affect the trade deficit and aggregate output, which will require vibrant global economic growth, a competitive dollar, and changes in domestic and foreign macroeconomic policies. In addition, after decades of increasing, global trade has slowed recently. Foreign country policies, however, may not align easily with U.S. priorities. The European Union continues to wrestle with its own financial crisis and economic downturn, while Japan is mired in persistent slow growth, although Prime Minister Abe's government launched a program of immediate and long-term initiatives— dubbed "Abenomics"—designed to place Japan on a path to more sustainable economic growth. Rising economic powers, whose strong growth represents expanding markets for U.S. goods, may also be turning to less expansionist macroeconomic policies. Many countries, including many G-20 and emerging economies, have returned to industrial policies, backtracking on trade liberalization. So despite U.S. policies directed at opening markets, export promotion and encouraging macroeconomic changes abroad, U.S. economic recovery still depends on a balance of increased domestic investment and demand, which could worsen the trade deficit if increased saving is not also part of the mix. On the international finance side, policy-driven currency misalignments and the specter of "currency wars" point to the other side of the global imbalances problem. Some countries are discussing the need for more coordinated and equitable exchange rate policies, if not a broader rethinking of the international monetary system. Attention has also turned to the relevance of the International Monetary Fund (IMF) and other multilateral economic institutions in this process, such as the World Bank, including reevaluating their role, structure, and governance (i.e., increased role of emerging economies). A current concern is the potential threat of competitive devaluations, particularly from China, that could increase trade tensions, hinder the rebalancing of the global economy, and undermine international economic stability. China is not alone in this behavior, but receives the most attention because of its closed capital account and large holdings of U.S. Treasury securities. U.S. international economic policy must also contend with "globalization," or the increasing integration of markets and production, and supply chain networks brought about by advances in technology, communications, transportation, and lower barriers to trade. These transformative changes in the global economy have led to large decreases in transaction costs that have spurred tremendous growth in trade, particularly of intermediate goods, which now account for over 60% of the world's commercial exchange. It has also contributed to rising incomes. In the United States, jobs are supported by U.S. exports to foreign affiliates and U.S. production abroad, as well as foreign firms operating in the United States. These complex production networks further complicate the trade and employment policy debates, and raise other questions such as what constitutes an "American-made" product and how will innovation and production strategies continue to change the economic landscape. At the same time, while global economic integration has increased trade and economic growth, it has also exposed U.S. firms and workers to greater competition from lower-cost and more efficient producers in certain sectors and increasingly, from state-owned-enterprises (SOEs). Globalization and the larger volume of imports of goods and services, therefore, may force some U.S. firms to make costly adjustments to remain competitive. In some cases this may take the form of worker dislocation and shifts to production abroad, and may raise concerns in Congress over distributional issues of global production and trade. In sum, U.S. costs and benefits linked to an increasingly interconnected global economy may run in many directions. The discussion is no longer simply about free trade versus protectionism. The debate involves domestic and foreign macroeconomic policies, the participation of foreign states in markets, the competitiveness of U.S. firms and workers, implications of value-chain and cross-country production, and the financial stability of the international economy. For the United States, an overarching goal is to maintain its high standard of living by remaining innovative, productive, and internationally competitive, while safeguarding those stakeholders who otherwise may be left behind in a fast-changing global economy, suggesting a strong supporting role for complementary domestic policies. These changes have also raised new trade policy issues, some of which are being discussed in current U.S. free trade agreement negotiations. Congress is in a unique position to address these issues, particularly given its constitutional mandate for legislating and overseeing international trade and financial policy. In addition to broader congressional oversight of the economic and political context of the current U.S. participation in the global economy, this report highlights major international trade and finance issues that the 113th Congress may address. The U.S. Constitution assigns express authority over foreign trade to Congress. Article I, Section 8, gives Congress the power to "regulate commerce with foreign nations" and to "lay and collect taxes, duties, imposts, and excises." For roughly the first 150 years of the United States, Congress exercised its authority over foreign trade by setting tariff rates on all imported products. Congressional trade debates in the 19th century often pitted Members from northern manufacturing regions, who benefitted from high tariffs, against those from largely southern raw material exporting regions, who gained from and advocated for low tariffs. A major shift in U.S. trade policy occurred after Congress passed the highly protective "Smoot-Hawley" Tariff Act of 1930 (P.L. 71-361), which, by raising U.S. tariff rates to an all-time high level, led U.S. trading partners to respond in kind. In response, world trade declined rapidly, exacerbating the impact of the Great Depression. Since passage of this tariff act, Congress has delegated certain trade authority to the executive branch. First, Congress enacted the Reciprocal Trade Agreements Act (RTAA) of 1934 (P.L. 73-316), which authorized the President to enter into reciprocal agreements to reduce tariffs within congressionally preapproved levels, and to implement the new tariffs by proclamation without additional legislation. Congress has renewed this authority periodically. Second, Congress enacted the Trade Act of 1974 aimed at opening markets and establishing non-discriminatory international trade for nontariff barriers as well. Because changes in nontariff barriers in reciprocal bilateral, regional, and multilateral trade agreements usually involve amending U.S. law, the agreements require congressional approval and implementing legislation. Congress has renewed and amended the 1974 Act many times, which includes fast-track trade negotiating authority, now called trade promotion authority (TPA). Congress also exercises trade policy authority through its oversight responsibilities and the enactment of laws authorizing trade programs and governing trade policy generally. These include such areas as U.S. trade agreement negotiations; tariffs; nontariff barriers; trade remedies; import and export policies; economic sanctions; and the trade policy functions of the federal government. In addition, Congress oversees the implementation of trade policies, programs, and agreements. Congress has an important role in international investment and finance as well. It has authority over bilateral investment treaties (BITs) and the level of U.S. financial commitments to the multilateral development banks (MDBs), including the World Bank, and to the International Monetary Fund (IMF). It also authorizes the activities of such agencies as the Export-Import Bank and the Overseas Private Investment Corporation (OPIC). Congress has oversight responsibilities over these institutions, as well as the Federal Reserve and the Treasury Department, whose activities affect international capital flows. Congress also closely monitors developments in international financial markets that could affect the U.S. economy, such as the Eurozone sovereign debt crisis. During the first session of the 113th Congress, while overshadowed by other legislative priorities, including federal budget issues, trade and trade policy issues were the subject of active congressional interest, including through oversight committee hearings, if not direct legislative action. That may change during the second session as at least some of these issues may come to a head in the form of legislation or congressional consideration. They include: renewal of trade promotion authority (TPA); potential trade agreements including the Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), and the Trade in Services Agreement (TISA), and also expanded agreements in information technology products and trade facilitation under the WTO; U.S.-China trade relations; international finance issues; review of the U.S. export control regime; reauthorization of the Export-Import Bank; and reauthorization of U.S. Customs and Border Protection (CBP) and expiring trade preference programs. Congress confronts these issues against the backdrop of a rapidly globalizing economy and the growing importance of emerging economic powers that have increased the role of global supply or value production chains, state-owned enterprises, and cross-border data flows, among other factors. These and other issues are discussed in more depth below. In July 30, 2013, in a speech, President Obama requested that Congress reauthorize TPA. The 113th Congress may consider reauthorization during the second session. TPA allows implementing bills for trade agreements to be considered under expedited legislative procedures—limited debate, no amendments, and an up or down vote—provided the President observes certain statutory obligations in negotiating trade agreements. These obligations include adhering to congressionally-defined trade policy negotiating objectives, as well as congressional notification and consultation requirements before, during, and after the completion of the negotiation process. The primary purpose of TPA is to preserve the constitutional role of Congress with respect to consideration of implementing legislation for trade agreements that require changes in domestic law, while also bolstering the negotiating credibility of the executive branch by ensuring that the trade agreements will not be changed once concluded. Since first enacted in the Trade Act of 1974, TPA has been renewed multiple times, with the latest grant of authority expiring on July 1, 2007. In light of TPA's special provisions governing trade agreement implementing bills, many consider its renewal as necessary to approve and implement new trade agreements. Others question whether TPA is necessary to pass trade implementing bills and note that it is not a prerequisite for initiating or concluding trade agreement negotiations. Some experts argue that TPA would have to be renewed if the United States is to be a credible negotiator in concluding proposed trade agreements such as the Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), a Trade in International Services Agreement (TISA), future WTO agreements, and other future trade agreements. It can also be argued that while the Obama Administration has been notifying and consulting Congress on these negotiations per previous TPA requirements, Congress has not formally expressed its views in the form of new or updated legislative negotiating objectives for trade agreements, which have been an important part of previous TPA/fast-track authorities. There are already bicameral efforts to renew TPA. Historically, the United States has pursued trade agreements to reduce and eliminate barriers to trade and establish non-discriminatory rules and principles to govern trade. Among the trade issues for the 113th Congress are U.S. negotiations with the TPP countries—now 12 countries and possibly more—to create a comprehensive and high-standard regional FTA in the Asia-Pacific region. In addition, the United States has entered into negotiations with the European Union on the proposed TTIP free trade agreement. The United States is also engaged in the plurilateral TISA negotiations. Members may also examine the agreements reached during the December 2013 WTO Ministerial in Bali, Indonesia, including an agreement on trade facilitation. The TPP is an evolving regional FTA, which may become a vehicle to advance a wider Asia-Pacific free trade area, as well as a U.S. policy response to the rapidly increasing economic and strategic linkages among Asian-Pacific states. The TPP was originally a more limited FTA concluded in 2006 among Singapore, New Zealand, Chile, and Brunei. Subsequently, the United States, Australia, Peru, and Vietnam joined the negotiations in the fall of 2008 (during the Bush Administration). President Obama endorsed the negotiations in November 2009, and Malaysia joined as a full participant in October 2010. After intensive consultations with TPP participants, Canada, Mexico, and subsequently, Japan joined the negotiations in 2012 and 2013, respectively, greatly increasing the economic significance of the potential agreement. The TPP is potentially an important trade agreement for the United States. In 2012, the TPP negotiating partners made up 37% of total U.S. goods and services trade. TPP negotiations aim to reduce and eliminate tariffs and non-tariff trade barriers to create a comprehensive and high standard FTA to which other nations can accede. Some of this trade liberalization has already occurred, however, as the United States has existing FTAs with six of the TPP partners (Australia, Canada, Chile, Mexico, Peru, and Singapore). The participants are also discussing new trade issues, such as supply chain management, state-owned enterprises (SOEs), regulatory coherence, new digital trade issues, and the participation of small and medium-sized enterprises to create what the Obama Administration refers to as a "21st century trade agreement." Certain aspects of the negotiations have proven controversial. These include select market access issues, such as agriculture, textiles, and apparel, as well as the level of intellectual property protection, the enforcement of environmental and labor rights, the treatment of state-owned enterprises, and access to government procurement. President Obama and other TPP leaders declared their intention to conclude the negotiations in 2013. Although the number of outstanding issues reportedly narrowed, TPP trade ministers did not reach a conclusion of the negotiations at their December 7-10, 2013 meeting and suggested that early 2014 may be a feasible timetable for concluding the agreement. Congress has a direct legislative interest in the progress of the negotiations. It must pass implementing legislation for the agreement to enter into force in U.S. law. The World Trade Organization (WTO) is an international organization that administers the trade rules and agreements negotiated by 160 participating parties—with Laos and Yemen becoming members in 2013—and serves as a forum for dispute settlement resolution and trade liberalization negotiations. The United States was a major force behind the establishment of the WTO on January 1, 1995, and the new rules and trade liberalization agreements that occurred as a result of the Uruguay Round of multilateral trade negotiations (1986-1994). The WTO succeeded the General Agreement on Tariffs and Trade (GATT), first established in 1947. The WTO Doha Round of multilateral trade negotiations, begun in November 2001, has remained deadlocked for several years. However, WTO Members at 9th Ministerial Conference held in Bali, Indonesia on December 3-7, 2013, agreed to a package of trade facilitation, agriculture, and development measures. Though modest in scope, it represents the first successful conclusion of a negotiation in the WTO's nearly 20-year history. The accord has three components: Trade facilitation. Members agreed to a package that would impose binding disciplines on issues concerning the process of trade: freedom of transit, fees and formalities associated with the import and export of goods, and transparency and publication of goods. These provisions are designed to reduce transaction costs and to improve efficiencies, especially with regard to trade with and between developing countries. The accord places binding disciplines on developing countries to implement these reforms. While wealthy donor countries and international organizations have pledged funds to least-developed countries (LDCs) to implement these reforms, the agreement itself places no obligations on Member states to provide assistance. Agriculture. Members agreed to a compromise on so-called food security issues. This agreement would exempt food stockpiling programs, especially for developing countries, subject to certain transparency requirements, from dispute settlement until a permanent solution to the relationship between these programs and trade-distorting subsidy limitations in the WTO Agriculture Agreement is negotiated. Members also agreed to provisions concerning the administration of tariff-rate quotas (TRQ) and recommitted themselves to negotiate the parallel elimination of export subsidies. Development Issues. The Members agreed to a package of items to enhance trade with least-developed countries (LDCs). The agreement contained: a commitment to develop simplified preferential rules-of-origin for LDCs; a "services waiver" to grant LDCs greater access to the services markets of developed countries; a commitment to negotiate duty-free, quota-free access to LDCs; and a commitment to improve market access for cotton from LDCs. The agreement also directed the WTO secretariat to develop a clearly defined work program to complete the Doha Round within the next 12 months. This task remains formidable. The negotiations have been characterized by persistent differences among the United States, the European Union, and advanced developing countries on major issues, such as agriculture, industrial tariffs and nontariff barriers, services, and trade remedies. While some have lauded the Bali accord as a vindication of the body's negotiating function, it remains to be seen whether this successful outcome has any lasting momentum to propel agreement on the wider Doha Round agenda. In addition, work has started on expanding the reach of the current WTO agreements outside the scope of the Doha Round. A group now composed of 46 developed and advanced developing countries are negotiating the TISA (discussed below). The 42 Members of the plurilateral WTO Government Procurement Agreement (GPA) are awaiting the threshold of the ratification for a revised GPA to enter into force after concluding negotiations to expand its commitments in March 2012. Also, several countries, including China, are in negotiations to accede to the GPA. However, negotiations to expand the scope of the plurilateral Information Technology Agreement (ITA) recently reached an impasse an impasse in November 2013. This was a major objective of the United States. TTIP is a proposed comprehensive and high-standard FTA between the United States and European Union (EU), through which the two sides seek to enhance trade disciplines and market access by reducing and eliminating remaining transatlantic barriers to trade and investment. The Obama Administration notified Congress of its intent to negotiate TTIP on March 20, 2013, and formal negotiations commenced in July 2013. Core components of the negotiations include: reducing and eliminating tariffs; enhancing regulatory cooperation and compatibility; opening government procurement markets; and strengthening and developing new rules in areas such as intellectual property rights, investment, digital trade, trade facilitation, labor and the environment, localization barriers to trade, and state-owned enterprises (SOEs). Both the United States and EU aim to conclude the negotiations in two years, but certain issues, notably regulatory compatibility, have been contentious in previous transatlantic dialogues, and some question the likelihood of their early resolution. TTIP is a potentially significant and strategic FTA for the United States. It involves the two largest advanced economies in the world—which, combined, represent 30% of global trade, nearly 20% of global direct investment, and almost half of global GDP. However, views on TTIP vary broadly among stakeholders. Supporters see an opportunity to boost transatlantic economic growth and jobs by addressing costly trade barriers; strengthen the U.S.-EU bilateral relationship; support broader and deeper trade liberalization; and address challenges associated with third countries. Opponents are concerned about adverse effects on import-sensitive sectors; the impact on U.S.-EU relations should negotiations stall; a focus on regional and bilateral FTAs detracting from multilateral trade liberalization; and potential infringement on U.S. and EU sovereignty, including the ability to regulate health, labor, and environmental interests. Congress has a direct interest in the TTIP negotiations, since it establishes overall U.S. trade negotiating objectives and would consider legislation to implement a final TTIP agreement. Possible congressional consideration of renewal of Trade Promotion Authority (TPA) (see above), which expired in 2007, could affect TTIP. As part of its oversight role, Congress could examine the impact of greater transatlantic trade liberalization on the U.S. economy and particular sectors; the role of a potential TTIP in EU-U.S. relations; how TTIP would compare with other FTAs currently being negotiated, such as the Trans-Pacific Partnership (TPP) and Trade in Services Agreement (TISA); and whether TTIP should be broadened to include other countries. Services are a significant sector of the U.S. economy, accounting for almost 70% of U.S. gross domestic product (GDP) and for over 80% of U.S. civilian employment. They not only function as end-user products by themselves, but also act as the "lifeblood" of the rest of the economy with transportation services ensuring the goods reach customers and financial services providing financing for the manufacture of goods. Services have been an important priority in U.S. foreign trade and trade policy and of global trade in general, although their intangibility, the requirement for direct buyer-provider contact, and other characteristics have limited the types and volume of services that can be traded. Advances in information technology and the related growth of trans-national supply and production networks have reduced these barriers making an expanding range of services tradable across national borders. Services present unique trade policy issues and challenges, such as how to construct trade rules that are applicable across a wide range of varied economic activities. The General Agreement on Trade in Services (GATS) under the WTO is the only multilateral set of rules on trade in services. Many policy experts, however, have argued that the GATS must be expanded if it is to govern services trade effectively, but this prospect is diminished given that GATS reform had been stuck in the floundering Doha Round of WTO negotiations. In order to salvage a services agreement, a group of WTO members, led by the United States and Australia, launched informal discussions in early 2012 to explore negotiating a trade in international services agreement (TISA). On January 15, 2013, the Office of the United States Trade Representative (USTR) notified congressional leaders of the United States' intention to engage formally in negotiations to reach a plurilateral TISA, in conformity with the now-expired TPA congressional notification requirements. Among U.S. objectives would be to: 1) allow U.S. service providers to compete on the basis of quality and competence rather than nationality; 2) permit comprehensive coverage of all services, including services that have yet to be conceived; 3) seek to secure greater transparency and predictability from U.S. trading partners regarding regulatory policies that present barriers to trade in services and hinder U.S. exports; and, 4) address new issues arising from globalization and new mechanisms for conducting trade. Negotiations began on April 15, 2013, and include, besides the United States: Australia; Canada; Chile; Taiwan (Chinese Taipei); Colombia; Costa Rica; EU; Hong Kong; Iceland; Israel; Japan; South Korea; Liechtenstein; Mexico; New Zealand; Norway; Pakistan; Panama; Paraguay; Peru; Switzerland; and Turkey. China has expressed interest in joining. Members of Congress have long had interest in trade agreements that could affect important sectors, such as services. In addition, Congress would have to approve a TISA for it to enter into force in the United States and, therefore, would likely want to play a role in shaping the content and outcome of a TISA. Since China embarked upon a policy of economic and trade liberalization in 1979, U.S.-Chinese economic ties have grown extensively. Total U.S.-China trade rose from $2 billion in 1979 to $536 billion in 2012, and is projected to increase to $555 billion in 2013. China is currently the United States' second-largest trading partner, its largest source of imports, and its third largest export market. China's large population and rapidly growing economy make it a potentially huge market for U.S. exports, and lower-cost imports from China benefit U.S. consumers. China is also an important part of the global supply chain for many U.S. companies, many of which use China as a final point of assembly for their products. In addition, China's large-scale holdings of U.S. Treasury securities ($1.3 trillion as of September 2013) have helped the federal government finance its budget deficits, thereby helping to keep U.S. real interest rates relatively low. Despite growing commercial ties, the bilateral economic relationship has become increasingly complex and often fraught with tension. From the U.S. perspective, many trade tensions stem from China's incomplete transition to an open-market economy. While China has significantly liberalized its economic and trade regimes over the past three decades, it continues to maintain, (or has imposed) a number of state-directed policies that appear to distort trade and investment flows, which many argue, undermine U.S. economic interests. As a result, U.S.-China commercial relations will likely continue to be a major focus for Congress. Important areas of congressional concern are discussed below. Numerous policies have been implemented by China to promote the development of domestic industries deemed critical to its future economic growth. China's primary goals include transitioning from a manufacturing center to a major global source of innovation, and reducing the country's dependence on foreign technology by promoting "indigenous innovation." The latter policy can amount to discrimination against foreign firms and has become a major source of trade tension with the United States. The Chinese government has responded that they have not and will not discriminate against foreign firms or violate global trade rules, but many U.S. business leaders remain skeptical even as they have acknowledged China's pledge to delink indigenous innovation from government procurement. Many U.S. firms have also complained about Chinese pressure to establish production facilities in China, share proprietary technology with Chinese partners, or set up R&D centers as a condition for gaining market access. A 2013 survey by the American Chamber of Commerce in China (Am Cham China) of U.S. firms reported that 35% of its respondents stated their belief that technology transfer was a requirement for market access in China and 37% stating that such requirements were increasing. The Obama Administration has initiated WTO dispute settlement cases against a number of Chinese industrial policies, including China's export subsidies to auto and auto parts (September 2012), export restrictions on rare earth elements (March 2012), and preferential subsidies given to Chinese wind power equipment manufacturers (December 2010). Lack of effective and consistent protection and enforcement in China of U.S. intellectual property rights (IPR) have been cited by U.S. firms as one of the most significant problems they face in doing business in China. Although China has significantly improved its IPR protection regime over the past few years, U.S. industry officials complain that piracy rates in China remain unacceptably high. The 2013 Am Cham China survey found that 72% of respondents felt that China's IPR enforcement regime was ineffective, up from 59% in its 2012 survey. A May 2013 study by the Commission on the Theft of American Intellectual Property estimated the annual cost to the U.S. economy of global IPR theft at $300 billion, of which, China accounted for 50% ($150 billion) to 80% ($240 billion) of those losses. Cyber-attacks by Chinese entities against U.S. firms have raised concerns over the potential large-scale theft of U.S. IPR, especially trade secrets, and its implications for the U.S. economy. A 2011 report by the U.S. Office of the Director of National Intelligence (DNI) stated that: "Chinese actors are the world's most active and persistent perpetrators of economic espionage. U.S. private sector firms and cyber security specialists have reported an onslaught of computer network intrusions that have originated in China, but the IC (Intelligence Community) cannot confirm who was responsible." A February 2013 report by Mandiant, a U.S. information security company, documented extensive economic cyber espionage by a Chinese unit (designated as "APT1") with alleged links to the Chinese People's Liberation Army (PLA) against 141 firms, covering 20 industries, since 2006. The report stated: "Our analysis has led us to conclude that APT1 is likely government-sponsored and one of the most persistent of China's cyber threat actors. We believe that APT1 is able to wage such a long-running and extensive cyber espionage campaign in large part because it receives direct government support." Following a meeting with Chinese President Xi Jinping in June 2013, President Obama warned that if cyber security issues are not addressed and if there continues to be direct theft of U.S. property, then "this was going to be a very difficult problem in the economic relationship and was going to be an inhibitor to the relationship really reaching its full potential." Unlike most major economies, China does not have a floating currency. Instead, the government pegs its currency (the renminbi—RMB) largely to the U.S. dollar, and intervenes in currency markets to limit its appreciation. Critics charge that that China manipulates its currency in order to give its exporters an unfair competitive advantage by making Chinese exports to the United States relatively less expensive and U.S. exports to China relatively more expensive than would occur under free market conditions. They argue that if China's currency is undervalued, it acts as a subsidy conveyed to Chinese exporters while constituting an additional trade barrier to U.S. exports to China. Some U.S. policymakers contend that China's currency policy has been a major contributor to large annual U.S. bilateral trade deficits with China ($315 billion in 2012) and the extensive loss of U.S. manufacturing jobs. In addition, some economists claim that China's currency policy induces other countries to intervene similarly in currency markets. Beginning in 2005, China began to liberalize its currency policy, due in part to international pressure, and allowed the RMB to appreciate gradually. From July 2005 to July 2009, the RMB was allowed to appreciate by 21%. However, once the effects of the global financial crisis became apparent, the Chinese government halted its appreciation of the RMB and kept it relatively constant through June 2010, when it was allowed to appreciate again. From June 2010 through the end of November 2013, the RMB has appreciated 12.2% against the dollar. (However, the RMB appreciated very little in 2012 and during the first 11 months of 2013.) In an October 2013 report, the Department of the Treasury stated that the RMB remained significantly undervalued. Several bills have been introduced over the past few years to address China's currency policy, some of which would have increased U.S. tariffs on Chinese products or sought to apply U.S. trade remedy measures against countries (such as China) deemed to have a currency that was fundamentally misaligned. Supporters contend that the RMB remains significantly undervalued against the dollar and that pressure needs to be applied to China to induce it to adopt a more market-based currency regime. Opponents argue that such legislation, if enacted, would likely have little impact on the U.S. economy, would worsen trade relations with China, and could later be found to be inconsistent with U.S. WTO commitments. Other Members contend that, while China's undervalued currency remains an area of concern, it has been superseded by other more significant challenges to U.S. economic interests, discussed above. A major focus of U.S. economic policy towards China has been to persuade it to rebalance its economy by reducing the country's policy preference for exporting and investing, and increase an emphasis on consumer demand. This goal could be achieved with a number of policies to boost household incomes (e.g., developing a social safety net and reducing the need to maintain high rates of savings) and implementing reforms to reduce distortive government policies (e.g., maintaining an undervalued currency and using the government-controlled banking system to subsidize state-owned enterprises). Many economists argue that boosting Chinese domestic consumption and eliminating distortive economic policies would greatly increase China's demand for imports, promote greater competition in China, improve Chinese living standards, and help reduce trade tensions with the United States. From November 9-12, 2013, the Communist Party of China held the 3rd Plenum of its 18th Party Congress, a meeting that many analysts anticipated would result in the initiation of extensive new economic reforms under China's new leadership. Following the meeting, the Communist Party issued a communique with a number of broad policy statements. One highlighted by the Chinese media was that the market would now play a "decisive" role in allocating resources in the economy. This was in contrast to previous statements that the market was a "basic" means of allocating economic resources. Some analysts have raised concerns over the communique's statement that China "must unwaveringly consolidate and develop the publicly owned economy, persist in the dominant role of the public ownership system, give rein to the leading role of the State-owned economy, and incessantly strengthen the vitality, control strength and influence of the State-owned economy." Some observers contend that this indicates that China will not implement reforms that reduce the role of the government in promoting and supporting state-owned enterprises (SOEs), a goal of U.S. economic officials. Others argue that the Plenum's signals indicate that SOEs will be subject to greater market forces. The extent of China's economic reforms resulting from the meeting will not be fully understood until more information is made available by the Chinese government. Treasury Secretary Lew, on his visit to Beijing immediately following the 3rd Plenum, was quoted as saying that China had announced "an ambitious agenda." He added, "The direction is significant, but the character and the pace of change matters." China's continued economic rise and U.S.-China trade relations will likely be closely monitored by Congress. Opinions differ, however, as to the most effective way of dealing with China on numerous issues. Some support a policy of engagement using various cabinet-level forums, such as the U.S.-China Strategic and Economic Dialogue (S&ED) and the U.S.-China Joint Commission on Commerce and Trade (JCCT). Others support a somewhat mixed policy of using engagement when possible, coupled with a more aggressive use of WTO dispute settlement procedures to address China's unfair trade policies. Still others, who see China as a growing threat to the U.S. economy and the global trading system, advocate a policy of trying to contain China's economic power and resorting to punitive measures when needed. Some Members may press the Administration to boost efforts to induce China to abide more fully by its WTO commitments, including bringing more trade dispute settlement cases in the WTO. They may also introduce new bills that seek to address China's currency, industrial, and IRP protection policies. The federal government promotes U.S. exports and investments through providing finance and insurance programs that are administered by the U.S. Export-Import Bank (Ex-Im Bank); the Department of Agriculture; and the Overseas Private Investment Corporation (OPIC), among other agencies. In addition, the Department of Commerce supports U.S. exports and inward investment into the United States through trade missions, advocacy, market research, and other activities, often with an emphasis on U.S. small businesses. A current broad-based framework for U.S. trade promotion and financing is the National Export Initiative (NEI), the Obama Administration's plan to double U.S. exports worldwide in five years (2009-2014). With the NEI nearing an end, some question whether its goal of doubling U.S. exports can be achieved, or whether the NEI should be extended or re-focused. Others contend that, regardless of the outcome, the NEI has elevated federal export promotion as a U.S. policy priority. More targeted Administration initiatives also are underway, centered, for example, on supporting trade and investment with specific regions (e.g., sub-Saharan Africa, Asia-Pacific) and in specific economic sectors (e.g., renewable energy). The 113th Congress could conduct oversight of and legislate on a number of issues related to federal trade promotion, including: the effectiveness of the NEI and other Administration initiatives to boost U.S. exports and investment; the extent to which these initiatives are aligned or serve as competing U.S. policy goals; the adequacy of federal funding of such efforts; proposals to reorganize, or enhance coordination of federal trade promotion and finance functions; and whether alternative policy options may be more effective. Ex-Im Bank and OPIC are two trade finance agencies whose authorities will expire in September 2014 unless renewed by Congress. Ex-Im Bank provides direct loans, guarantees, and insurance to help finance U.S. exports, in support of U.S. employment. OPIC provides political risk insurance and finance to facilitate U.S. private investment in developing countries, in support of U.S. foreign policy objectives. The financial activities of Ex-Im Bank and OPIC are backed by the full faith and credit of the U.S. government. Both agencies seek to fill gaps in private sector finance, and to help level the playing field for U.S. businesses competing against foreign companies that receive government-supported financing. As demand-driven agencies, their actual levels of financial support depend on commercial interests. Both agencies are self-sustaining; they use offsetting collections, generated from fees charged for their services and other sources, to fund their activities. Congress approves an annual appropriation setting an upper limit on each of the agencies' administrative and program expenses. Congress has responsibility for reauthorizing Ex-Im Bank and OPIC. In May 2012, the 112th Congress passed legislation to extend Ex-Im Bank's authority to September 30, 2014 ( P.L. 112-122 ). Among other provisions, the legislation allowed for incremental increases in Ex-Im Bank's lending authority from the previous $100 billion limit to $140 billion in FY2014 (contingent on certain requirements) and mandated increased Ex-Im Bank reviews of its lending operations. The 113th Congress could continue oversight of Ex-Im Bank's implementation of reauthorization requirements. In addition, as Ex-Im Bank's new expiration date nears, Congress will likely debate renewal of its authority. In contrast, Congress last reauthorized OPIC in 2003, extending its authority through FY2007 ( P.L. 108-158 ). Since then, Congress has extended OPIC's authority to conduct its programs through the annual appropriations process. Although Congress has made some adjustments to OPIC's activities through appropriations, some argue that the 113th Congress should consider OPIC reauthorization, which could afford Members greater opportunity to weigh in on broader OPIC policy issues, such as the agency's role in U.S. foreign policy. The 113th Congress could consider a range of issues related to Ex-Im Bank and OPIC reauthorization. Most fundamentally, Congress must decide whether to reauthorize them. In doing so, Congress could examine these agencies' economic and competitive rationales, their implications for the size and scope of the U.S. government, and whether other organizational structures are more suited to U.S. trade finance functions. Should Congress decide to renew their authorities, the length of reauthorization may be debated. On one hand, a multi-year or permanent authorization could enhance these agencies' long-term planning capacity and ability to assure businesses of the stability of their programs. On the other hand, shorter-term renewals could permit enhanced congressional oversight. Congress also may consider broader issues. For instance, in terms of the international context, Congress could examine U.S. economic competitiveness vis-à-vis the officially-backed export and investment financing provided by other countries, as well as the adequacy of current international disciplines for trade finance to which large emerging economies such as China, Brazil, and India, do not adhere. Other issues could include examination of the role of these agencies in supporting specific U.S. policy goals. For example, legislative proposals in the 113th Congress have called for increased Ex-Im Bank and OPIC support for U.S. trade and investment with Africa. In examining the potential for these agencies' greater involvement, Congress may consider how other stakeholder interests and policy goals should be balanced. Congress has authorized the President to control the export of various items for national security, foreign policy, and economic reasons. Separate programs and statutes for controlling different types of exports exist for nuclear materials and technology, defense articles and services, and dual-use goods and technology. Under each program, licenses of various types are required before an export can be undertaken. The Departments of Commerce, State, and Defense administer these programs. At the same time, Congress also legislates country-specific sanctions that restrict aid, trade, and other transactions to address U.S. policy concerns about proliferation, regional stability, and human rights. In the 113th Congress, these controls and sanctions may raise difficult issues over how to balance U.S. foreign policy and national security objectives against U.S. commercial and economic interests. In 2009, the Obama Administration launched a comprehensive review of the U.S. export control system. In the current system, responsibility for controlling exports is divided among the Departments of Commerce, State, and the Treasury, based on the nature of the product (munitions or dual-use goods) and basis for control, with enforcement shared among these agencies, as well as the Departments of Justice and Homeland Security. Key elements of the Administration's reform agenda include a four-pronged approach that would create a single export control licensing agency for both dual-use and munitions exports; adopt a unified control list; create a single integrated information technology system, which would include a single database of sanctioned and denied parties; and establish a single enforcement coordination agency. The Administration's blueprint envisions that these changes would be implemented in three phases with the final tier requiring legislative action. To date, efforts have been undertaken to harmonize the Commerce Control List (CCL), which focuses on dual-use items, with the U.S. Munitions List (USML). This has been done through an ongoing category-by-category review of USML items and a migration of what the Administration deems as less sensitive items to the CCL. Congressional notification is required if items are moved from the munitions list to the dual-use list; the first of these notifications occurred in March 2013. Rulemakings to transfer several categories of USML items were issued and changes to four categories of the USML taking effect in 2013. The President also made the determination required by the NDAA 2013 that the transition of certain satellites and related items from the USML to the CCL was in the national interest. An Export Enforcement Coordination Center, which was created by executive order on November 9, 2010, has been set up within the Department of Homeland Security to synchronize enforcement efforts. An integrated information technology system based on the Defense Department's USXports platform is being adopted by the Departments of State and Commerce. The 113th Congress may scrutinize this effort through oversight and may be asked to approve certain changes proposed by the Administration, including the creation and placement of the proposed licensing agency. Congress may also attempt to reauthorize or rewrite the currently expired Export Administration Act, the statutory basis of dual-use export controls. Economic sanctions may be defined as coercive economic measures taken against a target to bring about a change in policies. They typically include measures such as trade embargoes; restrictions on particular exports or imports; denial of foreign assistance, loans, and investments; or control of foreign assets and economic transactions that involve U.S. citizens or businesses. The decision to apply trade and aid sanctions is based, to some extent, on a country's record with respect to human rights, international terrorism, religious freedom, proliferation of weapons of mass destruction, international narcotics trafficking, trafficking in persons, interference with democratic processes, corruption, and money laundering. The United States currently maintains robust sanctions regimes against foreign governments it has identified as supporters of acts of international terrorism (Cuba, Iran, Sudan, and Syria), nuclear arms proliferators (Iran, North Korea, Syria), and egregious violators of international human rights standards (Syria, Burma, Cuba, Iran, North Korea). Members introduced a number of bills in the 1st session that, if enacted, could change United States' bilateral relationships with Cuba, Brazil, Sudan, Vietnam, Zimbabwe, and Pakistan. Congress remains engaged in the debate regarding weapons proliferation programs in Iran, North Korea, and Syria, rule of law matters in Russia, incremental movement toward normalizing trade relations with Burma, and supporting stability and development in the contentious Sudan-South Sudan border region. Nothing looms larger, however, than democracy in Egypt and nuclear proliferation by Iran—two critical matters about which Congress could adopt legislation. In both matters, a bipartisan group of legislators could prevail to affect U.S. foreign policy and national security interests in ways that are discordant with the President's negotiations. U.S. policies affecting imports are shaped by a mixture of economic objectives, foreign policy interests, and political considerations. The case for supporting freer trade and more open markets rests on the view that they yield substantial economic benefits for all participating countries. However, since the gains from trade may be disproportionately allocated within domestic economies, some industries and workers may be adversely affected by import competition. Thus, international trade rules also allow governments to provide means (called "trade remedies") by which certain groups may petition for temporary protection from import surges of "fairly" traded imports, or for redress in certain cases of "unfair" imports. Additionally, efforts to forge closer economic and political ties with developing countries may also lead to more open policies through the extension of non-reciprocal preferential access to the U.S. market. Import policy issues in which Congress has a direct interest include five broad policy areas: (1) trade remedies; (2) trade preferences; (3) border security and trade facilitation; (4) tariffs; and, (5) trade adjustment assistance. The United States and its trading partners use laws known as trade remedies to mitigate the injury (or threat thereof) of various trade practices to domestic industries and workers. The three most frequently applied U.S. trade remedies are: (1) antidumping (AD), which provides relief from injurious imports sold at less than fair market value; (2) countervailing duty (CVD), which provides relief from injurious imports subsidized by a foreign government or public entity; and (3) safeguards, which provide temporary relief from import surges of fairly-traded goods. These laws are enforced primarily through the administrative procedures of two U.S. government agencies, the Department of Commerce and the United States International Trade Commission. In AD and CVD cases, the remedy is an additional duty assessed to offset the calculated amount of dumping or subsidy. In safeguard cases that are determined by the President, an import quota or a tariff may be assessed. In addition, the WTO agreements contain specific obligations on these measures to which its member countries, including the United States, adhere. One issue that may emerge in the second session of the 113th Congress relates to the alleged under-collection of AD and CVD duties. U.S. Customs and Border Protection (CBP) has responsibility for collecting duties, including proposals that would require CBP and its sister agency U.S. Immigration and Customs Enforcement (ICE) to investigate allegations of AD/CVD duty circumvention under specific deadlines. A second concern involves China's currency intervention policy (see above) and whether China's alleged limiting of the appreciation of its currency should be treated as a subsidy in CVD investigations. Since 1974, Congress has created six trade preference programs designed to assist "lesser developed" countries: 1) the Generalized System of Preferences (GSP—expired July 31, 2013)), which applies to all eligible developing countries; 2) the Andean Trade Preference Act (APTA—expired July 31, 2013); 3) the Caribbean Basin Economic Recovery Act (CBERA—permanent); 4) the Caribbean Basin Trade Partnership Act (CBTPA—expires September 30, 2020); 5) the African Growth and Opportunity Act (AGOA—expires September 30, 2015); and 6) the Haitian Opportunity through Partnership Encouragement (HOPE—expires September 30, 2020) Act. Except for CBERA, which is permanent, these programs give temporary, non-reciprocal, duty-free access to the U.S. market for a select group of exports from eligible countries. Congress authorizes, revises, and conducts regular oversight of these programs. Since the GSP and ATPA programs expired in 2013, legislation extending and/or revising these preference programs could be considered in the second session of the 113th Congress. Colombia's status as a beneficiary country under ATPA expired upon entry into force of the U.S.-Colombia FTA and Bolivia has been dropped from the program. Because Ecuador is the only remaining designated beneficiary country, there is some question as to whether the 113th Congress will extend ATPA or allow it to expire. Congress could also examine the participation of the more advanced developing countries in these programs. With its current expiration set for 2015, AGOA has received increased Congressional interest in the 113th Congress. Both the Administration and relevant congressional committees have requested agency evaluations of the preference program in preparation for the renewal debate. As a cornerstone of U.S.-Africa trade policy, the potential reauthorization and reform of AGOA may also build upon recent legislative proposals to increase U.S.-Africa trade and investment. Given the significant improvement in the economies of several African countries during AGOA's lifespan, these legislative proposals and the AGOA renewal debate may have a greater focus on two-way U.S.-Africa trade. As a non-reciprocal preference program, AGOA currently focuses on African exports destined for the United State U.S. Customs and Border Protection (CBP), within the Department of Homeland Security (DHS), is the primary agency charged with ensuring the smooth flow of trade through U.S. ports of entry (POEs). CBP's policies with regard to U.S. imports are designed to: (1) facilitate the smooth flow of imported cargo through U.S. ports of entry; (2) enforce trade and customs laws designed to protect U.S. consumers and business and to collect customs revenue; and (3) enforce import security laws designed to prevent weapons of mass destruction, illegal drugs, and other contraband from entering the United States—a complex and difficult mission. Congress has a direct role in organizing, authorizing, and defining CBP's international trade functions, as well as appropriating funding for and conducting oversight of its programs. The second session of the 113th Congress may consider legislation to reauthorize CBP's trade functions in the above areas, and to provide additional funding for CBP's modernization efforts, such as the continuing development of the Automated Commercial Environment (ACE), an online platform designed to facilitate the import process, and the International Trade Data System (ITDS), a U.S. Treasury Department-led effort to develop an online "single window" for all U.S. agencies involved in import processing to clear goods for entry into the U.S. market. Trade facilitation aims to improve the efficiency of international trade by harmonizing and streamlining customs procedures, such as duplicative documentation requirements, customs processing delays, and non-transparent or unequally enforced importation rules and requirements. Multilateral efforts to streamline trade facilitation procedures were addressed as part of a "Bali Package" of "deliverables" at the 9th WTO Ministerial Conference in December 2013 (see above). The final text contains several provisions sought by U.S. negotiators, including multilateral rules for timely, binding advance customs rulings; and procedures that would allow expedited release for goods entered through air cargo facilities. Oversight into CBP efforts to enhance cargo security may also receive congressional attention as part of, or separate from, consideration of a possible CBP reauthorization bill. For example, the SAFE Port Act ( P.L. 109-347 ), as amended, included a statutory mandate to scan all U.S. maritime cargo with non-intrusive inspection equipment at overseas ports of loading by July 2012. On May 2, 2012, Homeland Security Secretary Napolitano notified Congress that she would exercise her authority to extend the 100% scanning deadline. Thus, cargo screening could become the focus of additional legislation in the 113th Congress, among other issues. Many Members of Congress introduce bills that support importer requests for the temporary suspension of tariffs on chemicals, raw materials, or other non-domestically-made components used as inputs in the manufacturing process. A rationale for these requests is that they help domestic producers of manufactured goods reduce costs, making their products more competitive. Due to the large number of bills typically introduced, they are often packaged together in a broader miscellaneous tariff bill. The United States Manufacturing Enhancement Act of 2010 ( P.L. 111-227 ) enacted on August 11, 2010, is the most recent MTB. It expired on December 31, 2012. Legislation could emerge in the second session of the 113th Congress proposing to retroactively renew these duty suspensions, enact new ones, or make procedural changes to the MTB process. It is also possible that consideration of an MTB bill could be controversial because of past congressional moratoriums on "earmarks," which in the past have included measures to provide "limited tariff benefits," including duty suspensions. Congress created Trade Adjustment Assistance (TAA) in the Trade Expansion Act of 1962 to help workers and firms adjust to dislocation that may be caused by increased trade liberalization. It is justified now, as it was then, on grounds that the government has an obligation to help those hurt by policy-driven trade opening. TAA is also presented as an alternative to policies that would restrict imports, and so provides assistance while bolstering freer trade and diminishing prospects for potentially costly tension (retaliation) among trade partners. As in the past, critics debate the merits of TAA on equity, efficiency, and budgetary grounds. Democratic leaders and the Obama Administration, however, considered TAA renewal essential for passage of three implementing bills for free trade agreements (FTAs) with Colombia, Panama, and South Korea. With this understanding, Congress reauthorized TAA with bipartisan support ( P.L. 112-40 ). The TAA statute reauthorized the workers, firms, and farmers programs through December 31, 2013, but included provisions that allow TAA programs to continue assisting clients who were certified before December 31, 2013. The TAA programs can continue to operate with FY13 appropriations if funds are available. Since Congress did not reauthorize the TAA program before January 1, 2014, the TAA program reverted from the expanded program made effective by the TAAEA to the more limited program that was in effect on February 13, 2011, before the TAAEA amendments. The 2011 reauthorization also discontinued TAA for communities because it was considered duplicative of other federal programs. Many, but not all, of the enhanced programs passed in an earlier (2009) reauthorization were continued, retaining eligibility for services workers and firms, increasing income support for workers undergoing job training, raising the Health Coverage Tax Credit, expanding funding for training benefits, and reinstituting more detailed program evaluation and reporting requirements. Funding was reduced for job search, relocation assistance, and wage insurance for older workers, and eligibility for public sector workers was discontinued. Senator Baucus introduced the Trade Adjustment Assistance Extension Act of 2013 ( S. 1357 ) on July 24, 2013. The bill would extend and reauthorize TAA for workers, firms, and farmers at current funding levels through 2020. On July 30, 2013, President Obama announced support for reauthorization of the TAA and linked it to passage of Trade Promotion Authority (TPA). TAA renewal continues to spur heated debate in Congress, but TAA reauthorizations that have been tied to the granting of trade negotiating authority have generally received strong support. The international protection and enforcement of IPR—such as patents, copyrights, trademarks, and trade secrets—is a major component of U.S. trade policy, due to the significant role of IPR in the U.S. economy and the potentially negative commercial, health, safety, and security consequences of counterfeiting and piracy. The United States pursues intellectual property objectives using a range of trade policy mechanisms, including multilaterally through the WTO, which administers the Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS Agreement"); regionally and bilaterally through the negotiation of FTAs; and domestically through U.S. trade laws, such as "Section 337" and "Special 301." IPR protection and enforcement have been a key negotiating objective in TPA and in U.S. trade agreement negotiations. The 113th Congress could conduct oversight of implementation of IPR commitments in the U.S. FTAs with Colombia, South Korea, and Panama, which entered into force in 2012. Congress also could conduct oversight of the treatment of IPR issues in current U.S. trade negotiations. IPR issues feature prominently in the TPP negotiations, in which the United States seeks intellectual property commitments that exceed the minimum standards of the TRIPS Agreement, "TRIPS-plus." Key issues in TPP include pharmaceutical patents and implications for access to medicines, and copyright enforcement and implications for digital data flows and privacy. Possible issues in the TTIP negotiations, which are in early stages, include the treatment of pharmaceuticals; the protection of geographical indications; and new concerns in the digital realm, such as forced localization barriers to trade. Both negotiations include a focus on commitments to enhance protections for trade secrets. Additionally, the 113th Congress could continue to monitor the resolution of the Anti-Counterfeiting Trade Agreement (ACTA), which was negotiated outside of the WTO by the United States and nearly 40 other primarily developed countries. The ACTA is intended to build on the TRIPS Agreement, such as by addressing new IPR issues in the digital environment. Concluded in 2010, the ACTA has not entered into force. The United States continues efforts to bring the ACTA into force. Among the U.S. domestic tools to pursue IPR-related trade policy is Section 337 of the Tariff Act of 1930 (19 U.S.C. §1337), as amended, which authorizes the U.S. International Trade Commission (ITC) to prohibit imports of products into the United States that infringe on U.S. intellectual property. In the 112th Congress, legislative efforts related to Section 337 focused on addressing jurisdictional problems associated with holding foreign websites accountable for piracy and counterfeiting. Multiple bills were introduced, renewing congressional and public debate about the balance between protecting U.S. intellectual property and promoting innovation. The 113th Congress could take these issues up again, as well as other issues, including CBP's enforcement of Section 337 exclusion orders. Concerns have been raised by some Members, as well as other stakeholders, about the effectiveness, efficiency, and transparency of the Section 337 enforcement process. The United States is the largest source and recipient of foreign direct investment (FDI) in the world. This dual position points to one aspect of globalization, the spread of economic activity by firms across national borders, which has become a prominent feature of the U.S. economy. Globalization also means the United States has important economic, political, and social interests at stake in the development of international policies regarding direct investment. Congress weighs in on all aspects of these international investment issues. The United States has established domestic policies that treat foreign investors no less favorably than U.S. firms, with some exceptions for national security. Under current U.S. law, the President exercises broad discretionary authority over developing and implementing U.S. direct investment policy, including the authority to suspend or block investments that "threaten to impair the national security." Despite the leading role of the President, Congress also is directly involved in formulating the scope and direction of U.S. foreign investment policy. For instance, following the terrorist attacks on the United States on September 11, 2001, some Members questioned the traditional U.S. open-door policy and argued for greater consideration of the long-term impact of foreign direct investment on the structure and industrial capacity of the economy, and on the ability of the economy to meet the needs of U.S. defense and security interests. In July 2007, Congress asserted its own role in making and conducting foreign investment policy when it adopted and the President signed the Foreign Investment and National Security Act of 2007 ( P.L. 110-49 ). This law broadens Congress's oversight role, and explicitly includes the areas of homeland security and critical infrastructure as separately identifiable components of national security that the President must consider when evaluating the national security implications of foreign investment transactions. At times, the act has drawn Congress into a greater dialogue over the role of foreign investment in the economy. The United States promotes international investment agreements to reduce restrictions on foreign investment, ensure non-discriminatory treatment of foreign investment, protect investor rights, provide investor-state arbitration, and balance other U.S. policy interests. International investment agreements typically take two forms: bilateral investment treaties (BITs) and BIT-like chapters in free trade agreements. In April 2012, the Obama Administration announced the conclusion of its review of the U.S. Model BIT, the template which the United States uses to negotiate with foreign countries on BITs and investment chapters in FTAs. The 2012 Model BIT maintains the "core" or substantive investor protections affirmed in the 2004 Model BIT review. In addition, it clarifies that BIT obligations apply to state-owned enterprises (SOEs); includes language further limiting performance requirements; clarifies labor and environmental provisions; clarifies which financial services provisions may fall under a prudential exception (such as to address balance of payments problems); and expands transparency obligations, among other provisions. The conclusion of the Model BIT review may generate momentum to conclude previously-launched negotiations with countries such as China and India, or to launch investment negotiations with other U.S. trading partners. For example, President Obama announced in July 2013 efforts to explore an investment treaty with the East African Community (EAC), building upon the U.S.-EAC Trade and Investment Partnership announced in June 2012. Investment policy issues also feature prominently in U.S. trade negotiations, including the current proposed TPP, where investor-state dispute settlement issues have been particularly controversial. They may be addressed in the TTIP negotiations as well, given the high level of transatlantic investment and U.S. and EU interest in using TTIP to signal the importance of investment protections to third countries. BITs are submitted to Congress as treaties, which require a two-third's vote of approval for ratification. BIT-like chapters in FTAs, by contrast, require simple majority approval of the trade agreement implementing legislation by both Houses of Congress. The 113th Congress may be asked to consider new BITs, as well as the possible TPP and TTIP that may include investment chapters. U.S. investment policy includes a focus on attracting investment to the United States. SelectUSA is a program established by Executive Order 13577 in June 2011 to coordinate federal efforts to attract and retain investment, both foreign and domestic, in the United States. Housed in the Department of Commerce, SelectUSA provides information to potential investors about doing business in the United States; serves as an "ombudsman" for investors to help resolve issues involving federal investment-related programs and activities; and advocates for U.S. cities, states, and regions competing for global investment. In October 2013, President Obama announced a broad-based plan to enhance SelectUSA, including by making investment promotion a formal part of the portfolio of U.S. ambassadors and their embassy staff. The 113th Congress could consider funding levels for Select USA, as well as conduct oversight of the effectiveness of SelectUSA in supporting U.S. investment policy. The International Financial Institutions (IFIs) include the International Monetary Fund (IMF), whose main task is ensuring international monetary and financial stability, and several multilateral development banks (MDBs), including the World Bank and four regional development banks—the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank. The United States is a member and major contributor to all these institutions. The IFIs and the Group of Twenty (G-20) major economies were at the forefront of the global response to the financial crisis in 2008, dramatically increasing their lending to help developing countries absorb the impact of reduced economic growth and its effects on trade and financial flows. To cover increased lending, the IMF and the MDBs sought new donor resources. At several G-20 summits, world leaders committed to ensure sufficient resources for the IFIs to support their macroeconomic stability and development mandates. Many of these efforts, which were directed at stabilizing the world economy in the midst of the 2008-2009 global economic crisis, are now focused on resolving the Eurozone sovereign debt crisis to ensure that it does not undermine the stability and growth of the world economy. Recent congressional attention has centered on the how IMF resources have been used since the 2008 global economic crisis, on proposed IMF governance changes, and on the IMF's role in the Eurozone debt crisis. Three Eurozone countries—Ireland, Greece, and Portugal—are currently receiving IMF-budget support and Congress will likely continue to conduct oversight of events in Europe. In December 2010, the Board of Governors of the IMF agreed to a wide-ranging set of institutional reforms. If enacted, they would increase the institution's core source of funding and expand the representation of major emerging market countries, such as Brazil, India, China, and Mexico. In order for key elements of the reform package to take effect, IMF rules dictate that the reforms must be approved by three-fifths of IMF members (113) representing 85% of the total voting power. Under this formula, approval by the United States is essential because it controls 16.75% of the voting power. Under U.S. law, congressional authorization is required for the United States to consent to change the U.S. quota in the IMF, which determines the U.S. share of total voting power. Furthermore, depending on the budgetary treatment of any newly-authorized U.S. contributions to the IMF, appropriations may be required. To date, a majority of IMF member countries have approved these reforms, but the United States has not. U.S. inaction reportedly created tensions at the IMF-World Bank Annual Meetings in October 2012 and October 2013, with some IMF members frustrated because the United States was instrumental in initially advancing some of the reforms. Many policymakers view U.S. participation in MDB capital increases as important because the United States is the largest shareholder in the MDBs, a position which also defines its power to veto, which it can exercise under certain circumstances. The Obama Administration has strongly supported capital increases at the MDBs, but cautioned that the increases must be tied to policy reforms to: improve transparency, accountability, and governance; better align management performance and incentives with improved development outcomes; and delineate more clearly the division of labor between the World Bank and the regional development banks. Congress may evaluate the effectiveness of and possibly consider future appropriations for MDBs. The Group of 20, or G-20, is the premier forum for international economic cooperation and coordination, and includes 20 major advanced and emerging-market economies that, together, account for two-thirds of the world's population and 90% of world GDP. Members of the G-20 include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, and the United States, as well as the European Union (EU). The leaders of the G-20 countries hold annual "summits," as well as more frequent gatherings of finance ministers, central bankers, and other officials. Discussions and agreements primarily focus on international economic and financial issues, although related topics, such as development, food security, and the environment, may also be featured. The G-20 has a rotating presidency, which was held by Russia in 2013. Russia hosted the 2013 G-20 summit in St. Petersburg on September 5-6. The official G-20 statement released at the end of the summit focused on a wide range of economic issues, including trade, investment, jobs, financial regulation, and corruption. However, foreign policy issues, most notably the situation in Syria, were reported to have dominated the informal discussions. Some analysts are now calling for a more formal foreign policy track in the G-20, similar to the set-up of the G-7/G-8 (Canada, France, Germany, Italy, Japan, the UK, and the United States, plus Russia). Other analysts argue that formally broadening the G-20 agenda to foreign policy issues would distract the discussion from important economic issues, such as U.S. Federal Reserve potentially "tapering" its quantitative easing program, the slowdown of growth in emerging economies, and progress on financial regulatory reforms. The 113th Congress may want to exercise oversight over the Administration's participation in the G-20 process, including the policy commitments that the Administration is making in the context of the G-20 and the policies it is encouraging other G-20 countries to pursue. Australia formally assumed the G-20 presidency on December 1, 2013, and is expected to host the next G-20 summit in Brisbane on November 15-16, 2014. Beginning in late 2009, the Eurozone has faced an economic crisis that has posed serious threats to economic stability in Europe and the broader international economy. The concerns of investors and policymakers have focused on high, and potentially unsustainable, levels of public and private debt in some Eurozone countries, particularly Greece, Ireland, Italy, Portugal, Spain, and Cyprus. Concerns about debt levels have been compounded by weaknesses in the Eurozone banking system, slow or negative growth, high unemployment, and persistent trade imbalances within the Eurozone. The financial crisis also became a political crisis, provoking large scale protests and directly or indirectly leading to the fall of several governments in Europe. European leaders and institutions have pursued a number of policies to stem contagion of the crisis. The European Central Bank took unprecedented steps to increase liquidity in the Eurozone banking system, Eurozone governments and the IMF provided financial assistance packages to countries in crisis, and governments implemented several rounds of austerity programs, among other measures. The intense market pressure facing Eurozone countries abated through most of 2013, and economic conditions in some crisis countries, particularly Ireland, have improved. Some analysts are speculating that the crisis is over, but others disagree. They argue that serious, long-term economic challenges remain, particularly related to growth and unemployment. They also caution that debt levels in some Eurozone countries remain too high. The United States and Europe have the largest bilateral economic relationship in the world, and many Members of Congress have expressed concern about the impacts of the Eurozone crisis on the U.S. economy. The crisis could continue to affect the U.S. economy through a number of channels. For example, slow or negative growth in the Eurozone could depress demand for U.S. exports. Some Members have also expressed concerns about the role of the IMF in the crisis. The IMF is providing loans to Greece, Ireland, Portugal, and Cyprus, in conjunction with financing from European sources. Some Members have questioned whether the IMF's role in the Eurozone has been appropriate and constructive. Others argue that the IMF's role in the Eurozone has been consistent with its mandate of promoting stability in the international economy. In December 2001, Argentina suffered a severe financial crisis, leading to the largest default on sovereign debt in history. After unsuccessful attempts to find a mutually acceptable solution to restructuring the debt, Argentina abandoned the negotiation process and made two bond exchange offers in 2005 and 2010 that were accepted by 92% of private creditors. This outcome left debt held by hedge funds and members of the Paris Club of countries, including the United States, in default. The offers flaunted normal restructuring procedures, and, as a result, Argentina faces prolonged litigation by holdout creditors that have resulted in judgments and attachment orders. In addition, Argentina has adopted policies that have caused increased tension with foreign states and companies. These include failure to pay judgments against Argentina in the World Bank's International Centre for Settlement of Investment Disputes (ICSID), nationalization of a largely Spanish-owned oil company, increasingly protectionist trade measures, capital and exchange rate controls, import taxes, and failure to submit to an IMF Article IV economic review required of all Fund members. Some U.S. policymakers remain frustrated at Argentina's reluctance to settle with U.S. stakeholders and alter other policies. The United States has taken a number of financial actions against Argentina, including suspension of GSP benefits, voting against loans to Argentina in the World Bank and Inter-American Development Bank, and denying bilateral aid. Previous congresses have introduced resolutions calling for Argentina's membership in the G-20 to be conditioned on adherence to international norms of economic behavior and various versions of the Judgment Evading Foreign States Accountability Act, which would have attempted to pressure Argentina in a number of ways. Despite congressional support for U.S. interests in this matter, there is disagreement as to whether this legislation is the best way to proceed given questions over committee jurisdiction and action pending before federal courts. CRS Report RL33743, Trade Promotion Authority (TPA) and the Role of Congress in Trade Policy , by [author name scrubbed]. CRS Report RS21004, Trade Promotion Authority and Fast-Track Negotiating Authority for Trade Agreements: Major Votes , by [author name scrubbed]. CRS Report 97-896, Why Certain Trade Agreements Are Approved as Congressional-Executive Agreements Rather Than Treaties , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL33944, Trade Primer: Qs and As on Trade Concepts, Performance, and Policy , coordinated by [author name scrubbed]. CRS Report R42694, The Trans-Pacific Partnership (TPP) Negotiations and Issues for Congress , coordinated by [author name scrubbed]. CRS Report R42344, Trans-Pacific Partnership (TPP) Countries: Comparative Trade and Economic Analysis , by [author name scrubbed]. CRS Report R42676, Japan Joins the Trans-Pacific Partnership: What Are the Implications? , by [author name scrubbed] and [author name scrubbed]. CRS Report R42448, Pivot to the Pacific? The Obama Administration's "Rebalancing" Toward Asia , coordinated by [author name scrubbed]. CRS Report RL34330, The U.S.-South Korea Free Trade Agreement (KORUS FTA): Provisions and Implications , coordinated by [author name scrubbed]. CRS Report RL34470, The U.S.-Colombia Free Trade Agreement: Background and Issues , by [author name scrubbed]. CRS Report R42965, NAFTA at 20: Overview and Trade Effects , by [author name scrubbed] and [author name scrubbed]. CRS Report RL31356, Free Trade Agreements: Impact on U.S. Trade and Implications for U.S. Trade Policy , by [author name scrubbed]. CRS Report RL32060, World Trade Organization Negotiations: The Doha Development Agenda , by [author name scrubbed]. CRS Report RS22154, World Trade Organization (WTO) Decisions and Their Effect in U.S. Law , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RS20088, Dispute Settlement in the World Trade Organization (WTO): An Overview , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL33536, China-U.S. Trade Issues , by [author name scrubbed]. CRS Report RL33534, China's Economic Rise: History, Trends, Challenges, and Implications for the United States , by [author name scrubbed]. CRS Report RS21625, China's Currency Policy: An Analysis of the Economic Issues , by [author name scrubbed] and [author name scrubbed]. CRS Report RL34314, China's Holdings of U.S. Securities: Implications for the U.S. Economy , by [author name scrubbed] and [author name scrubbed]. CRS Report R41748, China and the United States—A Comparison of Green Energy Programs and Policies , by [author name scrubbed]. CRS Report R41929, Boosting U.S. Exports: Selected Issues for Congress , by [author name scrubbed] et al. CRS Report R41495, U.S. Government Agencies Involved in Export Promotion: Overview and Issues for Congress , coordinated by [author name scrubbed]. CRS Report R41829, Reauthorization of the Export-Import Bank: Issues and Policy Options for Congress , by [author name scrubbed]. CRS Report R42472, Export-Import Bank: Background and Legislative Issues , by [author name scrubbed]. CRS Report 98-567, The Overseas Private Investment Corporation: Background and Legislative Issues , by [author name scrubbed]. CRS Report R41202, Agricultural Export Programs: Background and Issues , by [author name scrubbed]. CRS Report R41916, The U.S. Export Control System and the President's Reform Initiative , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33948, State and Local Economic Sanctions: Constitutional Issues , by [author name scrubbed] and [author name scrubbed]. CRS Report RS20871, Iran Sanctions , by [author name scrubbed]. CRS Report R43311, Iran: U.S. Economic Sanctions and the Authority to Lift Restrictions , by [author name scrubbed]. CRS Report R41336, U.S. Sanctions on Burma , by [author name scrubbed]. CRS Report RL34524, International Trade: Rules of Origin , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33867, Miscellaneous Tariff Bills: Overview and Issues for Congress , by [author name scrubbed]. CRS Report RL32371, Trade Remedies: A Primer , by [author name scrubbed]. CRS Report R41429, Trade Preferences: Economic Issues and Policy Options , coordinated by [author name scrubbed]. CRS Report RL33663, Generalized System of Preferences: Background and Renewal Debate , by [author name scrubbed]. CRS Report RS22541, Generalized System of Preferences: Agricultural Imports , by [author name scrubbed]. CRS Report R43173, African Growth and Opportunity Act (AGOA): Background and Reauthorization , by [author name scrubbed]. CRS Report RL34687, The Haitian Economy and the HOPE Act , by [author name scrubbed]. CRS Report RS22548, ATPA Renewal: Background and Issues , by [author name scrubbed]. CRS Report R43014, U.S. Customs and Border Protection: Trade Facilitation, Enforcement, and Security , by [author name scrubbed]. CRS Report R41922, Trade Adjustment Assistance (TAA) and Its Role in U.S. Trade Policy , by [author name scrubbed]. CRS Report R42012, Trade Adjustment Assistance for Workers , by [author name scrubbed]. CRS Report RS20210, Trade Adjustment Assistance for Firms: Economic, Program, and Policy Issues , by [author name scrubbed]. CRS Report R40206, Trade Adjustment Assistance for Farmers , by [author name scrubbed]. CRS Report RL34292, Intellectual Property Rights and International Trade , by [author name scrubbed] and [author name scrubbed]. CRS Report R41107, The Proposed Anti-Counterfeiting Trade Agreement: Background and Key Issues , by [author name scrubbed]. CRS Report RS22880, Intellectual Property Rights Protection and Enforcement: Section 337 of the Tariff Act of 1930 , by [author name scrubbed]. CRS Report R43052, U.S. International Investment Agreements: Issues for Congress , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33984, Foreign Direct Investment: Current Issues , by [author name scrubbed]. CRS Report RL32462, Foreign Investment in U.S. Securities , by [author name scrubbed]. CRS Report RL33388, The Committee on Foreign Investment in the United States (CFIUS) , by [author name scrubbed]. CRS Report RL32461, Outsourcing and Insourcing Jobs in the U.S. Economy: Evidence Based on Foreign Investment Data , by [author name scrubbed]. CRS Report R41170, Multilateral Development Banks: Overview and Issues for Congress , by [author name scrubbed]. CRS Report RS20792, Multilateral Development Banks: U.S. Contributions FY2000-FY2014 , by [author name scrubbed]. CRS Report R42019, International Monetary Fund: Background and Issues for Congress , by [author name scrubbed]. CRS Report R42844, IMF Reforms: Issues for Congress , by [author name scrubbed] and [author name scrubbed]. CRS Report R42377, The Eurozone Crisis: Overview and Issues for Congress , coordinated by [author name scrubbed]. CRS Report R40977, The G-20 and International Economic Cooperation: Background and Implications for Congress , by [author name scrubbed].

The U.S. Constitution grants authority over the regulation of foreign commerce to Congress, which it exercises through oversight of trade policy, including the consideration of legislation to approve trade agreements and authorize trade programs. Policy issues cover such areas as: U.S. trade negotiations; tariff and nontariff barriers; worker dislocation from trade liberalization, trade remedy laws; import and export policies; international investment, economic sanctions; and trade policy functions of the federal government. Congress also has an important role in international finance. It has the authority over U.S. financial commitments to international financial institutions and oversight responsibilities for trade- and finance-related agencies of the U.S. Government. The 112th Congress approved U.S. bilateral free trade agreements with Colombia, Panama, and South Korea, extended the Trade Adjustment Assistance (TAA) programs through December 31, 2013, and reauthorized the Generalized System of Preferences (GSP) through July 31, 2013. It also authorized permanent normal trade relations (PNTR) status for Russia and Moldova, reauthorized the U.S. Export-Import Bank, and approved full U.S. participation in general capital increases for the World Bank and four regional development banks. The 113th Congress may revisit these issues and address new ones. Among the more potentially prominent issues are: 1.Possible renewal of Trade Promotion Authority (TPA), allowing the President to enter into reciprocal trade agreements, and providing trade negotiating objectives and expedited legislative procedures to consider trade agreement implementing bills; and the possible related issue of TAA program reauthorization; 2.Negotiations for comprehensive reciprocal trade agreements with major trading partners, including the Trans-Pacific Partnership (TPP) with the United States 12 countries from the Western Hemisphere and Asia, and new negotiations with the European Union for the Transatlantic Trade and Investment Partnership (TTIP) Agreement; 3.U.S.-China trade relations including investment, intellectual property rights protection, currency reform, and market access liberalization; 4.International finance issues including implications of the ongoing Eurozone debt crisis for the U.S. economy, oversight of international financial institutions, and negotiations to conclude new bilateral investment treaties (BITs); 5.Oversight of the World Trade Organization (WTO) Doha Round negotiations, including the completed trade facilitation agreement, and of separate new trade negotiations (e.g. services) that some members of the WTO have undertaken; 6.Review of the President's export control reform initiative and possible renewal of the Export Control Act (EAA), and review of trade sanctions; and 7.Reauthorization of U.S. Customs and Border Protection (CBP) and expiring trade preference programs (e.g., the GSP and the Andean Trade Preference Act). A list of CRS reports covering these issues is provided at the end of the report.

The Federal Housing Administration (FHA), an agency of the Department of Housing and Urban Development (HUD), insures private mortgage lenders against the possibility that a borrower will default on his or her mortgage. If the borrower does default, and the home goes to foreclosure, FHA will pay the lender the remaining principal amount owed on the mortgage. FHA insurance is intended to encourage lenders to offer affordable mortgages to certain eligible borrowers who might find it difficult to obtain a conventional (that is, non-government-insured) mortgage, such as households with small down payments. FHA requires a 3.5% down payment for most mortgages it insures, which is lower than the down payment required for most conventional mortgages. Through its single-family mortgage insurance program, FHA insures eligible mortgages used to purchase or refinance a single-family home. A lender must be approved by FHA to be eligible to offer FHA-insured mortgages, and borrowers and mortgages must meet certain underwriting and eligibility criteria to qualify for FHA insurance. Borrowers also pay fees, called premiums, in exchange for the insurance. FHA's single-family mortgage insurance program is intended to be self-supporting. The money that it brings in from the fees charged to borrowers and any amounts that it recoups from the sale of foreclosed homes is intended to cover the costs of any claims paid to lenders when mortgages default. However, in recent years increasing foreclosures on FHA-insured mortgages and factors such as house price declines have put pressure on the single-family mortgage insurance fund, known as the Mutual Mortgage Insurance Fund (MMI Fund). At the end of FY2013, FHA was required to take a $1.7 billion mandatory appropriation from Treasury to ensure that it would have sufficient funds to cover all of its expected future losses on the loans that it was currently insuring. FHA did not need any funds from Treasury for this purpose in FY2014. Furthermore, by statute, the MMI Fund is required to maintain a capital ratio of 2%. This means that it is supposed to have an economic value that is equal to at least 2% of the total dollar volume of mortgages that it is currently insuring, where the economic value is the current net assets of the MMI Fund plus the net present value of the estimated future cash flows on the mortgages that it currently insures. In other words, it is a measure of the amount of funds that would be expected to be available to cover any unexpected future losses on the loans that it currently insures, beyond what is needed to cover expected losses. The capital ratio fell below 2% in FY2009, and has remained below 2% since then, turning negative in FY2012 and FY2013. In FY2014, the capital ratio was once again positive, but at 0.41% remained below the 2% statutory requirement. FHA has made a number of policy changes in recent years to attempt to improve its financial condition. Congress has also been considering additional reforms to FHA. This report describes recent policy changes made by FHA and recent legislative proposals that would make additional changes to FHA's single-family program. For the most part, this report does not go into detail about the features of FHA-insured loans, FHA's market role, or its financial status, except as necessary to describe implemented or proposed policy changes. For more information on the features of FHA-insured loans and FHA's role in the mortgage market, see CRS Report RS20530, FHA-Insured Home Loans: An Overview , by [author name scrubbed]. For details on the financial status of the MMI Fund, see CRS Report R42875, FHA Single-Family Mortgage Insurance: Financial Status of the Mutual Mortgage Insurance Fund (MMI Fund) , by [author name scrubbed]. FHA has made several changes to its single-family insurance programs, particularly since FY2010, to attempt to improve its financial status. Recognizing that there is a tension between FHA's mission of expanding access to mortgage credit and its need to maintain the financial soundness of the MMI Fund, these changes generally attempt to improve FHA's financial soundness without unduly limiting access to mortgages for creditworthy borrowers. FHA has the authority to make some of these changes administratively, through policy guidance or rulemaking procedures, while others require congressional action. The policy changes that FHA has made in recent years generally attempt to increase FHA's cash reserves, to decrease the riskiness of the mortgages it insures, or both. Many of the changes that FHA has made or could make—including increasing premiums and strengthening underwriting criteria—impact the risk profile of future loans that FHA will insure rather than loans that FHA has already insured. FHA has fewer options at its disposal for making changes that will reduce its risk related to loans that it already insures. However, it has taken some steps that address past loans as well as future loans, such as more aggressively holding lenders accountable for loans they originated that did not meet FHA's criteria, making changes to its procedures for addressing delinquent mortgages (known as loss mitigation), and implementing new methods of selling foreclosed properties (known as property disposition). This section describes several major policy changes that FHA has proposed or implemented in recent years. The changes are divided into three broad categories: changes to eligibility and underwriting criteria (including changes to the premiums borrowers pay), changes intended to enhance FHA's oversight of lenders, and changes to the way in which FHA handles delinquent mortgages and foreclosed properties. Mortgages that FHA insures must meet certain underwriting standards and otherwise comply with FHA requirements. Some of the changes that FHA has initiated over the past several years involve increasing the premiums that borrowers pay for FHA-insured mortgages and strengthening the underwriting guidelines for its single-family program. The premium increases are intended to ensure that FHA is charging enough for its insurance to cover its potential costs, as well as to build up additional funds that can be used to pay for higher-than-expected losses on loans that FHA insures. The underwriting changes are aimed at making FHA-insured mortgages less likely to default, and therefore likely to result in fewer insurance claims that FHA has to pay. However, as a result of these underwriting and premium changes, some prospective homebuyers may find that they are no longer eligible for FHA insurance, or that FHA-insured mortgages are no longer an affordable option for them. Borrowers of FHA-insured mortgages pay both upfront and annual mortgage insurance premiums (MIPs). The upfront premium is paid when the loan is originated and is calculated as a percentage of the original loan amount. The annual premiums are paid each year and are calculated as a percentage of the outstanding loan amount. The premiums represent a large portion of the cash flow into FHA's single-family insurance fund. The maximum levels of both the upfront and annual mortgage insurance premiums are set in statute, but FHA can administratively set the actual premiums it charges, as long as it does not exceed the statutory maximum. In recent years, FHA has made a series of changes to the premiums it charges to new borrowers, increasing the premiums several times before announcing a decrease in the annual premiums in January 2015. Table 1 shows the current upfront and annual premiums charged by FHA compared to the maximum premium levels allowed by statute. The upfront premium that FHA is currently charging is 1.75% of the loan amount, compared to a maximum of 3% allowed by statute. The annual premium varies slightly depending on the initial loan-to-value ratio (LTV) of the mortgage. The annual premiums are currently 0.85% of the loan balance (or 0.80% of the loan balance if the initial LTV is 95% or less), compared to a maximum of 1.55% (or 1.50% if the initial LTV is 95% or less) allowed by statute. The current premiums are reduced from premiums of 1.35% and 1.30%, respectively, before the premium decrease in January 2015. These annual premiums are lower than any time since early October 2010, although they are higher than the premiums that were charged prior to that date. For the most part, the changes to the premiums have been made administratively by FHA, although Congress required an increase in the annual mortgage insurance premium of 10 basis points (one-tenth of one percent) in the Temporary Payroll Tax Cut Continuation Act of 2011 ( P.L. 112-78 ). Congress also passed legislation in 2010 raising the maximum statutory annual premium that FHA is allowed to charge, which allowed FHA to make subsequent increases to the annual premium. The changes to the premiums since October 1, 2008, are shown in Table 2 , along with their effective dates and the FHA administrative guidance (known as Mortgagee Letters) that implemented the changes. There has been much debate about the appropriate level for FHA's premiums. Prior to the reduction in the annual premiums in January 2015, several housing and mortgage industry and consumer groups had called on FHA to lower the premiums, arguing that the higher fees were making FHA-insured mortgages too expensive and may have been making it harder for some creditworthy borrowers to obtain FHA-insured loans. Those in favor of lowering the premiums also argue that setting the premiums too high could harm the FHA insurance fund by reducing the number of borrowers who obtain FHA mortgages (and thus pay fees to FHA) or by leading only riskier borrowers to seek FHA loans while less risky borrowers are able to obtain more affordable loans elsewhere. Other observers have been critical of the decision to lower premiums, particularly while FHA's capital ratio remains below the 2% level required by statute. They note that lowering the premiums is likely to slow FHA's efforts to rebuild its capital reserves. This, in turn, raises concerns that FHA may not have enough funds to cover any increase in its expected costs in the event of another housing or economic downturn and that it could eventually require additional assistance from Treasury (and ultimately taxpayers). Critics of the decision also note that, while premiums that are set too high could lead lower-risk borrowers to seek other types of loans and negatively affect the overall credit quality of FHA's business, premiums that are set too low could also negatively impact the insurance fund. This could happen if the lower premiums lead to an increase in the number of higher-risk borrowers that take out FHA-insured loans without adequately pricing for that risk. Finally, some argue that lowering the FHA fees makes mortgage insurance offered by private companies (known as private mortgage insurance, or PMI) less competitive with FHA for some borrowers, possibly expanding the government's role in the mortgage market when many would like to see the government's role reduced. In addition to changing the amount of the premiums charged, FHA has also changed the length of time that borrowers have to pay the annual mortgage insurance premium. Since 2001, FHA had followed a policy of cancelling borrowers' annual mortgage insurance premiums when the mortgage balance reached 78% of the home's value (based on the initial value of the home), provided that the borrower had paid the premium for at least five years. Effective June 3, 2013, FHA re-instituted a policy of requiring most borrowers to pay the annual mortgage insurance premium for the life of the loan. This policy only affects borrowers who take out FHA-insured mortgages after the effective date. FHA made this policy change because, unlike private mortgage insurers, it continues to insure the entire remaining loan balance for the life of the loan regardless of the loan-to-value ratio. Furthermore, the fact that the premiums were canceled when a mortgage reached 78% of the initial value of the home (rather than the current value of the home), combined with decreases in home prices in recent years, meant that some borrowers could have had their premiums canceled when they actually had very little equity in the home based on the home's current value. This resulted in FHA paying some claims on defaulted mortgages for loans on which borrowers were no longer paying mortgage insurance premiums, and where the home's value was not high enough to recoup the amount of the claim that FHA paid. FHA has also increased the required down payment for borrowers with lower credit scores. For most FHA-insured loans, the required down payment is 3.5%. Beginning on October 4, 2010, FHA has required a down payment of at least 10% from borrowers with credit scores between 500 and 579, while the down payment requirement of 3.5% remains in place for borrowers with credit scores of 580 or above. Prior to making this change, the required FHA down payment was 3.5% for most borrowers, except that borrowers with credit scores below 500 were required to make a down payment of at least 10%. FHA no longer insures loans made to borrowers with credit scores below 500. FHA has stated that it had not insured many loans where the borrower's credit score was below 500, but that the loans that it did insure with borrower credit scores below that threshold have performed appreciably less well than loans to borrowers with higher credit scores. Implementing a higher down payment requirement for borrowers with lower credit scores is aimed at addressing concerns about "risk layering," or the possibility that a loan may be at a higher risk of default when it exhibits multiple risk factors rather than just one risk factor. Lower credit scores and higher loan-to-value ratios (that is, borrowing a higher amount relative to the total value of the home) are both potential risk factors. Increasing down payment requirements (and, therefore, reducing the loan-to-value ratio) for borrowers with credit scores below 580 is intended to help address that concern. Table 3 summarizes FHA's current down payment requirements. FHA made these changes to down payment requirements through rulemaking procedures, and it published a Federal Register notice on July 15, 2010, soliciting public comment on these and other changes. HUD then issued a Final Rule addressing only these changes on September 3, 2010, along with administrative guidance providing additional information on the implementation of these changes. Figure 1 illustrates the distribution of borrowers' credit scores by dollar volume of loans insured by FHA in each year between FY2005 and FY2014. The share of the total dollar volume of FHA-insured loans made to borrowers with lower credit scores decreased over this time period, and the share made to borrowers with higher credit scores increased, particularly beginning in FY2009. In each year between FY2005 and FY2007, roughly 30% of FHA-insured loans (by dollar volume) were made to borrowers with credit scores below 600. Since then, the share of mortgages made to such borrowers dropped to below 10% in FY2009 and to 1% or less each year since FY2011. Given this shift towards FHA serving fewer borrowers with credit scores below 600 in recent years, the down payment changes for the borrowers with the lowest credit scores might currently affect only a relatively small share of potential borrowers. However, if borrowers with higher credit scores begin turning to the conventional mortgage market and private mortgage insurance, and if FHA seeks to return to a more traditional role of insuring a higher proportion of mortgages made to borrowers with lower credit scores, it is possible that more borrowers who traditionally might have sought out FHA-insured mortgages could find themselves unable to qualify based on their credit scores and the higher down payment requirements. As the share of FHA loans to borrowers with lower credit scores decreased, the share of loans made to borrowers with higher credit scores increased. In FY2011, nearly 60% of the loans that it insured were to borrowers with credit scores of 680 or above, compared to about 20% of loans made to such borrowers in FY2007. In FY2014, based on partial year data, the share of FHA loans made to borrowers with credit scores of 680 or above was about 45%, a decrease of close to nine percentage points compared to FY2013. The share of FHA loans made to borrowers with credit scores between 640 and 679 increased by nearly five percentage points, to 42% from 38%. While the change in the distribution of borrower credit scores in recent years may partly reflect the changes in down payment requirements for borrowers with lower credit scores, it likely also reflects the general tightening of mortgage credit in the aftermath of the housing downturn, when even some borrowers with strong credit scores might have had difficulty accessing private alternatives for mortgage insurance, and some borrowers with lower credit scores might not have been able to obtain a mortgage at all. In addition, an increase in the loan limits for FHA-insured mortgages, particularly in high-cost areas, may have made FHA-insured loans an option for more borrowers with better credit scores who live in those areas. In the same 2010 Federal Register notice that included the changes in down payment requirements for borrowers with lower credit scores, FHA proposed reducing the amount of seller concessions it will allow. FHA modified this proposal in a 2012 revised notice, but has not yet issued a final rule implementing this proposed change. "Seller concessions" are any contributions to the borrower's closing costs or other settlement expenses that are made by the seller or any other interested third party. Specifically, FHA proposes reducing the amount of allowable seller concessions to the greater of (1) 3% of the lesser of the home's purchase price or appraised value or (2) $6,000. Currently, FHA allows seller concessions of up to 6% of the lesser of the sale price or the appraised value. The notice also revises the items that count as seller concessions. FHA maintains that limiting seller concessions to 3% would be in line with industry standards for loans with loan-to-value ratios similar to FHA's, and that FHA-insured loans with higher amounts of seller concessions have performed more poorly in the past. While higher amounts of seller concessions will not be absolutely prohibited, any amount of seller concessions above the 3% threshold will result in a reduction of the mortgage amount that FHA will insure. Provisions included in FHA reform legislation that was introduced, but not enacted, during the 113 th Congress would have required FHA to finalize the rules or, alternatively, would have implemented the 3% cap on seller concessions by statute. These bills are discussed in the " Legislative Proposals in the 113th Congress " section of this report. For most mortgages that will be insured by FHA, lenders can use an automated underwriting system to underwrite loans. However, certain FHA mortgages must be underwritten manually rather than through the automated system. For example, mortgages must be manually underwritten for borrowers with no credit history. The same July 2010 notice that proposed changes to FHA's down payment requirements and the reduction in seller concessions also proposed changes to FHA's manual underwriting requirements. A final notice published in December 2013 implements the new requirements. These changes generally attempt to reduce FHA's risk from manually underwritten loans while ensuring that creditworthy borrowers retain access to FHA-insured mortgages. They are effective for loans that are assigned FHA case numbers on or after April 21, 2014. In general, to qualify for an FHA-insured mortgage, a borrower's housing debt must not exceed 31% of his or her income (a 31% mortgage debt-to-income ratio, or DTI), and total debt must not exceed 43% of income (a 43% total DTI). If a borrower exceeds these debt-to-income ratios, he or she may still be able to qualify for an FHA-insured loan by showing that certain compensating factors are present, such as substantial savings or a history of sustaining higher housing debts. The new manual underwriting requirements are more specific about how many compensating factors must be present to approve a loan that exceeds the DTI ratios, as well as how high of a DTI will be permitted if compensating factors are present. The new manual underwriting requirements also require borrowers whose loans are manually underwritten to have cash reserves equal to at least one monthly mortgage payment. The notice also lowers the minimum credit score with which borrowers can exceed the DTI ratios if they exhibit compensating factors from 620 to 580. This change is intended to continue to provide access to credit for some borrowers who may have otherwise found it difficult to qualify for FHA-insured loans due to the new manual underwriting requirements. In order to originate mortgages that will be insured by FHA, a lender has to be approved by FHA. FHA-approved lenders must meet certain criteria, and the loans that they submit for FHA insurance must meet FHA's standards. Loans that do not meet FHA's requirements, but are submitted for FHA insurance, can cost FHA money if they default in the future. Therefore, FHA can take certain actions against lenders who submit mortgages for insurance that do not meet FHA's standards. These actions can include suspending lenders from FHA programs or terminating their approval to originate FHA-insured mortgages entirely as well as imposing civil money penalties. HUD's Mortgagee Review Board (MRB) reviews cases of lenders not complying with FHA requirements and enters into agreements to bring lenders into compliance or imposes penalties where necessary. HUD can also refer certain cases to the Justice Department for prosecution under federal statutes such as the False Claims Act or the Program Fraud Civil Remedies Act. In recent years, FHA has taken a number of steps to increase its oversight of FHA-approved lenders and otherwise manage its counterparty risk. In November 2009, FHA published a proposed rule announcing several changes related to FHA-approved lenders. A final rule implementing the changes was published in April 2010. These and other recent changes include increasing net worth requirements for FHA-approved lenders, eliminating separate FHA approval for mortgage brokers, implementing certain requirements related to FHA-approved lenders that were enacted by Congress in the Helping Families Save Their Homes Act of 2009 ( P.L. 111-22 ), and strengthening certain indemnification requirements. Some observers have noted that some lenders appear to be less willing to offer FHA-insured mortgages, or to only offer them under more restrictive terms than FHA requires, due to uncertainty about FHA's requirements and concern about the risk that FHA will find a fault with the loan and penalize the lender. In an attempt to provide more clarity to lenders on FHA's requirements and the types of mortgage defects that could trigger certain penalties, FHA has also been in the process of consolidating its requirements for lenders and servicers in a single handbook and making changes to the way in which it evaluates lender and servicer performance. The April 2010 final rule increased the net worth requirements for FHA-approved lenders. FHA's rationale for this change is that it will ensure that FHA-approved lenders have sufficient liquidity to withstand market fluctuations and any related losses that they might incur. FHA also notes that the net worth requirements had not been increased since 1993. The rule increased the net worth requirements to $1 million, with at least 20% of that amount held in cash or its equivalent, effective May 20, 2010, for new applicants and effective May 20, 2011, for lenders who were already FHA-approved. As of May 20, 2013, FHA-insured lenders are required to have a net worth of $1 million, plus an additional 1% of the dollar volume of FHA-insured loans originated, underwritten, purchased, or serviced by the lender in the previous fiscal year that exceeds an aggregate amount of $25 million (up to a maximum net worth requirement of $2.5 million). Twenty percent of this net worth requirement must be held in liquid assets. Some lenders have raised concerns that the increased net worth requirements could be burdensome for some lenders, and in particular could be more difficult for small lenders to meet than large lenders. Some have also raised concerns that increased costs to lenders of complying with these requirements could be passed on to borrowers. The April 2010 final rule also made changes to FHA's approval and monitoring of entities, such as mortgage brokers, that partner with lenders to originate FHA-insured loans. In order to offer FHA-insured loans, a lender must be approved by FHA. FHA had issued a different type of approval to entities that partner with lenders to originate FHA-insured loans, and it referred to these entities as loan correspondents. The entities it referred to as loan correspondents perform many functions related to originating a mortgage, but cannot underwrite, service, or own FHA-insured mortgages. Full-fledged FHA participating lenders, on the other hand, are authorized to perform all origination functions including underwriting, owning, and servicing FHA-insured loans. In the April 2010 final rule, FHA announced that it would no longer give FHA approval to loan correspondents. Entities that were previously approved as loan correspondents can continue to participate in the process of originating FHA-insured loans by becoming what FHA now calls third-party originators (TPOs) and partnering with an FHA-approved lender. The FHA-approved lender, not FHA, is now responsible for overseeing TPOs that it partners with and ensuring that they comply with all FHA requirements. TPOs can also apply to become FHA-approved lenders in their own right if they are able to undertake the underwriting, servicing, and ownership functions of FHA-approved lenders. FHA's rationale for this change is that the lender responsible for underwriting, owning, or servicing the mortgage bears the responsibility for ensuring that their loans meet FHA's standards, and that FHA's approval and oversight resources should be focused on lenders rather than on TPOs. By no longer issuing approval to loan correspondents/TPOs, FHA can focus more of its oversight efforts and resources on the lenders that underwrite, own, and service FHA-insured mortgages. However, some industry participants have raised concerns that removing the separate approval of loan correspondents could make it more difficult for some entities, including small banks, to participate in FHA programs, or could increase costs to FHA-approved lenders who will need to hire new staff to perform functions for which they used to rely on loan correspondents/TPOs. Some have also raised concerns that removing FHA oversight of TPOs could increase risk to the insurance fund if FHA-approved lenders do not adequately oversee TPOs. FHA stopped approving new applications for approval as loan correspondents on May 30, 2010. Loan correspondents who were already approved retained that approval through December 31, 2010. The Helping Families Save Their Homes Act ( P.L. 111-22 ), signed into law in May 2009, included several provisions aimed at ensuring that lenders involved in the origination of FHA-insured mortgages meet certain criteria and giving FHA additional authority to impose penalties on lenders when loans do not meet FHA's standards. Specifically, the law expanded the criteria that would make an entity ineligible to participate in the origination of FHA-insured mortgages, such as if certain of their employees are subjects of certain adverse actions (such as being suspended, debarred, or under a limited denial of participation for federal programs, or indicted or convicted of certain offenses); required FHA-approved lenders to notify FHA if certain actions are taken against a lender or its employees; and expanded FHA's ability to seek civil money penalties for violations of FHA requirements. While these provisions did not require rulemaking, the April 2010 final rule that addresses other FHA risk management changes also updates FHA regulations to reflect these requirements. FHA has also implemented changes through regulation to strengthen its authority to require certain lenders to compensate FHA for insurance claims paid on mortgages that do not meet its requirements. FHA-approved lenders that are approved to originate FHA-insured mortgages under a certain process, the Lender Insurance process, may be required by statute to compensate, or indemnify, FHA in cases of fraud or misrepresentation on the part of the lender or for claims paid on mortgages that did not comply with FHA loan requirements. In October 2010, FHA issued a proposed rule that would clarify these requirements, and in January 2012, FHA issued a final rule implementing these updated requirements. FHA is also seeking statutory changes that would increase FHA's indemnification authority by extending the indemnification provisions to other FHA-approved lenders in addition to the lenders that are approved to originate loans through the Lender Insurance process. FHA is also seeking changes that would expand its authority to terminate the approval of lenders under certain circumstances. Such provisions have been included in some FHA reform legislation that has been considered by Congress, discussed in the " Legislative Proposals in the 113th Congress " section of this report. FHA has been in the process of developing a new Single Family Handbook to update and consolidate its requirements for originating and servicing FHA-insured single-family mortgages. Provisions requiring FHA to publish a consolidated single-family handbook with guidance for lenders and servicers were included in legislation that was introduced during the 113 th Congress but were not enacted into law. FHA intends for the new handbook to provide clearer guidance to lenders and servicers on the requirements related to FHA-insured mortgages. Providing clearer guidance to lenders on FHA requirements could make lenders more willing to offer FHA-insured mortgages by reducing concerns that the loans will not meet FHA's standards. FHA is posting draft sections on its website for feedback. FHA has also been seeking feedback on changes to its framework for assessing problems with FHA-insured loans that do not meet its requirements. The new framework is intended to provide more clarity to lenders on the types of problems FHA may identify with a loan and the severity of different types of problems. Like the FHA Single Family Handbook, the new framework for communicating and assessing problems with FHA-insured mortgages could reduce lenders' uncertainty about what constitutes violations of FHA's requirements and may make them more likely to offer FHA-insured mortgages. When an FHA-insured loan goes into default, FHA requires mortgage servicers to engage in outreach to borrowers and to evaluate whether a borrower might be eligible for a workout solution that would avoid a foreclosure. These options are referred to as loss mitigation actions, because they are intended to limit—or mitigate—the losses to the FHA insurance fund from defaulted mortgages. Under FHA's loss mitigation program, servicers of FHA-insured mortgages are required to evaluate borrowers who are in default for certain loss mitigation options, in a certain order, before proceeding to foreclosure. Servicers are first required to evaluate borrowers for loss mitigation options that will allow the borrowers to keep their homes (such as loan modifications) before evaluating borrowers for options where they will lose their homes but avoid the process of foreclosure (such as short sales). If loss mitigation is unsuccessful and a property is foreclosed on, the property is generally conveyed to FHA to market and sell. FHA's methods of selling foreclosed properties are referred to as property disposition. To the extent that FHA can increase its returns from selling foreclosed properties, it can reduce the losses to the insurance fund that it incurs from foreclosures. FHA has made a number of changes to both its loss mitigation program and its property disposition methods in recent years. FHA has made a number of changes to its existing loss mitigation options that are designed to help borrowers remain in their homes. Specifically, FHA has made changes to make it easier for more borrowers to qualify for loss mitigation options that provide deeper reductions in monthly mortgage payments. These changes are designed to help more borrowers keep their homes and, consequently, reduce the claims that FHA pays on foreclosures. Another change that FHA has made is streamlining its short sale policy to try to increase the number of mortgages that are sold in a short sale rather than going through foreclosure. Homes that sell through short sales often result in less of a loss to the insurance fund than foreclosures, partly because they generally sell at higher prices than foreclosures and partly because FHA avoids the costs of maintaining a foreclosed property before it can be sold. Therefore, FHA expects that facilitating more short sales will reduce losses to the MMI Fund. Additional clarifications to FHA's requirements regarding mortgage servicers' communication with delinquent borrowers and evaluation of borrowers for loss mitigation options are included in a number of Mortgagee Letters published by FHA during 2013 and 2014. FHA has begun to sell some mortgages in default to investors through a program called the Distressed Asset Stabilization Program (DASP). Through this program, FHA sells pools of FHA-insured mortgages that are at least six months past due, and for which servicers have evaluated borrowers for all loss mitigation options, to the highest bidder. The investors that purchase the mortgages are not allowed to foreclose on the property for six months, during which time the investor and the borrower can try to negotiate a solution to avoid foreclosure. FHA sells these loans through two types of pools: national or regional pools and neighborhood stabilization outcome (NSO) pools. Investors who purchase the neighborhood stabilization outcome pools, which include loans in more specific geographic areas, are required to ensure certain outcomes that are intended to protect the surrounding neighborhood from the impact of foreclosures on at least half of the loans in the pool. DASP is intended to reduce losses to the FHA insurance fund by removing non-performing mortgages from FHA's outstanding insurance obligations and sparing FHA the costs of maintaining and marketing a foreclosed property. At the same time, it is intended to potentially help borrowers by giving investors an opportunity to offer borrowers workout solutions that FHA might not be able to offer, and to help stabilize neighborhoods by avoiding a situation where many foreclosed properties go on the market at the same time. However, some have raised questions about whether DASP includes sufficient protections for borrowers and whether FHA should do more to help mission-based nonprofits compete for properties through DASP. FHA has also expanded a pilot program through which certain foreclosed homes are sold directly by lenders rather than being conveyed to FHA to sell. This is referred to as "claim without conveyance of title," because FHA pays the lender an insurance claim but never takes title to the property. It is intended to reduce losses to the MMI Fund by reducing the costs to FHA of managing foreclosed properties before they are sold. According to FHA, in the fourth quarter of FY2014 its loss severity rate on alternate forms of property disposition—short sales, DASP, and claims without conveyance of title—was 46% of the outstanding mortgage balance, compared to 55% for foreclosed properties where FHA took title to the home and sold it using traditional methods. FHA has been making increasing use of these alternative forms of property dispositions. The share of property dispositions that have utilized one of these alternative methods has increased from under 20% in the fourth quarter of 2012 to 50% in the fourth quarter of 2013 and 75% in the fourth quarter of 2014. The share of alternative property dispositions in the fourth quarter of 2014 was higher than in previous quarters, when the share had fluctuated around 50%. While FHA has taken a number of actions to stabilize its finances in recent years, there are some changes that it cannot make without congressional action. Furthermore, some policy makers believe that additional changes are needed, beyond what FHA has done or has stated that it would do if given legislative authority. Therefore, some policy makers have proposed making additional changes to FHA's single-family program through legislation. Such proposals have included additional changes in underwriting or eligibility requirements to reduce the risk on FHA-insured loans and changes to FHA's capital requirements to require it to hold more funds in reserve to pay for unexpected losses. Furthermore, some policy makers have advocated making changes to FHA's mortgage insurance standards or business operations to attempt to reduce its role in the mortgage market and bring more purely private capital back into the market. However, others have expressed concern that some of these policy changes—whether aimed at strengthening FHA's finances, decreasing its role in the mortgage market, or both—could make it more difficult for some creditworthy borrowers to obtain FHA-insured mortgages. In both the 111 th and 112 th Congresses, bills containing certain FHA reforms were passed by the House of Representatives but were not considered by the Senate. The bills passed by the House in each of these Congresses were not the same, but they contained some similar provisions, including some that have been sought by FHA in recent years to provide it with additional authority for monitoring lenders. For example, while the specifics differed, these bills both would have provided FHA with increased authority to terminate lenders' FHA approval under certain circumstances and to require indemnification when insured mortgages did not meet FHA's requirements. During the 113 th Congress, the FHA Emergency Fiscal Solvency Act of 2013 ( H.R. 1145 ) was introduced in the House, but was not reported out of committee. The bill contained some of the changes that were included in the bills passed by the House in the 111 th and 112 th Congresses. Two additional bills related to FHA were ordered to be reported out of committee in the 113 th Congress: the FHA Solvency Act of 2013 ( S. 1376 ), which was reported in the Senate, and the Protecting American Taxpayers and Homeowners (PATH) Act ( H.R. 2767 ), which was ordered to be reported in the House. While H.R. 1145 and S. 1376 only address FHA, the PATH Act includes FHA provisions as part of a broader bill to reform the housing finance system. The PATH Act is also the most far-reaching of these bills, and includes a number of provisions that are aimed at more narrowly targeting FHA insurance to certain populations and bringing more purely private capital into the mortgage market. This section briefly describes some of the major provisions included in these FHA reform bills introduced in the 113 th Congress. It does not provide a comprehensive discussion of every provision contained in these bills. The FHA Emergency Fiscal Solvency Act was not reported out of committee in the 113 th Congress, but it contained similar provisions to bills that passed the House in previous Congresses. Among other things, this bill would have done the following: The bill would have required a minimum annual mortgage insurance premium of 0.55%. The bill would also have raised the maximum annual premium that FHA is allowed to charge to 2.05% (2% for mortgages with loan-to-value ratios at or below 95%) from 1.55% (1.50% for mortgages with loan-to-value ratios at or below 95%). Under current law, FHA is required to maintain a capital ratio of 2%. (The capital ratio is defined as the economic value of the MMI Fund—that is, the Fund's current capital resources plus the expected net present value of the future cash flows on the mortgages that it currently insures—divided by the total dollar amount of mortgages that FHA is currently insuring.) The capital ratio has been below this 2% threshold for several years. FHA is also required to contract with an independent actuary each year to perform an actuarial review of the MMI Fund. H.R. 1145 would have required FHA to provide more frequent actuarial reviews of the MMI Fund when its capital ratio falls below 2%. It would also have required FHA to submit an emergency capital plan describing actions it would take to restore the capital ratio when the ratio fell below the required threshold. Finally, the bill would have required the Government Accountability Office (GAO) to submit a report on FHA's safety and soundness. The bill would have expanded FHA's ability to seek indemnification for certain mortgages while requiring FHA to establish an appeals process for lenders to appeal indemnification decisions. It would also have increased FHA's ability to terminate a lender's approval to originate FHA-insured loans under certain circumstances. Additional provisions included, among others, a requirement that HUD submit a report examining opportunities for streamlining FHA programs. The PATH Act was a broader bill to reform the housing finance system that was ordered to be reported out of the House Financial Services Committee. Title II of the bill included extensive provisions related to FHA. Some of these included versions of provisions that had also been included in other bills in some form, including a number of changes to lender oversight, premiums, and capital requirements. Other provisions would have made additional, more far-reaching changes to FHA, including making it an independent agency, taking steps to more narrowly target FHA insurance, and reducing the amount of FHA's insurance coverage and increasing the role of private capital. These provisions were intended to better target FHA insurance to those who most need it, and to improve FHA's financial soundness. However, some expressed concern over the potential impacts that these provisions could have on credit availability or affordability for some households. Among several other provisions, the PATH Act, as ordered to be reported out of committee, would have done the following: The bill would have removed FHA from HUD and made it a free-standing agency. The bill would have limited FHA insurance to mortgages made to first-time homebuyers or low- and moderate-income homebuyers (defined as families with incomes less than 115% of area median income, or families with incomes less than 150% of area median income in designated high-cost areas). FHA would have been allowed to insure mortgages made to households that did not meet these criteria in times of tight credit availability or in areas affected by disasters. The minimum down payment would have been increased to 5% for non-first-time homebuyers, and the maximum dollar amount of a mortgage that can be insured by FHA would have been reduced in some non-high-cost areas. The bill would have prohibited FHA from insuring any mortgages where seller concessions exceeded 3%. It would also have prohibited FHA from insuring mortgages in any areas that had used eminent domain to acquire mortgages within the past 10 years. The bill would have required a minimum annual mortgage insurance premium of 0.55% of the mortgage balance, and would have required that FHA set its premiums at a level adequate to cover its administrative and personnel costs as well as the costs of insurance and maintaining the capital ratio. The bill would have increased the capital ratio requirement for mortgages insured after the bill was enacted to 4% from the current 2%. It would have required the capital ratio to be determined quarterly, and placed restrictions on the loan-to-value ratios of the mortgages that FHA could have insured if the capital ratio fell below certain thresholds. FHA's financial reports would have been required to use accounting methods that are used in the private sector. The PATH Act would have provided FHA with increased authority to require compensation from lenders under certain circumstances when mortgages did not meet FHA's standards while requiring FHA to establish an appeals process for lenders to appeal indemnification decisions. FHA would have been required to publish a consolidated handbook with all of its origination and underwriting requirements for lenders and servicers. The bill would have gradually reduced the share of the original principal amount of the mortgage that FHA can insure to 50% from 100% over a five-year period. It would also have required FHA to establish risk-sharing demonstration programs to transfer some of the credit risk of FHA-insured mortgages to other entities. The FHA Solvency Act, as reported out of the Senate Banking Committee, would also have made several changes related to lender oversight, mortgage insurance premiums, and capital requirements, among other things. It was not as far-reaching as the PATH Act, and would not have taken steps to limit who is eligible for FHA insurance or to bring private capital into the market to the same extent as the PATH Act. Among other provisions, the bill would have done the following: FHA would have been required to evaluate its underwriting standards and revise them as necessary, taking certain specific factors into account. It would also have been required to finalize its proposed rule on seller concessions (described earlier in this report). The bill would have required a minimum annual mortgage insurance premium of 0.55% of the mortgage balance and increased the maximum annual premium that FHA can charge to 2% or 2.05% (depending on whether the initial loan-to-value ratio is above 95%). It would also have required FHA to review the premiums annually to ensure that they were adequate to maintain the costs of insurance and the capital ratio. The FHA Solvency Act would have raised the required capital ratio to 3% and required FHA to take certain actions if the capital ratio fell below certain thresholds, including imposing premium surcharges on new borrowers and increasing its reporting requirements. It would have required stress testing of the MMI Fund similar to the stress tests required by the Federal Reserve, with the results included in the annual actuarial review, and it would have required FHA and Treasury to notify Congress within 48 hours if FHA drew on its authority with Treasury to fund any of its accounts. The bill would have provided FHA with increased authority to seek compensation from lenders under certain circumstances when a mortgage did not meet FHA's standards while requiring FHA to establish an appeals process for lenders to appeal indemnification decisions. Further, it would have allowed FHA to terminate lenders' approval on a nationwide basis as well as in specific areas. The bill would also have allowed FHA to transfer mortgage servicing to specialty servicers in some cases. FHA would also have been required to issue a consolidated handbook with all of its guidelines for lenders and servicers of FHA-insured mortgages.

The Federal Housing Administration (FHA), an agency of the Department of Housing and Urban Development (HUD), insures private mortgage lenders against losses on eligible mortgages. If a borrower defaults on an FHA-insured mortgage, FHA will repay the lender the remaining amount owed. FHA insurance is intended to encourage lenders to offer mortgages to households who might otherwise have difficulty obtaining a loan at an affordable interest rate, such as households with small down payments. Borrowers pay fees, called premiums, in exchange for the insurance, and these fees are supposed to pay for the costs of any mortgage defaults. In recent years, increasing foreclosure rates and falling house prices have strained FHA's single-family mortgage insurance fund, the Mutual Mortgage Insurance Fund (MMI Fund). At the end of FY2013, FHA received $1.7 billion from Treasury to ensure that it had sufficient funds to cover all of its expected future losses on the mortgages that it was currently insuring. This was the first time that FHA had ever required funds from Treasury for this purpose for its single-family program. In response to concerns about the financial condition of the MMI Fund, FHA has taken a number of steps in recent years to attempt to improve its financial position. These changes have included increasing the fees that it charges to borrowers, adjusting its underwriting standards, and making changes to the way that it manages delinquent mortgages and foreclosed properties. FHA has also requested additional authorities from Congress, such as improving its ability to hold FHA-approved lenders accountable for the mortgages they submit for FHA insurance. These authorities have been included in legislation that Congress has considered but have not been enacted to date. Congress has also been considering additional reforms to FHA. Proposed reforms include increasing the amount of capital that FHA is required to hold in reserve to pay for unexpected increases in future losses and specifying actions that FHA must take if its capital reserves fall below certain thresholds. Some of these proposed additional reforms have been included in several stand-alone bills that have been introduced in recent Congresses, including H.R. 1145 and S. 1376 in the 113th Congress. Additionally, reforms to FHA are being considered in the context of broader reforms to the housing finance system. One housing finance reform bill in the 113th Congress, the Protecting American Taxpayers and Homeowners (PATH) Act (H.R. 2767), would have made more far-reaching changes to FHA than those that have been included in other bills. These changes would have included limiting FHA-insured mortgages to only low- and moderate-income borrowers and first-time homebuyers in most circumstances, reducing the share of a mortgage that FHA can insure, and requiring greater risk-sharing with the private sector. The PATH Act would also have removed FHA from HUD and made it an independent agency.

With a population of 105 million people, Mexico is the most populous Spanish-speakingcountry in the world, and the third most populous country in the Western Hemisphere (after theUnited States and Brazil). This gives it a diplomatic weight in the hemisphere as a leader of LatinAmerican countries, and in the world as a leader of developing countries. With an estimated GrossDomestic Product (GDP) for 2005 of $660 billion, and estimated worldwide turnover trade (exportsand imports) for 2005 of $455 billion, Mexico is an active member of the World Trade Organization(WTO) and a leading trader in the world, principally through its partnership with Canada and theUnited States in the North American Free Trade Agreement (NAFTA). (1) Sharing a 2,000-mile border and extensive interconnections through the Gulf of Mexico, theUnited States and Mexico are so intricately linked together in an enormous number of ways thatPresident George W. Bush and other U.S. officials have stated that no country is more important tothe United States than Mexico. At the same time, Mexican President Vicente Fox (2000-2006), thefirst president to be elected from an opposition party in 71 years, has sought to strengthen thebilateral relationship through what some have called a "grand bargain." (2) Under this proposed bargain,the United States would regularize the status of undocumented Mexican workers in the United Statesand economically assist the less developed partner in the North American Free Trade Agreement(NAFTA) while Mexico would be more cooperative in border security and in controlling the illegaltraffic of drugs, people, and goods into the United States. Mexico is linked with the United States through trade and investment, migration and tourism,environment and health concerns, and family and cultural relationships. Mexico is the second mostimportant trading partner of the United States, and this trade is critical to many U.S. industries andborder communities. Mexican descendants constitute 64% (or 24 million) of the growing Hispanicpopulation of 37.4 million people in the United States, with a significant presence in California andTexas and other states. Moreover, Mexico is the largest source of legal migrants to the United States(21% of the total in 2002) and by far the largest source of undocumented migrants (57% of the totalin 2004, according to estimates). It also is the principal transit or source country for illicit drugs andit is a possible avenue for the entry of terrorists into the United States. As a result, cooperation withMexico is essential in dealing with migration, drug trafficking, and border, terrorism, health,environment, and energy issues. (3) In large part because of the United States, NAFTA is the world's largest free trade area, withabout one-third of the world's total GDP, accounting for about 19% of global exports and 25% ofglobal imports. Based on the volume of trade, Mexico is generally viewed as the least importantmember of NAFTA, although its population of over 100 million is more than three times that ofCanada (32 million), and its GDP is nearly equal to that of Canada ($757 billion). About 37% ofthe United States' trade with NAFTA countries is with Mexico, and 63% is with Canada. Under NAFTA, Mexico's estimated total turnover trade (exports and imports) with the UnitedStates for 2005 was $289 billion, making it the second most important trading partner of the UnitedStates (following Canada), while the United States is Mexico's most important partner by far,providing the market for 88% of Mexico's exports and supplying 62% of Mexico's imports. SinceNAFTA entered into force in 1994, total trilateral trade has more than doubled to $621 billion in2004, while Mexico-U.S. trade more than tripled from $82 billion to $266 billion, although theUnited States has experienced a generally growing trade deficit. U.S. foreign direct investment wasencouraged by NAFTA as well, although in recent years the amount and proportion of U.S.investment flows has declined from $20.4 billion (77% of total investment) in 2001 to $10.7 billion(56% of total) in 2003 as total worldwide investment declined. (4) As one of the major countries in the region, Mexico has historically played an important rolein Latin America and the Caribbean as a strong defender of the principles of non-intervention andself determination, particularly in the hemispheric Organization of American States (OAS). Thisstance put it at odds with the United States on policies toward Cuba since the 1960s and towardNicaragua in the 1980s, although it cooperated fully with the United States in the Summits of theAmericas process in the 1990s. Under President Fox, Mexico has sought to strengthen hemisphericrelations. The President has promoted the so-called Puebla-Panama Plan, which promotescooperative development efforts among the Central American countries and the southeastern statesof Mexico. He has revived the G-3 group (Colombia, Venezuela, and Mexico), has indicated theintent to become an associate member of the Southern Common Market (Mercosur) countries inSouth America, and is implementing free trade agreements with 10 countries in Central and SouthAmerica. In the OAS context, Mexico has been a strong advocate for the Inter-AmericanConvention Against the Illicit Manufacturing of and Trafficking in Firearms, the MultilateralEvaluation Mechanism of the Inter-American Drug Abuse Control Commission (CICAD), and therevision and updating of hemispheric security concepts after it formally withdrew from the RioTreaty collective security mechanism. In October 2003, it hosted a Hemispheric Security Conferencein Mexico City that adopted a new multi-dimensional approach, and in January 2004 it hosted aSpecial Summit of the Americas in Monterrey with emphasis on democracy and social issues. (5) While Mexico is strongly linked to the United States and to Latin America, it has importantties to Europe and Asia as well, and has been a member of the Organization of EconomicCooperation and Development (OECD) and the Asia-Pacific Economic Cooperation (APEC) forumsince the early 1990s. In addition, it is a regular participant in the Rio Group, the Ibero-AmericanConference, and the Latin America and Caribbean-European Union summits. Particularly underPresident Fox, Mexico has pursued an even more activist global foreign policy, with greater involvement in United Nations (U.N.) and Organization of American States (OAS) activities. Mexican officials are seeking to expand trade with the European Union under the EU-Mexico FreeTrade Agreement that went into effect in July 2000, and they signed a free trade agreement withJapan in 2004. Mexico held a temporary seat on the U.N. Security Council in 2002 and 2003 andexpressed support for continuing diplomatic efforts under United Nations auspices to achieve thedisarmament of Iraq, leading to expressions of disappointment from the Bush Administration andsome tension in the bilateral relationship. Under Fox, the country has been open to internationalhuman rights monitors and has played a stronger role in the United Nations Human RightsCommission, at times voting for resolutions critical of Cuba. On December 1, 2004, MexicanForeign Minister Derbez launched a bid for Mexico to have a permanent seat on the U.N. SecurityCouncil, placing it in competition with Brazil to represent Latin America in a still-to-be-approvedenlarged Security Council. In recent years, Mexico has hosted a number of important U.N. and OAS meetings. In March2002, it hosted the U.N. Conference on Financing and Development in Monterrey where PresidentBush announced the Millennium Challenge Account. In September 2003, Mexico hosted the WTOMinisterial in Cancun that collapsed without agreement despite the efforts of Foreign MinisterDerbez to achieve consensus between developing and developed countries to advance the DohaRound of global trade talks. In October 2003, it hosted a Hemispheric Security Conference inMexico City that adopted a multi-dimensional approach to transnational threats, and in January 2004it hosted a Special Summit of the Americas in Monterrey to refocus the Summit process on theadvancement of democracy and economic growth and the reduction of poverty and inequality in theregion. The United States and Mexico have developed a variety of mechanisms for consultation andcooperation on the wide variety of issues on which they interact, with some overlapping in thefunctioning of the various fora. Grouped together to some extent by function and longevity, thesemechanisms include (1) periodic presidential meetings; (2) annual cabinet-level BinationalCommission meetings with 10 Working Groups; (3) annual meetings of congressional delegationsin the Mexico-United States Interparliamentary Group Conferences; (4) NAFTA-related trilateralmeetings under various groups; (5) bilateral border area cooperation meetings hosted by such entitiesas the Border Environment Cooperation Commission (BECC) and the United States-Mexico BorderHealth Commission; and (6) trilateral meetings under the Security and Prosperity Partnership (SPP)of North America, launched in March 2005. Presidents Bush and Fox have met on a regular basis and have discussed a range of issues,at times in specially arranged bilateral meetings and state visits, and at other times at the margins ofmultilateral meetings. In 2001, the Presidents met in mid-February in Guanajuato, Mexico atPresident Fox's ranch where they launched bilateral immigration talks; in mid-April in Quebec,Canada during a Summit of the Americas meeting; in early May in Washington, D.C., in earlySeptember in the Washington, D.C. on an official state visit where migration issues figuredprominently again; and in early October in New York when President Fox expressed solidarity withthe United States following the terrorist attacks. In 2002, the Presidents met in March in Monterrey,Mexico, following the U.N. Conference on Financing and Development; and in October in LosCabos, Mexico, at the APEC summit. In 2003, the Presidents met in October, in Bangkok,Thailand, at the APEC summit, where they reaffirmed the desire to continue bilateral immigrationtalks. In 2004, the Presidents met in January, in Monterrey, Mexico, at the time of the SpecialSummit of the Americas; in March at President Bush's ranch in Crawford, Texas, where theydiscussed President Bush's January 2004 immigration proposal; and in late November in Santiago,Chile at another APEC summit following President Bush's re-election, where immigration issueswere broached again. In 2005, the Presidents met in March in Texas, along with Prime MinisterMartin of Canada, and launched the trilateral "Security and Prosperity Partnership (SPP) of NorthAmerica." (6) Functioning since 1981, the United States-Mexico Binational Commission, with practicallyunparalleled cabinet-level participation, meets yearly, alternating between Mexico and the UnitedStates, with high level consultation on the full range of bilateral topics through a number ofassociated Working Groups. The Binational Commission meeting scheduled for October 2005 wascancelled because Mexican officials were dealing with Hurricane Wilma in the Yucatan region ofMexico, but Mexican Foreign Minister Derbez visited Washington, D.C. on October 26, 2005, forofficial meetings. Many of the relevant agencies in both countries had been interacting with eachother in the context of the March 2005 launch of the trilateral "Security and Prosperity Partnershipof North America," and the June 2005 reports to the three North American leaders on the initialaccomplishments and plans for the trilateral partnership. At the Binational Commission meeting held in November 2004, in Mexico City, theWorking Groups reviewed regular activities throughout the year and announced agreements. (7) The Working Groups (withagency representatives indicated) as then constituted were: (1) Foreign Policy (U.S. Department ofState and Mexican Ministry of Foreign Affairs); (8) (2) Migration and Consular Affairs (U.S. Departments of State andHomeland Security and Mexican Ministries of Foreign Affairs and Government); (3) HomelandSecurity and Border Cooperation (U.S. Departments of State and Homeland Security and MexicanMinistries of Foreign Affairs and Government); (4) Law Enforcement and Counter-Narcotics (Chaired by U.S. and Mexican Attorneys General) with reference to the more frequent Senior LawEnforcement Plenary (SLEP) meetings; (5) Trade and Agriculture (U.S. and Mexican Ministries ofTrade and Agriculture); (6) Labor (U.S. and Mexican Ministries of Labor); (7) Education (U.S. andMexican Ministries of Education); (8) Environment (U.S. Environmental Protection Agency (EPA)and Mexican Ministry of Environment and Natural Resources (SEMARNAT); (8) Housing (U.S.Department of Housing and Urban Development and Mexican Commission of Housing); (9) Transportation (U.S. Department of Transportation and Mexican Ministry of Communication andTransportation); and (10) Energy (U.S. and Mexican Ministries of Energy) that met in the summer. A report on the related public-private Partnership for Prosperity (P4P) launched by Presidents Bushand Fox in September 2001 to promote development in Mexico, particularly in areas with highout-migration rates, was also made at the meeting. At the conclusion of the November 2004 Binational Commission meetings, Secretary of StateColin Powell, summarizing the accomplishments, emphasized the growing bilateral cooperation oncounter-narcotics and border security matters between the countries, including the creation of a newWorking Group on Cyber-Security. He also noted the conclusion of educational agreements that willadvance Mexican competitiveness, housing agreements to strengthen the local mortgage market,agricultural agreements to advance cooperation on rural development programs, and environmentalagreements to promote environmental conservation. With regard to the accomplishments of the Partnership for Prosperity (P4P), Secretary Powellnoted that these programs had lowered the fees for transferring funds from the United States toMexico, brought together more than 1400 business and government leaders from both countries, anddeveloped innovative methods to finance infrastructure projects. Other accomplishments were theestablishment for the first time of a Peace Corps program in Mexico, and the recent establishmentof the Overseas Private Investment Corporation (OPIC) in Mexico that is expected to provide over$600 million in financing and insurance to U.S. businesses in Mexico. (9) Beginning in 1961, legislators from Mexico and the United States have met once a year todiscuss the full range of bilateral topics, alternating between Mexico and the United States. (10) During the latestinterparliamentary meeting, the 44th in the long series, in early June 2005, in Newport, Rhode Island,the delegates focused on immigration and security, commerce and competitiveness, criminal justice,and the new trilateral "Security and Prosperity Partnership of North America." Mexican delegatesurged U.S. enactment of a comprehensive immigration reform and action to strengthen Mexico'seconomy, while pointing out that Mexican policymakers were increasingly recognizing the migrationphenomenon as a two way street and were adopting measures like the "3 for 1" program under whichcommunity contributions from Mexicans abroad are matched by the federal, state, and municipalgovernments to encourage their return to Mexico. U.S. delegates urged the Mexican legislators tostrengthen their agricultural sector and to open their energy sector to investment to promotedevelopment and to create jobs for Mexicans within the country. They also called upon Mexicanpolicymakers to better control their southern border with Guatemala, and to extradite suspectswanted for murdering U.S. police officers. Delegates from both countries praised the trilateral"Security and Prosperity Partnership (SPP) of North America" launched in March 2005 to advanceregional cooperation and competitiveness. Functioning since 1994 when the North American Free Trade Agreement (NAFTA) betweenCanada, Mexico, and the United States went into effect, these trilateral institutions provide themechanisms for interaction on trade and trade-related issues. NAFTA Commissions, Secretariat, and WorkingGroups. The NAFTA agreement of 1993 established a variety of commissions andworking groups. The central institution is the NAFTA Free Trade Commission, consisting of thetrade ministers of each county, which meets annually or when required. For the United States, theappropriate representative is the United States Trade Representative (USTR). Implementation ofNAFTA is carried out by more that 25 committees, with representation from the Departments ofState, Agriculture, Commerce, Justice, Transportation, and Treasury as well as agencies such as theSmall Business Administration (SBA) and the Environmental Protection Agency (EPA), dependingon the issue. The NAFTA agreement required each of the countries to have a permanent NAFTASecretariat to assist the NAFTA Commission and to administer the NAFTA dispute resolutionprocedures. In the case of the United States, the NAFTA Secretariat is located in the Departmentof Commerce's International Trade Administration. (11) At the most recent meeting of the NAFTA Free Trade Commission in San Antonio, Texas,on July 16, 2004, the three trade ministers issued a joint statement hailing "a decade of achievement"under NAFTA, and committing to "deepening economic integration in North America." They alsopledged to achieve meaningful progress on the WTO Doha Development Agenda, and on Free TradeArea of the Americas (FTAA) talks. (12) Commission for Environmental Cooperation(CEC). Established by the trilateral North American Agreement on EnvironmentalCooperation (NAAEC) of 1993, a companion side agreement to NAFTA, the Commission wasformed to strengthen environmental cooperation between the United States, Mexico, and Canada,and to consider complaints of non-compliance with environmental law brought by variousnon-governmental groups. The Commission is governed by a Council composed of the environmentministers (or alternative representatives ) from each of the three countries, who receive outside inputfrom National Advisory Committees, Governmental Advisory Committees and the Joint PublicAdvisory Committee (JPAC). At the most recent Commission meeting, on June 22, 2005, theMinisters adopted the Strategic Plan 2005-2010 for cooperating on environmental protection matters. More recently, the Commission, in November 2005, issued the first ever trinational conservationplans for six wildlife species, and in December 2005, made public the factual record developed inresponse to a Mexican non-governmental organization's complaint that Mexico was failing toenforce environmental laws in the Sierra Tarahumara. (13) Commission for Labor Cooperation (CLC). Created by the trilateral North American Agreement on Labor Cooperation (NAALC) of 1993,another NAFTA side agreement, the Commission was established to encourage cooperation on labormatters and to consider complaints of non-compliance with labor law lodged by non-governmentalorganizations. The Commission is governed by a Council of Ministers composed of the ministersof labor of each of the countries, with assistance from a trinational Secretariat and independentEvaluation Committees of Experts. The agreement requires each government to establish its ownNational Administrative Office (NAO), which in the case of the United States is located in theDepartment of Labor. At the Seventh Ministerial Meeting in November 2003, the ministers praisedthe cooperative advances in the labor area and announced the release of a major report on NorthAmerican labor markets and a guide to the rights of migrant workers. (14) In other recent action, inNovember 2004 the Mexican Secretary of Labor agreed to ministerial consultation with the U.S.Secretary of Labor following a hearing and report on a non-governmental complaint of failure toenforce labor rights in two garment factories in Puebla, Mexico. In 2005, non-governmental groupsalso filed submissions alleging violation of the labor rights of Mexican pilots and Mexican textileworkers in the state of Hidalgo. (15) North American Energy Working Group(NAEWG). Created in the spring of 2001 by the energy ministers of Canada,Mexico, and the United States, the mission of the trilateral NAEWG is to foster communication andcooperation among the governments and energy sectors of the three countries on energy-relatedmatters, and to enhance energy trade between the countries while respecting domestic jurisdictions. Working Group experts have issued four reports, the first on the general energy picture in June 2002,the second on energy efficiency standards in December 2002, the third on regulation of internationalelectricity trade in December 2002, and the fourth on the North American Natural Gas Vision inJanuary 2005. (16) Working in conjunction with the Working Group on Law Enforcement andCounter-Narcotics Matters of the Binational Commission (see above), the Senior Law EnforcementPlenary (SLEP) is an annual meeting of senior law enforcement officials from both countries wherethey discuss cooperation on law enforcement and counter-narcotics matters. The SLEP andBinational Commission meetings are supplemented by regular meetings between the U.S. andMexican Attorneys General, and by cooperation among the border states Attorneys General. WhenU.S. Attorney General Alberto Gonzales met with Mexican Attorney General Daniel Cabeza de Vacaon October 13, 2005, in San Antonio, Texas, they announced training and intelligence sharinginitiatives to combat narcotics-related violence on the border, particularly in the area of NuevoLaredo, Mexico. (17) A wide variety of Mexico-United States binational organizations meet on a regular basis todeal primarily with the problems of the areas on both sides of the common border. International Boundary and Water Commission(IBWC). Created by treaties of 1889 and 1944, the International Boundary andWater Commission is a binational governmental organization charged with the task of identifyingand solving boundary and water problems arising along the 2,000 mile border between Mexico andthe United States. There is a U.S. section of the Commission in El Paso, Texas, and a Mexicansection in Ciudad Juarez, Chihuahua, with each side funding its own section. In recent action, inNovember 2005, the IBWC sponsored a binational summit of stakeholders to developrecommendations for the sustainable development of the Rio Grande Basin, and in December 2005,the U.S. section adopted an Environmental Management System to ensure the integration ofenvironmental considerations into day-to-day decisions. (18) Border Environment Cooperation Commission(BECC). Established under the North American Free Trade Agreement of 1993,the Border Environment Cooperation Commission is a joint U.S.-Mexico international organizationwith a mandate to assist border communities in developing environmental infrastructure projects,and to certify the feasibility of these projects for the purpose of receiving loans from the sisterinstitution, the North American Development Bank (NADBank). The BECC is governed by a Boardof Directors, with members from U.S. and Mexican public and private sectors, and is located inCiudad Juarez, Chihuahua. In 2004, the mandate of the BECC and NADBank were expanded toinclude communities in Mexico up to 300 kilometers from the border, and to establish a joint Boardof Directors for both institutions. Funding for the U.S. side comes from the InternationalCommissions section of the Department of State appropriation in the Commerce, State, JusticeAppropriations. The BECC has also received funds directly from the U.S. Environmental ProtectionAgency (EPA) and Mexico's Ministry of Social Development (SEDESOL), and has provided morethan $30.2 million to aid in the development of 230 water, sewage, and municipal waste projects in131 communities on both sides of the border. Since the establishment of the BECC, it has certified105 environmental infrastructure projects for funding in Mexico and the United States worth $2.4billion. (19) North American Development Bank (NADBank). Established under the North American Free Trade Agreement of 1993, the North AmericanDevelopment Bank is an international financial institution established and capitalized in equal partsby the United States and Mexico for the purpose of financing environmental projects along theborder. It is located in San Antonio, Texas. As indicated above, in 2004, the geographical mandateof the NADBank was expanded to cover Mexican communities up to 300 kilometers from theborder. U.S. funding for the NADBank comes from the Multilateral Development Banks section ofthe Foreign Operations Appropriations. By the end of FY2005, the NADBank had authorized 24loans for border environmental projects totaling $105 million. The NADBank also administers theBorder Environment Infrastructure Fund (BEIF) with funds directly from the EPA's Border Fund. By the end of FY2005, $516 million in BEIF grants have been committed for 54 water andwastewater projects along the border. (20) United States-Mexico Border Health Commission(USMBHC). Created as a binational health commission by an agreement in July2000 by the ministers of health in each country, the commission members include the federalsecretaries of health, the chief health officers of the six border states in Mexico and the four borderstates in the United States, and prominent health professionals from both countries. TheCommission seeks to provide a mechanism for coordinated action to improve health and the qualityof life at the border. The Commission receives funding from the United States and Mexico, with theU.S. contribution coming from appropriations for the Office of Global Health Affairs, Departmentof Health and Human Services. In March 2001, the Commission established a ten-year binationalagenda of health promotion and disease prevention known as Healthy Border 2010 with 20objectives in 11 focus areas. The 11 focus areas include seeking to improve access to health careand immunization, and seeking to reduce the incidence of cancer, diabetes, asthma, HIV/AIDS, andsuicide. (21) U.S.-Mexico Border Environmental Program -- Border2012. Following up on the La Paz agreement in 1983, the Border XXI program in1996, and the New Border Vision in 1997 and 1998, Border 2012 is a 10-year set of binational goalsto protect and advance public health and environmental conditions in the U.S.-Mexico border region. It brings together EPA, HHS, Mexico's environment and health ministries, the U.S. border tribes,and the environmental agencies from each of the ten U.S.-Mexico border states. EPA takes the leadin Border 2012, but the initiative is said to emphasize a bottom-up approach, with four regionallyfocused workgroups to maximize the participation of local communities in efforts to reduce air, land,and water pollution. (22) Participants in Border 2012 efforts work closely with the International Boundary and WaterCommission (IBSC), the North American Commission for Environmental Cooperation (CEC), theBorder Environment Cooperation Commission (BECC) and the North American Development Bank(NADBank). (23) Mexico-U.S. Border Partnership. The bilateralBorder Partnership ("Smart Border") Agreement was launched in March 2002, with the stated goalof balancing security enhancement with transit enhancement. It sought to utilize advancedtechnology to strengthen screening infrastructure at the border in order to facilitate the transit ofpeople and goods across the border. When Mexico's Secretary of Government Santiago Creel metwith Secretary of Homeland Security Michael Chertoff in May 2005 to assess progress under thepartnership, they focused on the six new Secure Electronic Network for Traveler's Rapid Inspection(SENTRI) lanes for pre-screened, low-risk individuals, and the eight new Free and Secure Trade(FAST) lanes for pre-cleared cargo. They also focused on the coming repatriation of Mexicannationals in accordance with the 2004 U.S.-Mexico Action Plan for Cooperation and Border Safetyand the joint 2004 Memorandum of Understanding on the secure, orderly, dignified, and humanerepatriation of Mexican nationals. (24) Border Liaison Mechanisms (BLMs). Developedin recent years, the BLMs are regularly scheduled meetings that are held in each of the ten clustersof "sister cities" along the Mexico-U.S. border, with chairmanship of the meeting alternatingbetween the U.S. and Mexican Consul Generals. The purpose of the meetings is to exchange viewsand develop solutions to pressing border problems, including transportation, law enforcement, andpublic safety issues, with those attending the meetings including representatives from relevantfederal, state, and local agencies from both countries. In August 2005, for example, U.S. officialsmet with Mexican officials in the BLM for the New Mexico-Chihuahua region. (25) Binational Group on Bridges and BorderCrossings. This binational group was created in 1983, but since 1989 it has oftenbeen held as part of the Binational Commission meetings. It is generally attended by representativesof the ministries responsible for foreign affairs, treasury, transportation, immigration, and security,including officials in charge of the bridges and border crossings. Interested citizens and businessmenoften attend as well. The 35th meeting of the binational group met May 2-4, 2005, in Reynosa,Mexico, and agreed to advance cooperation to modernize the bridges and crossing points in that areain keeping with the Border Partnership announced by Presidents Fox and Bush in March 2002 andthe commitments during the Binational Commission meetings in November 2004. (26) Border States Conferences. Operating since1980, the Border Governors Conference brings together on an annual basis the governors of the tenborder states (six Mexican states and four U.S. states) to discuss the many issues affecting theborder. (27) In additionto this comprehensive conference, there are direct state-to-state versions: (1) the Cuatro Caminos(Four Paths) Conference between Texas and neighboring states (Tamaulipas, Nuevo Leon, Coahuilaand Chihuahua); (2) the Commission of the Californias (California and Baja California); (3) theSonora-Arizona Commission; and (4) the Chihuahua-New Mexico Commission. Gulf of Mexico States Accord. Established in1995, this is an agreement among the eleven U.S. and Mexican states (six Mexican states and fiveU.S. states) bordering the Gulf of Mexico that is facilitating trade and cooperation between the twocountries. This organization views the Gulf of Mexico as a "trade superhighway," as a "borderwithout bridges," that promoted, for example, the shipment of Daimler-Chrysler vehiclesmanufactured in Mexico from Tampico, Mexico, to Tampa, Florida in less time than using landroutes. Other initiatives include promoting environmental standards in the Gulf area, encouragingbinational university exchanges, and advancing private sector cooperation under the Gulf of MexicoPartnership. (28) On March 23, 2005, President Bush hosted a meeting in Texas with President Fox and PrimeMinister Martin, in which the leaders established the trilateral "Security and Prosperity Partnership(SPP) of North America." The new partnership seeks to advance the security and prosperity of thecountries, under a conception that is trilateral, but that will allow any two countries to move forwardon an issue, and create a path for the third country to join later. The initiative is to complement, notreplace, existing bilateral and trilateral fora. To implement this partnership the leaders establishedMinisterial-led working groups that were instructed to develop measurable and achievable goals topromote security and prosperity and to report back to the leaders within 90 days and semi-annuallythereafter. For the United States, the Department of Homeland Security is the lead agency on theworking group on security, and the Department of Commerce is the lead agency on the workinggroup on prosperity, along with representation by the Department of State. (29) On June 27, 2005, Secretary of Homeland Security Chertoff and Secretary of CommerceGutierrez met with their Canadian and Mexican counterparts in Ottawa, Canada, and released aReport to Leaders with initial results and proposed initiatives for the future under the Security andProsperity Partnership (SPP) of North America. (30) In the security area, the report discussed efforts to establish common approaches to securityto protect against external and internal threats and to further streamline legitimate trade and travel. Among these efforts, the countries would implement common border security and bioprotectionstrategies, enhance infrastructure protection and emergency response plans, improve aviation andmaritime security and intelligence cooperation against transnational threats, and continue to facilitatethe legitimate flow of people and cargo at the borders. In the press conference, the ministershighlighted the agreement to develop and implement common methods of screening individuals andcargo, development of a unified trusted traveler program to expand upon the SENTRI and FASTprograms, and development of a collective approach to protecting infrastructure and responding tovarious incidents. In the prosperity area, the report discussed efforts to enhance North Americancompetitiveness and to improve the quality of life. To achieve this, the countries would improveproductivity through regulatory cooperation and harmonization; enhance cross-border cooperationon health, food safety, and environmental protection projects; promote sectoral collaboration inenergy, transportation, and financial services; and reduce the costs of trade by increasing theefficiency of the cross-border operations. In press statements, the ministers cited agreement oncommon principles for electronic commerce, liberalization of the rules of origin on householdappliances and machinery, streamlining and harmonizing regulatory processes, and collaboration inthe steel, automotive and energy sectors to enhance competitiveness.

This report provides information on the importance of Mexico to U.S. interests andcatalogues the many ways Mexico and the United States interact. The report is a snapshot of thebilateral relationship at the beginning of 2006. It will not be updated on a regular basis. Sharing a 2,000-mile border and extensive interconnections through the Gulf of Mexico, theUnited States and Mexico are so intricately linked together in an enormous multiplicity of ways thatPresident George W. Bush and other U.S. officials have stated that no country is more important tothe United States than Mexico. At the same time, Mexican President Vicente Fox (2000-2006), thefirst president to be elected from an opposition party in 71 years, has sought to strengthen therelationship with the United States through what some have called a "grand bargain." Under thisproposed bargain, the United States would regularize the status of undocumented Mexican workersin the United States and economically assist the less developed partner in the North American FreeTrade Agreement (NAFTA), while Mexico would be more cooperative in efforts to control theillegal traffic of drugs, people, and goods into the United States. The southern neighbor is linked with the United States through trade and investment,migration and tourism, environment and health concerns, and family and cultural relationships. Itis the second most important trading partner of the United States, and this trade is critical to manyU.S. industries and border communities. It is a major source of undocumented migrants and illicitdrugs and a possible avenue for the entry of terrorists into the United States. As a result, cooperationwith Mexico is essential to deal effectively with migration, drug trafficking, and border, terrorism,health, environment, and energy issues. The United States and Mexico have developed a wide variety of mechanisms for consultationand cooperation on the range of issues in which the countries interact. These include (1) periodicalpresidential meetings; (2) annual cabinet-level Binational Commission meetings with 10 WorkingGroups on major issues; (3) annual meetings of congressional delegations in the Mexico-UnitedStates Interparliamentary Group Conferences; (4) NAFTA-related trilateral trade meetings undervarious groups; (5) regular meetings of the Attorneys General and the Senior Law EnforcementPlenary to deal with law enforcement and counter-narcotics matters; (6) a wide variety of bilateralborder area cooperation meetings dealing with environment, health, transportation, and bordercrossing issues; and (7) trilateral meetings under the "Security and Prosperity Partnership (SPP) ofNorth America" launched in Waco, Texas, in March 2005.

Despite measles having been declared eliminated in the United States 15 years ago, there have continued to be occasional outbreaks of the virus that have raised questions about the virus itself, the medications available to prevent its transmission, and the federal government's role in ensuring that vaccine-preventable diseases, such as measles, do not reestablish themselves in the United States. This report presents basic information about this infectious disease, its history in the United States, available treatments to prevent individuals from contracting measles, and the federal role in combatting measles—from funding, to research, to the authority of the federal government in requiring mandatory childhood vaccinations. According to the U.S. Centers for Disease Control and Prevention (CDC), "measles is a highly contagious virus that lives in the nose and throat mucus of an infected person." It is transmitted through coughing and sneezing, and it can live for up to two hours on a surface or in an airspace where the infected person coughed or sneezed. Someone who is not immunized against measles and comes into contact with the virus has a 9-in-10 chance of becoming infected. Symptoms associated with the measles start to appear approximately 7 to 14 days after a person is infected. Symptoms usually consist of high fever, cough, runny nose, and red/watery eyes. Two to three days after the onset of symptoms, small white spots may appear inside the mouth; a rash typically follows three to five days after symptoms begin. The most common complications from measles include inflammation of the middle ear, pneumonia, and diarrhea. Measles can cause serious illness resulting in hospitalization, and 1 in every 1,000 measles cases may develop acute encephalitis (inflammation of the brain), which could lead to permanent brain damage. Between 1 and 2 of every 1,000 children with measles will die from respiratory and neurologic complications. Those who are most at risk for severe illness and complications from the measles include infants and children younger than 5 years old, adults older than 20 years old, pregnant women, and people with compromised immune systems (e.g., HIV infection, cancer patients). Diagnosed cases of measles were first required to be reported by health care officials in the United States approximately 100 years ago; about 6,000 measles-related deaths were reported each year for the first decade of reporting. In the decade prior to the introduction of the first measles vaccine in 1963, most children got measles while growing up. Each year, approximately 3-4 million people in the United States caught the infection, an estimated 400 to 500 people died, and 48,000 were hospitalized. As recently as 2013, the World Health Organization estimated 145,700 deaths globally from measles. In 1954, John F. Enders and Dr. Thomas C. Peebles collected blood samples from several ill students during a measles outbreak in Boston, MA, in an attempt to create a measles vaccine. By 1963, Enders and colleagues had successfully created a measles vaccine and licensed it in the United States. Today, the measles vaccine is combined with mumps and rubella (MMR) or with mumps, rubella and varicella (MMRV). The Advisory Committee on Immunization Practices (ACIP) and CDC recommend that all children receive two doses of MMR vaccine, the first dose at 12 to 15 months of age, and the second at 4 to 6 years of age. Adults who do not have evidence of immunity (e.g., written documentation of vaccination, laboratory confirmation of measles) are recommended to receive at least one dose of the measles vaccine. Those who should not get the vaccine include anyone who has ever had a life-threatening allergic reaction (e.g., anaphylactic shock) to the antibiotic neomycin or to prior doses of the MMR or MMRV vaccine, pregnant women, and individuals with any type of cancer, HIV/AIDS, or other immune system disease. According to the CDC, the risks associated with the MMR vaccine "causing serious harm, or death, is extremely small" and receiving the vaccine "is much safer than getting measles, mumps, or rubella." However, as is the case with every medication, the MMR/MMRV vaccine is not 100% safe. It can result in what CDC characterizes as "mild problems," such as fever (1 out of 6 people) or mild rash (1 out of 20 people); "moderate problems," such as seizure caused by fever (1 out of 3,000 doses) or temporary joint stiffness or pain, mostly in teenage or adult women (up to 1 out of 4); and "severe problems," such as serious allergic reaction (less than 1 out a million doses) or deafness. The rarity of these severe problems makes it difficult to ascertain whether they are caused by the vaccine. It should be noted that among the issues that has resulted in pockets of lower rates of MMR/MMRV vaccination have been concerns over the safety of the measles vaccine itself, in particular concerns that the vaccine may cause autism. While the perception is real and may be influencing some parent's decisions to vaccinate their children, the scientific link between autism and the MMR vaccine has been studied extensively and has overwhelmingly been found to be unsubstantiated. According to data published in CDC's Morbidity and Mortality Weekly Report (MMWR), in 2013 (the year for which most recent data are available) "the overall national coverage for MMR vaccine among children aged 19 - 35 months was 91.9%." However, MMR vaccine coverage levels vary by state. According to the CDC, "in 10 states, 95% of the children aged 19–35 months in 2013 had received at least one dose of MMR vaccine, while in 17 other states, less than 90% of these children were vaccinated against measles." The MMWR article also observes that "pockets of unvaccinated people can exist in states with high vaccination coverage, underscoring considerable measles susceptibility at some local levels." CDC has noted that MMR vaccination rates among children 19 – 35 months have exceeded 90% since 1996. What has changed in recent years is the number of measles importations into the U.S. due to the continued high rates of measles in some parts of the world combined with pockets within the U.S. where vaccination rates are low. In tandem, despite an overall high rate of immunization, these trends continue to put individuals who cannot or will not get vaccinated at greater risk for the disease. The President's FY2016 budget request for the CDC reports that "from January 1 to November 29, 2014, CDC received reports of 610 measles cases from 24 states in the United States. This is the highest number of cases reported in the United States, including the largest single measles outbreak, since the Vaccines for Children (VFC) Program was established in 1994." Thus far in 2015 (through January 30), CDC has received reports of 102 measles cases located in 14 states. Most of the 102 cases—81 people from California and 13 from six other states—are considered to be part of a large, ongoing outbreak linked to an amusement park in California, and about half the patients were unvaccinated or did not know their vaccination status. At present, only one company is licensed to sell measles vaccine in the United States: Merck & Co., Inc., based in Whitehouse Station, NJ. According to the U.S. Food and Drug Administration, Merck is licensed and approved to sell two vaccines that contain the measles vaccine—one is the Measles, Mumps and Rubella Virus Vaccine, Live (known as MMR II), and the second is Measles, Mumps, Rubella, and Varicella Virus Vaccine Live (known as ProQuad). According to Merck's financial filings with the U.S. Securities and Exchange Commission, global revenue from the sale of ProQuad in 2013 (the most recent year for which annual sales data are available) was $314 million; revenue from the sale of MMR II was $307 million for the same year. For the first nine months of 2014, revenue from the sale of ProQuad was reported to be $278 million and revenue from the sale of MMR II was $249 million. The role of the federal government in vaccine policy, particularly in the development of guidelines for when to administer specific vaccines (and when not to) and to what populations is extensive. The federal government also has a major role in the purchase and distribution of vaccines, particularly childhood vaccines. However, the role of the federal government is much more limited and constrained in its ability to mandate the use of specific vaccines by individuals—this responsibility rests primarily with state and local officials. As mentioned earlier, the federal government's role in making evidence-based recommendations and guidance on the use of vaccines by different population groups is significant. The CDC's ACIP is the main group within the federal government charged with developing "recommendations on how to use vaccines to control diseases." The federal government has a robust capacity for monitoring vaccine usage, particularly the potential for adverse events. The system in place for this task is the Vaccine Adverse Event Reporting System (VAERS), operated jointly by the CDC and the FDA. Both vaccine manufacturers and healthcare providers must report adverse events through the VAERS system, whereas others (e.g., consumers) may do so voluntarily. The President's FY2016 budget request included $4.1 billion for the Vaccines for Children Program (VCP), which provides "vaccines to children whose parents or guardians may not be able to afford them," including vaccination against the measles. Funding for the program is allocated through the Centers for Medicare & Medicaid Services to the CDC. In addition to the VCP is CDC's Section 317 immunization program, which is funded by annual discretionary appropriations and provides grants to states, territories, commonwealth trusts, and several cities for vaccine purchase and programs (e.g., outreach and disease surveillance). The President's FY2016 budget request includes a projected $560.5 million for the Section 317 program. According to CDC, in calendar year 2014, the VCP and Section 317 programs spent $38.3 million on the purchase of MMR vaccine for children. The National Institutes of Health reports that in FY2015, it plans to spend an estimated $1.65 billion on vaccine-related research, focusing on issues ranging from HIV/AID to biodefense. The preservation of public health has traditionally been regarded as primarily the responsibility of state and local governments, and the authority to enact laws relevant to the protection of the public health derives from the states' general police powers. With regard to communicable disease outbreaks, these powers may include the enactment of mandatory vaccination laws. The Supreme Court has upheld the power of states to institute a mandatory vaccination program as an exercise of its police powers. In Jacobson v. Commonwealth of Massachusetts , the Supreme Court upheld a state law that gave municipal boards of health the authority to require the vaccination of persons over the age of 21 against smallpox, and determined that the vaccination program had "a real and substantial relation to the protection of the public health and safety." In upholding the law, the Court noted that "the police power of a State must be held to embrace, at least, such reasonable regulations established directly by legislative enactment as will protect the public health and the public safety." Likewise, the Court has recognized state and local power to require students to be vaccinated. In Zucht v. King , the Supreme Court upheld a local ordinance requiring vaccinations for schoolchildren. The Court invoked Jacobson for the principle that states may use their police power to require vaccinations, and noted that the ordinance did not bestow "arbitrary power, but only that broad discretion required for the protection of the public health." In turn, lower courts have given considerable deference to the use of the states' police power to require immunizations to protect the public health. For example, West Virginia does not offer a religious exemption from school vaccination requirements, but the U.S. Court of Appeals for the Fourth Circuit has rejected free exercise, equal protection, and substantive due process challenges to the law. Similarly, New York permits religious exemptions only if a parent holds "genuine and sincere religious beliefs" against vaccination, and permits school districts to bar unvaccinated children from school during an outbreak. The U.S. Court of Appeals for the Second Circuit has upheld the law against substantive due process, free exercise, and equal protection claims. Many states also have laws providing for mandatory vaccinations during a public health emergency or outbreak of a communicable disease. Generally, the power to order such actions rests with the governor of the state or with a state health officer. For example, a governor may have the power to supplement the state's existing compulsory vaccination programs and institute additional programs in the event of a civil defense emergency period. Or, a state health officer may, upon declaration of a public health emergency, order an individual to be vaccinated "for communicable diseases that have significant morbidity or mortality and present a severe danger to public health." In addition, exemptions may be provided for medical reasons or where objections are based on religion or conscience. However, if a person refuses to be vaccinated, he or she may be quarantined during the public health emergency giving rise to the vaccination order. State statutes may also provide additional authority to permit specified groups of persons to be trained to administer vaccines during an emergency in the event insufficient health care professionals are available for vaccine administration. Although states have traditionally exercised the bulk of authority in this area, the federal government does have jurisdiction over public health matters. The Commerce Clause states that Congress shall have the power "[t]o regulate Commerce with foreign Nations, and among the several States." Accordingly, under the Public Health Service Act, the Secretary of the Department of Health and Human Services has authority to make and enforce regulations necessary "to prevent the introduction, transmission, or spread of communicable diseases from foreign countries into the States or possessions, or from one State or possession into any other State or possession." Regulations issued pursuant to this authority include quarantine and isolation measures to halt the spread of certain communicable diseases. However, no mandatory vaccination programs are specifically authorized, nor do there appear to be any regulations regarding the implementation of a mandatory vaccination program at the federal level during a public health emergency. With regard to foreign countries, the Secretary has the power to restrict the entry of groups of aliens for public health reasons. This power includes the authority to issue vaccination requirements for immigrants seeking entry into the United States. Currently, certain vaccines specified in statute, and other vaccines recommended by the ACIP for the general U.S. population, are required for immigrants who seek permanent residence in the United States, and for people currently living in the United States who seek to adjust their status to become permanent residents. CDC has determined that two diseases for which vaccines are recommended for routine use by the ACIP—for human papillomavirus (HPV) and zoster (shingles)—do not have the potential to cause outbreaks, and are therefore not required for admission. Vaccination requirements may be waived when the foreign national receives the vaccination, if the civil surgeon or panel physician certifies that the vaccination would not be medically appropriate, or if the vaccination would be contrary to the foreign national's religious or moral beliefs. Likewise, the military has broad authority in dealing with its personnel, both military and civilian, including the protection of their health. Military regulations require U.S. troops to be immunized against a number of diseases, including tetanus, diphtheria, influenza, hepatitis A, measles, mumps, rubella, polio, and yellow fever. Inoculations begin upon entry into military service, and later vaccines depend upon troop specialties or assignments to different geographic areas of the world. Courts have upheld the legality of military mandatory vaccination orders. American Academy of Pediatrics/Measles Outbreak Update 2015: http://www2.aap.org/immunization/illnesses/mmr/measles.html ; http://www.aap.org/en-us/about-the-aap/aap-press-room/Pages/American-Academy-of-Pediatrics-Urges-Parents-to-Vaccinate-Children-to-Protect-Against-Measles.aspxCDC/Epidemiology and Prevention of Vaccine-Preventable Diseases: http://www.cdc.gov/vaccines/pubs/pinkbook/meas.html#vaccinesCDC/Measles Cases and Outbreaks: http://www.cdc.gov/measles/cases-outbreaks.htmlCDC/Advisory Committee on Immunization Practices: http://www.cdc.gov/vaccines/acip/index.html ; http://www.cdc.gov/vaccines/hcp/acip-recs/vacc-specific/mmr.html ; http://www.cdc.gov/vaccines/hcp/acip-recs/vacc-specific/mmrv.htmlCDC/Ten Great Public Health Achievements in the 20 th Century: http://www.cdc.gov/about/history/tengpha.htmInstitute of Medicine/On the U.S. Measles Outbreak: http://notes.nap.edu/2015/01/28/the-institute-of-medicine-on-the-us-measles-outbreak/#.VNEIIC43m7MWorld Health Organization/Measles Fact Sheet: http://www.who.int/mediacentre/factsheets/fs286/en/

The earliest accounts of measles date back over 1,000 years. This report presents basic information about this infectious disease, its history in the United States, available treatments to prevent individuals from contracting measles, and the federal role in combatting measles—from funding, to research, to the authority of the federal government in requiring mandatory childhood vaccinations. The report provides additional resources for information on measles and recommendations for vaccination against the disease. According to the U.S. Centers for Disease Control and Prevention (CDC), "measles is a highly contagious virus that lives in the nose and throat mucus of an infected person." It is transmitted through coughing and sneezing, and it can live for up to two hours on a surface or in an airspace where an infected person coughed or sneezed. Someone who is not immunized against measles and comes into contact with the virus has a 90% chance of becoming infected. According to the CDC, in 2013 (the most recent year in which data are available) "the overall national coverage for MMR vaccine among children aged 19-35 months was 91.9%." However, MMR (measles, mumps, rubella) vaccine coverage levels continue to vary by state, with 10 states reporting 95% of children aged 19-35 months receiving at least one dose of MMR vaccine, while in 17 other states, less than 90% were vaccinated. The President's FY2016 budget request for the CDC reports that "from January 1 to November 29, 2014, CDC received reports of 610 measles cases from 24 states in the United States. This is the highest number of cases reported in the United States, including the largest single measles outbreak, since the Vaccines for Children (VFC) Program was established in 1994." Thus far in 2015 (through January 30), CDC has received reports of 102 measles cases located in 14 states. While the overall U.S. MMR annual vaccination rate has exceeded 90% since 1996, the increased number of imported measles cases, combined with pockets of unvaccinated individuals, has resulted in a larger number of outbreaks in recent years. The role of the federal government in vaccine policy, particularly in the development of guidelines for when to administer specific vaccines (and when not to) and to what populations is extensive. The federal government also has a major role in the purchase and distribution of vaccines, particularly childhood vaccines. However, the role of the federal government is much more limited and constrained in its ability to mandate the use of specific vaccines by individuals—this responsibility rests primarily with state and local officials.

The Department of Veterans Affairs (VA) provides a range of benefits and services to veterans who meet certain eligibility rules; these benefits include medical care, disability compensation and pensions, education, vocational rehabilitation and employment services, assistance to homeless veterans, home loan guarantees, administration of life insurance as well as traumatic injury protection insurance for servicemembers, and death benefits that cover burial expenses. The VA carries out its programs nationwide through three administrations and the Board of Veterans Appeals (BVA). The Veterans Benefits Administration (VBA) is responsible for, among other things, providing compensation, pensions, and education assistance. The National Cemetery Administration (NCA) is responsible for maintaining national veterans' cemeteries; providing grants to states for establishing, expanding, or improving state veterans' cemeteries; and providing headstones and markers for the graves of eligible persons, among other things. The Veterans Health Administration (VHA) is responsible for health care services and medical and prosthetic research programs. The VHA is primarily a direct service provider of primary care, specialized care, and related medical and social support services to veterans through the nation's largest integrated health care system. Inpatient and outpatient care are also provided in the private sector to eligible dependents of veterans under the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA). The VHA is also a provider of health care education and training for physician residents and other health care trainees. The other statutory missions of VHA are to serve as a contingency backup to the Department of Defense (DOD) medical system during a national security emergency, and to provide support to the National Disaster Medical System and the Department of Health and Human Services as necessary. In general, eligibility for VA health care is based on previous military service, presence of service-connected disabilities, and/or other factors. Veterans generally must enroll in the VA health care system to receive medical care. Once enrolled, veterans are assigned to one of eight categories (see Appendix ). It should be noted that in any given year, not all enrolled veterans obtain their health care services from the VA. While some veterans may rely solely on the VA for their care, others may receive the majority of their health care services from other sources, such as Medicare, Medicaid, private health insurance, and the military health system (TRICARE). VA-enrolled veterans do not pay premiums or enrollment fees to receive care from the VA; however, they may incur out-of-pocket costs for VA care related to conditions that are not service-connected. In FY2013, approximately 8.9 million of the 22.2 million living veterans in the nation were estimated to be enrolled in the VA health care system (see Table 1 ). From FY2010 through FY2013 the total number of enrollees has increased by 6.6%. Of the total number of enrolled veterans in FY2013, VA anticipated treating approximately 5.75 million unique veteran patients (see Table 2 ). For FY2014, VHA estimates that it will treat about 5.8 million unique veteran patients, and of these, VA anticipates treating more than 674,000 Operation Enduring Freedom (OEF), Operation Iraqi Freedom (OIF), and Operation New Dawn (OND) veterans. In FY2014, OEF, OIF, and OND patients would represent approximately10.4% of the overall patients served by the VA. VHA also provides medical care to certain non-veterans; in FY2014 this population is expected to increase by almost 18,000 patients over the FY2013 level. In total, including non-veterans, it is estimated the VHA will treat nearly 6.5 million patients in 2014, a slight increase of 1.3% over the number of patients treated in FY2013 (see Table 2 ). Between FY2010 and FY2013, the number of patients treated by VA has grown by 7.1%. The total number of outpatient visits, including visits to Vet Centers, reached 88.7 million during FY2012 and is projected to increase to approximately 92.2 million in FY2013 and 95.5 million in FY2014. The rest of this report focuses on appropriations for VHA. It begins with a brief overview of VA's budget as a whole for FY2013 and the President's request for FY2014. It then presents a brief overview of VHA's budget formulation, a description of the accounts that fund the VHA, and a summary of the FY2013 VHA budget. The report ends with a section discussing recent legislative developments pertaining to the FY2014 VHA budget. In order to understand annual appropriations for the Veterans Health Administration (VHA), it is essential to understand the role of advance appropriations. In 2009, Congress enacted the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ) authorizing advance appropriations for three of the four accounts that comprise VHA: medical services, medical support and compliance, and medical facilities. The fourth account, the medical and prosthetic research account, is not funded with an advance appropriation. P.L. 111-81 also required the Department of Veterans Affairs to submit a request for advance appropriations for VHA with its budget request each year. Congress first provided advance appropriations for the three VHA accounts in the FY2010 appropriations cycle; the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ), provided advance appropriations for FY2011. Subsequently, each successive appropriation measure has provided advance appropriations for the VHA accounts: the Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 ), provided advance appropriations for FY2012; the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ), provided advance appropriations for FY2013; the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ), provided advance appropriations for FY2014; and the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ), provided advance appropriations for FY2015. Under current budget scoring guidelines, advance appropriations of budget authority are scored as new budget authority in the fiscal year in which the funds become newly available for obligation, and not in the fiscal year the appropriations are enacted. Therefore, throughout the funding tables of this report, advance appropriations numbers are shown under the label "memorandum" and in the corresponding fiscal year column. For example, advance appropriations for FY2013 authorized by the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ), are shown under a separate memorandum and in the FY2013 column. However, it should be noted that budget authority for FY2013 refers to the budget authority authorized in P.L. 112-74 and augmented by supplemental funding provided by the Disaster Relief Appropriations Act, 2013 ( P.L. 113-2 ), and by additional funding provided by Division E of the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ), which included funding for the medical and prosthetic research account (the account that is not funded as advance appropriations). Funding shown for FY2013 does not include advance appropriations provided in FY2013 by P.L. 113-6 for use in FY2014. Instead, the advance appropriation provided in FY2013 for use in FY2014 is shown in the memorandum in the FY2014 column. Similarly, funding shown for FY2014 does not include advance appropriations provided in FY2014 for use in FY2015. The VA budget includes both mandatory and discretionary funding. Mandatory accounts fund disability compensation, pensions, vocational rehabilitation and employment, education, life insurance, housing, and burial benefits (such as graveliners, outer burial receptacles, and headstones), among other benefits and services. Discretionary accounts fund medical care, medical research, construction programs, information technology, and general operating expenses, among other things. Figure 1 provides a breakdown of FY2013 budget allocations for both mandatory and discretionary programs (see also Table 5 ). In FY2013, the total VA budget authority was approximately $134.1 billion; discretionary budget authority accounted for about 46% ($61.2 billion) of the total, with about 87% ($53.3 billion) of this discretionary funding going toward supporting VA health care programs, including medical and prosthetic research. The VA's mandatory budget authority accounted for about 54% ($72.9 billion) of the total VA budget authority, with about 83% ($60.63 billion) of this mandatory funding going toward disability compensation and pension programs. Figure 2 provides a breakdown of the FY2014 President's budget request for both mandatory and discretionary programs (also see Table 7 ). For FY2014, the Administration requested approximately $147.9 billion. This includes approximately $63.5 billion in discretionary funding and $84.5 billion in mandatory funding. Similar to most federal agencies, the VA begins formulating its budget request approximately 10 months before the President submits the budget to Congress, generally in early February. VHA's budget request to Congress begins with the formulations of the budget based on the Enrollee Health Care Projection Model (EHCPM). The model estimates the amount of budgetary resources VHA will need to meet the expected demand for most of the health care services it provides. The EHCPM's estimates are based on three basic components: the projected number of veterans who will be enrolled in VA health care, the projected utilization of VA's health care services—that is, the quantity of health care services enrollees are expected to use—and the projected unit cost of providing these services. Each component is subject to a number of adjustments to account for the characteristics of VA health care and the veterans who access VA's health care services. The EHCPM makes projections three or four years into the future. Each year, VHA updates the EHCPM estimates to "incorporate the most recent data on health care utilization rates, actual program experience, and other factors, such as economic trends in unemployment and inflation." For instance, in 2012, VHA used data from FY2011 to develop its health care budget estimate for the FY2014 request, including the advance appropriations request for FY2015. Table 3 provides a detailed timeline for formulating the FY2014 budget request and the FY2015 advance appropriations request. As noted previously, VHA is funded through four appropriations accounts. These are supplemented by other sources of revenue. Although the appropriations account structure has been subject to change from year to year, the appropriation accounts used to support the VHA traditionally include medical care, medical and prosthetic research, and medical administration. Congress also appropriates funds for construction of medical facilities through a larger appropriations account for construction for all VA facilities. In FY2004, "to provide better oversight and [to] receive a more accurate accounting of funds," Congress changed the VHA's appropriations structure. Specifically, the Department of Veterans Affairs and Housing and Urban Development and Independent Agencies Appropriations Act, 2004 ( P.L. 108-199 , H.Rept. 108-401 ), funded VHA through four accounts: (1) medical services, (2) medical administration (currently known as medical support and compliance), (3) medical facilities, and (4) medical and prosthetic research. Brief descriptions of these accounts are provided below. The medical services account covers expenses for furnishing inpatient and outpatient care and treatment of veterans and certain dependents, including care and treatment in non-VA facilities; outpatient care on a fee basis; medical supplies and equipment; salaries and expenses of employees hired under Title 38, United States Code (U.S.C.); cost of hospital food service operations; aid to state veterans' homes; and assistance and support services for family caregivers of veterans authorized by the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ). For FY2013, the President's budget request proposed the transfer of funding for biomedical engineering services from the medical facilities account to this account. The Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ), approved this transfer. The President's budget request for FY2014 proposed to continue funding for biomedical engineering services in the medical services account. The Military Construction and Veterans Affairs, and Related Agencies Appropriations bill for FY2014 ( H.R. 2216 ; H.Rept. 113-90 ) that was passed by the House of Representatives June 4, 2013, and the Senate Appropriations Committee reported version of H.R. 2216 ( S.Rept. 113-48 ) continued this transfer for FY2014. This account provides for expenses related to the management, security, and administration of the VA health care system through the operation of VA medical centers, and other medical facilities such as community-based outpatient clinics (CBOCs) and Vet Centers. It also funds 21 Veterans Integrated Service Network (VISN) offices and facility director offices; chief of staff operations; public health and environmental hazard programs; quality and performance management programs; medical inspection; human research oversight; training programs and continuing education; security; volunteer operations; and human resources management. The medical facilities account funds expenses pertaining to the operations and maintenance of the VHA's capital infrastructure. These expenses include utilities and administrative expenses related to planning, designing, and executing construction or renovation projects at VHA facilities. It also funds leases, laundry services, grounds maintenance, trash removal, housekeeping, fire protection, pest management, and property disposition and acquisition. As required by law, the medical and prosthetic research program (medical research) focuses on research into the special health care needs of veterans. This account provides funding for many types of research, such as investigator-initiated research; mentored research; large-scale, multi-site clinical trials; and centers of excellence. VA researchers receive funding not only through this account but also from the Department of Defense (DOD), the National Institutes of Health (NIH), and private sources. In general, VA's research program is intramural; that is, research is performed by VA investigators at VA facilities and approved off-site locations. Unlike other federal agencies, such as NIH and DOD, VA does not have the statutory authority to make research grants to colleges and universities, cities and states, or any other non-VA entities. In addition to the appropriations accounts mentioned above, the Committees on Appropriations include medical care cost recovery collections when considering funding for the VHA. Congress has provided VHA the authority to bill some veterans and most health care insurers for nonservice-connected care provided to veterans enrolled in the VA health care system, to help defray the cost of delivering medical services to veterans. Funds collected from first and third party (copayments and insurance) bills are retained by the VA health care facility that provided the care for the veteran. Table 4 provides details of MCCF collections from FY2009 through FY2014. In its FY2014 congressional budget submission, the Administration is proposing two legislative proposals to increase collections in FY2014. The first proposal would amend 38 U.S.C. Section 7332(b) and allow the VHA to disclose the veteran's patient records, including the identity, diagnosis, prognosis, or treatment of a patient relating to drug abuse, alcoholism or alcohol abuse, infection with the human immunodeficiency virus (HIV), or sickle cell anemia to the veteran's private health insurance plans for the purpose of VHA obtaining reimbursement for nonservice-connected care. The second proposal would provide authority for VHA to be considered a participating provider whether or not an agreement is in place with a veteran's private health insurance plan. This would allow VHA to collect charges for treatment of a veteran's nonservice-connected conditions. The President's FY2013 budget request was submitted to Congress on February 13, 2012. The President's budget requested $135.8 billion in budget authority for the VA as a whole (see Table 5 ). This included approximately $75 billion in mandatory funding and $61 billion in discretionary funding. For FY2013, the Administration requested $53.3 billion for VHA. This included $41.5 billion for the medical services account, $5.7 billion for the medical support and compliance account, $5.4 billion for the medical facilities account, and nearly $583 million for the medical and prosthetic research account (see Table 6 ). The total requested amount for VHA represented a 4.1% increase over the FY2012-enacted appropriations. Furthermore, as required by the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ), the President's budget requested $54.5 billion in advance appropriations for the three medical care accounts (medical services, medical support and compliance, and medical facilities) for FY2014. On December 7, 2012, the President submitted a $236.6 million supplemental request for VA for costs associated with Hurricane Sandy, which included $27 million for VHA. Congress did not enact a regular Military Construction and Veterans Affairs and Related Agencies Appropriations bill for FY2013 (MILCON-VA Appropriations bill) prior to the beginning of FY2013, and funded most of the VA (excluding the three medical care accounts: medical services, medical support and compliance, and medical facilities) through a six-month government-wide continuing resolution ( P.L. 112-175 ). On January 29, 2013, the Disaster Relief Appropriations Act, 2013, was enacted as P.L. 113-2 . This act provided the approximately $236.6 million in supplemental funding requested by the President for the VA, which included $27 million for VHA. On March 6, 2013, the House passed the Department of Defense, Military Construction and Veterans Affairs, and Full-Year Continuing Appropriations Act, 2013 ( H.R. 933 ). The Senate passed an amended version of the bill on March 20, 2013, and the House agreed to the amended version the next day. The Consolidated and Further Continuing Appropriations Act, 2013 ( H.R. 933 ; P.L. 113-6 ), was signed into law by the President on March 26, 2013. Division E of P.L. 113-6 contained funding for the VA. P.L. 113-6 provided $133.9 billion in budget authority for the VA as a whole (excluding the Hurricane Sandy Funding Needs supplemental funding provided in P.L. 113-2 ). This includes approximately $72.9 billion in mandatory funding and $61 billion in discretionary funding. For FY2013, funding for VHA is $53.3 billion (excluding the Hurricane Sandy Funding Needs supplemental funding provided in P.L. 113-2 ). Furthermore, as required by the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ), P.L. 113-6 provides $54.5 billion in advance appropriations for the three medical care accounts (medical services, medical support and compliance, and medical facilities) for FY2014. The Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ), required across-the-board rescissions for all discretionary accounts including those of the VA. Section 3001 in Division G of the act required a 0.1% across-the-board rescission for discretionary VA accounts appropriated in FY2013. Section 3004 in Division G of P.L. 113-6 was intended to eliminate any amount by which the new budget authority provided in the act exceeded the FY2013 discretionary spending limits in Section 251(c)(2) of the Balanced Budget and Emergency Deficit Control Act, as amended by the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012. Subsequent to the enactment of P.L. 113-6 , the Office of Management and Budget (OMB) calculated that additional rescissions of 0.032% of security budget authority, and 0.2% of nonsecurity budget authority, would be required. Table 5 and Table 6 shows the FY2013 amounts (based on OMB calculations) following the 0.1% and 0.032% across-the-board rescissions. Additionally, Table 5 and Table 6 shows the Hurricane Sandy Funding Needs supplemental funding provided in P.L. 113-2 . The President submitted his FY2014 budget request to Congress on April 10, 2013. The FY2014 President's Budget is requesting $147.9 billion for the VA as a whole (see Table 7 ). For VA medical services, the Administration's budget is requesting $157.5 million in additional funding above the FY2014 advance appropriations of $43.6 billion provided in FY2013. According to the VA, the increased funding levels requested for FY2014 reflect the increased costs of medical care requirements resulting from the implementation of the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ) and the Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012 ( P.L. 112-154 ). In total, the President is requesting $55.2 billion for VHA for FY2014. This includes $43.7 billion for the medical services account, $6.0 billion for the medical support and compliance account, $4.9 billion for the medical facilities account, and nearly $586 million for the medical and prosthetic research account (see Table 8 ). As required by the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ), the President's budget is requesting $55.6 billion in advance appropriations for the three medical care appropriations (medical services, medical support and compliance, and medical facilities) for FY2015 (see Table 8 ). On March 13, 2013, the House Budget Committee reported a budget resolution ( H.Con.Res. 25 H.Con.Res. 25, 113 th Congress), and the budget resolution was agreed to by the House on March 21, 2013. According to the committee report that accompanied H.Con.Res. 25 ( H.Rept. 113-17 ): The resolution calls for $145.7 billion in budget authority and $145.4 billion in outlays in fiscal year 2014 [for Veterans Benefits and Services]. Discretionary spending is $63.3 billion in budget authority and $63.1 billion in outlays in fiscal year 2014. This in an increase of 3.1 percent from last year's discretionary level. Mandatory spending in 2014 is $82.4 billion in budget authority and $82.3 billion in outlays. The ten-year totals for budget authority and outlays are $1.7 trillion and $1.7 trillion, respectively. This resolution also authorizes up to $55.483 billion for fiscal year 2015 in advance appropriations for medical care, consistent with the Veterans Health Care Budget and Reform Transparency Act of 2009. Since the President has yet to submit a budget request this year, the VA's request for veterans-medical-care advance appropriations for fiscal year 2015 is unavailable as of the writing of this concurrent resolution. The amount authorized in this resolution reflects the amount requested in the administration's fiscal year 2013 request for fiscal year 2015 and is the most up-to-date estimate on veterans' health-care needs requested by the Department of Veterans Affairs. On March 14, 2013, the Senate Budget Committee reported a budget resolution ( S.Con.Res. 8 , 113 th Congress), and the budget resolution was agreed to by the Senate on March 23, 2013. According to the committee print that accompanied S.Con.Res. 8 ( S.Rept. 113-12 ): The budget resolution sets fiscal year 2014 levels at $145.5 billion for budget authority [BA] and $145.3 billion for outlays for [Veterans Benefits and Services]. Over the FY 2014-2018 period, BA totals $779.5 billion, with $776.4 billion in outlays. From FY 2014-2023, the [Veterans Benefits and Services] function totals $1.688 trillion in BA and $1.68 trillion in outlays. For discretionary spending, the resolution calls for FY 2014 levels of $63.1 billion in BA and $62.9 billion in outlays. BA totals $336.3 billion and outlays equal $333.6 billion over five years. From FY 2014-2023, the discretionary total for [Veterans Benefits and Services] is $730.9 billion in BA and $723.8 billion in outlays. On May 15, 2013, the House Military Construction and Veterans Affairs Subcommittee approved its version of a Military Construction and Veterans Affairs and Related Agencies Appropriations bill for FY2014 (MILCON-VA Appropriations bill). The full House Appropriations Committee voted to report the measure on May 21, 2013, and the House passed H.R. 2216 on June 4, 2013. The MILCON-VA Appropriations bill for FY2014 ( H.R. 2216 ; H.Rept. 113-90 ) proposes a total of $147.6 billion for the VA (see Table 7 ). The total includes $84.5 billion for mandatory programs, and $63.1 billion for discretionary programs (see Table 7 ). H.R. 2216 ( H.Rept. 113-90 ) (see Table 7 ) as passed by the House proposes $54.9 billion for VHA for FY2014, which comprises four accounts: medical services, medical support and compliance, medical facilities, and medical and prosthetic research. The House-passed measure does not include the additional funding amount of $157.5 million (above the FY2014 advance appropriations) for the medical services account that was requested by the President for FY2014, and proposes to rescind $156.0 million from the FY2014 VHA amount that was provided as an advance appropriation in FY2013, giving the Secretary the discretion to allocate these reductions across VHA accounts. H.R. 2216 proposes $55.6 billion in advance FY2015 funding for the medical services, medical support and compliance, and medical facilities accounts—the same level included in the House-passed Budget Resolution, and the President's request (see Table 8 ). On June 18, 2013, the Senate Military Construction, Veterans Affairs, and Related Agencies Subcommittee approved its version of the MILCON-VA Appropriations bill. The full Senate Appropriations Committee marked up the bill and voted to report the measure on June 20, 2013. The MILCON-VA Appropriations bill for FY2014 ( H.R. 2216 ; S.Rept. 113-48 ) proposes a total of $147.9 billion for the VA for FY2014. The total includes $84.5 billion for mandatory programs, $63.5 billion for discretionary programs. The Senate Appropriations Committee approved measure does not include the full additional funding amount of $157.5 million (above the FY2014 advance appropriations) for the medical services account that was requested by the President for FY2014, and instead proposes a $25 million increase for the medical services account (see Table 8 ). The committee notes that The justification accompanying the budget request provides few details regarding the data and assumptions that were modified in the updated actuarial model projection. Absent this data, the Committee cannot accurately assess the merits of an additional request. The Committee also notes that the Department routinely carries forward significant funds from one fiscal year to the next and directs that any of funding carried forward from fiscal year [FY] 2013 be applied to unanticipated needs. Furthermore, the Senate Appropriations Committee approved measure ( H.R. 2216 ; S.Rept. 113-48 ) proposes an additional $100 million for the medical facilities account for FY2014 for nonrecurring maintenance projects (see Table 8 ). Congress was unable to complete action on any of the FY2014 appropriation acts prior to the beginning of the new fiscal year. Lawmakers also failed to agree on language in a FY2014 continuing resolution (CR). With no agreement in place on October 1, 2013, the resulting lapse in funding led to a partial shutdown of government operations. Congress finally reached agreement on a temporary CR on October 16, 2013, and the President signed the Continuing Appropriations Act, 2014 ( P.L. 113-46 ), the following day to reopen the government. That CR (P.L. 113-46) funded most of the VA (excluding the three medical care accounts: medical services, medical support and compliance, and medical facilities) through January 15, 2014. P.L. 113-73 extended the CR through January 18, allowing extra time for legislative consideration of an omnibus appropriation bill. On January 17, 2014, the President signed into law the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ). Division J of this act included the Military Construction and Veterans Affairs, and Related Agencies Appropriations Act, 2014 (MILCON-VA Appropriations Act, 2014). In total the MILCON-VA Appropriations Act, 2014 provides a total of $147.9 billion in budget authority for VA programs in FY2014. Of this amount, $55.1 billion is provided for VHA, which comprises four accounts: medical services, medical support and compliance, medical facilities, and medical and prosthetic research accounts. P.L. 113-76 provides $40 million for FY2014 for the medical services account in addition to the advance appropriation of $43.6 billion that was provided in P.L. 113-6 (see Table 8 ). Furthermore, the MILCON-VA Appropriations Act, 2014, provides $85 million for FY2014 for the medical facilities account in addition to the advance appropriation of $4.9 billion provided in P.L. 113-6. This additional funding will be used to address the backlog of non-recurring maintenance needs at existing VA hospitals and clinics. As required by the Veterans Health Care Budget Reform and Transparency Act of 2009 (P.L. 111-81), the MILCON-VA Appropriations Act, 2014, provides advance appropriations of $55.6 billion for FY2015 for three VHA accounts (medical services, medical support and compliance, and medical facilities). Furthermore, P.L. 113-76 rescinds $50 million from the FY2014 VHA accounts (see Table 8 ).

The Department of Veterans Affairs (VA) provides benefits to veterans who meet certain eligibility criteria. Benefits to veterans range from disability compensation and pensions to hospital and medical care. The VA provides these benefits through three major operating units: the Veterans Health Administration (VHA), the Veterans Benefits Administration (VBA), and the National Cemetery Administration (NCA). This report focuses on funding for the VHA. The VHA is primarily a direct service provider of primary care, specialized care, and related medical and social support services to veterans through the nation's largest integrated health care system. Eligibility for VA health care is based primarily on previous military service, disability, and income. The President's FY2014 budget request was submitted to Congress on April 10, 2013. The President's budget requested $147.9 billion in budget authority for the VA as a whole. For FY2014, the Administration requested $55.2 billion for VHA. This included $43.7 billion for the medical services account, $6.0 billion for the medical support and compliance account, $4.9 billion for the medical facilities account, and nearly $586 million for the medical and prosthetic research account. Furthermore, as required by the Veterans Health Care Budget Reform and Transparency Act of 2009 (P.L. 111-81), the President's budget requested $55.6 billion in advance appropriations for the three medical care accounts (medical services, medical support and compliance, and medical facilities) for FY2015. On May 15, 2013, the House Military Construction and Veterans Affairs Subcommittee approved its version of a Military Construction and Veterans Affairs and Related Agencies Appropriations bill for FY2014 (MILCON-VA Appropriations bill). The full House Appropriations Committee voted to report the measure on May 21, 2013, and the House passed H.R. 2216 on June 4, 2013. The MILCON-VA Appropriations bill for FY2014 (H.R. 2216; H.Rept. 113-90) proposed a total of $147.6 billion for the VA as whole. For FY2014, H.R. 2216 proposed $54.9 billion for VHA. H.R. 2216 also included $55.6 billion in advance FY2015 funding for the medical services, medical support and compliance, and medical facilities accounts—the same level included in the House-passed FY2014 Budget Resolution, and the President's request. On June 18, 2013, the Senate Military Construction, Veterans Affairs, and Related Agencies Subcommittee approved its version of the MILCON-VA Appropriations bill. The full Senate Appropriations Committee voted to report the measure (H.R. 2216; S.Rept. 113-48) on June 20. H.R. 2216 (S.Rept. 113-48) proposed appropriations totaling $147.9 billion for FY2014 for the functions of the VA as a whole and $55.2 billion for VHA. Similar to the House version, the Senate committee-approved version included $55.6 billion in advance FY2015 funding for the medical services, medical support and compliance, and medical facilities accounts. Neither a MILCON-VA Appropriations bill, nor a continuing appropriations resolution (CR), including FY2014 funding for most of the VA (excluding the three medical care accounts: medical services, medical support and compliance, and medical facilities), was enacted prior to the beginning of FY2014. A funding gap resulted in a partial government shutdown. The funding gap was terminated by the enactment of a CR (P.L. 113-46) on October 17, 2013. The Consolidated Appropriations Act, 2014 (P.L. 113-76), was enacted on January 17, 2014, providing appropriations totaling $147.9 billion for FY2014 for the functions of the VA as a whole and $55.1 billion for VHA. P.L. 113-76 includes $55.6 billion in advance FY2015 funding for the medical services, medical support and compliance, and medical facilities accounts.

Border and Transportation Security (BTS) is a pivotal function in protecting the American people from terrorists and their instruments of destruction. The issue for Congress is how to achieve desired levels of security, while not compromising other important values in the process. In a series of three reports, a strategic approach to BTS using a variety of frameworks to clarify objectives and help identify policy options is discussed. This final report builds on the analysis presented in the first two reports, and explores possible new directions and policy options that spring directly from the analytical frameworks contained in those reports. Before doing so, however, it is useful to place this set of activities in the broader context of overall Homeland Security efforts and to review the development of congressional concern and policy approaches up to this point. The homeland security effort can be seen as a series of concentric circles or screens, with the outer screen being that of preventive efforts launched outside the country. The continuum of activities to provide homeland security then moves through progressively smaller circles starting from more distant efforts to closer and more localized measures. Thus, the process starts with prevention abroad and ends with emergency preparedness and response at home: Discovery and preventive intervention of terrorist actions emanating from abroad before reaching the United States; Interdiction of dangerous people or things at the U.S. border and in the interior transportation sector; Defense against catastrophic terrorism inside the United States through law enforcement and domestic intelligence efforts; Protection of critical infrastructure and the population ; and Emergency Preparedness and response . Congressional concern with terrorism and border security was manifested early, following a series of terrorist attacks in the 1990s. The congressional response began with inquiries as to the nature of the terrorist threat and the commissioning of several studies, and was followed by specific, targeted measures to protect the nation following the events of 9/11. Congressional interest, however, continues in broader, more comprehensive approaches including efforts in the 108 th Congress to respond to the report of the 9/11 Commission embodied in the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA, P.L. 108-458 ). Congressional policy actions are summarized briefly below: Broad efforts to understand the terrorist threat . Starting in 1998, Congress stimulated the creation of three commissions to better understand the nature of the terrorist threat facing the nation. These included the Gilmore Commission, the Bremer Commission, and the Hart-Rudman Commission. Highly specific actions to protect against immediate threats . Immediately following the airplane-based attacks of 9/11, early legislative action focused on airline security, visa and border security, and then moved on to maritime security. Structural and procedural changes to provide an effective framework for action . Following the 9/11 attacks, Congress enacted legislation to create the Department of Homeland Security to provide a structural framework for subsequent action, and the USA PATRIOT Act to provide the tools needed for the new challenge to national security. Interest in broader, more comprehensive substantive approaches . As evidenced in oversight hearings, Congress has been frustrated by the failure to more aggressively address other border and transportation security threats (including the need to create integrated terrorist watch-lists, and measures to address other modes of transportation—rail and mass transit, air cargo, trucking, and buses). These concerns were given a strong impetus by the Final Report of the 9/11 Commission, which highlighted the need for more strategic approaches to the terrorist threat, and are now expressed in legislative form in P.L. 108-458 . The evolution of congressional concern (moving from general to specific and back to broader concerns) makes this an opportune time to consider some possible policy frameworks that might shed additional light on the nature of the problem and possible new or enhanced policy choices. The next section of the report briefly summarizes the two earlier reports in the series that address the complexity of the challenge, as well as the programs and policies developed thus far to contribute to border and transportation security. The third section explores the idea of using a "layered" approach to protecting the nation—relying on multiple and overlapping policy actions on a number of fronts to increase the probability of interdicting bad people or bad things. The final section explores some ideas for possible new directions and policy options that spring directly from the analytical frameworks used in the report. The task of providing border and transportation security is complex both because of its scale and possible conflicts with other important national goals. The magnitude of the task is substantial—covering thousands of miles of land borders, millions of passengers, hundreds of airports and seaports, and millions of individual motor vehicles, rail cars, and cargo containers. The first possible goal conflict springs from the demands of security confronting the need for facilitating the essential travel and trade that are at the heart of continued economic growth. This reality leads to a redefinition of the task from one of pitting security vs. economic well-being to that of good border management. Good border management requires facilitating (and even expediting) the flow of desirable goods and people across our borders, while screening out dangerous people and material. The process of doing that is made more manageable if the border is envisioned not merely as a physical boundary but rather as a flexible concept that allows for the possibility that the border begins at the point where goods or people commence their U.S.-bound journey. The result of such a broader perspective is a significantly wider array of options for good border management. A companion report presents several graphical images of how this process might be envisioned. (See CRS Report RL32839, Border Security: The Complexity of the Challenge , by [author name scrubbed].) That report blends the geographic dimension of the problem with the challenge of screening people, goods, and documents. It starts by identifying the paths that may be followed in moving from the source country to the United States, and then overlays the various points at which people, goods, and documents face the possibility of interception en route to the ultimate destination (the final destination inside the United States). The results are portrayed in Figure 1 . The figure should be viewed from left to right, moving from the foreign port of exit (FPOE) through a transit zone (illustrating the case where some goods or people might move through one or more intermediate countries en route), to the domestic port of entry (DPOE)—the final destination in the United States. In the process, exported goods may be handled by multiple intermediaries, people will follow several processes, and the necessary travel documents will pass through many hands. While designed to illustrate the multiple points where bad things can happen, the illustration also suggests that the multiple points of vulnerability in the shipping or travel process can also be seen as opportunities for interception—and, if exploited, can actually increase the probability of interdiction of the bad things and bad people that we seek to intercept before they arrive at their intended targets. The current programs designed to accomplish this interception are discussed more fully in the second report in this series: CRS Report RL32840, Border and Transportation Security: Selected Programs and Policies , by Lisa M. Seghetti, [author name scrubbed], and [author name scrubbed]. These efforts can be summarized by using an analytical framework that highlights generic strategies that might be used to achieve greater border and transportation security: Pushing the border outwards to intercept unwanted people or goods before they reach the United States (as in the Container Security Initiative and passenger pre-screening); Hardening the border through the use of technology (e.g., X-ray machines for examining cargo without opening the containers, radiation and explosives detectors, and unmanned aerial vehicles to monitor remote areas at the border); Making the border more accessible for legitimate trade and travel (faster passage for trusted travelers and cargo conveyors); Strengthening the border inspection process through more effective use of intelligence (terrorist screening data bases); and Multiplying effectiveness of interdiction programs through the engagement of other actors in the enforcement effort (including engaging Canada, Mexico, state and local law enforcement resources, and the private sector). The realization that multiple points of vulnerability might be turned into expanded opportunities for interdiction has given rise to the notion of a "layered" approach to security. The basic idea of layering is that multiple and overlapping measures applied at key points in the border security environment could succeed where only more targeted measures might fail because of their rising expense, increasing conflict with other goals, or inability to cover all conceivable risks arising from opportunistic terrorist tactics. The concept of a layered approach to border and transportation security is gaining currency in policy discussions. The idea was cited in a security context in the so-called Gore Commission Report on aviation safety and security in early 1997. The commission stated the belief that "aviation security should be a system of systems, layered, integrated, and working together to produce the highest levels of protection." An important pre-9/11 reference to "layering" was found in the Hart-Rudman Commission Report in 2001. The commission stated: "We believe that homeland security can best be assured through a comprehensive strategy of 'layered defense' that focuses first on prevention, second on protection, and third on response...." This report discusses the concept of layered protection as applied specifically to border security, and offers a definition that is intended to translate the concept into something more concrete—with the goal of making it possible to be applied to actual programs and policy actions. The most recent advocacy of a layered approach comes from the 9/11 Commission Report issued in July 2004. Addressing the importance of passenger screening, the commission states: "The FAA set and enforced security rules, which airlines and airports were required to implement. The rules were supposed to produce a 'layered' system of defense. This meant that the failure of any one layer of security would not be fatal, because additional layers would provide backup security." Later, the commission introduced a footnote specifically endorsing such a "layered" approach, and refers the reader to Dr. Stephen Flynn's latest work in which he uses a household-based example of what layering would look like in a residential setting: The simple act of locking a door with a conventional lock will deter most amateur thieves.... Returning to our case of securing a home, we might consider some additional ways to ward off burglars without trying to make conventional doors and windows burglar-proof. Since thefts often occur at night, we could consider installing automatic lights that are triggered when people approach. A dog on the premises will provide another measure of security. Add to this a sign posted on the front lawn that indicates the home is monitored by a security company. Finally the community could form neighborhood watch groups and post signs on the streets advertising this fact. Any of these measures might work only 60% of the time. But statistically, five 60% measures when placed in combination will raise the overall probability of preventing a burglary to 99%. In many instances, it may well be that the cost of all these measures is less expensive than trying to bolster any one or even two measures. A truly operational definition would be applicable to the entire environment of border and transportation security, and would suggest specific action points and measures for added protection. The following is a provisional attempt to address that need: A "layered" approach to border and transportation security is a comprehensive strategy that identifies key points of vulnerability wherever they exist (including travelers, staff, cargo, vehicles, processes, documents, and locations) and turns them into targets of opportunity for interdiction. It provides a series of interdependent, overlapping, and reinforcing redundancies, designed to raise the odds that terrorist activity could be intercepted—also raising the risks and costs to terrorists, and serving both an interception and deterrence function. Layering speaks to three dilemmas of policy design in border and transportation security: The law of diminishing returns—i.e, at some point, the unit costs of any single measure become increasingly high as we attempt to push to higher levels of security; Heightened goal conflict—as tightened security begins to impede the legitimate flow of desired people and goods, as well as resulting in possible incursions on privacy and civil liberties; and The opportunistic nature of terrorism—i.e, the more we harden one target, the more likely that terrorists will shift their attention to a softer target and/or use different means. To reduce cost and risk of operations, terrorists desire to use targets and methods that have been used successfully before, can be easily taught and replicated, and have a high probability of success and impact. Frustrating any or all of these goals could lead to abandoning the operation. Figure 1 illustrates that the security of people and cargo destined for the United States requires a complex set of policies that engage actors from each of the geographic zones (foreign governments, private sector actors, and U.S. government agencies). These relationships and policies must also take into consideration requirements unique to the different modes of transportation (air, vessel, truck, and rail). Policies could, for example, encompass the entire journey from the source zone to the destination zone; or policies could focus distinctly on a particular zone/place/actor in the journey. Or, as noted above, a layered approach may be employed that involves nearly all of the constructs identified in Figure 1 (e.g., people, conveyances, cargo, places, routes, etc.) To pursue a layered approach to border and transportation security would mean applying some measures of security effort to each of the following points of vulnerability/opportunity: Staff authentication —focusing on any staff involved with the transportation of people or shipment of goods; Passengers —screening anyone traveling on any of the conveyances of concern; Conveyances (passenger or cargo)—monitoring the vessel, car, truck, plane, train used in conveying travelers or goods—including concern for the physical security of the conveyance itself; Access control —implementing a system to achieve and maintain control of the physical space where the conveyances or cargo are either stored, staged, maintained, repaired, loaded, or inspected. Cargo and baggage —screening whatever is placed on the conveyance, including cargo, as well as baggage associated with passengers; Ports (points of departure, transit, and entry)—encompassing all kinds of ports (airport, land port, sea port, rail yard/crossing), and involving physical security of the port itself, access control, and some kind of monitoring systems; and Security en route —maintaining the highest level of security throughout the system/between ports—reflecting that whatever security is achieved in the initial stages before or during the time when people or cargo leave the foreign port, must be maintained until the conveyance safely reaches the domestic port of entry and the intended recipient. Looking at each of these targets of vulnerability and seeing them as opportunities suggest some possibilities for further policy exploration. The following are offered as brief illustrations of areas that might warrant further consideration based on the framework set out above. In many cases, actions have already begun, and the option would relate to acceleration or enhancements. In others, where new beginnings are envisioned, the options might entail further research or exploration. However, it should be noted that action in any of these areas would need to be weighed against prevailing resource constraints and possible conflicts with other important societal goals (such as facilitating the legitimate flow of people and goods, and avoiding infringements on civil liberties and rights). With these qualifications, the following options might be explored as part of a layered approach to border and transportation security. One early interception opportunity in the transportation process is to ensure that all transportation staff are whom they claim to be, and that terrorists do not gain access to, or gain control of, any part of the transportation system. The options below address this point of vulnerability/opportunity. Accelerate implementation of the experimental program for development of a Transportation Workers' Identification Credential (TWIC), with enhancement of the screening process. In spring of 2005, prototype versions of the TWIC were being tested in a variety of sites, involving 2,000-3,000 truck drivers, longshoremen, and other workers at the Ports of Los Angeles and Long Beach as well as at 33 other locations. The pilot program tests three different types of biometric identification (iris scans, fingerprints, and hand geometry). The plan is to apply a single standard to an estimated 5 million transportation industry workers at seaports, airports, chemical plants, and other protected facilities in the United States. Next steps could include acceleration of the implementation of TWIC (particularly to maritime workers) and possible expansion to workers in all areas of transportation. Through international agreement, it may be possible to consider expanding secure identification to transportation workers from other countries. An option would be some level of screening for staff at all levels and points in the process, including office workers along the entire supply and shipping chain. In this sense, even clerks in shipping houses may represent some level of vulnerability, since they have the capacity to alter documents that disguise the real contents of shipments. Another key point in the process is to ensure that terrorists do not gain access to transportation systems and cross our borders and/or perpetrate an act of terrorism while on board. To add this layer of defense might involve the following. Undertake improvements in terrorist screening databases. The 9/11 Commission recommends that "Every stage of our border and immigration system should have as part of its operations the detection of terrorist indicators on travel documents. Information systems able to authenticate travel documents and detect potential terrorist indicators should be used at consulates, at primary border inspection lines, in immigration services offices, and in intelligence and enforcement units." This effort would start with expansion of intelligence efforts feeding into the databases, and would be enhanced by more sophisticated name recognition software (to reduce the number of false positive identifications). Finally, the entire effort could benefit from better integration of databases and other technical improvements for greater ease and speed of use at the border and by other immigration and law enforcement personnel. The enhanced screening effort would also involve improved training for border security staff (see section on training, below). One of the key recommendations of the 9/11 Commission was to expand the use of biometric identifiers as one of the more secure forms of identity authentication. The Commission noted that when people travel, they usually move through defined channels or portals: They may seek to acquire a passport. They may apply for a visa. They stop at ticket counters, gates, and exit controls at airports and seaports. Upon arrival, they pass through inspection points. They may transit to another gate to get on an airplane. Once inside the country, they may seek another form of identification and try to enter a government or private facility. They may seek to change immigration status in order to remain. Each of these checkpoints or portals is a screening—a chance to establish that people are who they say they are and seeking access for their stated purpose, to intercept identifiable suspects, and to take effective action. This effort would include continued research into the most effective biometric identifiers, assessment of their relative cost and feasibility of use, and the development of appropriate standards. It could also include research and investment in readers to increase the accuracy, speed, and efficiency of use at multiple portals. Explore feasible and effective methods of screening for rail and transit passengers. While early passenger screening efforts understandably focused on air transportation passengers, the 9/11 Commission urged that efforts be made to expand coverage to other modes—especially passengers on rail and mass transit systems. Referring to major vulnerabilities that still exist in cargo and general aviation security, the commission stated that "Opportunities to do harm are as great, or greater, in maritime or surface transportation." Because of the need to maintain the free flow of people that is an essential feature in the effective functioning of these modes, passenger screening in this setting would require additional research and creative experimentation. But, given the threat made manifest in the 3/11 train bombings in Madrid in 2003, many experts believe further exploration of feasible screening methods is merited. The Intelligence Reform and Terrorism Prevention Act of 2004 [ P.L. 108-458 ] also extended some form of screening to cruise ships and larger charter airplanes. Provide better training for border inspectors, in conjunction with augmented research on terrorist travel methods and document falsification techniques. This was an area highlighted in the 9/11 Commission final report (and especially in its supplementary volume on terrorist travel): We found that as many as 15 of the 19 hijackers were potentially vulnerable to interception by border authorities. Analyzing their characteristic travel documents and travel patterns could have allowed authorities to intercept four to 15 hijackers and more effective use of information available in U.S. government databases could have identified up to three hijackers. According to the commission, there were clear signs and markings on the travel documents used by most of the terrorists that would have linked them to terrorism, but that these telltale marks were the results of recent research and were not part of routine inspector training at the time. Explore ways to deny internal travel to those terrorists who have already entered the country—whether legally or illegally. The commission asserted that: Targeting travel is at least as powerful a weapon against terrorism as targeting their money. The United States should combine terrorist travel intelligence, operations, and law enforcement in a strategy to intercept terrorists, find terrorist travel facilitators, and constrain terrorist mobility. The 9/11 Commission report suggests setting national standards for state-issued documents—including birth and death certificates, driver's licenses, etc. That proposal was addressed in part in the Intelligence Reform and Terrorism Prevention Act of 2004, and has also been the subject of further legislation in the 109 th Congress ( H.R. 418 ). ( H.R. 418 was passed in the House of Representatives on February 10, 2005). As part of the layering effort, attention could also be given to the actual means of transportation to ensure their safety and integrity. These steps could include: Provide regular inspection of all transportation conveyances and their environments for possible terrorist tampering and/or planting of explosive devices. These inspections could include some strategic risk targeting, but would also benefit from random inspections as well (as discussed further below). Pay special attention to trucks in the inspection process, especially those carrying hazardous material. Trucks were used in the Embassy bombings in Africa, and remain a favorite delivery mechanism for large-scale explosives (whether using imported materials, transporting hazardous material, or modifying domestic materials as in the case of Oklahoma City or the first World Trade Center attack in 1993). Steven Flynn also notes a weakness in the overall transportation system for short-haul (drayage) truckers, where there is a high-turnover rate, and consequent difficulty in providing adequate security clearances. Flynn goes on to recommend the use of transponders to track the location and route of those vehicles transporting hazardous material. Some have gone beyond that to propose an automatic shutoff device for large rigs hauling such material. California has considered such a plan in the past, and may be re-examining the concept. According to a report on research being done at the Lawrence Livermore National Laboratory, truck-stopping devices are being designed that could be used by road-side law enforcement officers to activate the air-brakes of a truck carrying hazardous cargo to bring it to a quick stop if it was thought to represent a terrorist threat. Ensuring the safety of transportation vehicles themselves is an essential step in the security process, but an important stage of this effort is to protect the environment of the protected vehicles. This is especially problematic for rail and transit systems, which have long exposed open stretches along rail tracks. Some reasonable steps, might include: Explore protective steps like more guards, fencing, cameras, and sensors in places where transportation vehicles are based or through which they transit. It could also include hardware and software that basically replace the traditional key to sensitive areas with an intelligent credential (badge or plastic card) which could be verified specifically to the user through a biometric check. Such enhanced access control could also provide a number of useful by-products, including a record of movement that could capture every instance of request for entry, grant of entry, denial of entry and other data; a record of personnel movement; asset protection; and flexible security. Aside from screening passengers, cargo and baggage have been significant sources of concern and the focus of many policy actions and additional proposals. Some additional measures to consider include: Enhance the focus on shipping containers. Many analysts have identified containers as an area of particularly high-risk. While only about 5% of these large containers are being screened, there are serious obstacles to detailed container screening. As a result, enhancement might be considered for existing processes of advanced targeting of those especially high-risk containers, screening early in the process (before the container is loaded onto the ship), scanning devices to detect contraband and radiation without opening the box, and smart-container technology to detect and note when the box is opened, and possibly using Global Positioning System (GPS) technology to track container location at any given point in time. Such proposals respond at least in part to the vulnerability of cargo while in the transit zone (illustrated in Figure 1 ). Increase attention given to air cargo inspection. Stephen Flynn provides a provocative statement on this topic: "Nevertheless, while the flying public is busy shedding shoes and bags at X-ray check-in points, the tons of air freight being loaded in the belly of most commercial airliners continues to fly the American skies virtually uninspected." This concern led the 9/11 Commission to recommend that TSA require that each airliner have at least one hardened container in which to place any suspicious cargo. Others suggest better oversight of and industry-wide standards for the "known shipper" program to ensure that the supply chain is truly secure, and that more random checks would be a useful supplement. Congress required an immediate tripling of cargo inspections for cargo on airline passenger planes in the FY2005 Appropriations Bill approved for the Department of Homeland Security. None of these efforts approaches the stringency of the 100% inspection proposal of Congressman Ed Markey (D-MA) in the 108 th Congress. Expand use of fixed and mobile portal screening devices for explosives and radiation detection, as well as random inspections for other hazardous material. Flynn and others recommend a review of all rail routes that would take hazardous cargo through heavily populated areas, and re-routing them as necessary. Recently, the City Council for the District of Columbia, passed a 90-day ban on shipments of hazardous materials through the nation's capital—the first such action by a local government. "Vehicles at rest are vehicles at risk." While not completely safe while en route, transportation vehicles are most vulnerable when entering, leaving, or at rest in ports. Enhance and expand maritime domain awareness efforts. Domain awareness makes use of radar, sonar, cameras, and direct observation to track all vessels entering or leaving the harbor on an integrated computer display, and link the vessels with cargoes and crews for possible inspection targeting and/or interception. It is also used to protect incoming and outgoing vessels from threats within the harbor or when approaching or departing. While well-developed in several ports, maritime domain awareness efforts might productively be expanded to more ports and improved—especially in light of the related concern about the potential threats posed by large shipping containers and large liquid natural gas conveyances. Strengthen security at rail and transit terminals. As noted earlier by the 9/11 Commission Report: "Surface transportation systems such as railroads and mass transit remain hard to protect because they are so accessible." Yet, the "3/11" attacks on the Madrid rail system in 2003 and the Aum Shinrikyo sarin gas subway attack in Tokyo on March 20, 1995 should leave no doubts as to the capabilities or the intent of terrorists to strike these targets. For passenger travel and transit systems, where accessibility and openness are prime goals, various analysts have suggested more extensive use of non-intrusive inspection (NII) technologies such as portal screening devices, "puffer" type explosive screening for passengers (recently tested in the New Carrollton station in the Washington metropolitan area and New York's John F. Kennedy airport), sensors for chemical and biological materials, bomb-sniffing dogs, frequent traveler IDs, and random checks of passengers and baggage en route. Explore ways to strengthen security at the nexus points for multi-modal shipping as cargo moves from one conveyance to another (truck to container to ship to train to truck to delivery). This could include security for smaller pallets of goods (which fall short of constituting a full container) to ensure no tampering as cargo goes through the consolidation and de-consolidation phases. Explore the concept of using port design to build security into the on-going processes of the port in a seamless manner. New designs could facilitate such essential security steps as in-line baggage screening, inspection at rail sidings, and easier access in areas of heavy traffic and bottlenecks (e.g., the Ambassador Bridge at the Detroit-Windsor connection, and other congested land-border ports). The challenge is often to make better use of very limited space, and it may take re-design efforts to achieve higher levels of security effectiveness. A design initiative could involve all kinds of ports and terminals (airport, seaport, rail and transit). Total system security requires maintaining the high levels of security at each stage of the journey, through intermediate ports of call, and throughout the system until the destination is reached and the goods or people safely reach the intended destination. Consider the adoption of special efforts to assure security of passengers and cargo as they move through the highly porous—and vulnerable "transit zone." (See Figure 1 .) One possibility is exploring the use of multi-modal security devices for cargo, including "smart containers" and transponders. There are a number of potential actions that would cut across modes of transportation and/or points of vulnerability or opportunity. The following policy options present the potential for multiple payoffs in terms of security. Explore methods for better targeting of both passengers and cargo. This could involve a blend of sophisticated and directed targeting, with an additional complementary component of random inspections. The goal would be to achieve the greatest level of confidence concerning the contents of a container or the identity of the individual seeking entry, in order to isolate and interdict high-risk people and goods. The ability to intercept high-risk people may be dependent on a combination of biometric identifiers, accelerated implementation of the US-VISIT program, better integration of terrorist watch lists, better training of border inspectors, and use of screening at several points in the transportation process. The ability to successfully target high-risk containers is dependent upon similar needs, with the crucial addition of information regarding which containers are most likely to contain contraband. Both of these processes require better use of intelligence. They also require an attempt to avoid predictability in whatever we do to make it less likely that terrorists can take evasive actions based on second-guessing our targeting system. (See below). Make systematic use of random changes in inspection targets and procedures. Random changes and random inspections are useful supplement to targeting, in order to determine what you don't know—in terms of identifying gaps in present algorithms for setting targets. It also increases risks for terrorists, who may be studying the inspection process carefully in order to exploit any predictable patterns to avoid interdiction. A good example of using random principles is found at the land border port between Mexico and the United States at the Douglas, AZ port. This port uses sophisticated (and automated) algorithms to randomly switch inspectors from one lane to another, as well as change targets for inspection—and does so at random intervals, using a secure communication system for the inspectors. Consider the expanded use of "Red Teams" and war-gaming. These concepts are borrowed from both the national security and intelligence fields, and are related functionally. The use of Red Teams involves gathering experts in the security field and various potentially vulnerable sectors to creatively explore vulnerabilities and suggest ways in which attacks might be feasible. War games involve taking the scenarios developed by the Red Teams and determining ways to defeat the attack efforts. This path was cited approvingly by the 9/11 Commission in the following graphic example. The commission noted that such techniques have been used by the military for many years, revealing that the North American Aerospace Defense Command (NORAD) had run an exercise that "postulated a hijacked airliner coming from overseas and crashing into the Pentagon." The exercise was terminated because of the exigencies of the Korean War . The commission identified the four elements common to this type of contingency planning as "(1) think about how surprise attacks might be launched; (2) identify telltale indicators connected to the most dangerous possibilities; (3) where feasible, collect intelligence on these indicators; and (4) adopt defenses to deflect the most dangerous possibilities or at least trigger an early warning." The first step represents the Red Team portion of the process, and the fourth step is the war-gaming phase. The intervening stages are used to target intelligence to inform the entire response process. The notion of "Red Teams" was specifically endorsed in the Bush Administration's National Strategy for Homeland Security. More recently, the Red Team technique was also endorsed by the 9/11 staff group charged with aviation and transportation security, in an early version of its draft report to the commission. Expand research and development efforts to develop better and more flexible detection devices for radiation and explosives that are capable of working across transportation systems. In terms of explosives detection, the ability to use NII technology to detect explosives carried by a passenger at a distance could have a very high payoff in the crowded setting of rail and transit terminals. The 9/11 Commission stated that "The most powerful investments may be for improvements in technologies with application across the transportation modes, such as scanning technologies designed to screen containers that can be transported by plane, ship, truck or rail. Though such technologies are becoming available now, widespread deployment is still years away." As noted above, this is not intended as a comprehensive inventory of all steps that could be considered, nor is it a series of recommendations. The examples cited here flow directly from the frameworks used above and offer a few illustrative options that might be worth further exploration. The goal is to find more effective ways to promote better border management. This effort is complicated by the many potential goal conflicts that can arise in seeking greater security, while at the same time trying to pursue other important national goals like promoting economic growth, assuring freedom of movement to law-abiding citizens and allies, and protecting privacy and civil liberties. Pushing too hard on any one of these goals may make it too expensive, both in terms of resource costs, but also in losses imposed on other important social goals. One possible path to facilitate this delicate balancing act is to pursue the "layered" approach recommended by the 9/11 Commission and other BTS analysts over the years. Such an approach would mitigate over-reliance on any one policy action, yet holds out the possibility of achieving a higher level of security cumulatively by spreading actions over many areas to enhance the odds of either interdicting or deterring terrorist activity wherever it may occur. It also addresses the dilemma of terrorist opportunism, which afflicts preventive efforts that are more concentrated. As fast as we secure one area through a concentration of resources, the terrorists have shown themselves to be remarkably adaptable in seeking other softer targets (in effect, finding the weakest link in the defensive chain and attacking it, instead of the newly hardened target). Whether policymakers wish to follow the layering strategy discussed above, or pursue a more targeted approach, the options identified above may constitute a useful point of departure for possible actions to consider. Under any circumstances, the following criteria (in the form of policy questions) may be useful in evaluating how far to take any single action: What are the relative priorities for action in the near term? Does the action yield security benefits that outweigh possible social or economic costs? Is the step being taken in the least intrusive manner consistent with achieving the objective? Are incursions on privacy and civil liberties taken into account, minimized, and accompanied by appeals processes for any violations? In what ways will the steps under consideration interact with others in the security process to provide higher cumulative security?

There is consensus that Border and Transportation Security (BTS) is a pivotal function in protecting the American people from terrorists and their instruments of destruction. The issue for Congress is how to achieve desired levels of security, while not compromising other important values in the process. This report addresses possible new approaches and policy options that might be explored by Congress to attain these goals. It is one of three CRS reports in a series that make use of analytical frameworks to better understand complex problems in BTS and to facilitate consideration of alternative policies and practices. (The first report in the series, CRS Report RL32839, Border Security: The Complexity of the Challenge, by [author name scrubbed], analyzes the reasons why BTS is so difficult to achieve. The second report CRS Report RL32840, Border and Transportation Security: Selected Programs and Policies, by Lisa M. Seghetti, [author name scrubbed], and [author name scrubbed], discusses programs now in place. This report is the last in the series). BTS plays an important role in the broader function of providing homeland security. The overall homeland security effort can be seen as a series of concentric circles or screens, with the outer screen being that of preventive efforts launched outside the country—before terrorists or their weapons can reach the country. The next screen is interdiction efforts at the border and in the transportation system. The continuum of activities then moves through progressively smaller circles ending with emergency preparedness and response. Congressional concern over homeland security began with broad-gauged efforts to learn more about the nature of the terrorist threat, and then moved to much more specific actions following the events of 9/11. Congressional interest in broader, more strategic approaches continues—which makes this review of possible new directions and policy options timely. Both the complexity of the challenges at the border, and the realization that multiple points of vulnerability might be turned into expanded opportunities for interdiction, have given rise to the notion of a "layered" approach to security. The basic idea of layering is that multiple and overlapping measures applied at several points in the border security environment could be more successful than more targeted measures alone. The problem in hardening a few selected targets is the rising expense of unit costs, increasing conflict with other goals, and/or inability to cover all conceivable risks posed by the shifting and opportunistic nature of terrorist tactics. To pursue a layered approach to border and transportation security would mean applying some measure of security effort to each of the following points of vulnerability/opportunity: transportation staff, passengers, conveyances, access control, cargo and baggage, ports, and security en route. Several possible policy options are presented that flow directly from the framework presented in the three-part series of CRS reports. Before action is contemplated in any of these areas, however, it would be important to assess the priority of each step, its relative cost-effectiveness, and the level of intrusiveness and possible conflicts with other important social goals (e.g., privacy and civil liberties). This report will not be updated.

Businesses that are incorporated in foreign countries and conduct a large portion of their operations outside of the territorial jurisdiction of the United States may nevertheless cause injury to U.S. persons. For example, a foreign company might manufacture in its home country a machine that another company later distributes in the United States, ultimately resulting in an injury to a U.S. consumer. As a further example, a foreign subsidiary of a U.S. corporation might make a product that allegedly causes the death of U.S. persons traveling in a foreign country, but that subsidiary might otherwise have no significant connection to the United States. Although foreign companies may engage in actions or omissions that injure U.S. persons—or even foreign plaintiffs —such injured persons may face various procedural challenges in obtaining judicial relief from a foreign company defendant in U.S. courts. One potential obstacle to such civil lawsuits is the doctrine of personal jurisdiction. The Supreme Court has long interpreted the Due Process Clause of the Fourteenth Amendment to limit the power of state courts to render judgments affecting the personal rights of defendants who do not reside within the state's territory. And the Federal Rules of Civil Procedure give federal district courts power to assert personal jurisdiction over a defendant to the same extent that a state court in which the federal district court is located may assert that power, meaning the same limits on personal jurisdiction generally apply to federal courts. In this vein, the Court has, for instance, held that a New York company that sells a car to a New York resident is not subject to a products-liability lawsuit in Oklahoma solely because the car was involved in an accident there. Questions over personal jurisdiction are among the most frequent constitutional issues resolved by lower federal courts, and are the basis for a dismissal of complaint in a considerable number of cases lodged in both federal and state court. This report broadly traces the evolution of the doctrine of personal jurisdiction through more than a century of Supreme Court rulings. In particular, it highlights recent developments in the doctrine, which have generally given a more limited view of when a court can exercise personal jurisdiction over a given defendant. The report concludes with a brief discussion of the debate over the Court's most recent rulings in this area of law, and addresses one possible action Congress might take to address any concerns with the Court's recent decisions on personal jurisdiction: authorizing federal courts to exercise nationwide personal jurisdiction over foreign companies that have minimum contacts with the United States as a whole rather than with an individual state. In 1877, the Supreme Court decided an important case addressing the constitutional limits on state courts' exercise of personal jurisdiction over nonresident defendants. In Pennoyer v. Neff , the Court indicated that, absent a defendant's consent, a state court's jurisdiction generally extends only to persons or property within its territory. The Court grounded this "physical presence" approach in principles of federalism: each state of the union is a coequal and independent sovereign in the federal system, and thus possesses exclusive authority over persons and property within its domain. Although the Court's decision in Pennoyer addressed personal jurisdiction over natural persons, the Court's early jurisprudence following the 1877 case established that state courts could potentially exercise jurisdiction over foreign corporations doing business in the state based on the legal fiction that those corporations had implicitly consented to personal jurisdiction, or could be deemed "present" within the state, based on their in-state activities. The Pennoyer Court's "physical presence" test established the constitutional foundation for strict limits on state courts' authority to exercise in personam jurisdiction over a nonresident defendant—that is, to render judgments concerning that defendant's personal rights and obligations. Thus, for example, service upon a defendant by publishing notice of the lawsuit in a newspaper circulating in the forum state was insufficient to confer jurisdiction on a court to adjudicate the personal liability of a defendant who had left the state and did not intend to return. Nevertheless, even in the absence of a nonresident defendant's physical presence or consent, courts could still attain jurisdiction over the defendant indirectly through the attachment (i.e., seizure) of the defendant's property interests within the forum and the provision of notice to the defendant. In particular, a state court could exercise in rem jurisdiction over a nonresident defendant's property interest in the state in order to adjudicate all of the rights or claims in a piece of property. It could also exercise quasi in rem jurisdiction over a nonresident defendant by adjudicating a plaintiff's claim to the property in relation to the defendant or to satisfy the claims of its own citizens against the defendant personally. However, judgments resting upon the exercise of in rem or quasi in rem jurisdiction would not personally bind the defendant to an extent greater than the value of the property. Although Pennoyer 's physical presence test informed the Supreme Court's jurisprudence related to jurisdiction for several decades, a significant expansion of the U.S. economy in the mid-20 th century altered that focus. As commerce and travel among the states and between the states and foreign countries increased, corporations expanded the geographical scope of their activities. A more interconnected, global economy meant that a corporation's activities had greater potential to cause harm in distant jurisdictions, but also meant that businesses could more easily defend lawsuits arising from that harm in distant fora. Faced with these new realities, the Court reconsidered the nature of the due process limitations on the jurisdiction of state courts over nonresident individuals and corporations that conducted activities in the states. In the 1945 case International Shoe Co. v. Washington , the Court explained its rejection of a strict adherence to the physical presence test, holding that a state could authorize its courts to subject an out-of-state entity to in personam jurisdiction, consistent with due process, and thus require it to defend a lawsuit, if that entity had "certain minimum contacts" with the forum state "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." The Court rested its holding in part on the notion that an entity conducting activities in a state benefits from the protections of state law, and thus should have to respond to legal complaints arising out of its actions in the forum even if it is not "physically present" in the state. Thus, the Supreme Court's opinions in International Shoe and subsequent cases have established a more flexible two-part test for determining when exercise of personal jurisdiction over each nonresident defendant sued by a plaintiff comports with due process: (1) the defendant has established minimum contacts with the forum state that demonstrate an intent to avail itself of the benefits and protections of state law; and (2) it is reasonable to require the defendant to defend the lawsuit in the forum. Nevertheless, as noted, the Court has confirmed that several traditional bases for the exercise of judicial power over a nonresident defendant for claims against him continue to enjoy a presumption of constitutionality without requiring an independent inquiry into the contacts among the defendant, the forum, and the litigation. Specifically, the traditional bases for jurisdiction include if: (1) the defendant is domiciled in the forum state (e.g., a defendant who is a natural person intends to establish a permanent home in the forum or a corporation intends to establish a permanent headquarters); (2) the defendant has consented to jurisdiction; or (3) a defendant who is a natural person is served with process while he is physically present—even temporarily—within the forum. The Court has also indicated that a state court may adjudicate the personal status of a plaintiff in relation to the defendant (e.g., marital status) without considering whether personal jurisdiction over the defendant is constitutionally valid. Over the years, the Supreme Court has offered three main justifications for the constitutional constraints on a court's assertion of personal jurisdiction over nonresident persons and corporations. First, each state's status as a "co-equal sovereign" in a federal system of government implies at least some limits on the power of its courts to render judgments affecting the rights of entities outside of that state's boundaries. Second, constitutional limits on personal jurisdiction attempt to address concerns about the unfairness of subjecting defendants to litigation in a distant or inconvenient forum. Finally, constitutional limits on the exercise of personal jurisdiction recognize that the Due Process Clause protects defendants from being deprived of life, liberty, or property by a tribunal without lawful power. Since its 1945 decision in International Shoe , the Supreme Court has elaborated on the nature and quality of the minimum contacts that a defendant must have with the forum in order for a court to subject him or her to personal jurisdiction in that forum consistent with due process. When determining whether a defendant has minimum contacts with the forum, the Court has distinguished the types of contacts sufficient for a court's exercise of "general" personal jurisdiction over the defendant from those contacts sufficient for its exercise, alternatively, of "specific" jurisdiction. A court's exercise of specific jurisdiction may be constitutional when the defendant has contacts with the forum that give rise to, or are related to, the plaintiff's cause of action (e.g., an act or occurrence caused by the defendant that takes place in the forum or has an impact there). However, when there is "no such connection [between the forum and the particular claims at issue], specific jurisdiction is lacking regardless of the extent of a defendant's unconnected activities in the State." By contrast, a court's exercise of general jurisdiction over a nonresident defendant for any claim—even if all the incidents underlying the claim occurred in a different state—may be constitutional when the defendant's activities in the forum state are so substantial that it is reasonable to require it to defend a lawsuit that did not arise out of its activities in the forum state and is unrelated to those activities. Perhaps in order to ensure greater predictability for defendants attempting to discern where they may be subject to suit on claims arising anywhere in the world, in more recent years, the Court has significantly limited the types of activities or affiliations of the defendant in the forum state sufficient for general jurisdiction, holding that those contacts must be so substantial as to render the defendant "essentially at home" in the forum state. The Court has clarified that, absent exceptional circumstances, a corporate defendant is "at home" when it is incorporated in the forum state or maintains its principal place of business there. Insubstantial in-state business, in and of itself, does not suffice to permit an assertion of jurisdiction over claims that are unrelated to any activity occurring in a state. Although the Court has rarely addressed the scope of general personal jurisdiction, it has decided several cases elaborating on the quality and nature of the defendant's contacts with the forum and litigation necessary for a court's exercise of specific jurisdiction over the defendant. A common theme throughout many of these decisions is that "unilateral activity" in the forum state by a person who has some family, business, or other relationship with a nonresident defendant will not suffice to establish a defendant's minimum contacts with the forum. In other words, jurisdiction is not proper merely because the defendant could have foreseen that a third party with which it has a family or business relationship (e.g., a defendant's family member or customer of a defendant corporation) would have contacts with the forum. Rather, the defendant must "purposefully avail" itself "of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." The defendant must have reasonably anticipated being haled into court there—a standard that potentially allows a defendant to predict where it will be subject to suit and plan the geographic scope of its activities or ensure against the risk of being sued in a distant forum accordingly. The Court has also emphasized that the minimum contacts inquiry should not focus on the location of the resulting injury to the plaintiff; instead, the proper question is whether the defendant's conduct connects him to the forum in a meaningful way. Many of the Supreme Court's decisions on the minimum contacts test address specific categories of contacts between the defendant and forum, such as the alleged tortious conduct of the defendant in the forum state; a contract between the defendant and an entity in the forum state; a business relationship between the defendant and a party in the forum state; and property interests of the defendant in the forum state. For example, in cases in which the plaintiff alleged that a nonresident had committed the tort of libel causing harm in the forum state, the Court upheld the exercise of specific personal jurisdiction over a defendant that intentionally targeted the state with publication of allegedly libelous material. The Court determined that regularly publishing a widely circulated magazine with knowledge that harm could occur to the state's residents amounted to a sufficient contact between the defendant, the forum, and the litigation. As a result, the Court has recognized that, provided there is a sufficient connection between the defendant and the forum, states have a "significant interest" in permitting their courts to exercise jurisdiction over defendants in order to redress harm that occurs within state boundaries. In the past, there has been disagreement among the Supreme Court Justices, however, as to when a nonresident corporation whose product causes injury within the forum state has "purposefully availed" itself of the privilege of conducting business within the state, and should therefore be subject to personal jurisdiction in that state in a tort action for products liability. In the 1987 case Asahi Metal Industry v. Superior Court , four Justices agreed that a nonresident defendant's awareness that a product it manufactured would end up in the forum state through its intentional placement of the product in the stream of commerce outside of the forum did not by itself constitute an act directed at the forum sufficient for specific personal jurisdiction. Writing for a plurality of the Court, Justice O'Connor maintained that a tribunal lacked the authority to exercise personal jurisdiction over a defendant that had not performed additional actions in the forum state that demonstrated an intent to serve that state's market. According to her plurality opinion, because the defendant did not have clear notice that it could be subject to suit in California, it would have been unfair to subject the defendant to suit there. However, another four Justices would have held that the defendant's intentional placement of a product into the stream of commerce by itself was sufficient for personal jurisdiction because the defendant could foresee being sued in any state in which the product was regularly sold and marketed. Those Justices would have grounded this result in the benefits that defendants derive from the regular retail sale of their products in the forum and the protections of state law. This disagreement appears to remain unresolved after a 2011 case, J. McIntyre Machinery, Ltd. v. Nicastro , in which a plurality of the Court indicated that a foreign manufacturer of a product cannot be subject to the jurisdiction of a state court based on its mere expectation that the products it ships to an independent U.S. distributor might be distributed in the forum state. Instead, according to the plurality written by Justice Kennedy, the defendant must have directly targeted the individual state with its goods, thereby "purposefully availing" itself of the privilege of conducting in-state business. However, the plurality's view did not command a majority of the Court, and a narrower concurring opinion would have found jurisdiction lacking under any of the various tests for personal jurisdiction articulated in the Justices' opinions in Asahi because the shipment of products into, or their sale in, the forum state did not occur regularly, and there was no additional sales-related conduct (e.g., marketing) by the defendant in the forum. In addition to addressing cases involving a defendant's alleged tortious conduct, the Supreme Court has also addressed minimum contacts in the context of out-of-state defendants reaching out to a forum state to establish a continuing business relationship in that state. For example, the Court upheld a California court's exercise of specific personal jurisdiction over a Texas mail order insurance company that had no office or agent in California because the Texas company mailed an offer of insurance to the plaintiff's son in California. The son accepted the offer and continued to send the company premium payments through the mail to Texas from California until the son died in California. The Court noted that the suit arose from a contract that had a "substantial connection" with California, holding that the state had a significant interest in providing redress for its residents in cases in which insurance companies refuse to pay claims. Similarly, when a nonresident defendant establishes an office in a state to conduct business through agents in the state, he may have to answer a lawsuit related to those business activities when an agent is served in the forum, regardless of whether he consented to service of process through his agent. Another context in which the Supreme Court has addressed the minimum contacts test involves contractual disputes between the parties to a lawsuit. Thus, when a franchisor headquartered in Florida brought suit in a local federal court against Michigan franchisees for the alleged breach of a franchise agreement to make required payments in Florida, the Court held that specific jurisdiction over defendants was proper based on the specific circumstances surrounding the contractual relationship. The Court stated that a contract between an out-of-state party and an individual in the forum state is insufficient by itself to establish personal jurisdiction if the contract lacks a substantial connection to the state as established by, among other things, an (1) examination of the parties' prior negotiations (e.g., whether the defendant reached into the forum to negotiate the contract); (2) the terms of the contract (e.g., where payments were to be made and which state's law was to govern); and (3) the course of dealing (e.g., whether the defendant established a "substantial and continuing relationship" in the forum state). The Court has also opined on when a defendant's property interests in the forum may serve as a contact for purposes of personal jurisdiction. In Shaffer v. Heitner , the Supreme Court held that a state court could not exercise quasi in rem jurisdiction over a nonresident defendant by attaching the defendant's property interests in the state without inquiring separately into whether these property interests and any other connections between the defendant, forum, and litigation established sufficient minimum contacts to satisfy the first prong of the International Shoe test. Thus, a Delaware court could not subject nonresident officers and directors of a Delaware corporation to personal jurisdiction for the alleged breach of duties to the corporation based solely on the court's attachment of their stock and stock options in the corporation. The Court noted that jurisdiction over property must in fact have a direct effect on the interests of the defendant in that property and therefore affect its personal rights. However, the Shaffer Court also noted that in some cases, such as cases establishing title to real property, ownership of the property itself may establish sufficient contacts among the defendant, forum, and litigation. Even if a nonresident defendant has minimum contacts with the forum, the Supreme Court has, at times, considered whether a state court's exercise of personal jurisdiction over him would comport with due process by examining the reasonableness of the exercise of jurisdiction. In International Shoe and its subsequent opinions, the Court has established a multi-factor test that seeks to ensure that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice." The Court has subsequently clarified that in applying this test to evaluate the reasonableness of the exercise of jurisdiction in light of the defendant's contacts with the forum and litigation, it will examine several factors, including: (1) "the burden on the defendant"; (2) "the forum State's interest in adjudicating the dispute"; (3) "the plaintiff's interest in obtaining convenient and effective relief"; (4) "the interstate judicial system's interest in obtaining the most efficient resolution of controversies"; (5) and "the shared interest of the several States in furthering fundamental substantive social policies." Although the Supreme Court has had few occasions to address the reasonableness prong of the International Shoe test for personal jurisdiction, it has provided some guidance as to when courts may deem it reasonable to subject a defendant to suit. Thus, the Justices have, for example, suggested that courts should remain cautious about exercising personal jurisdiction over corporations domiciled abroad, particularly when most of the conduct at issue occurred overseas. Courts may therefore evaluate the risks that subjecting a foreign corporation to suit in the United States for overseas conduct would have on international relations between the United States and its trading partners. In a case involving the exercise of personal jurisdiction over a foreign corporation, moreover, the policies of other nations are relevant and must be carefully considered. In addition, when considering the burden on the defendant, the Court may consider it a heavy burden for a company domiciled abroad to travel from its foreign headquarters to have a dispute with another foreign corporation litigated in U.S. courts. This concern may stem in part from the notion that the interests of the plaintiff and forum are minimal when the claim is based on overseas transactions, the plaintiff is not a resident of the United States, and the allegedly tortious conduct could be deterred by subjecting companies over which the court has lawful judicial power to suit. Recent Supreme Court rulings have limited the circumstances in which U.S. courts may exercise personal jurisdiction over certain corporate defendants. In particular, the cases have limited the availability of U.S. courts as forums for lawsuits against foreign companies for claims arising from their conduct overseas. These decisions have required substantial contacts between the foreign defendant, the U.S. forum, and the litigation. For example, a plurality of the Court held in a 2011 case that a foreign company that manufactures a machine in a foreign country cannot be subject to the specific jurisdiction of a state court based on its mere expectation that the products it ships to an independent U.S. distributor might be distributed in the forum state. Instead, according to the plurality, the defendant must have directly targeted the individual state with its goods, thereby "purposefully availing" itself of the privilege of conducting in-state business. In addition to narrowing the scope of activities that may constitute minimum contacts between the defendant and the forum sufficient for a court's exercise of specific jurisdiction, the Court has significantly limited the types of activities or affiliations of the defendant in the forum state sufficient for general jurisdiction, holding that those contacts must be so substantial as to render the defendant "essentially at home" in the forum state. The Court has clarified that, absent exceptional circumstances, a corporate defendant is "at home" when it is incorporated in the forum state or maintains its principal place of business there. For example, the Court held in BNSF Railway Co. v. Tyrrell that Montana courts could not exercise general jurisdiction over a railroad company that had over 2,000 miles of track and more than 2,000 employees in the state because the company was not incorporated or headquartered in Montana and the overall activity of the company in Montana was not "so substantial" as compared to its activities throughout all of the jurisdictions in which it conducted business so as to render the corporation "at home" in the state. The Supreme Court's recent expansion of the personal jurisdiction defense has led to considerable debate, with several commentators criticizing the decision as being too solicitous toward corporate defendants. On the other hand, other commentators have defended the recent change in the Court's decisions, asserting that it will bring more clarity and cohesion to the doctrine of personal jurisdiction and reduce unfairness to defendants. If Congress disagrees with the Court's recent jurisprudence that has generally made it more difficult for plaintiffs to sue foreign companies in U.S. courts and obtain judicial relief for their injuries, it might consider legislative options to address such concerns. One action that Congress might take to address any concerns with the Court's recent decisions on personal jurisdiction is to functionally override the Federal Rules of Civil Procedure and authorize federal courts to exercise nationwide personal jurisdiction over certain defendants, such as foreign companies, that have, in the aggregate, minimum contacts with the United States as a whole rather than with an individual state. Congress could then amend federal statutes addressing venue (i.e., the district or county where a lawsuit may be brought) to address any concerns with fairness to foreign defendants. Currently, the venue statute (28 U.S.C. § 1391) provides as a fallback venue "any judicial district in which any defendant is subject to the court's personal jurisdiction with respect to such action." Presumably, Congress would need to amend this provision if it wanted to authorize nationwide personal jurisdiction; otherwise, venue would lie in any federal judicial district. Of course, any legislation authorizing nationwide personal jurisdiction would still have to comport with the demands of constitutional due process. The Supreme Court has specifically declined to address whether the Due Process Clause of the Fifth Amendment may limit the federal courts' exercise of personal jurisdiction. Authorizing federal courts to exercise nationwide personal jurisdiction over foreign defendants who have, in the aggregate, substantial contacts with the United States might satisfy the Court's due process-related concern that a U.S. tribunal possess lawful power over a defendant. However, such a proposal may still raise concerns about unfairness to foreign defendants that may result from requiring them to defend a lawsuit in a distant forum, particularly when the lawsuit does not arise out of the defendant's activity in the United States. Such fairness concerns may be particularly important in light of suggestions from the Supreme Court that the courts should consider several specific factors when evaluating the reasonableness of subjecting a foreign defendant to suit, including the burden on the foreign defendant, the policies of other nations, and the potential effect of such lawsuits on international relations between the United States and its trading partners. In this regard, the Court's personal jurisdiction jurisprudence that generally limits the powers of states may provide insight into the limits on Congress's power to expand the personal jurisdiction of federal courts.

Businesses that are incorporated in foreign countries and conduct a large portion of their operations outside of the territorial jurisdiction of the United States may nevertheless cause injury to U.S. persons. For example, a foreign company might manufacture in its home country a machine that another company later distributes in the United States, ultimately resulting in an injury to a U.S. consumer. Although foreign companies may engage in actions or omissions that injure U.S. persons, such injured persons may face various procedural challenges in obtaining judicial relief from a foreign company defendant in U.S. courts. One potential obstacle to such civil lawsuits is the doctrine of personal jurisdiction. The Supreme Court has long interpreted the Due Process Clause of the Fourteenth Amendment to limit the power of state courts to render judgments affecting the personal rights of defendants who do not reside within the state's territory. And the Federal Rules of Civil Procedure give federal district courts power to assert personal jurisdiction over a defendant to the same extent that a state court in which the federal district court is located may assert that power, meaning the same limits on personal jurisdiction generally apply to federal courts. The Court has offered several justifications for the constitutional constraints on a court's assertion of personal jurisdiction over nonresident persons and corporations, including concerns about state sovereignty and fairness to defendants. The Supreme Court's jurisprudence addressing the doctrine of personal jurisdiction spans a period of American history that has witnessed a significant expansion of interstate and global commerce, as well as major technological advancements in transportation and communication. These changes produced a fundamental shift in the Court's views concerning the doctrine. Although the Court initially considered the defendant's physical presence within the forum state to be the touchstone of the exercise of personal jurisdiction over him or her, it later rejected strict adherence to this rule in favor of a more flexible standard that examines a nonresident defendant's contacts with the forum state to determine whether those contacts make it reasonable to require him to respond to a lawsuit there. The Supreme Court's opinions in International Shoe Co. v. Washington and subsequent cases have established a more flexible two-part test for determining when exercise of personal jurisdiction over each nonresident defendant sued by a plaintiff comports with due process: (1) the defendant must establish minimum contacts with the forum state that demonstrate an intent to avail itself of the benefits and protections of state law; and (2) it must be reasonable to require the defendant to defend the lawsuit in the forum. Recent Supreme Court rulings have limited the circumstances in which U.S. courts may exercise personal jurisdiction. This report discusses the evolution of the doctrine of personal jurisdiction as elucidated by the Supreme Court in its opinions. It concludes by examining the implications of recent developments in the doctrine of personal jurisdiction for Congress, as well as options that Congress might have to address these developments.

The ready availability and rapid adoption of encryption technologies has ignited a discussion on the applicability of the technology and the conditions under which those technologies should be used and made accessible. Information and communications technology (ICT) manufacturers have implemented strong cryptosystems into their products, which make their users and the devices themselves safer and more trustworthy. But while that happened, law enforcement officers have been increasingly stymied in their efforts to investigate crimes and enforce the rule of law. There are multiple sides to the encryption debate, but the sides generally reduce to two main parties: those who favor cryptosystems built as strongly as possible, and those who favor cryptosystems built with the opportunity for access if necessary and approved by a judicial authority. Many technology companies, trade associations, security experts, and organizations dedicated to protecting civil liberties and human rights support the first argument. This group argues that our modern economy relies on the trustworthiness of users and devices. They further argue that threats compromise that trustworthiness and put devices and their users under constant attack. They also argue that deliberately weak cryptosystems will place their users and products at an international disadvantage and ultimately make everyone less safe. Many government agencies, including federal, state, and local law enforcement agencies, fall into the second group. They argue that absolute privacy has never existed because judges could authorize the disclosure of information within their jurisdiction. The recent adoption of encryption technologies hinders the orders of judges to authorize disclosure of information and law enforcement's ability to conduct investigations. To provide context for this debate, this report will (1) provide a primer on the technology that enables encryption; (2) discuss the uses of encryption; and (3) discuss policy options for future actions on encryption. Encryption is a process to secure information from unwanted access or use. Encryption uses the art of cryptography, which comes from the Greek words meaning "secret writing," to change information which can be read (plaintext) and make it so that it cannot be read (ciphertext). Decryption uses the same art of cryptography to change that ciphertext back to plaintext. For computer systems, encryption works by applying a cryptosystem to the message, or block of data, that the user seeks to encrypt. A cryptosystem is a five-element system which includes a set of plaintexts , keys , encryption methods , decryption methods , and ciphertexts . The interaction of these elements is displayed below where TP is plaintext, ME is a method of encryption, K is the key, TC is the cipthertext and MD is a method of decryption. The encryption and decryption algorithms govern how the cryptosystem substitutes characters in the plaintext and transposes it to a ciphertext, and then back to its original plaintext. TP + ME+ K = TC TC + MD+ K = TP Using a simplified graphical representation, encryption would appear as follows: In some cryptosystems, the key that encrypts the message and decrypts the message is the same—these systems are known as symmetric. In other cryptosystems, one key would encrypt a message while it will take another key to decrypt the message—these systems are known as asymmetric. To encrypt a message, or block of data, the user would choose an encryption method—in computer security, that is an algorithm—and choose a key. The user would then enter the key into the algorithm with the plaintext to develop a ciphertext. As shown in Figure 1 , a plaintext, or the thing that a user seeks to encrypt, would be put through an encryption method and transformed into unintelligible information. This process requires both a key and the encryption method. A user with the key could take that unintelligible information and apply the decryption method, with the key, to transform the information into something intelligible. There are many encryption methods, also known as standards, available for use by the public, such as the Data Encryption Standard and Blowfish. However, many modern encryption implementations use the Advanced Encryption Standard (AES). AES was developed as a result of a call for proposals from the National Institute of Standards and Technology (NIST), and once publicly scrutinized, it was accepted as a standard by the Department of Commerce in 2001. Many cryptosystems today use AES as the method for how data are substituted and transposed to ensure security. A key is the input to the encryption and decryption methods (or algorithms, in the case of computer security) that guides the specific substitutions and transpositions the encryption and decryption methods perform. While the same encryption method may be used to secure a wide array of data, each instance of that method being applied with a different key makes that encrypted data unique. In implementing a cryptosystem, the user generates a key by creating, and continuing to use, a password, passphrase, or passcode. In these cryptosystems, each user has a unique password, or key, but shares the encryption and decryption methods among all users. Alternatively, the system could generate a key for the user. This second technique is common in securing website connections. Depending on the implementation of the cryptosystem, the key may be the password (or passphrase or passcode). Or, it could be an element necessary to generate the key used in the cryptosystem, as is the case with the iPhone. In the iPhone's cryptosystem, the user generated passcode is combined with the phone's unique identifier to create the key each time the passcode is entered. In this system, the key is not stored on the device. The secrecy of the key is a crucial element that ensures a cryptosystem is secure. An adversary may intercept the ciphertext and know the encryption standard in use on that system. However, the key will remain a secret, and as a result, so too will the ciphertext. Another way of thinking about the importance of the key is that those who have access to the key have access to the data. Expanding on this concept, whoever is able to discover the key, can discover the data. That is why the secrecy of a key is so critical to the overall security of a cryptosystem. It is because the key is so critical to a cryptosystem that keys and data are kept and transmitted separately in secure cryptosystems. If a key was sent along with a ciphertext, an adversary who intercepts that communication would have all elements necessary to decrypt the message. Key escrow systems propose that an intermediary holds encryption keys so that authorized users may access their data in the event that they lose or forget their password, or in the event that a government agency presents the intermediary with a court order to hand over the data. While this appears to be a compromise to the encryption debate, some have argued that key escrows dilute overall security while attempting to strike a balance between individual and national security. Intermediaries may become the target of a variety of attacks. Hackers will seek to circumvent any security put in place to protect the keys, seeking to reap the payload of an unknown trove of users' keys—and data. It is also foreseeable that governments may use the range of tools at their disposal (espionage, legal, economic, etc.) to obtain the keys. The use of an intermediary to reserve encryption keys arguably creates a weakness by which all users may have their data compromised. Current strong cryptosystems limit knowledge of the key to only the creator of the key (and with whomever that user decides to share their key). Creating one or more repositories for keys (the escrow) increases the opportunities for the keys to become known. One way for this to happen is that the repository itself has a weakness which exposes the keys. Another is for an insider or a hacker to expose information held by the repository. A split key scheme is where a key is mathematically split into N pieces, of which only a majority of those pieces is necessary to recreate a usable key to decrypt data. This may be represented as R = ( N-x ), where R is the recovery key and x is some number less than N . Proponents of this structure suggest that those holding the pieces of a key must independently agree, and in a majority, to allow access to data. For instance, in this scheme, the user will retain a complete copy of their key, but three organizations (the government, the platform provider, and another party) would also have parts of the key, and two of those three would need agree to recreate the key before someone other than the user could access the encrypted data. However, opponents of this scheme point out that the holders of the pieces of the key will likely become targets for adversarial attacks, increasing the likelihood that entire cryptosystems become compromised. Public keys and private keys are used in an asymmetric cryptosystem. In this system, a public key is a key that is known to anyone, it is not a secret. It may be used by anyone to encrypt data. However, the data can only be decrypted by the user or users with the private key, which is a secret. This system allows many users to submit information to one or more users confidentially and securely. Public and private keys also help address concerns of authentication. If a sender signs an item with their private key, then the recipient may verify the signature with the public key to have a reasonable understanding that the message is authentically from the sender. Private keys are privately held; that is, held by the user. And public keys are held by trusted third parties which provide access to those keys when requested so that users may use them on demand. An example of this is when a user connects to a website via Hypertext Transfer Protocol-Secure (HTTPS). To enable the secure connection to the website, a user starts the process by sending a request to the site. The site would then send their public key to the user, and the user's computer would then generate a new key (to be used in the HTTPS connection), encrypt it with the website's public key and send that back. The user knows that only the website that has the private key could decrypt the information the user just sent. With the new, user-generated key, the website would create the secure connection with the user, indicated to the user by the HTTPS icon (frequently a lock symbol) in the browser window. In computer science, the term "backdoor" has many definitions. For the purpose of the encryption debate, a backdoor is a way of bypassing the normal authentication methods of a cryptosystem. In this context, the normal authentication method is that the user enters a key and encrypts or decrypts the data. There are legitimate and illegitimate ways to access encrypted data. If an authorized user were to provide the password (or key) to another person, then the second person would have access via a normal authentication method and be a legitimate user. If someone were to guess a user's key, that person would access the encrypted data via a legitimate authentication method, but would be an illegitimate user. Furthermore, any weakness, whether intentionally or unintentionally introduced in the cryptosystem can act as a backdoor. If such a weakness exists, anyone with the capability to exploit the weakness will have access to the information. It is unlikely that any single party will remain the sole user of a backdoor. Because of the increased amount of information generated with computer systems, and the connectedness of those systems, the systems are inherently a target for illegitimate access. Court-ordered access to encrypted data through the use of a backdoor falls into a grey area. On one hand the access would be beyond the normal authentication of the device, but on the other it would be within an existing legal structure that is deemed legitimate by society at large. Society's current acceptance of that legal structure is evidenced through centuries of court cases which determined an equilibrium between an individual's right to privacy and the state's need to ensure security. A hash is separate from but related to encryption. A hash uses similar mathematical functions as an encryption method to produce a string of characters as an output. This output can only occur one way, so a hash value may be derived from a message, but knowing the hash value will not allow one to know the message. Hash values are used to validate the integrity of a message. If the hash value for a message changes, then the message itself is altered. This allows a user to determine whether or not they will trust the message. One may encrypt a message and hash a message, or only do one or the other. Although they use similar mathematical functions, they are not required to be used in tandem. The encryption is a way of achieving confidentiality, while the hash is a way of achieving integrity. See " What is to gain through using encryption? " for more. Encryption is not new to human communications. There are examples of Egyptian scribes using transposed hieroglyphs in 1900 BC. Julius Caesar used a simple substitution cipher to send private messages to acquaintances via courier. Thomas Jefferson invented a wheel cipher which was recreated during World War II for communications. The modern encryption debate ignited in the 1990s during what is often dubbed the "crypto-wars." During this period, the U.S. government proposed the promulgation of encryption with a key-escrow system, known as the "clipper chip." Researcher Matt Blaze found a vulnerability in the security of the clipper chip and the government ended its campaign for key escrow to accompany encryption. Our current encryption debate began early in the 21 st century with the ready availability of encryption platforms which could inhibit government access to electronic evidence. The debate increased in fervor in 2014 when both Apple and Google added full-disk encryption to their mobile operating systems. This by-default encryption exponentially increased the amount of digital evidence that law enforcement was not as easily able to access, and therefore the debate over security of individuals and national security became more prevalent. While the standards for designing and implementing a cryptosystem are published and made publicly available, creating a usable and secure system is a challenging endeavor. In addition to having a mathematically sound standard to use for the encryption and decryption method, using very large prime numbers (numbers that are divisible only by themselves and one) in the algorithm is necessary to ensure that the secret key remains undiscoverable. If a number other than a prime number is used, the adversary may be able to use factors of that number (a pair of numbers that may be multiplied to generate a new number) to generate a key. That is, if a divisible number is used, the adversary may chance upon the solution by finding two other numbers that are factors of the chosen number. This is otherwise known as a "collision." Such primes are so large that they are not written out in character form but are represented exponentially, such as 2 44,497 -1. Additionally, strong ciphers are necessary. Such strong ciphers use 128 bits and 256 bits of data in modern encryption. And finally, large key bit length is necessary to ensure that adversaries cannot compute a key through a brute force attack. A weakness in any one of those elements—the mathematics behind the standard, the key bit length, the key itself, or the prime numbers used—can compromise the cryptosystem, either in its entirety or for a group of users. In addition to the complexity of implementing a secure cryptosystem, processing the algorithms that enable encryption comes at a cost—time, heat generated from the processing, and energy consumed. Although cryptosystems were around as the Internet was developing, these costs inhibited encryption from becoming ubiquitous, as it would have overly taxed early hardware and led to users abandoning the platform. According to the Committee on National Security Systems (CNSSI), the United States intergovernmental agency responsible for the security of information technology systems which are used for national security purposes: Cryptanalysis is the study of and techniques performed to defeat or otherwise circumvent a cryptosystem. It is the analysis of a cryptosystem to attack it; Cryptography is the use of a mathematical technique to encrypt or decrypt some data. It is the application of a cryptosystem; and Cryptology is the mathematical science that deals with cryptanalysis and cryptograph. Depending on the implementation, a cryptosystem is crackable. There are attacks against cryptosystems every day. Cryptanalysis contains three main types of attacks. 1. Attacking the ciphertext . In this type of attack, the adversary has the encrypted data and wants to discover the plaintext, and possibly the key. 2. Attack ing the plaintext . In this type of attack, the adversary has encrypted data and its corresponding plaintext and tries to determine the key. 3. Attack ing chosen plaintexts . In this type of attack, the adversary selects plaintexts to be enciphered with a cryptosystem and receives the resulting ciphertexts. Then, using that information, tries to determine the key used in that cryptosystem. However, cryptographers design cryptosystems to be practically uncrackable. A practically uncrackable system is one in which trying to attack a system using brute force—that is, guessing every possible iteration of the key until the key is discovered—cannot accomplish the goal within any usable amount of time. Cryptosystems are built to require processors to run through multiple instructions and multiple iterations of those instructions before something is encrypted or decrypted. Those iterations require time. Strong cryptosystems, using strong keys, would require multiple times the age of the universe to discover a key with today's computing power. Because of the large amount of possibilities, those seeking to use a brute-force attack do not just start at zero and add characters until they get to the key. Instead, they attack other elements of the system. For instance, knowing that users choose simple passwords, the attacker could start guessing likely options to greatly reduce the time to find the key. Or, an attacker could circumvent a cryptosystem entirely and insert themselves between the user and the information they are accessing. Data can only be encrypted while at rest (stored) or in transit (being sent). While a user accesses the data, or is otherwise processing the data, it is in plaintext. So, rather than try to compromise the cryptosystem, an attacker may determine that it is better to compromise the device that is employing the cryptosystem (e.g., the computer or the cell phone). If the attacker puts malicious software on the device that allows them access to what the user is viewing, they could see what the user intends to encrypt before the cryptosystem is activated. So, although the encryption is still sound, it does not protect against other forms of attack. In this scenario, the attacker would have access to the unencrypted data on the device. So, if the device in question is a corporate laptop that uses full-disk encryption, when the user logs in and connects to a network, the laptop's contents are decrypted and available to the attacker. Such contents may include health records, corporate secrets, or even the activity of the user, such as websites being visited or applications being used. Encryption is used by a variety of users for a variety of purposes. Fundamentally, encryption enables information to remain confidential to a single user or between a user and multiple users. Encryption also enables a level of certainty that who is communicating is who they say they are (as in the case of public-private key encryption) and that the communication is only available to intended recipients. Individuals use encryption to keep aspects of their lives held on digital platforms private on their devices and among those with which they share information. Businesses use encryption to ensure that their research is kept confidential from their competitors, and to ensure that their transactions with their suppliers and customers are authentic. Governments use encryption to assure their information is kept and handled in confidence. Even without a user's interaction, devices may use encryption when communicating to other devices to ensure that commands received from one device are authentic and safe to execute. However, those seeking to obscure their malicious activities from legal authorities may also employ encryption to thwart opportunities to disable and disband their malicious activity. In computer science, data exist in three states. Data at rest, or stored data: data resident on a device (e.g., a hard drive or smartphone) that are neither being manipulated nor otherwise processed. Data in motion, or data in transit: data being sent between or among various points. Data in use, or data in process: data that are being generated, manipulated, or otherwise used by a user or system. Data that are at rest or in motion can be encrypted. In the case of data in motion, it is encrypted, then sent. However, data that are in use are in a plaintext form to the user or system so that they can manipulate that data, and thus these data cannot be encrypted. A cybersystem includes the end terminals in use; the modems and routers used to transmit data; the servers that process the information; the software packages used in sharing that data; other network-connected devices on that network collecting, generating, and processing data; and the user. Encryption is used by all elements in the cybersystem to protect the data in that system, the users of the system, and the system itself. The influx of new devices to the market (i.e., Internet of Things devices) multiplies cybersystems beyond the end-user terminal and network infrastructure. This expansion amplifies the opportunities for encryption to be applied as a protective measure. As Matt Blaze, a professor of computer science at the University of Pennsylvania, testified before Congress in April 2015: It is difficult to overstate the importance of robust and reliable computing and communications to our personal, commercial, and national security today. Virtually every aspect of our lives, from our health records to the critical infrastructure that keeps our society and economy running, is reflected in or supported in some way by increasingly connected digital technology. The influx of new communications and computing devices software over the last few decades has yielded enormous benefit to our economy as well as to our ability to connect with one another. This trend toward digital systems, and the benefits we reap from them, will only accelerate as technology continues to improve. Preventing attacks against our digital infrastructure by criminals and other malicious actors is thus now an essential part of protecting our society itself. Encryption can be applied to data at rest on a per file basis (e.g., encrypting a file with a unique password), or on the entire storage device (e.g., encrypting an entire hard drive or smartphone). Encryption can also be applied before a file is transmitted; for instance, a user may encrypt a file before emailing it to a colleague. Or encryption may be applied to every packet of data in transit between or among points on a network, as in the use of virtual private networks (VPN) or HTTPS. Data exist as plaintext prior to its encryption. Points at which data is plaintext include when it is being created (e.g., taking a picture or typing a text), processed (e.g., editing a document), or otherwise used (e.g., the system accesses that file for routine maintenance). As people put more of their data online, and rely on Internet-connected services to conduct their daily business—business which includes healthcare, power generation and consumption, financial transactions, governance, travel, and relationships, to name a few—the devices people use are generating, collecting, storing and adapting information about them. This information is of value to adversaries of all sorts. If an unauthorized person were able to access these data, they would become aware of the more intimate and sensitive aspects of the data owner's life and business. Full disk encryption on a device, such as a smartphone, ensures that a person's life is kept confidential in the event that device is stolen or misplaced. Encrypted files ensure that when a data breach occurs, user data are not immediately at the whim of the adversary. Encryption can also curtail nefarious activity. If an adversary knows that a system is secured with strong encryption, that fact may deter the adversary from targeting that user or system. But encryption occurs beyond an end device or data server. No one has yet built a digital system that is natively and completely secure because cybersystems are large, complex, and contain various elements (e.g., hardware and software) within that system which are updated and replaced at varying intervals. In such a dynamic environment, vulnerabilities present themselves throughout the system. Nevertheless, society relies on these systems. Encryption applied throughout the cybersystem affords its users a level of certainty that their data and service are trustworthy—allowing modern society to remain functioning and productive. Simply, "going dark" is a term of art that represents the government's inability to obtain electronic evidence. While encryption has dominated the going dark debate, it is only one element of that debate. The Federal Bureau of Investigation (FBI) describes going dark with the following scenario: "law enforcement at all levels has the legal authority to intercept and access communications and information pursuant to court orders, but it often lacks the technical ability to carry out those orders because of a fundamental shift in communications services and technologies." As technology has evolved, some companies have implemented automatic end-to-end encryption on certain communications and data. As a result, law enforcement has reported instances of being stymied from obtaining certain communications as well as stored data that have been encrypted. For instance, of the 4,148 wiretap orders authorized by judges in 2015, there were 13 reported instances in which encrypted communications were encountered, and 11 of these 13 instances involved encryption hindering law enforcement officials. Information security, or the security of information in computer systems, is based on a model with three elements. Confidentiality means "preserving authorized restrictions on access and disclosure, including means for protecting personal privacy and proprietary information." Stated otherwise, confidentiality ensures that when a user sends another user a message, they are certain that only those two users are able to read that message. Integrity means "guarding against improper information modification or destruction, and includes ensuring information nonrepudiation and authenticity." Stated otherwise, integrity ensures that when a user sends a message to another user, the message arrives as the sender intends, without alteration. Availability means "ensuring timely and reliable access to and use of information." Stated otherwise, availability ensures that when a user sends a message to another user, that message is available for the recipient to access when they so choose. Cybersecurity professionals have tools available to them to help ensure integrity and availability. Hash values allow users to try to ensure the integrity of information, and dynamic routing tries to ensure the availability of information when a user requests it. Ensuring the confidentiality of information had been challenging, until encryption became ubiquitous. Encryption is a tool that users and cybersecurity professionals can employ to try to ensure that their data and communications remain confidential. As Jay Healey said, "The attackers are beating us in every area. And always have been. The one place that aids the defenders, the one place the mathematics is on our side, is on encryption. In that one area, we are stronger than they are." Also, by employing strong cryptosystems, users can achieve a level of integrity in their data and communications. Although encryption itself would not stop an adversary from intercepting and manipulating data, the altered data would not be readable by the user since the alteration would change one of the inputs (the ciphertext) in the cryptosystem. As a result, they would be made aware of illegitimate alterations to their data. This extra layer of security also helps to mitigate the onslaught of attacks users face every day. In the physical world, an attacker would need to be physically near its target to carry out an attack. But online, attackers can automate a coordinated attack against many targets regardless of physical location because of the interconnected nature of the public internet. Encrypting data mitigates the potential attacks users may face when they connect online. The spread of ubiquitous encryption occurred faster than many other technologies were adopted. The speed at which encryption was promulgated left many end-users without the time to consider the implications of employing strong encryption for their data. If a user were to forget or otherwise lose the key, the data would remain in a ciphertext state and stay unreadable to that otherwise legitimate user. With full-disk encryption by default, users have the opportunity to encrypt data without judging the sensitivity of that data first. A user's data may be sensitive, but not require strong security. In the physical world, a user may keep a diary in a locked desk drawer, but in the digital world, that same diary may be encrypted preventing access by anyone other than that user. The implications for that level of protection are generally not considered by users when they employ encryption. Strong encryption may deny otherwise-authorized users from accessing shared information, such as family photos and tax records, in the event that the user who maintains the key is not available to decrypt information. This level of security is also a contributing factor to the encryption element of the going dark debate. Generally, impositions on the Fourth Amendment right to security of papers and effects against unreasonable searches and seizure is considered satisfied upon an independent judge issuing a warrant or other court order to access that information. Fifth Amendment concerns are more nuanced. The Fifth Amendment protects an individual's right not to be compelled to give incriminating evidence against oneself. Depending on the facts of the case, this might include providing one's passcode to a locked device. In the pre-digital era, the Supreme Court employed a distinction between requiring an individual to disclose a safe combination, which impermissibly required the target to reveal the contents of his mind, and handing over a safe key, which did not. However, the Court has yet to state whether this same dichotomy should apply to passcodes and passwords employed in more modern technology, and the lower courts are only in the early stages of developing case law on this subject. The encryption debate today is a debate of values. On one hand, there is the core value of individual security, and privacy from each other and from the state. On the other hand, there is the core value of national security, that security of the state is necessary to ensure the security of the individual. Evaluation of the individual (or information) security versus national security values is hampered by lack of information. Both sides of the debate have presented general arguments and scenarios about the risks they hope to mitigate. The public debate on encryption has lacked information on the specific threats that strong, end-to-end encryption mitigates and why another form of encryption would put the public at risk. Conversely, the public debate has also lacked specific information on how strong, end-to-end encryption has stymied security activities and put the public at risk. Without this specific information, the public is generally unable to accurately determine the risk presented by encryption, or the lack of it. Instead, the debate is informed by extreme cases which present dire scenarios from which to form a position, but which may not accurately reflect the risk involved. As discussed above, individual users are under constant attack online from adversaries near and far. The ease with which attacks can be carried out, regardless of geographic location, further exasperates information security professionals. Encryption is a tool information security professionals and end-users can employ to ensure the data under their care remains confidential and its integrity remains intact. The systems users rely upon are under similar attack. Some of these systems govern life-sustaining and life-saving applications, such as wireless medical devices. Pervasive encryption within these systems helps ensure the trustworthiness of those systems. Additionally, any system that stores a key would also be vulnerable to an insider threat. An insider, or authorized user or employee, is a threat to such a system because they have legitimate access to the system. Insiders can violate security policies and compromise the security of a system unintentionally or intentionally. However, information security costs users in both time and computing power. Users also lose opportunities for their information to become available to loved ones or investigators if they are a victim and unable to provide the information. Additionally, users may have a false sense of security through misconfigured cryptosystems which are vulnerable to a variety of attacks. Some have argued that the advances in technology have surpassed the government's ability to keep pace. Without a balance between the advances in technology and government capabilities, some argue that law enforcement agencies at all levels are unable to enforce the rule of law through effective investigations. With this perceived imbalance, crimes online (such as child pornography and financial thefts) and crimes against online infrastructure (such as ransomware and denial of service attacks) will arguably go un- or under-investigated. Additionally, encryption technologies help enable criminal associations to persist, such as the indoctrination of a lone wolf terrorist by foreign actors, and limit the ability for law enforcement to intervene for the safety of our communities. The proposal from those championing national security is based on the premise that law enforcement must investigate criminal activity to maintain rule of law. The discussion has generally not addressed the level of criminal activity that may go un- or under-investigated (through evidence being encrypted or otherwise) for the government to still maintain the rule of law. This is an element of the debate which some hope to entertain in 2017. In the second session of the 114 th Congress, Members have introduced a variety of legislative proposals to address elements of the encryption issue. Table 1 , below, highlights bills that address elements of the encryption debate. Additionally, Senators Burr and Feinstein have made a discussion draft of their proposal publicly available, but it has not yet been introduced. The Burr-Feinstein draft, otherwise titled the "Compliance with Court Orders Act of 2016," would require a provider of computing services to either decrypt a communication or assist the government in decrypting the message in compliance with a court order. Under this proposal, a judge could issue a court order invoking this act in one or more of the following cases: (a) the crime resulted in or threatened death or serious bodily harm; (b) foreign intelligence, espionage and terrorism; (c) crimes against minors; (d) violent felonies; (e) serious Federal drug crimes; or (f) the state equivalents of any of the above. Continue to allow the courts to develop case law on encryption . This status quo option would continue to allow cases such as the one concerning the San Bernardino iPhone to come up in courts. But after a few years of this strategy both the government and the technology community are coalescing around a view that Congress legislate on the matter of the availability of encryption and law enforcement's access to encrypted communications, in order to provide uniformity and certainty. Additionally, some have suggested that barring congressional action, market forces and other stakeholders (such as other governments) would be in a position to drive policy. Force platforms to maintain a way to access the plaintext of data. Rather than focus on the users, this proposal would focus on the platform itself. In this reference, a platform is the suite of hardware, software, or databases that support the service being used (e.g., the Messages application for Apple, Inc. devices). This would allow a solution to arrive at scale, that is, for many users at once, since the providers of the encryption service would build in a mechanism to read plaintexts of data using their platform rather than rely on the individual compliance from users. However, this proposal would, by its nature, introduce a weakness in the security of that platform, one which would likely become the target for adversaries. Although the solution would apply across all users for legitimate access, it would be equivalent to providing adversaries with the opportunity to access the data for all users. One example of this proposal is for platforms to act as administrators of devices or services they provide, and use their administrator access to provide data to law enforcement. Improve the government's ability to investigate and extract digital evidence. This proposal was offered by Susan Landau, a professor in cybersecurity policy at Worcester Polytechnic Institute, in testimony to the House Judiciary Committee. In this proposal, the U.S. government would invest in research, capabilities, and capacity to continue to carry out investigations despite any technology employed which may act as a hindrance to the investigation. The cost of such an investment is unknown. Create "compelled disclosure" laws. Otherwise known as "key disclosure laws," this proposal would make it a criminal penalty to fail to produce plaintext versions of documents requested by law enforcement when asked for data held by someone with access. Australia implemented such a law. However, such a law would likely face Constitutional challenges.

Encryption is a process to secure information from unwanted access or use. Encryption uses the art of cryptography to change information which can be read (plaintext) and make it so that it cannot be read (ciphertext). Decryption uses the same art of cryptography to change that ciphertext back to plaintext. Encryption takes five elements to work: plaintexts, keys, encryption methods, decryption methods, and ciphertexts. Data that are in a state of being stored or in a state of being sent are eligible for encryption. However, data that are in a state of being processed—that is being generated, altered, or otherwise used—are unable to be encrypted and remain in plaintext and vulnerable to unauthorized access. Purposes of Encryption Today, encryption is as ubiquitous as the devices that connect to the Internet. Encryption is a tool that information security professionals and end users alike can employ to ensure that the data in their custody remain confidential to only those who are authorized to access the data. It also helps to ensure that data is accessed as the authorized users intend, and not altered by a third party. Strong encryption helps users around the world trust the systems and data they are using, thereby facilitating the transactions that allow society to operate, such as economic activity, control of utilities, and government. This is important because the world has become more connected, and attackers have become more persistent and pervasive. It is difficult to overemphasize the extent to which Internet-connected systems are under attack. But the frequency with which data breaches are exposed in the news media can act as an indicator of the prevalence of active exploitations. Encryption is a tool used to thwart attempts to compromise legitimate activity and national security. Major Issues However, encryption has posed challenges to law enforcement and elements of national security. Strong encryption sometimes hinders law enforcement's ability to collect digital evidence and investigate crimes in the physical world. As more real world transactions are conducted via digital means and adversaries continue to perpetrate crimes, this problem may become more pronounced. There are multiple sides to the encryption debate, but the sides generally reduce to two main parties: those who favor cryptosystems built as strongly as possible, and those who favor cryptosystems built with the opportunity for access if necessary and approved by a judicial authority. Encryption has created new issues for end users, as well. The technology was adopted rapidly, and users were not afforded the same opportunities to alter their habits as with the more steady adoption of technologies in the past. With the quick adoption of encryption, users left themselves more vulnerable to being unable to access or share their own data, for instance in the event that they forget the key or lack a way to share that key. One proposal to alleviate concerns over access to encrypted data by law enforcement includes mandating access for law enforcement while retaining strong encryption. However, this proposal undermines how encryption systems are built by introducing some extraordinary access into the system beyond the direct access of the user. This proposal carries risk as it creates an attack vector which adversaries of all types could seek to exploit. The increased risk raises the possibility that a persistent adversary will be able to circumvent the protections put in place to allow limited access and compromise the data and systems in use. In the 114th Congress, many activities have focused on encryption, including some legislative proposals.

Following a major disaster, the financial capacity of a local government may be severely undermined by a decrease in local revenues. The reduction in tax or other revenue can limit the local government's ability to maintain public services or afford many extraordinary but necessary expenditures. Revenue shortfalls can also impact the size of a local government and the jobs of government employees, as exemplified by the decrease in the size of New Orleans city government since Hurricane Katrina. Revenue loss frequently occurs when significant portions of the population are displaced for extended periods of time, or key sources of economic activity, like tourism, are heavily disrupted by a disaster. In addition, many local governments are restricted by state or local laws, constitutions, or codes of practice from borrowing to fund operational expenses. Often with few options available to make up for lost revenue, local governments may need to reappropriate funds from other portions of their budget or scale back their operations. The shortage of revenues, and the resulting limitation on financial capacity, has been cited as one of the most significant and consistent hurdles to long-term disaster recovery. The Community Disaster Loan (CDL) Program, managed by the Federal Emergency Management Agency (FEMA), provides loan assistance to local governments to help them overcome a loss in revenues. Though there are many disaster assistance programs available to communities, the CDL program is the only program that specifically provides assistance to local governments to help compensate for revenue shortfalls. The core purpose of these community disasters loans, as detailed in the original Senate committee report authorizing the program, is "to permit the local governments to continue to provide municipal services, such as the protection of public health and safety and the operation of the public school system." Consistent with this stated purpose, the local governments that are eligible for loans include entities such as special districts and school boards that provide a wide array of local government services. The CDL program was first authorized by the Disaster Relief Act of 1974, which was later renamed the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act). As codified in Section 417 of the Stafford Act, the program allows the President to make loans to any local government which may suffer a substantial loss of tax and other revenues as a result of a major disaster, and has demonstrated a need for financial assistance in order to perform its governmental functions. As with most other authorities in the Stafford Act, this authority has been delegated from the President to the Administrator of FEMA. After severe disasters, the revenue base of a local government may take years to fully recover, if ever. Some key sources of revenue may never return to pre-disaster levels, such as property taxes from areas severely damaged by a disaster. To account for the local government's continuing need for financial assistance in these circumstances, FEMA also has the authority to cancel the repayment on all or part of the loan. FEMA may cancel a loan up to the amount that the local government's tax and other revenues are insufficient to meet its cumulative operating budget over a period of three full fiscal years following a major disaster, in addition to any unreimbursed disaster-related expenses made in that time period. The fundamental purpose of the program has been relatively unchanged since inception. However, some statutory and regulatory provisions have varied through the history of the program, notably those that govern elements such as loan eligibility and the size of the loans. The loan program that began in 1974 was essentially unaltered in statute until 2000, when the 106 th Congress revised the core polices of the program for the first time by placing a $5 million cap on the size of the loans. Loans administered before 2005, and recent loans not governed by the exemptions discussed immediately below, are known as "traditional" community disaster loans (TCDLs). Following Hurricane Katrina and the 2005 hurricane season, the 109 th and 110 th Congresses created unique statutory guidelines for the loan program applicable exclusively to local governments impacted by those disasters. Collectively, these loans are referred to as "special" community disaster loans (SCDLs). FEMA promulgated regulations to govern the implementation of SCDLs that were very similar to those for the TCDLs, but with several notable distinctions. These new statutory and regulatory guidelines altered some of the eligibility, size, and forgiveness criteria applicable to the SCDLs. A similar pattern of special legislation was again passed in the 110 th and 111 th Congresses for community disaster loans applicable to local governments impacted by disasters in the calendar year 2008. These loans also had some different provisions for eligibility and size, as will be discussed, and will be referred to as the 2008 CDLs for the purposes of distinguishing them in this report. The majority of the statutory and regulatory provisions of the Community Disaster Loan Program are consistent across each set of loans. While this report will explain the consistent provisions of the loan program, it is intended also to highlight the unique provisions through a comparative analysis of traditional CDLs, special CDLs, and 2008 CDLs. In particular, since the issue of loan forgiveness has been a flash point of policy debate throughout the program's history, this report also highlights the statutory and regulatory provisions for loan forgiveness and discusses some of the debate on the issue. In doing so, the report offers some empirical analysis of data from each set of loans to identify the distribution and forgiveness of CDLs by the types of governments receiving a loan. It is important to note that this report is not intended to comprehensively audit FEMA's administration or forgiveness of any particular loan or set of loans. The CDL Program may be of interest to Congress because of the ongoing debate over the cost and amount of disaster assistance provided to communities. Moreover, as will be discussed in this report, recent program management decisions by FEMA have drawn the attention and criticism of some in the general public and of Members of Congress. Congress may be interested in expanding, eliminating, or amending the CDL program before additional loans are issued. The historical use of the program is summarized in Table 1 and Table 2 . An approximate total of $1,615 million in principal was offered to local governments through the program, with roughly $1,326 million borrowed. FEMA has cancelled approximately of $896 million of the $1,326 million of principal advanced to the local governments since program inception. Historically, the Community Disaster Loan Program has been used infrequently by local governments, relative to other disaster assistance programs authorized by the Stafford Act. In sum, 249 loans were issued to 200 local governments under 26 different disaster declarations from 1974 to 2010. In that same period, there were 1,542 disaster declarations leading to an incalculable number of local governments conceivably eligible for loans. From August 1976 through September 30, 2005, a period of 29 years, FEMA approved 64 traditional loans for different local governments related to 21 separately declared disasters. Following Hurricanes Katrina and Rita in 2005, FEMA issued 157 special loans to 109 local governments. In response to the 2008 disasters, FEMA issued 24 loans to 23 different local governments. Program use is generally confined to a large number of loans being issued following specific disasters. For instance, FEMA issued 28 loans after floods in Illinois in 1993, 157 loans after Hurricanes Katrina and Rita, and 14 loans after Hurricane Ike in 2008. But no loans were issued after the 9/11 terrorist attacks, after any earthquakes (including the Northridge earthquake in 1994), or after several major hurricanes like Floyd in 1999, Isabel in 2003, or the series of four Florida hurricanes in 2004. No community disaster loans were issued from FY1999 through FY2005. The limited use of the program may be attributable to a number of reasons, including, but not limited to: A general lack of awareness of the program among local governments impacted by disasters, or limited advertisement of the program by FEMA to those governments; The eligibility provisions of the loan program may exclude many potential applicants; The size, interest rate, or others terms of the loan may be unattractive to local governments; The procedures for applying and managing the loan may be considered too cumbersome or intrusive by local or state governments following a disaster; There is relatively little need for the program overall, except in particular disaster situations, in comparison to other programs. This may be caused, in part, by circumstantial immediate increases in local revenues produced by the often high level of economic activity involved with the disaster response and recovery efforts. An accurate accounting of the number and type of potential applicants to the program, and their reasons for not applying, is not available. Therefore, it is difficult to assess the relatively limited demand for the CDL program. It is beyond the scope of this report to fully discuss each iteration of the regulations governing the CDL program since 1974. However, a summary of rulemakings is provided in Table 3 . The core policies of the program were initially established in a program manual, and then promulgated in a rulemaking in 1979. The CDL program rules did not undergo dramatic policy change between 1979 and 2005, though considerable clarification and specificity has been added over various rulemakings, most prominently in the 1988 rulemaking. As warranted, notable changes in regulations are remarked upon further throughout the report. Unlike most other Stafford Act programs, the Community Disaster Loan program is not funded through the Disaster Relief Fund. The program is instead funded through the Disaster Assistance Direct Loan Program (DADLP) account. The account also funds activities under Section 319 of the Stafford Act, which provides advances or loans for the portion of assistance applicants are responsible for under the different cost-sharing provisions of the Stafford Act (commonly referred to as the applicant/state "match" for assistance). Generally, funds have been annually appropriated to the DALDP account for the purposes of Section 319 of the Stafford Act. However, funds for the purposes of the Community Disaster Loan program have often been appropriated through emergency supplemental appropriation bills in response to a particular set of disasters. Like the Disaster Relief Fund, funds appropriated to the DALDP have traditionally been treated as "no year" funds and were available until expended. Table 4 provides a list of the appropriations for the program by since 1990. The CDL program is subject to the Federal Credit Reform Act of 1990, as amended ( P.L. 101-508 , FCRA). The FCRA changed the accounting method for measuring the cost of federal direct loans and loan guarantees, starting in FY1992. Under the FCRA, discretionary programs providing new direct loan obligations or new loan guarantee commitments require appropriations of budget authority equal to the loans' estimated subsidy costs. Furthermore, the appropriations bill must include an estimate for the dollar amount of the new direct loan obligations that are supported by the subsidy budget authority appropriated to the agency for its credit program. The subsidy rate for any loan program is calculated by CBO in each appropriation. Therefore, appropriations to the DADLP account for the purposes of the CDL program have varied in the total dollar amount of loans that can be issued per appropriated dollar. For example, in P.L. 109-88 , a congressional appropriation to the DALDP account of $750 million in budget authority actually supported the issuance of $1 billion in loans, at a calculated subsidy rate of 75%. However, in P.L. 110-329 the DADLP account was appropriated $98.15 million for the CDL program, to subsidize gross obligations for the principal amount of direct loans not to exceed $100 million, at a calculated subsidy rate of 98.15%. The Office of Management and Budget also produces subsidy rate estimates for each program in the annual budget report. However, since loans were last issued by FEMA in 2009, the latest available rate estimate for the CDL program was in FY2009, at a rate of 93.95%. This rate is very high in relation to other loan programs because of the high cancellation rate of the program (discussed in full later). This section of the report describes the law and regulations that governed all traditional community disaster loans (TCDLs) issued from April 1988 to October 2005, and all loans since 2005 not covered by the unique provisions of the SCDLs or the 2008 loans discussed later. It also describes important statutory and regulatory elements that are applicable for all categories of loans in the program. By default, these traditional rules will continue to govern all future community disaster loans unless otherwise mandated by Congress or until FEMA revises the regulations. For the purposes of calculations and categorization, however, this report classifies all loans made through the CDL program from inception to 2005 as "traditional," since the loans were guided by relatively the same regulations. Of note, there were 64 traditional loans issued between 1976 and 1998, with no loans issued between 1998 and 2005. Four loans governed by the traditional regulations were issued in response to the severe tornadoes that struck Greensburg, KS, and surrounding areas in 2007. To be eligible for a loan, local governments must meet three basic requirements provided in Section 417 of the Stafford Act. First, local governments must have suffered losses "as a result of a major disaster." Second, a local government should have "suffer[ed] a substantial loss of tax and other revenues." Third, there "has to be a demonstrated need for financial assistance" for the loan to be issued. FEMA's interpretation of these three statutory conditions are formulated in the eligibility criteria for traditional loans outlined in 44 C.F.R. §206.363. Consistent with the first requirement, FEMA regulations restrict eligibility to only those local governments in the designated area of a presidential major disaster declaration. Local government is broadly defined in the Stafford Act, and therefore loans have been granted to governmental bodies ranging from general purpose municipal city governments, tribes, hospitals, school boards, sheriff departments, water and sewage authorities, to transportation districts. FEMA has previously determined that this definition also treats each U.S. territory as a single eligible municipal taxing authority, which has allowed the Virgin Islands and American Samoa to submit consolidated applications. Local governments are ineligible, however, if they are legally barred from incurring federal debt, or debt to fund operating expenses, either by state or local laws. Table 5 displays the distribution of community disaster loans by type of local government entity. TCDLs can be approved for a local government in either the fiscal year in which the disaster occurred or the immediately following fiscal year. Only one TCDL may be approved for any one local government as the result of a single disaster. Also, as a result of the Disaster Mitigation Act of 2000 ( P.L. 106-390 , henceforth DMA 2000), a loan cannot be issued to any local government that is in arrears in payment on a previously existing community disaster loan. The regulatory criteria for what constitutes a substantial loss in tax or other revenues, and how a local government demonstrates a need for the financial assistance, are considerably more complex. There are two factors used by FEMA to decide if there is a substantial loss in tax or other revenues. The first is whether the reduction in revenue is severe enough to significantly and adversely impact the level of essential municipal services being provided by the local government. The second is whether the disaster has caused a projected 5% loss in total revenue for the fiscal year of the disaster or the fiscal year following the disaster. This particular eligibility criterion has often been altered in statute to increase the percentage of revenue loss required to receive loans of larger sizes, and is one of the key differentiating elements of the special and 2008 loans. FEMA regulations contain eight different factors that are used to determine if a local government has a need for financial assistance. The factors include whether the local government is in danger of municipal insolvency, if there are available cash or liquid assets to cover the losses, and the existing debt ratio of the local government. These regulatory factors are consistent across the traditional, special, and 2008 loans. Some of the factors are designed to gauge the current financial health of the government, and thereby the need for financial assistance. These provisions, if implemented strictly, may inhibit the loan eligibility of fiscally sound jurisdictions and enhance the loan eligibility of fiscally weak jurisdictions. To help implement these eligibility criteria, FEMA has established a formal application process for the program. The regulations specify that the state in which the local government is located review and validate the application, with the Governor's Authorized Representative (GAR) officially approving the application. One of the application forms requires the local government to self-certify that it meets a number of eligibility terms, to include most of the factors used to determine a financial need for the loan. The local government is also required to provide its most current financial reports for the three fiscal years prior to the disaster, in addition to other documentation required by FEMA, to support its application. To help ensure that a loan is repaid, the state must co-sign the promissory note for the loan if a loan application is accepted. If the state cannot legally sign the note, the local government must pledge collateral security to cover the principal amount of the note. These requirements were newly introduced to the program in the 1988 rulemaking. In that rulemaking, FEMA claimed these changes were necessary to counteract local governments that did not always act in a "fiscally responsible manner, and have been reluctant, and in some cases refused, repeatedly, to repay the uncancelled principal and related accrued interest after the regulatory loan cancellation and appeal process had been exhausted." FEMA staff have indicated that, since this addition to the regulations, there have been unspecified circumstances in which states have been unwilling to co-sign a loan application with a local community. In these circumstances, local governments have either provided collateral security or withdrawn their loan applications. During the application process, FEMA reviews whether or not a government experienced a five percentile loss in total tax and other revenues in either the fiscal year of the disaster or the following fiscal year. As mentioned previously, this eligibility factor is part of the substantial loss determination required in statute. Often with the assistance of contract staff hired by FEMA, the local government is required to extensively document empirical evidence of a 5% predicted revenue loss in lieu of actual revenue loss. For the purposes of evaluating a loan application and the eligibility of a local government, FEMA will not consider any voluntary reduction in the collection or assessment of tax or other revenues as a "legitimate" revenue loss to meet the 5% standard. This prevents a government from willfully reducing its revenues in order to become eligible for a loan, or to increase the overall loan size once eligible. The applicant is also allowed to submit a formal letter to FEMA explaining the financial context of its request, and its pressing need for the financial assistance. For a demonstration of need, FEMA presumes the need exists through the self-certification of the government, unless evidence is found that would otherwise contradict eligibility on this provision. FEMA reviews and notifies each applicant whether its loan has been accepted. If denied a loan because inadequate information was provided, the local government is allowed to resubmit a revised application within 60 days. FEMA staff said that in practice they informally pre-screen communities for their eligibility for CDLs when working with them in the disaster recovery process following a major disaster. Therefore, FEMA could not provide any instances when an applicant that formally submitted an application had been denied. The informal pre-screening process makes it difficult to ascertain what are the most common factors that prevent a government from applying for or receiving a loan. However, based on anecdotal evidence, FEMA staff suggested that local governments often do not have the 5% in revenue loss to justify a substantial loss from the disaster. It is also unclear whether local governments with strong financial standing are any more or less likely to receive a loan, as hypothetically possible under the need determination criteria. From FY1974 to FY2000, the only statutory limitation on the size of a traditional community loan was that it could not exceed 25% of the annual operating budget of the local government for fiscal year in which the major disaster occurred. As a result of an amendment made in the DMA 2000 ( P.L. 106-390 ), the dollar amount of any loan was further limited to $5 million per loan, regardless of what percentage of the annual operating budget that figure represented. One of the stated intentions of the DMA 2000 was to reduce the financial cost of disaster assistance following natural disasters. The $5 million cap was intended to prevent some of the extremely large loans, such as one for $127.2 million to the Virgin Islands after Hurricane Marilyn in 1995, from being issued and ultimately cancelled. The $5 million cap has been a source of controversy since inception. Many argue that it inequitably limits the amount of assistance to local governments with large operating budgets versus those with smaller budgets. Following the 9/11 terrorist attacks, a bill was introduced in the House to remove the cap and make other revisions to the CDL program, but it failed to reach the floor. The $5 million provision was one of the elements Congress waived, under certain conditions, by special legislation for the SCDLs and 2008 CDLs. The cap remains in place for all future disaster loans unless otherwise stipulated by Congress. No loans were issued between the passage of the $5 million cap and its subsequent waiver for the SCDLs (discussed further later), though the $5 million cap did restrict the size of 2008 CDLs under certain conditions and was in place for four loans issued under traditional regulations for disasters in 2007. Through regulation, FEMA further limits the size of a loan to a local government's projected need for financial assistance. Using the financial documents provided in the application, FEMA calculates the cumulative amount of projected revenue loss plus projected unreimbursed disaster-related expenses (UDREs) for the fiscal year of the disaster and the following three fiscal years. The projected sum over the three-year period serves as the size of a loan if it is less than the 25% of the annual operating budget or $5 million dollar cap. The goal behind the regulation is to prevent a community from taking out a loan in excess of its projected need. The SAFE Port Act ( P.L. 109-347 ), enacted on October 13, 2006, further raised the loan size limit for a traditional CDL from 25% to 50% of a local government's annual operating budget in the fiscal year of a disaster. This increased loan size can only be issued if a government's tax and other revenue loss is equal to or more than 75% of its annual operating budget. No government, including those impacted by Hurricanes Katrina and Rita, has received a loan using this standard. This is because it is rare to lose revenues up to 75% of an operating budget following a disaster. Moreover, were this stipulation applied to a future loan, the size would still be limited by FEMA's calculation for projected need, and therefore might not reach a 50% operating budget figure. The CDL statute is silent on what interest rate should be charged for loans issued under the program. As a default interpretation, FEMA has set interest rates for all TCDLs, regardless of size, to the rate for five-year maturities as determined by the Secretary of Treasury on the date of execution. The rate is fixed for the course of a loan. The interest rate on CDLs is often higher than the average rate on municipal (state and local) bonds of similar maturity. This is because the federal tax exemption of interest on state and local government bonds enables those governments to sell bonds at lower interest rates than comparable federal bonds. Theoretically, the relatively higher CDL rate implies that localities with strong credit ratings may be better off borrowing from the private credit market, if they were permitted to borrow to cover operating expenses. Communities with a weaker credit rating—or those anticipating a sufficient revenue loss to justify loan cancellation—may be more attracted to traditional CDLs. The average interest rate for all TCDLs since program inception is 6.59%. Though the total amount of the loan is obligated by FEMA, the local government must request disbursement of the loan in increments based on a defined schedule or by need. With each increment requested, the local government is required to submit new financial evidence, which FEMA considers, to justify the withdrawal. In implementation of the regulation, FEMA has stated that it rarely denies disbursement requests from local governments because the requests are typically justified by financial evidence. The only guidance found in the statute on the use of the loan funds is that a local government must use the funds "to perform its governmental functions." FEMA has interpreted this clause to further mean that the funds can only be used to carry on existing local government functions of a municipal operation character or to expand such functions to meet disaster-related needs. In an interim rule released for the SCDLs, FEMA indicated further that the local government may pass loan proceeds to a private non-profit that provides government services, though the responsibility for repayment remains with the local government. The funds cannot be used to finance capital improvements or for the repair or restoration of damaged public facilities. Also, the funds cannot be used to fund the "match" share for another federal assistance program. FEMA monitors the use of the funds in the annual reports submitted by the local governments and through the requests for disbursements. FEMA has approved 68 TCDLs to 68 different local governments from 13 different states and 2 different territories. Of those loans, only 57 loans were used by the local governments, meaning they borrowed some dollar amount from available funds. In total, local governments were approved for $284.1 million, which is $48.1 million more than the total $236 million that has been borrowed. Table 6 summarizes the amount of loans borrowed through the traditional regulations by government type. By statute, repayment on a loan may be cancelled in whole or in part if the "revenues of the local government during the three full fiscal-year period following the major disaster are insufficient to meet the operating budget of the local government, including additional disaster-related expenses of a municipal operation character." Though it has been amended, this provision's intention was included in the original authorization in 1974. FEMA will also forgive any amount of related interest owed on the cancelled principal of a loan. To implement this statute, FEMA uses the regulations in 44 C.F.R. §206.366 to determine how much, if any, of a loan should be cancelled. Typically, FEMA hires an outside auditing firm to perform the required analysis for the forgiveness evaluation of a community's operating budget. FEMA's cancellation decisions are based on the auditing firms' analysis of a local government, as well as any additional explanatory information that the jurisdiction provides in support of its cancellation application. To be eligible for loan cancellation, a local government must first submit a cancellation application before the expiration date of the loan through its state GAR and the applicable Regional Administrator for FEMA. This means a local government must apply for cancellation within five years from the date the promissory note was signed. As a matter of practice, FEMA notifies local governments of the cancellation application's requirements, and begins assisting them early in the process to ensure timely delivery. An extensive amount of supporting financial documents is required by FEMA to review a cancellation application. These documents are listed in full in 44 C.F.R. 206.366(c)(1), and include items that help FEMA understand the local government's property tax evaluation practices and individual fund balance sheets. In addition to the documents, FEMA encourages applicants to submit a written narrative explaining their financial situation to make it easier for FEMA to understand the unique circumstances of each local government. Upon receipt of an application, FEMA begins its evaluation process. Succinctly, the following steps are followed in the evaluation: 1. FEMA determines if a cumulative operating deficit exists in the three fiscal years after the disaster. Without a cumulative operating deficit, no loan cancellation is possible. A "cumulative operating deficit" is essentially the shortfall between actual revenues and actual expenditures of a local government over the three-year period. 2. FEMA then tries to associate the deficit to either a disaster-related loss in revenue or an increase in expenditures due to unreimbursed disaster-related expenses. In this step, FEMA is essentially trying to determine what amount of the deficit has been "caused" by the disaster, and not by other factors. 3. After step 2 is complete, a total amount of disaster-related deficit will have been calculated. FEMA may cancel an equivalent amount in loan principal owed by the local government (either partially or in full). The associated interest of the cancelled principal is also forgiven. This process is further explained in the rulemakings for the SCDLs, as well as a supporting presentation made by FEMA explaining cancellation for SCDLs. The process outlined should not be distinctly different for traditional loans, as their guiding regulations are the same except for the additional clarifications explained in " Cancellation of Special Community Disaster Loans ." This process is difficult to implement in practice because of the numerous ways in which operating budgets, revenues, and additional disaster-related expenses of a municipal operating character can be interpreted. The relevant regulations on how FEMA interprets these terms for TCDLs are discussed immediately below. Any applicants that are denied cancellation of all or part of their loan may appeal the decision. In practice, this appeal is handled within the same division/directorate in FEMA, but by more senior staff. An appeal must be submitted within 60 days of a denial. All appeal decisions are final. "Operating budget" is defined as "actual revenues and expenditures of the local government as published in the official financial statements of the local government." The term "actual" is important because not all budgeted monies are always spent, and not all projected revenues are collected, in any fiscal year. FEMA is only interested in what actually occurred during the full three-year period, as opposed to annual projections. Also, since local governments often have budget deficits prior to the disaster, FEMA does not consider it within the purpose of the CDL program to fund these deficits. Therefore, when calculating the operating budget of a local government, FEMA reduces the budget size by the pre-disaster deficit amount. Further, since the funds are meant to be used only for operating expenses and not for capital expenses, any amount of money the government transfers from an operating budget to a capital budget is added back into the total operating budget. The term "revenues" is not clearly defined in the traditional regulations. However, FEMA does provide key stipulations on how they should be calculated. If a local government reduces the tax or other revenue rates for undamaged property, such as reducing the percentage charged for property tax or the fees charged for utilities, FEMA uses the rates from the pre-disaster level in its overall calculation for cancellation. Many governments will reduce taxes and fees on unaffected areas or experience a decrease in property values in unaffected, but nearby, areas. Through this regulation, FEMA uses the pre-existing rates for revenue calculation and appraisals of property value, as if the rates/appraisals were never reduced. This regulation prevents hypothetical situations where a government could willfully reduce its revenues, thus encouraging larger loan sizes and cancellation rates. As noted in the traditional rules, this regulation "may result in decreasing the potential for loan cancellations." The regulations do, however, leave open the possibility that taxes and fees could be reduced on damaged property, and that FEMA could credit a loss in revenue associated with lower appraisals for damaged property. As with the projections of revenue loss during loan size calculations, FEMA will include "unreimbursed disaster-related expenses" (UDREs) of the local government in the overall amount that the loan may be cancelled. UDREs include those [expenses] incurred for general government purposes, such as police and fire protection, trash collection, collection of revenues, maintenance of public facilities, flood and other hazard insurance, and other expenses normally budgeted for the general fund.... Expenses that are not eligible for forgiveness include expenditures associated with debt service; any major repairs, rebuilding, replacement, or reconstruction of public facilities or other capital projects; intragovernmental services; special assessments; and trust and agency fund operations. Any expenses that may be eligible for coverage under another federal assistance program are also ineligible, as a means of preventing double dipping for federal assistance. The normal term of a CDL is five years, where the full principal and accumulated interest are due all together at the end of the five-year term on whatever amount is not cancelled. FEMA may consider requests for an extension on the repayment of the loan, based on the local government's financial condition. However, the total term of a loan normally may not exceed 10 years, except under extenuating circumstances outlined in the regulations. In these extenuating circumstances, an additional loan may be issued by FEMA after the first 10 years, allowing a second 10-year promissory note to be signed. In order to receive this additional amount of time to repay a debt, a local government must first attempt to apply for credit in the private market at a rate equivalent to the current Treasury rate for a similar loan. If additional time is granted, the outstanding principal and interest becomes the principal amount of a new loan from FEMA. There is currently one loan outstanding past the 10-year repayment mark under these circumstances. Local governments may also make prepayments on a loan without penalty. In the event of default, FEMA may request administrative offset against other federal funds due to the borrower or refer the loan to the Department of Justice for enforcement and collection. The total dollar amounts and percentage rates of cancellation for TCDLs are displayed by government type in Table 8 and Table 9 . To summarize, of loans that have had any amount of money borrowed, 46.4% of the loans were at least partially forgiven. On average, each loan had 38.9% of its principal cancelled by FEMA. The total percentage of principal cancelled was 97.2%, largely due to the weighted impact of several large loans having been cancelled. In addition to the loans that have been cancelled through normal regulations, one large loan made to the U.S. Virgin Islands following Hurricane Hugo in 1989 was cancelled in part by special legislation. Through the normal cancellation regulations, FEMA forgave $21 million of the $50.1 million in principal borrowed through the loan (and in doing so, also forgave the associated interest on the $21 million). The U.S. Virgin Islands also repaid about $7.7 million in interest on the remaining principal. The remaining balance of principal and interest was cancelled through legislation. In the Department of the Interior and Related Agencies Appropriation Act, 2001 ( P.L. 106-291 ), Congress transferred funds from the Department of the Interior to FEMA for the purpose of cancelling some of the remaining interest on the U.S. Virgin Island loan. The following year, in the Department of the Interior and Related Agencies Appropriation Act, 2002 ( P.L. 107-63 ), Congress again transferred funds from Department of the Interior to FEMA, this time for the purpose of cancelling the remaining balance on the loan. By doing so, Congress cancelled the U.S. Virgin Islands' obligation to pay a remaining $27 million in principal and $17.5 million in interest. In addition to the heavy loss of lives and the dislocation of hundreds of thousands of families, Hurricanes Katrina and Rita caused devastating damage to property and seriously disrupted the economic activity that normally provided the tax and revenue base of the affected areas, especially in Louisiana and Mississippi. As the full scale of the devastation was revealed, the 109 th Congress passed a series of emergency supplemental appropriations to provide financial assistance to the region. Within two weeks, Congress had passed two separate emergency supplemental appropriations to meet the needs arising from Hurricane Katrina ( P.L. 109-61 and P.L. 109-62 ). These appropriations focused on funding more commonly used disaster assistance programs and accounts, such as the Disaster Relief Fund (DRF), and did not initially include any appropriation for the Disaster Assistance Direct Loan Program (DALDP) account for the CDL program. However, on October 7, 2005, the 109 th Congress passed and President Bush signed into law the Community Disaster Loan Act of 2005 ( P.L. 109-88 , henceforth CDL Act of 2005). The act transferred up to $750 million to the DALDP account from the $50 billion previously appropriated for disaster assistance following Hurricane Katrina in P.L. 109-62 . The $750 million was available to support up to $1 billion in special loans to local governments until expended. The CDL Act of 2005 also allowed for an additional $1 million of the disaster relief funds provided by P.L. 109-62 to be transferred to the DALDP account for the administrative expenses of the program. Loans totaling the full $1 billion were approved by FEMA under the CDL Act of 2005. Since the first obligation was quickly exhausted, the 109 th Congress passed the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006 ( P.L. 109-234 , henceforth Emergency Supplemental of 2006) on June 15, 2006. The Emergency Supplemental of 2006 transferred another $278.8 million to the DADLP to support an additional $371.733 million in direct loans to communities affected by Hurricane Katrina or other hurricanes in the 2005 season (such as Hurricane Rita). An additional $1 million was appropriated for administrative expenses. The numerical relationship between the appropriated amounts in each Act ($750 million and $278.8 million) and the allowable amount of loans ($1 billion and $371.733 million) was based on the assumption of a 75% credit subsidy rate for the loans. From the possible $371.733 million available under the Emergency Supplemental of 2006, FEMA approved loans totaling $271 million for all eligible applicants, leaving $101 million of the loan authorization unused. Though collectively the loans from both laws are called special community disaster loans (SCDLs), each law had slightly different statutory provisions for how the loans could be issued and administered by FEMA. The intended purpose of the SCDLs was slightly different than the purpose of the TCDLs. The CDL Act of 2005 appropriated the initial funds for the loans "to assist local governments in providing essential services." The Emergency Supplemental of 2006 echoed this purpose statement. The impact of this clause is reflected by a difference in language in the opening sections of the regulations for each set of loans. In regulations for the TCDLs, it states that the program's purpose is for "any local government which has suffered a substantial loss of tax or other revenues as a result of a major disaster and which demonstrates a need federal financial assistance in order to perform its governmental functions " (italics added). This language directly replicates the traditional purpose statement found in the opening portions of Section 417(a) of the Stafford Act. In contrast, the regulations that applied to SCDLs state "in order to provide essential services." In an initial interim rule issued shortly after the CDL Act of 2005, FEMA noted that by using the "essential services" definition it expected "proceeds from these loans will be limited to the performance of core municipal operating functions." Further, in the Notice of Public Rulemaking (NPRM) for the special regulations issued in 2009, FEMA cited this difference between "essential services" versus "governmental functions" as being restrictive to the purpose of the special loans by comparison to the TCDLs. FEMA also indicated that local government entities such as recreational districts were unable to apply for and receive loans under the essential services definition. Outside of this restriction, it is unknown what other practical impacts, if any at all, this difference had on eligibility or the cancellation of SCDLs. The SCDLs from the CDL Act of 2005 were available to any local government for the purpose of providing essential services. Though many local governments under various disaster declarations could have applied for loans, the full $1 billion went to governments in Louisiana or Mississippi under major disaster declarations for Hurricane Katrina. Eligibility for the SCDLs made available in the Emergency Supplemental of 2006 was more restrictive, and was limited to governments under major disaster declarations from Hurricane Katrina and the 2005 hurricane season. Under this limitation, only governments in Louisiana and Mississippi applied for and received loans through this appropriation. Local governments in Alabama, Florida, and Texas could have also applied for and received these special loans, but did not. Because eligibility for these loans was limited to the 2005 hurricane season, FEMA interpreted that the Emergency Supplemental of 2006 loans must be made by September 30, 2006, the end of FY2006, in accordance with the existing regulatory provision that loans can only be issued in the fiscal year of the disaster or the succeeding fiscal year (FY2005 or FY2006). Since the declarations for Hurricane Rita were issued at the very end of FY2005 (on September 24, 2005), there was significant time pressure on the application process for the loans issued under Emergency Supplemental of 2006. As with traditional loans, the issuance of SCDLs was restricted to the fiscal year of the disaster declaration or the succeeding fiscal year (FY2005 or FY2006). However, the stipulation that a government may only receive one loan per disaster was removed to account for two loan appropriations made by the 109 th Congress that had separate eligibility provisions. FEMA anticipated that the first appropriation under the CDL Act of 2005 would be insufficient to meet the full eligible demand from local communities impacted by the hurricanes. Therefore, loan amounts were allocated to as many applicants as equitably as possible until funds were exhausted, in part by prioritizing some local governments that provided more essential services (such as hospitals and school boards) over governments providing fewer essential services. In some cases, this did not allow all local governments to receive their full loan eligibility amount, so, upon the second appropriation (via the Emergency Supplemental of 2006), additional loans were issued to some communities to meet their full eligible amount under the CDL Act of 2005. An additional loan could have also been issued to local governments under the unique loan size provisions of the Emergency Supplemental of 2006 or for damage from Hurricane Rita as well as Hurricane Katrina. As applicable to traditional loans issued prior to 2000, the CDL Act of 2005 removed the restriction on the $5 million cap for loans, regardless of revenue loss. However, the loans issued under the CDL Act of 2005 were still restricted to 25% of the annual operating budget of a government. The $5 million cap was removed again in the Emergency Supplemental of 2006. In addition, loans were allowed to reach 50% of the operating budget for a local government in the fiscal year of the disaster. However, this uniquely large loan size was only allowed if the local government had suffered a projected loss of 25% or more in tax revenues. Because the percent-of-budget limit was raised to 50%, communities that applied in the first round for SCDLs under the CDL Act of 2005 for up to 25% of their operating budget could now apply for an additional 25% under the emergency supplemental loans. FEMA still maintained the regulatory provision that loan size was limited to the projected revenue loss plus unreimbursed disaster expenses, so it is unclear how many loans actually reached or approached the full 50% standard. Under the CDL Act of 2005, FEMA issued a total of 136 loans (84 to Louisiana and 52 to Mississippi). Under the Emergency Supplemental of 2006, FEMA issued 16 additional loans (12 to Louisiana and 4 to Mississippi). However, in the information provided to CRS by FEMA, loans were not specifically identified by appropriation, so it is unclear which loans were issued under which law. It is also unclear if additional loans issued under the Emergency Supplemental of 2006 were issued to new or old recipients, or what the size of the loan was as a percent of the local government's operating budget. Section 417(a) of the Stafford Act stipulates that loans are available to governments that have suffered "a substantial loss of tax and other revenues." As with the TCDLs, special loans issued under the CDL Act of 2005 followed this provision. However, under the Emergency Supplemental of 2006, a local government could receive a loan for up to 50% of their operating budget if they suffered a loss of 25% or more in tax revenues due to Hurricane Katrina or Hurricane Rita. This distinction is important because many local government entities, especially special districts, rely on revenues other than taxes (such as charges and fees) and therefore had difficulty meeting the standard of a 25% loss strictly from taxes. These local government entities included, for example, hospitals, ports, airports, regional transit agencies, and communications authorities. As with traditional loans, the statute for the SCDLs included no specific provisions regarding the interest rate for the loans. By default, FEMA created regulations setting the interest rates on the SCDLs to the rate for five-year maturities as determined by the U.S. Treasury. However, possibly as a consolation offered to those concerned about the non-cancellation provision for the SCDLs, FEMA also allowed interest rates to be reduced "if an applicant can demonstrate unusual circumstances involving financial hardship." The reduced interest rate was the U.S. Treasury's five-year maturity rate plus one percentum, adjusted to the nearest 1/8%, and reduced by one-half. For example, assume that the yield on five-year Treasury bonds was 4.32%, as it was on October 21, 2005. Adding one percentum would give 5.32%. Rounding that to the nearest 1/8% would give 5 3/8%. Reducing that by one-half would give 2 11/16% (2.69%) as the subsidized interest rate on SCDLs. It is unknown how applicants demonstrated to FEMA they had "unusual circumstances involving financial hardship," but all SCDLs were released with this lower interest rate. Some might argue that the extreme devastation of Hurricane Katrina was self-evident justification for applying the lower interest rate. The average interest rate for the 157 approved SCDLs was 2.86%. Table 7 summarizes the amount of loans borrowed through either the CDL Act of 2005 or the Emergency Supplemental of 2006. In total, 157 separate SCDLs were approved by FEMA for 109 separate local governments in Louisiana and Mississippi. However, local governments either withdrew or did not elect to borrow money in 28 of the loans. Therefore, in terms of only those loans that had some amount of borrowed principal, 129 loans were issued and used by 92 local governments. In total, local governments were approved for $1,270 million in principal, which is $230 million more than the $1,040 million that was borrowed. FEMA issued 53 special disaster loans that exceeded the previous limit of $5 million, with the largest being two different loans for $120 million each to the City of New Orleans. On average, the local governments in Louisiana borrowed more than those in Mississippi, especially in the municipal government category. Presumably, this difference was due to the scope of the damage in Louisiana and the size of the local government budgets. The CDL Act of 2005 contained a unique provision preventing the loans issued from being cancelled under Section 417(c)(1) of the Stafford Act. Though the stipulation against loan forgiveness was controversial, it was reportedly insisted upon by the Office of Management and Budget and the Republican leadership in the House as a condition for providing the loan assistance. Several Members made statements on the House and Senate floors objecting to the requirement that the loans be repaid in full, without the possibility of cancellation. Thirteen days after the enactment of the CDL Act of 2005, companion bills were introduced in each chamber of Congress to repeal the provision that disallowed the cancellation of the special CDLs, but neither was voted upon in the 109 th Congress. The loans authorized by the Emergency Supplemental of 2006 also prohibited loan cancellation. Attempts to repeal the restriction on loan forgiveness were taken up again in the 110 th Congress. Some of the bills only attempted to remove the provision for the loans in the CDL Act of 2005, while others also attempted to allow forgiveness for the loans from the Emergency Supplemental of 2006. Ultimately, the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 ( P.L. 110-28 ) allowed cancellation for both the loans under the CDL Act of 2005 and the Emergency Supplemental of 2006. In response, FEMA initiated a rulemaking process to allow for the SCDLs to be forgiven. Table 3 displays the key steps in the rulemaking process associated with the SCDLs. The interim rule, released in October 2005, was issued under the presumption that SCDLs would not be eligible for cancellation (per the original statute of the CDL Act of 2005). Therefore, the interim rule essentially replicated existing regulations for the CDL program, except that it removed the $5 million cap on loan size; restricted loan use to "essential services"; and removed provisions on how loans could be cancelled. After the change in law in May 2007 that allowed SCDLs to be cancelled ( P.L. 110-28 ), FEMA proposed a rule in April 2009 indicating how SCDLs would be processed for possible cancellation. According to media reports, the time delay between the passage of the law allowing cancellation and the release of the proposed rulemaking (approximately 22 months) was criticized by many lawmakers. The April 2009 release date for the proposed rule was approximately 18 months ahead of the five-year maturity date for the first batch of SCDLs, though it came about six months after the first loans could have technically been reviewed for cancellation (after the first three fiscal year period since issuance). In essence, the proposed rule amended the existing SCDL rules by adding the identical cancellation regulations used for traditional community disaster loans since 1988. According to FEMA, the agency contemplated "possible changes to these well-established cancellation procedures" but found that the cancellation provisions for the traditional Community Disaster Loan program work—they provide sufficient and accurate information on which FEMA can base its decision to cancel loans—and compliance on the part of the borrower is relatively easy. There are no significant issues with these existing procedures that require revision.... The final rulemaking allowing for SCDL cancellation was released in January 2010, which was approximately nine months before the maturity date of the first SCDLs. FEMA received 68 comments on the proposed rule from 2009, and in response to these suggestions made five substantive changes to the regulations. In addition to comments from the general public and representatives of local governments who received special loans, several past and present Members of Congress submitted comments on behalf of their constituents. The regulations for SCDL were changed in the final rule by: Altering how property tax revenue loss is evaluated for cancellation applications. In principle, this amendment made cancellation of loans more likely in certain restricted circumstances. Additionally, FEMA clarified how it would evaluate the loss of property revenue in general. In implementing this regulation, FEMA indicated that unless provided information to the contrary, FEMA will assume that any assessed property value decline during the three full fiscal years after the disaster was related to the disaster, and not to general market conditions, as market conditions themselves were severely affected by the disaster during that period of time. Clarifying the definitions of "revenues" and "operating expenses." The regulation continued to rely on the existing definition of operating budget. These definitions were developed from the Government Accounting Standards Board and published by the Government Finance Officers Association. Identifying the different persons/positions within FEMA that would rule on the initial cancellation application and any possible appeal. Although these positions were different, they were within the same management chain at FEMA (with the appeal being ruled on at a higher level). Providing a specific timeline for the cancellation review process, allowing FEMA 60 days to process the evaluation. Allowing local governments to submit financial data for the three full fiscal years following the disaster, as normal, or the 36 calendar months following a disaster. This aided local governments whose fiscal years did not match the typical October 1 st start date of the federal fiscal year. These revisions aside, FEMA reiterated that the general procedures for loan cancellation used for TCDLs would be repeated, having found them to be an efficient and accurate method of determining when revenues of a local government are insufficient to meet its operating budget. These procedures were successfully applied after other major hurricanes, including but not limited to hurricanes Andrew (1992) and Marilyn (1995). As discussed above, local governments often received more than one SCDL loan from FEMA. Though some of these loans were distinct in the sense that they were issued under different appropriations and allowances under the law (CDL Act of 2005 and the Emergency Supplement of 2006), FEMA completed a single cancellation review process per local government, regardless of how many special loans a government received. The local government information needed for FEMA to process each loan cancellation application was the same if the government had four loans or one. In theory, the cancellation review process was conducted in the same manner as for the TCDLs, except that Clarified definitions were applied in the review of local government budgets; The loss of property taxes was handled more flexibly to the benefit of local governments; and A definitive timeline for the application review and appeal process was followed by FEMA. FEMA contracted with a private accounting firm to help it conduct the application review. In addition to the regulations, FEMA also provided local governments with several additional support documents to help guide the governments through the cancellation application process, including a review of FEMA's accounting methodology. After calculating a total dollar amount of operating budget deficit that is disaster-related, FEMA cancelled an equal amount of money from the total principal owed by each local government, cancelling the principal balances loan by loan. For example, consider a hypothetical local government that had $20 million in "forgivable" operating budget deficit. If the local government had two loans, one for $15 million and another for $10 million, FEMA would cancel the full principal and interest of the first loan and $5 million of the principal and associated interest from the second loan. Historically, decisions rendered by FEMA for cancelling community disaster loans have provoked controversy, especially for particularly large loans. Decisions rendered by FEMA for cancelling SCDLs were no exception. The majority of the local governments that did not receive full cancellation proceeded to appeal FEMA's initial decision, and 10 local governments were continuing their appeals as of June 15, 2012. The specific financial audit procedures used by FEMA to calculate the cancellable amount of a loan have been particularly contentious. FEMA's intention was to apply standard practices and accounting methods for reviewing the necessary elements (operating budget, revenues, expenditures, etc.) established by the Government Accounting Standards Board in hopes of avoiding confusion or inconsistencies. However, Senator Mary Landrieu wrote to the U.S. Attorney General, Eric Holder, enumerating a number of issues with FEMA's cancellation procedures. The Louisiana legislative auditor also conducted a review of FEMA's procedures, and found several ambiguities in how FEMA would treat certain types of revenues, expenditures, and budgetary procedures. Some of these ambiguities were claimed to have led to inconsistencies in the review of the cancellation application. CRS cannot independently verify or evaluate these assertions regarding the financial audit procedures of FEMA. Others, including Senator David Vitter, further suggested that FEMA's cancellation procedures unfairly treated the governments that "slashed budgets" because they do not ultimately have a three-year operating budget deficit, even though their communities were still recovering and experiencing significant revenue shortages. Comments made by Vice President Joseph Biden in a public speech in St. Bernard's Parish, LA, on January 15, 2010, subsequently increased attention around the cancellation of SCDLs. Local media sources quoted Mr. Biden as saying to the crowd, in reference to the SCDLs, "I advise you to apply quickly, because when you apply you are going to get the right answer.... You're going to get your money." Other sources further quoted Mr. Biden as saying "It sure looks like to me you're still rebuilding, so I want to tell you something, it will be ... [verbal pause].... You're gonna get the money." The Vice President's comments were perceived by some community members, state legislators, and Members of Congress as a promise or guarantee that the SCDLs would be cancelled in large or completely. The Vice President's comments on that occasion have since been used to argue for greater flexibility on behalf of FEMA to more readily cancel the loans. The appeal and adjudication process for special loan cancellation continues, with a total of 17 loans issued to 10 different local governments still in appeal as of June 15, 2012. For the purposes of the calculations presented in Table 8 and Table 9 , loans still under appeal were categorized by their financial status as of June 15, 2012, as provided by FEMA. If, for instance, the appealed loans have already had some amount cancelled, but the local governments are appealing for more forgiveness, the loan is categorized as partially cancelled. Of the loans in appeal, four have already been partially cancelled. A particular challenge in assessing SCDL cancellation rates is that multiple loans were often issued to a single local government entity, though FEMA ultimately conducted one cancellation review per local government, as opposed to per loan issued (see " Single Cancellation Review Per Government Locality "). For the purposes of evaluating overall cancellation rates, some of these loans should ideally be combined, while others should be treated separately, depending on why each loan was issued. For instance, if a second loan was issued for the sole purpose of providing the local government its full eligible amount under the CDL Act of 2005, these loans should probably be treated as a single loan. But if an additional loan was issued to a local government for unique damage caused by Hurricane Rita and not Hurricane Katrina, or for loan size provisions under the Emergency Supplemental of 2006 and not the CDL Act of 2005, it might be proper to statistically treat them as separate loans. However, too little information is available to CRS to conduct analysis of these loans along these suggested categories. As a default, these loans are treated as separate loans per their issuance by FEMA. To summarize from Table 8 and Table 9 , 59.7% of the SCDLs were at least partially forgiven. On average, each special loan had 54.1% of its principal cancelled by FEMA. The total percentage of principal cancelled was 68.9%. As reported out of the Senate Appropriations Committee, the Department of Homeland Security Appropriations Act, 2013 ( S. 3216 ) includes a general provision that would alter existing procedures for cancelling SCDLs. This provision is also included, almost verbatim, in the draft Senate version of the disaster relief supplemental appropriations bill for Hurricane Sandy, as released by the Senate Appropriations Committee. If passed by Congress, this provision is likely to reopen the cancellation application and review process for most, if not all, remaining loans that have not been fully cancelled. Local governments would have until April 30, 2014, to submit a revised cancellation application, and FEMA would have to issue its determination and resolve all appeals by April 30, 2015. The corresponding DHS appropriations bill as passed by the House of Representatives, H.R. 5855 , does not include a similar general provision on SCDLs. A corresponding House version of the Senate draft of the Disaster Relief Appropriations Act, 2013, has also not been released. For all SCDLs not already cancelled in full, Section 560 of S. 3216 would direct the Administrator of FEMA to review the remaining un-cancelled or partially cancelled loans for possible further cancellation with newly prescribed procedures. There are 71 special loans, issued to 54 different local governments, that could be reviewed again by FEMA with new procedures. However, it is unclear how many of the 54 local governments would resubmit for possible cancellation. In total, there is approximately $324.1 million in principal and $52.3 million in interest from these loans that could be cancelled under these new procedures. This total includes approximately $28.2 million in principal and interest that local governments have already repaid to FEMA. These repaid funds could be reimbursed by FEMA if a new cancellation review found that they should be cancelled under the new guidelines. As discussed in the " Review Process for Loan Cancellation " section of the report, current cancellation procedures require FEMA to calculate the "operating budget deficit" of a local government over a three fiscal year period. This process depends critically on what is defined as "revenue," "operating budget," and a "disaster-related expense of a municipal operating character." The proposed change to the procedures would require FEMA to exclude revenues in the General Fund that are dedicated, by law, to be disbursed to special districts or other purposes. FEMA would also be required to count disaster-related capital expenses not covered by insurance or other federal proceeds, debt-servicing expenses, and sick/leave pay as a "disaster-related expense of a municipal operating character." These issues are not currently covered specifically by law or in existing FEMA regulations, but it is presumed that these changes would revise the manner in which FEMA implements its existing cancellation process. Existing concerns over how FEMA previously implemented the SCDL cancellation application and review process are discussed in the " Controversy Surrounding SCDL Cancellation " section of the report. If the proposed change is passed by Congress, FEMA may also consider a timeframe of three, five, or seven fiscal years after the date of the disaster declaration (which was August 29, 2005), instead of just the three fiscal year period prescribed under current law. It is unclear whether FEMA would exercise this option, and if so, if they would apply it consistently as a means of increasing or decreasing cancellation rates. In some circumstances, for instance, a seven fiscal year period may produce a lower cancellation amount than a five or three fiscal year review period, and vice versa. FEMA may choose to conduct an evaluation of each loan under each length of time period; under one of the two new options consistently (e.g., always review each application for a five year period), or simply continue to use the three fiscal year period standard. If FEMA chooses to review each loan under each time period, they would also then need to decide whether to choose the period that produces the least, median, or most amount of operating budget deficit (and thus the total amount of principal to be cancelled). Local governments would have until September 30, 2035 (roughly 30 years after Hurricane Katrina and the loans were issued), to repay the remaining amount of principal and interest not cancelled under the new procedures. This would extend the current maximum repayment period allowable by regulation, as discussed in the " Loan Repayment " section of the report, from 20 years to roughly 30 years. It is impossible to predict the impact the new procedures would have on existing cancellation rates for SCDLs. In all likelihood, rates of cancellation will be higher under the new procedures, especially if FEMA chooses to evaluate each loan under the time period most beneficial to the applicant. However, the new cancellation amount will depend on the budgetary specifics of each local government and on decisions that FEMA would have to make to implement the law. In addition to the provision discussed above, the Senate Appropriation Committee's draft of the Disaster Relief Appropriations Act, 2013, also includes a reporting requirement related to the CDL program. This provision is part of the Disaster Recovery Act of 2012 which is included in the draft bill. If passed, this provision would require the recently established Hurricane Sandy Rebuilding Task Force to submit a report to various committees of the House and Senate. Among other issues, this report would evaluate the impact of Sandy on local and state budgets and the ability of the CDL program to "effectively and expeditiously" address these budgetary impacts. The Task Force is instructed to provide a thorough assessment of the CDL program, to include an analysis of the loan size limitation and FEMA's regulations and procedures governing most aspects of the program. They are also instructed to provide recommendations on how the program could be legislatively amended. If passed, the report is required within 90 days of enactment. Part of the controversy surrounding the SCDLs is a general perception that the overall cancellation rates for traditional loans and special community disaster loans have differed, and specifically that SCDL cancellation rates were lower than those of TCDLs. Without conducting a full audit of the program and loan cancellation decisions, it is difficult to precisely evaluate this perception. By some statistical measures, TCDL rates for cancellation are lower than SCDL rates. By other measures, SCDLs have been forgiven at lower rates than TCDLs. Table 8 and Table 9 provide several measures for comparing the cancellation rates of TCDLs to SCDLs. In summary, TCDLs had a lower percentage of loans fully cancelled or with some level of cancellation than SCDLs (33.9% and 46.4% versus 50.0% and 59.7%, respectively). On average, TCDLs also had lower dollar amounts of principal forgiven per loan than SCDLs (38.9% versus 54.1%). However, as a function of total dollar amount of principal cancelled in each loan category, TCDLs had a much higher cancellation rate than SCDLs (97.2% versus 68.9%). Regardless of the data presented, the overall cancellation rates of each set of loans are not definitive evidence that the regulations and procedures used by FEMA were fairly or consistently applied, or that local governments in either set of loans received their "appropriate" amount of cancellation under the law. The disaster and financial circumstances surrounding each loan issued through the program are unique, and therefore aggregate assessments of the loan categories only provide a broad indication of how the program was managed. As a reminder, these tables only evaluate loans that had some amount of principal borrowed by the local governments, excluding a total of 39 loans that local governments did not borrow any amount from the approved principal. The 2008 calendar year was marred by numerous major disasters, notably Hurricanes Ike and Gustav that impacted parts of Texas and Louisiana and historic flooding that impacted wide swaths of Iowa. In response to the disasters, the 110 th Congress passed the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, which included the Disaster Relief and Recovery Supplemental Appropriations Act, 2008 ( P.L. 110-329 , henceforth Disaster Supplemental of 2008). Through the Disaster Supplemental of 2008, the DADLP Account was appropriated $98.15 million for the CDL program, to subsidize gross obligations for the principal amount of direct loans not to exceed $100 million. The original appropriation in the Disaster Supplemental of 2008 did not create unique provisions for the administration of the loans, and the funds were available until expended. However, two subsequent laws passed in the 111 th Congress established unique conditions for eligibility and loan size specific to disasters in the 2008 calendar year. The first law to create unique provisions for the 2008 CDLs was the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 , henceforth ARRA). The second revision came in the Supplemental Appropriations Act, 2009 ( P.L. 111-32 , henceforth Supplemental of 2009). Neither ARRA nor the Supplemental of 2009 included any additional funds for the DADLP account. FEMA has not issued new regulations in response to the unique provisions of the 2008 loans. ARRA revised the 2008 CDLs in two significant ways. First, it created unique provisions for loan size that are discussed below. Second, it restricted these provisions only to applicants impacted by disasters in the calendar year of 2008. Therefore, although the appropriated amount of $98.15 million in the Disaster Supplemental of 2008 was designated as no year funds, the special provisions on the size of the loans available only applied to disasters in the 2008 calendar year. The second revision to eligibility came in the Supplemental of 2009 ( P.L. 111-32 ). Section 608 of the law provided an exemption for local governments in Texas that were impacted by Hurricane Ike. The special provision changed the traditional program regulations on eligibility for the loans based on loss of revenue. Normally, FEMA uses the fiscal year of the disaster or the succeeding fiscal year as the base period for determining whether the loss in revenue is sufficient for need. Since the Hurricane Ike disaster was declared on September 13, 2008, the years normally evaluated would have been FY2008 and FY2009. The law altered this by allowing FY2010 to be included as a base period for revenue loss evaluation for eligibility. There were 14 different loans issued to 13 different governments under the Hurricane Ike declaration for Texas, but it is unknown how many times this provision was used in their application for a loan. As with the SCDLs, FEMA waived the regulatory provision preventing only one loan being issued per disaster to a community. This allowed eligible communities who received an original loan under the Disaster Supplemental of 2008 to apply for an additional loan under the special loan size provisions of ARRA. Only one local government received an additional loan under this exemption. In ARRA, Congress altered the loan size for the 2008 CDLs by eliminating the $5 million cap and increasing the potential size of the loans from 25% to 50% of the prior year operating budget. A local government could only receive this larger percentage size and an amount more than $5 million if they suffered a projected loss of at least 25% in tax revenues. For the importance of the distinction between just tax revenues versus tax and other revenues, see the " "Tax and Other" Revenue Clause " section of the report. The loan size provision in ARRA was identical to the changes made to loan size by the Emergency Supplemental of 2006 for Hurricane Katrina and the 2005 hurricane season ( P.L. 109-234 ). Only one additional loan was issued to a government under this provision, allowing the local government to receive a loan above the 25% operating budget threshold. Several additional governments reached the $5 million cap (eight in total), but, since they did not meet the requirement of a 25% loss in tax revenues, the cap was not waived. FEMA approved 24 loans to 23 separate local governments in 3 different states (5 each to Iowa and Louisiana, and 14 to Texas). Of these loans, 20 were used by 19 different governments, meaning some amount of the money was actually borrowed by a government. Thus far, local governments have borrowed approximately $49.7 million from the $60.6 million that was approved, which is $10.9 million less than their full eligible amount. Table 10 summarizes by government type the amount of loans issued through the 2008 legislative exemptions. Unlike the original laws passed for the SCDLs, neither ARRA nor the Supplemental of 2009 contained any unique provisions altering the ability of the 2008 CDLs to be cancelled under Section 417(c)(1) of the Stafford Act. Therefore, it is FEMA's stated intention to review the forgiveness of 2008 CDLs for using the "traditional" rules for loan forgiveness, not through the SCDL rules (44 C.F.R. §206.366 versus 44 C.F.R. §206.376). However, one might reasonably expect that the expanded definitions for terms such as "operating expenses" and "revenue" would be used for future forgiveness evaluations by FEMA. These new definitions were meant to provide more clarity than the traditional regulations. The 2008 CDLs recently became eligible for cancellation, as they reached the three-fiscal-year mark since the disaster on October 1, 2011. However, under the cancellation regulations, they each have until five years after the date of the promissory note to submit their application. The earliest maturity date for these loans is January 26, 2014. There may be an incentive to apply early for cancellation because interest on the loans will continue to accrue over the next few years. If a portion of the loan is not cancelled, it may behoove local governments to pay back the remaining principal of loan to avoid this accrued interest. The average interest rate for these loans is 1.89%. As discussed in the " Frequency of Program Use " section of the report, the community disaster loan program is rarely used by local governments relative to other common disaster assistance programs. However, when the program has been used, it has provoked controversies—especially surrounding the authority to cancel the repayment of loans. In future appropriations and authorizations of the CDL program, Congress may consider some of the policy issues and options discussed succinctly below. Some of the options presented, if considered more thoroughly and enacted by Congress, may increase or decrease the disaster assistance provided through the program, and thus the overall use of the program by local governments. It is beyond the scope of this report to fully discuss or evaluate the policy issues and options provided here. However, CRS is available to confidentially assist committees and Members of Congress and their staff as they analyze the potential policy implications of various proposals. Congress could consider changing some of the core components of the program discussed throughout the report, namely the eligibility, use, size, and cancellation of the loans. Some of the many options for doing so are discussed briefly here. As discussed in " Eligibility Criteria ," there are only three eligibility conditions provided in the law authorizing the CDL program. First, local governments must have suffered losses "as a result of a major disaster." Second, a local government should have "suffer[ed] a substantial loss of tax and other revenues." Third, there "has to be a demonstrated need for financial assistance" for the loan to be issued. FEMA has developed these three statutory conditions into a full set of regulations on eligibility, outlined in 44 C.F.R. §206.363. Congress could alter these legal and regulatory conditions to change the scope, use, and efficiency of the program. Currently, program eligibility is restricted to local governments in declared disaster areas. As discussed in the report, the regulatory definition of local government allows a broad group of government entities to apply for loans. From an implementation standpoint, it may be too difficult to craft a one-size-fits-all regulation for these local government types, especially when considering the different types of operating budgets, revenues, and expenditures encompassed by these governments. Additionally, though some standard methods exist for government accounting (namely those established by the Government Accounting Standards Board), each jurisdiction does not necessarily interpret these standards in the same way. In response to this implementation challenge, Congress could consider restricting loans only to a higher level of government jurisdiction. For instance, instead of all local governments being eligible for loans, loans could be offered exclusively to states that have been impacted by a disaster. The state could then disburse the loan proceeds to local governments as it deems appropriate with its own requirements and procedures. Or, loans could be made at the county or parish level, which is the level of distinction used to declare disasters through the Stafford Act. Allowing loans to be offered to states has been proposed in legislation before, though local governments were also eligible in that proposal. In conjunction with this change, the size of loans may need to be increased to adjust to the larger jurisdiction level. Existing methods for assessing loan size (expected revenue loss calculations) could still be done at the higher jurisdiction level. Conversely, Congress could consider restricting the type of local government that is eligible for a loan to a more specified set of government entities, such as only general purpose municipal governments. This would reduce some of the complexity from the program by eliminating special districts, school boards, and other types of local governments that often have unique revenue streams and budget requirements. However, these types of local governments often also provide essential government services not provided by general purpose municipal governments. Therefore, eliminating their program eligibility could reduce the potential benefits of the disaster assistance for the whole community. Altering the jurisdiction level, or restricting the type of local governments, eligible for disaster loans could potentially improve the efficiency and transparency of the program. It may allow FEMA to establish a uniform set of regulations and procedures that are easier to implement, and easier for potential recipients to understand, in complex disaster situations. This could lead to less controversy and confusion regarding program use and its requirements, as well as reducing the administrative costs of the program. However, from the perspective of local governments currently eligible for the program, shifting the program to a higher level jurisdiction may lead to new challenges in that their county or state governments could set administrative guidelines for the loans that are more stringent or cumbersome than FEMA's existing procedures. Additionally, the federal government may lose some level of transparency on how the disaster assistance is spent beyond the county or state level, whereas the current program has a level of oversight at the local government jurisdiction. Congress could also consider changing the eligibility criteria related to the statutory requirement that governments must have experienced a "substantial loss of tax and other revenues" to receive a loan. FEMA's major regulatory interpretation of this provision is that a government must indicate an expected 5% loss in revenue in order to receive a loan. There are also special provisions for loan size in the law that use expected revenue loss as a method for determining what loan size a local government is eligible to receive. Congress could increase or decrease the amount of expected revenue loss required as a means of increasing or decreasing the use of the program in the future, respectively. Further, Congress could make permanent the provisions of the Emergency Supplemental of 2006 that restricted loans of a certain size to governments that had experienced a 25% loss or more in exclusively tax revenues, but not all types of revenues. By restricting eligibility to only governments that experience a significant loss of tax revenues, eligibility would also essentially be restricted to the types of local governments with tax revenue streams. It may be too difficult to develop and administer an objective set of eligibility requirements that adequately address when a local government has "lost" enough revenue to "need" disaster assistance. For instance, depending on the financial situation of a particular government and the amount of disaster impact, a local government may truly "need" assistance after only losing 2%-3% of their tourism revenue, while in other instances, a local government may only "need" assistance after losing 8%-9% of their total revenue stream. Given this issue, Congress could consider changing the program to eliminate all eligibility requirements related to the local government having a "substantial loss" in revenue and a "demonstrated need" for assistance. Instead, Congress could allow loans to be offered to any local government in a declared disaster area. This would allow local governments to self-select for the loan program, making their own determination if they need or want a loan from the federal government to cover any amount of "loss" in revenues. In this situation, loan size could still be restricted to some formula determination made by the federal government, or the local government could be allowed to determine the size of the loan (likely within reasonable boundaries, or up to the amount they would be willing to provide in collateral). It is immediately unclear what the new level for demand would be for loans if these eligibility requirements were eliminated. However, this proposal could be combined with legislative revisions that either increase or decrease the interest rate or standards for loan cancellation to make the loans more or less attractive to local governments, respectively. As discussed in the " Use of Funds " and " Purpose of the Special Loans " sections of the report, there has been only one major policy change to how funds could be used in the history of the program. This occurred when SCDLs were restricted for "essential services" instead of a broader "government functions." FEMA has interpreted that neither "essential services" nor "government functions" include capital expenses or matches for other assistance programs. As a means of increasing or decreasing the scope and use of the program, Congress may wish to consider amending the ways in which loan funds can be used by local governments. To expand the scope, Congress could authorize the use of loan funds on capital projects that are not otherwise eligible for disaster assistance, namely through major disaster assistance programs under the Stafford Act. These loans could help a local government more rapidly rebuild damaged infrastructure or build new facilities as a means of stimulating the disaster recovery process. As a result, these capital projects may, arguably, help restore the government's impacted sources of tax revenues from businesses and properties. However, allowing loan proceeds to be used for capital projects may expand the original intention of the program of being exclusively focused on government "services" or "functions." Because of the high cost of many capital projects, it is possible that the demand for loans, and their overall size, would increase in this proposal. Conversely, Congress may wish to restrict the use of loan funds to only certain types of government functions—such as law enforcement, education, or public health—as a means of ensuring that federal assistance is only spent on the certain local government functions. However, many individualized programs already exist that target specific government functions, such as relief funds for transportation infrastructure damage, and the loan program may become redundant to these programs depending on the functional area. Currently, loan size is capped by both law and regulatory provisions, as discussed in the different "Loan Size" sections of the report. In various iterations of the program, loan sizes have been capped in law by a strict dollar amount ($5 million) and by a percentage of the operating budget of the recipient local government (25% and 50% in different eligible conditions). Additionally, in regulations, FEMA has restricted the size of loans to a formula used to determine the "need" of the local government, essentially the sum of the projected revenue loss and projected unreimbursed disaster-related expenses of the recipient local government. As a means of controlling the overall cost of the program and the amount of assistance offered to the local government, Congress could consider revising any one of these methods of determining loan size. Strict dollar caps per local government can be useful because the maximum cost of a loan is predictable, regardless of disaster or local government factors. However, Congress may view a total dollar limit as relatively inequitable to local governments of a larger size, because the relative amount of assistance they receive is less than smaller governments as a percentage of their budgets or revenue streams. Another alternative would be to formally establish a version of FEMA's formula for calculating "need" in program statute, and remove all other caps on the size of the loans. Congress could alter the existing need calculation in various ways, including specifically defining what constitutes an "unreimbursed disaster-related expense" or restricting the formula only to projected revenue losses of some kind. Congress could also consider setting the loan size to the sum of itemized predicted expenditures by the local government. Instead of using a specific numeric formula to determine need, Congress could replace the need formula with the independent assessment of expert accountants that could determine the "need" of the local government through some objective analysis of their financial condition. An independent analysis may capture factors such as the scope of disaster devastation specific to the event more readily than existing methods. However, any independent analysis, though theoretically impartial, may be critiqued for being inequitably applied in some disaster scenarios. Historic cancellation rates for the program are provided in Table 8 and Table 9 . Congress may wish to evaluate different proposals either increasing or decreasing the likelihood of loans being cancelled, as a means of increasing or decreasing the assistance provided to local governments. Any proposal increasing the likelihood of a loan being forgiven, or of making forgiveness automatic (and thereby converting the loan program to a grant program), is likely to increase the federal cost and use of the program. Congress may wish to eliminate the possibility of loans being cancelled in whole or in part, as was done under the initial legislation appropriating for the SCDLs. There are several potential benefits to eliminating the loan cancellation provision. First, not allowing cancellation could reduce, or potentially eliminate altogether, the cost of the program to the taxpayer. Depending on the interest and default rates on the loans, the program could be close to if not completely budget neutral (or even provide revenue for the federal government if interest rates were high). Second, not allowing cancellation could reduce the administrative costs of the program for both the federal and local government, as it would rid the need for costly reviews and appeals on old loans. Finally, structuring it as a loan program without cancellation could reduce the hypothetical use of local governments who apply for and receive the loans without a true "need" for the assistance after a disaster. Of course, this also means that the program provides less true "assistance" to the local governments following a disaster. Communities that are struggling with continued revenue shortfalls may be unduly burdened by the loan repayment. Instead of completely restricting cancellation, Congress may wish to only allow loans to be cancelled up to a certain percentage of the initial principal (for instance, 50% of the principal). This option could still provide some benefit to the local governments that are financially struggling years after a disaster, while constraining the overall costs of the program to federal taxpayers. Instead of eliminating the cancellation of loans altogether, Congress could consider changing the metrics used to determine whether or not a loan should be forgiven by FEMA. In theory, the current statutory standard for cancellation—whether revenues of a local government are "insufficient" to meet their operating budget after three fiscal years —is intended to serve as proxy measure for the "need" or fiscal "health" of local government as it continues its disaster recovery. Following a disaster, local governments can be faced with a difficult choice of either continuing their pre-disaster spending levels in order to stimulate recovery in hopes of returning their community "back to normal," or cutting their budgets in response to a continued shortfall in revenues. Some have criticized the program for "penalizing" those local governments that attempt to restrain their operating costs following a disaster in a fiscally prudent manner in response to this dilemma. One alternative metric Congress could consider is to only evaluate actual loss of revenue of a local government during the three-year fiscal period based on pre-disaster standards, regardless of whether or not revenues were sufficient to meet the operating budget of the local government post-disaster. This metric could be simpler to implement, as it would remove FEMA from the position of evaluating the budgetary decisions and conditions of the local government post-disaster. However, such a process opens the possibility that a local government that truly did not "need" (by some subjective measure) the loan funds to provide government services following a disaster could receive the superfluous assistance from the federal government. Another alternative would be to create a process that does not rely exclusively on objective accounting calculations of revenue, budgets, and expenditures, and instead allows an independent panel of experts to evaluate the disaster recovery progress of the local government through some objective and subjective analysis. If the expert panel determined a local government was still struggling to provide government services due to the disaster, the panel could recommend forgiveness of the loan to FEMA. Of course, any subjective decision-making process for cancellation is prone to criticisms of being inequitably applied, of lacking transparency, or of being motivated and manipulated by political considerations. Instead of not allowing any cancellation, Congress may wish to fully cancel all "loans" by creating a grant program instead of a loan program. When the CDL program was first established in 1974, it actually replaced a grant program created in 1970 with similar eligibility requirements. The grant program was authorized in Section 261 of the Disaster Relief Act of 1970 (P.L. 91-606, 84 Stat. 1744), and allowed the President to make grants to any local government which, as the result of a major disaster, had suffered a substantial loss of property tax revenue. Similar to the structure of the 1970 grant program, Congress may wish to replace the loan program with grants that have a set size based on lost revenue. One option would be to replicate the procedures that FEMA follows now to determine loan size and use them to determine grant size instead. With a grant program, immediate revenue relief could be provided to local jurisdictions in a disaster area without saddling them with additional debt. With no possibility of interest or principal repayments, a grant program could cost more per dollar of aid delivered than a loan program. In addition, a grant program is likely be used by more jurisdictions than a loan program and could therefore be considerably more expensive for federal taxpayers. Conversion to a grant program could also allow more local governments to receive assistance. Some local governments are barred from the current loan program because they legally cannot incur debt to fund government operations, or they are not allowed to borrow directly from the federal government. Similarly, many local governments are required to maintain a balanced budget, and therefore would not have a cumulative operating deficit after the three fiscal year period. FEMA has noted in rulemakings that balanced budget procedures prevent these governments from having their loans cancelled. Congress could also consider transforming the program into a hybrid grant and loan program. In this circumstance, a grant could be offered between certain thresholds of revenue loss (for instance, between 5% and 10% of expected revenue loss), and a loan could be issued for the remainder of the need of the local government. The loan could be offered with or without the possibility of being cancelled in conjunction with the grant. A hybrid program that can offer both grants and loans has some precedent. For instance, the Rural Communities Facilities Program managed by USDA offers both grants and loans for the same purpose. However, the various complexities of managing a hybrid program, as well as financing it through appropriations, are certainly worth considering when evaluating this proposal. Converting the disaster loan program into either a full or hybrid grant program may also involve modifying the current appropriation account, the Disaster Assistance Direct Loan Program account. If the disaster loan program became a full grant program, Congress could consider funding the program through the Disaster Relief Fund, as is practice for most other Stafford Act programs. The core purpose of the CDL program is to provide financial assistance to local governments that are having difficulty providing government services because of a loss in tax or other revenue. In the future, Congress may reevaluate this core purpose, irrespective of the method and means of providing the assistance. Congress may no longer consider it in the interest of the federal government to aid local governments experiencing revenue loss after a disaster, especially since there are a wide array of more targeted disaster assistance programs available to local governments. Or, Congress may conclude that supporting the maintenance of local government operating budgets through the loan program violates the principles of federalism upon which most disaster assistance programs are based. If Congress wishes to end the CDL program, it could do so by ending appropriations to the DALDP account for the purposes of the program, or by eliminating its authorization in the Stafford Act. As an alternative to direct loan assistance through the CDL program, Congress could consider alternative programs designed to restore certain types of local government revenues following a disaster. For instance, some local government financial stress related to revenue loss could be alleviated by programs that promote the return of businesses or tourism to the region. Existing programs, such as the Small Business Administration's Disaster Loan Program, could be reviewed by Congress to ensure they adequately address the needs of private businesses in this regard.

The core purpose of the Community Disaster Loan (CDL) program is to provide financial assistance to local governments that are having difficulty providing government services because of a loss in tax or other revenue following a disaster. The program assists local governments by offering federal loans to compensate for this temporary or permanent loss in local revenue. The CDL program is managed by the Federal Emergency Management Agency (FEMA). First authorized in the Disaster Relief Act of 1974 (P.L. 93-288), the Community Disaster Loan program is currently codified in Section 417 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. §5184, as amended). The program is funded through the Disaster Assistance Direct Loan Program account, rather than the Disaster Relief Fund (DRF) that funds the majority of other Stafford Act programs. In sum, 249 loans were issued to 200 local governments under 26 different disaster declarations from 1974 to 2010. An approximate total of $1,615 million in principal was offered to these governments in loans, of which roughly $1,326 million was borrowed by the governments. Through the program, FEMA may also cancel the repayment of the loans if certain financial conditions prevailed after the three fiscal years following the disaster. Through its cancellation authority, FEMA has forgiven approximately $896 million of the $1,326 million in principal advanced to local governments since program inception. This report compares and analyzes three different categories of loans issued in different time periods in the program's history: "traditional" loans issued between 1974 and 2005, in 2007, and between 2009 and June 2012 (TCDLs); "special" (SCDLs) loans issued in 2005-2006 following Hurricanes Katrina and Rita; and loans issued under unique provisions in 2008 (2008 CDLs). As authorized by Congress and administered by FEMA, the SCDL and 2008 loan categories had different provisions than traditional loans to guide the eligibility of local governments and dollar size of the loans. SCDLs also had unique provisions that slightly altered the purpose of the loans, lowered the interest rate charged on the loans, and clarified the cancellation procedures for the loans. In the original legislation authorizing and appropriating the SCDLs, repayment of the loans was not allowed to be cancelled by FEMA. However, Congress later amended the law to allow cancellation for SCDLs. Some controversy has arisen over FEMA's administration of the cancellation authority for these special loans, with many suggesting that FEMA has not cancelled the appropriate amount of loan balances. Table 8 and Table 9 provide several measures for comparing the cancellation rates of TCDLs to SCDLs. In summary, TCDLs had a lower percentage of loans fully cancelled or with some level of cancellation than SCDLs (33.9% and 46.4% versus 50.0% and 59.7%, respectively). On average, TCDLs also had lower dollar amounts of principal forgiven per loan than SCDLs (38.9% versus 54.1%). However, as a function of total dollar amount of principal cancelled in each loan category, TCDLs had a much higher cancellation rate than SCDLs (97.2% versus 68.9%). As reported out of the Senate Appropriations Committee, the Department of Homeland Security Appropriations Act, 2013 (S. 3216) includes a provision that would alter existing cancellation procedures for SCDLs. This provision is also included, almost verbatim, in the draft bill entitled the Disaster Relief Appropriations Act, 2013, as released by the Senate Appropriations Committee. The provision may require FEMA to reopen the review process for 71 special loans, issued to 54 local governments, that have not been fully cancelled in existing procedures. If passed into law, this provision may result in higher rates of cancellation for the SCDLs. All statistical figures provided in this report are accurate as of June 15, 2012. Congress may consider changes to the overall CDL program in the future. Options could include altering future authorization and appropriations for the program in favor of more tailored disaster assistance programs, or converting the loan assistance into a grant program. There are also options for amending the program less significantly, including changing the way loan funds may be used by local governments, changing the total dollar size of the loans, and altering how the cancellation authority can be applied by FEMA.

The Asia Pacific Economic Cooperation (APEC) has been identified by both Congress and the Bush Administration as an organization that may help promote the U.S. goal of liberalizing international trade and investment in Asia, and possibly the rest of the world. In addition, because of the unique nature of APEC's membership and organization, the association provides a forum at which the United States can hold bilateral discussions on non-economic matters such as international security and human rights. As one indicator of congressional interest in APEC, in the National Defense Authorization Act for Fiscal Year 2006 ( P.L. 109 - 163 ), Congress called for the President to develop a comprehensive strategy to address the "emergence of China economically, diplomatically, and militarily; promote mutually beneficial trade relations with China; and encourage China's adherence to international norms in the areas of trade, international security, and human rights." It continues by specifying that this comprehensive strategy should "identify and pursue initiatives to revitalize United States engagement in East Asia." The act then states, "The initiatives should have a regional focus and complement bilateral efforts. The Asia Pacific Economic Cooperation forum (APEC) offers a ready mechanism for pursuit of such initiatives ." [emphasis added] The notion that APEC may be an effective forum for advancing U.S. interests in Asia is apparently shared by the Bush Administration. During a White House pre-trip press briefing on August 30, 2007, National Security Council Senior Director Dennis Wilder stated, "The importance that the President attaches to APEC is demonstrated by the fact that he has not missed an APEC leaders meeting since taking office." In addition, senior administration officials indicate that the White House sees APEC as a model for regional economic integration in the Asia Pacific which allows the United States to play a significant role in the region's political and economic development. Some members of the Association of Southeast Asian Nations (ASEAN) have been actively pursuing alternative "Asian only" models for regional economic development, including "ASEAN + 1" (ASEAN and China), "ASEAN + 3" (ASEAN, China, Japan, and South Korea), and the East Asia Summit (EAS), also known as "ASEAN + 6" (ASEAN, Australia, China, India, Japan, New Zealand, and South Korea). The Bush Administration's interest in APEC may bring up the regional forum before the 110 th Congress in several ways. First, Congress may choose to consider the level of direct and indirect financial support provided to APEC. Second, Congress may take into account U.S. commitments to APEC when considering legislation on various trade and non-trade issues. Third, Congress may increase oversight of APEC-related activities and programs of the U.S. Trade Representative, the Department of State and other federal departments and agencies. Although both Congress and the Bush Administration view APEC as important to U.S. trade and economic and human security interests in the Asia, it is uncertain that APEC is a reliable mechanism for advancing those interests and if Congress and the Bush Administration share a common view of what the U.S. interests in Asia are. In particular, the organizational and operational structure of APEC is unusual among multilateral associations, reflecting an atypical approach to trade liberalization. As a result, APEC's approach, organization, and operations may make it difficult for the United States to promote its positions on various issues through its activities in APEC. APEC is an association of 21 "member economies" bordering the Pacific Ocean that are working cooperatively to promote economic growth and prosperity in the Asia-Pacific region. During the 1994 meetings in Bogor, Indonesia, APEC established the "Bogor Goals" of "free and open trade and investment in the Asia-Pacific by 2010 for industrialized economies and 2020 for developing economies." These goals have been reaffirmed at the Leaders' Meeting each subsequent year. APEC began in 1989 as an Australian initiative—backed by Japan and New Zealand—in recognition of the growing interdependence among Asia-Pacific economies and in response to the free-trade areas that had developed in Europe and North America. It is the only international trade organization in which Hong Kong, mainland China, and Taiwan are all members. In contrast to most other multilateral organizations, APEC is a cooperative forum in which members arrive at decisions via consensus. All commitments made by members are voluntary; APEC has no formal enforcement mechanisms to compel members to comply with any trade liberalization policies previously declared at APEC meetings—an approach often referred to as "open regionalism." Point 9 of the 1994 "APEC Economic Leaders' Declaration of Common Resolve" states, "APEC economies that are ready to initiate and implement a cooperative arrangement may proceed to do so while those that are not yet ready to participate may join at a later date." The underlying notion of the APEC approach to trade liberalization is that voluntary commitments are easier to achieve and more likely to be implemented than obligatory commitments derived from agreements negotiated by more traditional—and potentially, confrontational—methods. By establishing a common vision or goal for the organization, the belief is that future APEC discussions can make more rapid progress towards the organization's goals by seeking consensus views with which members are willing to comply. By contrast, trade agreements negotiated according to more traditional approaches tend to foster confrontation and expectations of reciprocal concessions. Lacking a shared goal or objectives, it may be difficult to resolve differences among the parties and complete an agreement. Later on, if any party to the agreement feels that it was inequitable, they may fail to comply with the terms of the agreement, or withdraw from the agreement in its entirety, even if there are formal sanction or grievance provisions within the agreement. APEC strives to meet the Bogor Goals in three "broad areas" of cooperation. First, members consult with each other to formulate individual and collective actions to liberalize merchandise and service trade, as well as international investment. Second, members discuss their domestic regulations and procedures to find ways of facilitating international business. Third, the members engage in "Economic and Technical Cooperation," or ECOTECH, to provide training and foster greater cooperation among APEC members. In 1995, APEC created a template to achieve the Bogor Goals in its "Osaka Action Agenda." The Osaka Action Agenda emphasizes APEC's "resolute opposition to an inward-looking trading bloc that would divert from the pursuit of global free trade" by accepting a set of fundamental principles for APEC's trade and investment liberalization and facilitation. These principles include comprehensiveness; WTO consistency; comparability; non-discrimination; transparency; flexibility; and cooperation. APEC's unusual approach to trade liberalization is reflected in its organization and operation. APEC's organization consists of a small Secretariat in Singapore, which reports to the constituents of five separate groups: the preeminent Leaders' Meeting, the APEC Business Advisory Council, the Ministerial Meeting, the Sectoral Minister Meetings, and the Senior Officials Meetings. The Secretariat, in turn, supervisors the work of six different groups: the Committee on Trade and Investment, the Economic Committee, the Steering Committee on ECOTECH, the Budget and Management Committee, Special Task Groups, and Working Groups. Each member of APEC seconds representatives to work on the Secretariat's staff to serve as program directors. Source: APEC website, http://www.apec.org/apec/about_apec/structure.html . The focal point of APEC activities is the annual Leaders' Meeting in which the APEC leaders set goals, publicize them, and provide momentum for the process. This is usually held in October or November of each year, and is attended by heads of state except for those from Taiwan and Hong Kong who, because of China's objections, send other representatives. The first Leaders' Meeting was held in 1993 on Blake Island, near Seattle, Washington. Major decisions are generally affirmed and/or announced at the Leaders' Meeting. The meeting also provides a platform for and gives momentum to major APEC initiatives. Although APEC confines its agenda primarily to economic issues, the leaders often hold bilateral meetings during the Leaders' Meeting to discuss international security, human rights, and other issues. Most of the decisions announced at the Leaders' Meeting are first considered in a series of Ministerial Meetings held throughout the year. These include the respective ministers dealing with trade, finance, transportation, telecommunications, human resources development (education), energy, environment, science and technology, and small and medium-sized enterprises. The largest ministerial is the annual Joint Ministerial Meeting which precedes the Leaders' Meeting. It usually is attended by foreign trade or commerce ministers from member states. The various Ministerial Meetings make recommendations to the Leaders' Meeting; they do not have the authority to act independently on behalf of APEC. Working under the direction of the various APEC ministers, the Senior Officials coordinate the activities of the various committees, working groups and task forces within APEC. Senior Officials Meetings are held three or four times a year. The current U.S. Senior Official for APEC is Ambassador Patricia M. Haslach. The APEC Business Advisory Council (ABAC) consists of up to three individuals appointed by each APEC member. It provides advice on implementing the APEC agenda and other specific business-related issues. ABAC also can make comments on the recommendations of the various Ministerial Meetings. Most of the specific tasks before APEC are addressed in committees, working groups, or expert groups that deal with economic issues of importance to the region. For implementing the Bogor goals, the Committee on Trade and Investment plays the key role. APEC has ten working groups that work on specific areas of cooperation and facilitation: (1) Trade and Investment Data, (2) Trade Promotion, (3) Industrial Science and Technology, (4) Human Resources Development, (5) Energy Cooperation, (6) Marine Resource Conservation, (7) Telecommunications, (8) Transportation, (9) Tourism, and (10) Fisheries. Each working group has one or more shepherds (members) who take responsibility for coordinating the work of the group. The APEC chair rotates annually and since 1989 has been held by (in order): Australia, Singapore, South Korea, Thailand, the United States, Indonesia, Japan, the Philippines, Canada, Malaysia, New Zealand, Brunei, People's Republic of China, Mexico, Thailand, Chile, South Korea, and Vietnam. In 2007, Australia was once again the APEC chair, with the Leaders' Meeting held on September 8-9 in Sydney. Decisions within APEC's various organizational bodies are based on the consensus approach of APEC. Most committees, working groups, and special task groups have representatives from all 21 members, and select their leadership from amongst themselves. Members may delay or refrain from any action recommended or approved by a meeting, committee, working group or special task force without facing sanctions or recriminations from other members. However, all decisions and agreements of the various meetings, committees, and working groups must be implemented in accordance with the Osaka Action Agenda. APEC actions take place at three levels: actions by individual members; actions with the confines of APEC; and collective APEC actions with respect to other multinational organizations. The primary form of individual member actions are the "Individual Action Plans," or IAPs. Each year, APEC members submit at the Ministerial Meeting an IAP that spells out what steps the member has taken and/or will take to advance their trade regime towards the achievement of the Bogor Goals. IAPs typically are organized along both sectoral (e.g., architectural services) and topical (e.g., customs procedures) lines. Although members cannot impose changes on each other's IAPs, the Osaka Action Agenda calls on each member to consult, submit, and review the IAPs to foster comparability, transparency, and cooperation amongst the IAPs. The internal actions of APEC generally involve research on topics related to trade liberalization, the exchange of best practices, and the standardization of policies and procedures related to international trade and investment. In some cases, APEC will create a working group on a particular topic, with the goals of generating a "collective action plan," or CAP. In some cases, the CAPs are little more than a topical summary of the member IAPs; in other cases, the working group plays a more active role in promoting trade liberalization and facilitation via the CAPs. Another example of an APEC's internal action is the "APEC Business Travel Card," an idea advanced by the ABAC. Business travelers possessing an APEC Business Travel Card are allowed fast-track entry and exit through special APEC lanes at major airports, and multiple, visa-free entry amongst members that recognize the card. Collective actions of APEC usually involve joint or coordinated efforts to advance trade and investment liberalization in other multilateral organizations. Most recently, APEC's collective actions have focused on helping complete the Doha Round of the WTO. For example, following the 2006 Leaders' Meeting in Hanoi, APEC released a statement on the "Doha Development Agenda of the WTO" that affirmed the members' "collective and individual commitments to concluding an ambitious and balanced WTO Doha agreement" by each member "moving beyond our current positions in key areas of the Round." The key areas mentioned were "trade-distorting farm support," "market access in agriculture," "real cuts in industrial tariffs," and "new openings in services trade." In January 2007, Australia assumed the chair of APEC, and was the host for the various APEC meetings held throughout the year. Following the meetings in 2006, various goals were suggested for 2007, including "further studies on ways and means to promote regional economic integration." The official theme for the APEC 2007 meetings was "Strengthening Our Community, Building a Sustainable Future." In the runup to the events in Sydney, the host country indicated that the main foci for the meetings would be climate change and regional economic integration. These themes were echoed in pre-event statements by several other APEC members, including China. Successful conclusion of the Doha Round negotiations, energy security, and counter-terrorism efforts were other major topics raised by members prior to the meetings in early September. The major APEC meetings for 2007 were held in Sydney in September. The 15 th APEC Economic Leaders' Meeting was held on September 8 and 9; the U.S. delegation was headed by President George W. Bush. The 19 th APEC Ministerial Meeting was held on September 5 and 6; the U.S. delegation was headed by Secretary Rice. Consistent with past practices, a Leaders' joint declaration and a ministerial joint statement were released after their respective meetings. Both documents focused on a limited number of topics, which generally reflected the goals established for 2007 at the end of the 2006 APEC meetings. What follows is a topical summary of APEC's achievements for 2007 as presented in the two documents. The issue of climate change became the top topic for the 2007 Economic Leaders' Meeting. In a separate joint declaration on the subject, the economic leaders agreed that "economic growth, energy security and climate change are fundamental and interlinked challenges for the APEC region." The leaders reaffirmed their commitment to the United Nations Framework Convention on Climate Change and stated their support for a post-2012 international climate change arrangement to replace the expiring Kyoto Protocol. With the exception of Australia, Brunei Darussalam, and the United States, all APEC members are parties to the Kyoto Protocol. The APEC members pledged to take four specific actions on climate change. First, they set "an APEC-wide regional aspirational goal of a reduction in energy intensity of at least 25 percent by 2030 (with 2005 as the base year). Second, APEC members will attempt to increase forest coverage by at least 20 million hectares of all types of forests by 2020. Third, they agreed to create an Asia-Pacific Network for Energy Technology (APNet) to strengthen collaboration on energy research. Fourth, APEC will also establish an Asia-Pacific Network for Sustainable Forest Management and Rehabilitation. For the third year in a row, the APEC Leaders issued a separate statement on the ongoing WTO negotiations. Their joint statement maintains that the negotiations "offer unparalleled potential to create a better trading environment." In addition, the APEC leaders "insist that consensus will only be possible on the basis of an ambitious, balanced result that delivers real and substantial market access improvements for agricultural and industrial goods and for services and real and substantial reductions in trade-distorting agricultural subsidies." The joint statement on WTO negotiations ends with a call for all APEC members to participate in the continuing talks in Geneva, and to resume negotiations based on the draft texts tabled by the chairs of the negotiating groups on agriculture and non-agricultural market access. In contrast to the 2006 meetings in Hanoi, the topic of regional economic integration was not the leading issue for the 2007 APEC meetings. The economic leaders "welcomed and endorsed" a report submitted by the APEC ministers entitled, "Strengthening Regional Economic Integration." In their report, the ministers reaffirmed APEC's commitment to the Bogor Goals and their support for a "multilateral trading system." To that end, they stated that APEC's priority was the successful conclusion of the Doha Round, but that APEC also supported regional economic integration through "high-quality and comprehensive" regional trade agreements (RTAs) and free trade agreements (FTAs), including the possible long-term prospects for forming a "Free Trade Area for the Asia-Pacific (FTAAP)." The annual Leaders' and Ministerial Meetings are generally the occasions at which APEC members submit an update on their individual IAPs, and committees and working groups submit their CAPs. The meetings also provide an opportunity for APEC to provide guidance on which areas of trade liberalization and facilitation are of the greatest interest among the member economies. In their joint declaration, the Leaders endorsed three specific areas where APEC members have agreed to "accelerate efforts" to promote trade and investment liberalization and facilitation: (1) Reducing barriers to trade and investment through FTAs and RTAs; (2) Improving the regional business environment; (3) Facilitating integration of the such sectors as transportation, telecommunications, mining, and energy. In 2007, the Ministers "welcomed" the completion of seven "IAP Peer Reviews" by Australia, China, Hong Kong, Japan, New Zealand, South Korea and Taiwan. They also "endorsed the revised CAPs being implemented by all APEC members in pursuit of APEC's free trade and investment goals." They also "welcomed" APEC's 2 nd Trade Facilitation Action Plan that was endorsed at a Ministers Responsible for Trade (MRT) meeting in July 2007. The action plan set out a framework for reducing trade transaction costs by 5% by 2010. The Ministers expressed their pleasure at Mexico and the United States joining the APEC Business Travel Card Scheme, increasing the number of APEC members participating in the program to 19. However, the United States is considered a transitional member. Business travelers from APEC member economies to the United States are still required to present a valid passport and visa (if required by U.S. law). APEC Business Travel Card holders are provided expedited visa interviews and entitled to use "fast-track" immigration lanes (typically the lanes designated for flight crews) at U.S. international airports. The United States cited a few new advances in trade and investment liberalization and facilitation in its 2007 IAP. First, the United States designated East Timor and Liberia as "beneficiary developing country" under the Generalized System of Preferences (GSP), in order to foster trade with both nations. Second, the United States concluded a number of bilateral free trade agreements and bilateral investment treaties (BITs) lowering trade and investment barriers. In addition, the bilateral trade agreements with Bahrain and Morocco and a bilateral investment treaty with Uruguay went into force in 2006, as well as the multilateral U.S.-Central American-Dominican Republic (CAFTA-DR) Free Trade Agreement. In general, the United States maintains that it has very few trade and investment barriers that prevent its achievement of the Bogor Goals. Prior to the meetings in Sydney, during an APEC Budget and Management Committee meeting in Singapore, the United States announced it was going contribute $1.5 million to APEC's Trade and Investment Liberalization and Facilitation Special Account and a total of $800,000 to the APEC Support Fund. Over the last few years, APEC has expanded its agenda to consider issues of "human security," principally on issues related to terrorism, disease and natural disasters. Besides the obvious direct suffering of the victims, APEC sees threats to human security as undermining international trade, economic development, and prosperity. A new item added to the list of threats to human security in 2007 was product safety. In their joint declaration, the Leaders "agreed to the need to develop a more robust approach to strengthening food and consumer product safety standards and practices in the region, using scientific risk-based approaches and without creating unnecessary impediments to trade." The Leaders directed the Ministers to work on this priority issue. On the subject of terrorism, the Leaders "reaffirmed our commitment to dismantle terrorist groups, eliminate the danger posed by the proliferation of weapons of mass destruction, and to protect our economic and financial systems from abuse from terrorist groups." Concerning threats posed by disease, the Leaders focused their efforts on the potential risk of pandemics and combating the spread of HIV/AIDS. The Leaders reiterated APEC's commitment to build regional preparedness to respond to potential pandemics. Also, they endorsed guidelines for the creation of a supportive workplace environment for workers living with HIV/AIDS. Natural disasters were also a priority during the Sydney meetings. Since the 2004 tsunami, the possible consequences of another major natural disaster has continued to be a concern in the region. In December 2005, Congress passed the "Tsunami Warning and Education Act" ( P.L. 109 - 424 ), which authorizes increased U.S. funding for the tsunami warning system in the Pacific over the next five years. Finally, the Leaders identified "high and volatile energy prices" as an ongoing economic risk to the region, and that the risk can "best be met by expanded trade and investment to boost supply and greater efficiency in use." Besides the preceding economic and trade issues, the Leaders raised one administrative issue in their joint declaration—the need to make APEC more efficient and responsive. To that end, the Leaders established the APEC Support Unit and transferred the appointment of the Executive Director to a fixed term. Also, in order to "maintain APEC's momentum," the Leaders decided to continue its current moratorium on new members until at least 2010. The new member moratorium was seen as a blow to India, who is considered a leading candidate for the next round of new APEC members. According to a source on the Philippine delegation, "western members" opposed India joining APEC because of its political and economic strength, but were open to the admission of "smaller countries" such as Colombia and Panama. Other economies that have expressed an interest in joining APEC are Burma, Cambodia, Ecuador, Laos, Macau, Mongolia, Pakistan, and Sri Lanka. In his speech to the APEC's business summit, President Bush spoke at some length about the development of democracy in Asia. According to President Bush, "The expansion of freedom and democracy in the Asia Pacific region is one of the great stories of our time." After noting that at the end of World War II, Australia and New Zealand were the only democracies on the western side of the Pacific, he pointed out that 60 years later, East Timor, Indonesia, Japan, the Philippines, South Korea, and Taiwan are now democracies. Later on in his speech, President Bush called for efforts to bring democracy to Burma and North Korea; and said that the United States looked forward to "free and fair elections" in Thailand. He also spoke of "encouraging Russia's leaders to respect the checks and balances that are essential to democracy" and working with China's leaders to use the opportunity of the 2008 Olympics to demonstrate "a commitment to greater openness and tolerance." Following his summary of democracy in Asia, President Bush proposed "the creation of a new Asia Pacific Democracy Partnership." As he described it, "Through this partnership, free nations will work together to support democratic values, strengthen democratic institutions, and assist those who are working to build and sustain free societies across the Asia Pacific region." No details were provided in the speech or following the speech on the membership or financing of the Asia Pacific Democracy Partnership. The annual Leaders' and Ministerial Meetings are also an occasion for APEC to release new reports and make important announcements. The 2007 meetings continued this tradition. During the Ministerial Meeting, APEC announced the publication of its "Code of Conduct for Business" as part of its ongoing anti-corruption campaign. It was also announced that APEC had accepted the offers of the United States and Russia to host the 2011 and 2012 meetings respectively. The 2008 meetings are to be held in Lima, Peru, on November 22 and 23. The annual APEC Leaders' Meeting also provides a rare opportunity for the U.S. President to hold bilateral meetings with a number of important government leaders at one location. In particular, the annual APEC gathering is the one time when top officials from China, Hong Kong, and Taiwan are attending the same event. As a result, it has not been unusual for the U.S. President to schedule a series of bilateral meetings during the week of the APEC Leaders' Meeting. In 2007, President Bush continued the tradition of bilateral meetings. During his time in Sydney, he met with Australia's Prime Minister John Howard, China's President Hu Jintao, Indonesia's President Susilo Bambang Yudhoyono, Japan's Prime Minister Shinzo Abe, Russia's President Vladimir Putin, and South Korea's President Roh Moo-Hyun. In addition, President Bush hosted a working lunch with the leaders from seven members of the Association of Southeast Asian Nations (ASEAN) that are also members of APEC—Brunei Darusaalam, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. What follows is a summary of President Bush's bilateral meetings. The bilateral meeting between President Bush and Prime Minister Howard was originally scheduled to occur after the Leaders' Meeting. However, President Bush's controversial decision to leave early meant the bilateral meeting was moved forward to September 4, 2007. The rescheduling of the bilateral meeting, and President Bush's early departure, apparently caused some friction between Australia and the United States prior to the start of the APEC events. The main announcement made following the September 4, 2007 meeting between President Bush and Prime Minister Howard was the signing of U.S.-Australia Defense Trade Cooperation Treaty. A White House summary of the terms of the treaty indicates that most U.S. and Australian military articles would be able to be exported within a "circle" consisting of the U.S. government, the Australian government, and specific defense companies in both nations without prior government approval. President Bush indicated that he intended to submit the treaty to the U.S. Senate for approval after his return to the United States. In addition to the new treaty, the two leaders held what Prime Minister Howard called "a very broad-ranging discussion." Prime Minister Howard commented in particular on the topics of climate change and conditions in the Middle East (including Iraq, Iran and the Israeli-Palestinian situation). President Bush's comments on their meeting focused on the new treaty and the situations in Iraq and Afghanistan. He also raised concerns about the recent demonstrations in Burma and what he characterized as "tyrannical behavior" by the nation's military government. President Bush held a separate meeting with Australia's opposition Labour Party leader, Kevin Rudd, on September 6, 2007. When asked about the intent of the meeting prior to President Bush's departure for Sydney, State Department officials pointed out similar meetings with opposition party leaders in the past, and that the President Bush's primary objective would be to explain the importance of Australia keeping its troops in Iraq. Many political observers in Australia expect the Labour Party to win the next parliamentary elections, and believe Mr. Rudd may be Australia's next Prime Minister. The meeting between President Bush and China's President Hu Jintao occurred on September 6, 2007. In his summary of the meeting, President Bush highlighted their talks on North Korea, Sudan, climate change, and economic and trade relations. He also mentioned that the subjects of product safety, exchange rates, and religious freedom were raised during the meeting. Summarizing their conversation as "candid and friendly," President Hu focused his comments on climate change, Taiwan, the Korean Peninsula, the Iranian nuclear issue, and Sudan. The main topic of the meeting was what President Bush called Indonesia's "struggle against extremism"—an indirect reference to the Jemaah Islamiah (JI) and other terrorist organizations or separatist movements operating in Indonesia. The two presidents also spoke about the importance of military-to-military cooperation between Indonesia and the United States, pointing out the value of a recent U.S. visit by Indonesian military officers. President Bush also complemented Indonesia's efforts on climate change, highlighting their efforts in forest and coral reef preservation. In what proved to be his last official meeting with President Bush, Prime Minister Abe summarized the main topics of their discussion of September 8, 2007, as being climate change, the fight against terrorism, and the importance of the Japanese-American military refueling operation in the Indian Ocean. In his summary, President Bush echoed the topics mentioned by Prime Minister Abe, and added energy security to the list. Following their meeting on September 7, 2007, President Putin indicated that their conversation had covered a range of topics, including missile defense, Russia's WTO accession plans, Iran's nuclear program, and environmental issues. President Bush and South Korean President Roh Moo-Hyun met on the afternoon of Friday, September 7, 2007. The two discussed a wide range of topics, including the six-party talks with North Korea and the situation in Iraq. The pending U.S.-Korea Free Trade Agreement was not mentioned in a White House summary of the content of the meeting. The official post-meeting statements by both presidents focused on the talks with North Korea and the prospects for the end of the Korean War. At a post-meeting press conference, President Roh asked President Bush to "be a little bit clearer in your message" on a supposed U.S. declaration to end the Korean War. President Bush responded, "I can't make it any more clear, Mr. President. We look forward to the day when we can end the Korean War. That will end—will happen when [North Korean President] Kim Jong-Il verifiably gets rid of his weapons programs and his weapons." The brief exchange was the subject of discussion in the international media and among Korea analysts. Some speculate that President Bush had omitted an agreed upon statement in his summary of the meeting and President Roh was reminding him of the missing statement. Others have speculated that President Roh attempted to press the issue in hopes of obtaining a stronger statement on the subject from the U.S. President. There have also been claims that the exchange was the result of a translation error during the Presidents' meeting. Whatever the cause, President Roh's break with the usual post-meeting protocol, and the apparent irritation it caused President Bush, was viewed by many as another example of lingering tensions between the two presidents. During the working lunch on September 7, 2007, President Bush announced his decision to create the position of Ambassador to ASEAN. He also stated his intention to host a meeting in the United States to celebrate 30 years of U.S.-ASEAN relations. President Bush's invitation to ASEAN members to a meeting to be held in Texas raised questions about the possible attendance by Burma. During a press conference held on September 7, 2007, U.S. Deputy National Security Advisor Jim Jeffrey stated, "we'll work out the level of attendance of the various countries, including, hypothetically, the attendance of Burma, at another time." The United States currently has a ban on economic and trade relations with Burma. To the Bush Administration, the key outcomes of the APEC meetings in Sydney were: (1) Progress on the development of a FTAAP; (2) The endorsement of the APEC report on regional economic integration; (3) Agreement on a joint declaration on climate control; and (4) The Leaders' joint statement on the WTO negotiations. Looking ahead to the 2008 meetings in Lima, Peru, the White House is primarily concerned about some hesitance on the part of some of Asian APEC members to fully participate in the meetings. The U.S. proposal to explore the possible creation of a FTAAP was accepted at last year's APEC Leaders' Meeting in Hanoi, but in relatively general terms. In the view of the White House, various elements of this year's APEC meetings indicate progress was being made in obtaining more interest and support for the concept of an FTAAP. In particular, the inclusion of the exploration of a FTAAP as one of the "agreed actions" in the report on regional economic integration was perceived as a qualitative change in APEC's overall attitude from a year before. In addition, by endorsing the report, the Leaders have given a green light to specific research projects described in the report that may become a precursor to a larger feasibility study for a FTAAP. However, the Bush Administration is aware that China, Japan, and some ASEAN members remain skeptical about the feasibility and desirability of creating a FTAAP. To the Bush Administration, the report on regional economic integration creates an "umbrella" over much of APEC's work on trade and investment liberalization, as well as advances the discussion on forming a FTAAP (see above). In addition to its "agreed actions" on the exploration of a FTAAP, the report on regional economic integration includes "agreed actions" on: the promotion of "high-quality, comprehensive RTAs/FTAs"; the reduction of "behind-the-border barriers" to trade and investment; support for structural reform of member economies; the strengthening of financial markets; the improvement of key sectors in APEC (including transportation, mining, and the environment); and capacity building for APEC's developing economies. As described by one administration official, the "agreed actions" provide APEC with a clearer agenda for its trade and investment liberalization efforts. The significance of APEC's joint declaration on climate control is largely in the inclusion of both the United States and China as endorsers of the document. While the environmental objectives in the joint declaration are non-binding, the document does find common ground between China and the United States on pollution reduction efforts. Although this year's joint statement on the WTO negotiations is considered softer in tone and less specific in content that last year's statement, the Bush Administration considers it useful to have all 21 APEC members endorsing the concept of completing the Doha Round negotiations. In addition, the Bush Administration points to the statement's agreement that the resumption of negotiations "on the basis of the draft texts tabled by the chairs of the negotiating groups" as a significant outcome. From its inception, there has been mixed attitude within APEC about the inclusion of members from the eastern rim of the Pacific Ocean. For some of the Asian members of APEC, their economic interest and connections to the eastern rim of the Pacific are focused almost exclusively in the United States. As a result, according to administration officials, it may be difficult for some Asian members to drum up sufficient domestic support to finance a delegation to the meetings in Lima comparable in size and stature as those sent to APEC meetings held in Asia. The concern is that reduced representation from Asia may undermine the ability to make much progress during the 2008 meetings. The early departure of both Secretary Rice and President Bush from their respective meetings was heavily discussed by the media. The decision by President Bush to depart after the first day of the two-day Leaders' Meeting came only a few days before the start of the APEC meetings, and was considered by some commentators a blow to relations with Australia and counterproductive to U.S. ambitions to forward its agenda during the event. To some analysts, Bush's early arrival did little to counteract the negative impact of the early departure. In the weeks prior to the APEC meetings, the media ran stories indicating that many of President Bush's top advisors were recommending that he not attend the APEC meetings at all. The perceived slight to APEC was compounded by President Bush's misstatement in which he referred to APEC as OPEC, and his comments about visiting "Austrian troops" in Iraq when he meant "Australian troops." In addition, Secretary Rice's decision to depart with President Bush, as well as her decision not to attend the recent ASEAN meetings, exacerbated existing regional concerns that the Bush Administration is not giving adequate attention to the Asia Pacific Region. During the pre-trip press briefing, President Bush's early departure was the focus of two questions. The first question asked if the White House was "worried that [it] sends the wrong signal to the region that he is not interested in their concerns, or that he's giving short shrift to their concerns." The second question raised concerns that by not giving "Asia the attention it deserves," the Bush Administration has "created an opening for China to increase its clout." Senior Director Wilder replied that he did not find such criticisms "very credible." In addition, Deputy National Security Advisor Dan Price, during a press briefing on September 7, 2007, made the following unsolicited statement: Now, there's been a fair amount of chatter in some circles questioning the U.S. commitment to this region. As the President made clear today, as well as in the meetings and as he will make clear, U.S. engagement in APEC is permanent, unshakeable, and growing. Besides the perceived inattention to the region as a whole, the late changes in President Bush's schedule supposedly created some tension with Australia and Prime Minister Howard. According to media accounts, Prime Minister Howard had pressed President Bush to remain for both days, or at least designate Secretary Rice as his replacement for the second day of meetings. Both requests were unmet by the United States. In addition, the changes in security arrangements made necessary by Bush's early arrival and early departure added to the already high $140 million security bill for the event. Prime Minister Howard was already facing sharp domestic criticism for the high cost and tight security arrangements implemented for the APEC meetings. The APEC Leaders' joint declaration on climate control received a mixed response by the international media. To some, the fact that the 21 APEC members—including China, Japan and the United States—had agreed to common targets for improvements in energy efficiency and reforestation was a promising development for the creation of a post-Kyoto Protocol agreement on pollution control. However, others pointed to the voluntary nature of the "aspirational global emission reduction goals" as proof that the statement has little real value or significance. Other commentators felt that domestic political forces (for example, Prime Minister Howard's concerns about the upcoming elections) had driven APEC's willingness to agree to the joint declaration on climate control. The second major document coming out of the 2007 APEC meetings, the report on regional economic integration, also was met with a mixed response. Some observers criticized the report for being too general and too encompassing in content, and as a result, provided little sense of overall direction or guidance for APEC. For example, they say the report presents the growing number of FTAs and RTAs, the long-term possibility of forming a "Free Trade Area of the Asia-Pacific," and the continued development of the WTO as forces promoting regional economic integration, but does not explore the possible tensions between those three trends. Upon closer reading, the report endorses all three approaches to greater trade and investment liberalization without discussing potential contradictions that might ensue. President Bush's proposal of an "Asia-Pacific Democracy Partnership" (ADP) garnered modest attention in the media and from other APEC members. According to one report, "while China does not welcome the 'Democracy Partnership,' ... it is not overly alarmed either." The press in Taiwan noted, with some apparent pleasure, that President Bush included Taiwan among the examples of democracy in Asia. Commentators expressed misgivings about President Bush's vagueness about the membership and financing of the ADP, and were concerned that some APEC members might be apprehensive about how their participation in the ADP would impact their relations with China. The primary goal of APEC is to foster international trade by means of trade and investment liberalization and facilitation. Since its inception in 1993 and the adoption of the Bogor Goals in 1994, APEC members have lowered their trade restrictions to varying degrees. With over a decade of history, one question is whether or not there has been a corresponding rise in APEC members' foreign trade accompanying their liberalization and facilitation efforts. Figure 2 compares the growth of intra-APEC and total APEC exports to the growth of global exports. Starting in 1981, total APEC exports begin growing faster than global exports, and intra-APEC exports are outstripping total APEC exports. However, the pace of export growth slows for all three categories in 1995, with noticeable downturns in APEC exports occurring in 1998 and 2001, corresponding to the Asia financial crisis and the attacks on the World Trade Center and the Pentagon. Since the downturn in 2001, the pace of world export growth has increased, and the pace of APEC export growth has increased even more. Import statistics reveal a similar pattern to exports (see Figure 3 ). From 1970 to 1980, there is little difference in the import growth rate for intra-APEC, total APEC, and the world. Starting in 1981, APEC's imports—both from amongst its members and from the world—begin to increase faster than world imports. The divergence between APEC import growth and world imports continues until 1997, when the Asian financial crisis precipitates a sharp decline in APEC's imports and global imports in 1998. For the next two years—1999 and 2000—global imports and APEC's imports recover, only to drop once again following the attacks on September 11, 2001. Import levels grew modestly in 2002 for both APEC and the world, and then accelerated starting in 2003, with APEC's import growth rate outstripping that of the world. While the trade data appear to support the notion that APEC has promoted trade growth for its members, the results are not conclusive. Although APEC's exports and imports have grown at a faster rate than world trade figures since the creation of APEC, it is uncertain if its trade growth is the result of trade liberalization and facilitation, or caused by other economic factors. APEC's members include several of the fastest growing economies in the world—for example, China and Vietnam—so the average economic growth rate for APEC members is higher than the global average. APEC's greater economic growth rate could be sufficient to explain most of its better trade performance compared to global figures. However, the fact that intra-APEC exports and imports are growing at a faster rate than total APEC trade raises concerns about possible trade diversion. On the one hand, the greater growth of intra-APEC trade could be the result of lower intra-APEC trade barriers stemming from the members' actions via their IAPs and CAPs, and the spread of RTAs and FTAs amongst APEC members. On the other hand, the higher intra-APEC trade expansion could represent the diversion of trade from other nations as APEC members form preferential bilateral trade agreements that siphon off trade from non-APEC members. Even with its "open regionalism" approach to trade and investment liberalization, APEC has been seen since its inception as a possible vehicle for liberalizing both regional and global trade. In general, observers focus on two methods by which APEC may help foster greater trade and investment liberalization. The first method is by forming a coalition during WTO negotiations. The efforts of the APEC Geneva Caucus during the recent Doha discussions are often cited as an example of how APEC can help promote trade and investment liberalization. There is little disagreement among experts that APEC has been a positive force for trade and investment liberalization within the WTO. The second method is more controversial. Over the last decade, the number of Asia-Pacific bilateral trade agreements (BTAs) has grown dramatically. However, according to one observer, "The result is a competitive form of liberalization. As occurred within APEC itself, there are competing models of FTAs that cannot be integrated." A reporter described the phenomena as follows: The trade diplomacy of east Asia has become so blindingly complex that even the metaphors are getting muddled. The subtitle of one academic paper on free trade agreements (FTAs) suggests using "spaghetti bowls as building blocks." Another describes a "patchwork of bilateral hub-and-spoke FTAs in a noodle bowl." According to some experts, the growth of bilateral trade agreements (BTAs) amongst APEC members represents an unsystematic process that could lead to the formation of an APEC-wide regional trade agreement (RTA) much like the proposed FTAAP. According to this view, the actions of APEC—via the IAPs, CAPs, and the various committee reports—forms a commonality of perspective on issues, thereby permitting some members to conclude limited BTAs. The idea is that over time, the network BTAs will form the basis for the creation of a RTA. However, other experts view the proliferation of BTAs as forming a barrier to trade and investment liberalization. As described by one scholar, "The resulting web of agreements and negotiations is fragmented, uncoordinated, and uneven in content and coverage." Because many BTAs are politically (not economically) motivated, the emerging BTAs in Asia generally suffer from several problems—WTO-incompatibility; narrow sector focus; discriminatory rules of origin (ROOs)—that make future amalgamation of the BTAs nearly impossible. As one expert describes it: The predictable results of foreign policy-driven FTA negotiations light on economic strategy are bitty, quick-fix sectoral deals. Politically sensitive sectors in goods and services are carved out.... Little progress is usually made in tackling domestic regulatory barriers.... Finally, the sway of power politics can result in highly asymmetrical deals, especially when one of the negotiating parties is a major player. Even if the merger of the various BTAs into an Asia-Pacific RTA were accomplished, there are concerns that the resulting agreement would institutionalize a number of tariff and non-tariff trade barriers in the region. A U.S. trade official was quoted as saying, "Bilateral FTAs being pursued by China, and Japan, and Korea to some extent, risk falling to the lowest common denominator. As someone once quipped, 'they are neither F, nor T, nor A.'" Some observers go on to argue that the rising number of BTAs in the region is generating dynamics that are preventing the formation of a FTAAP and progress in the Doha Round, despite the best efforts of APEC. One scholar writes: I note how the current discussions with the Asia-Pacific Economic Cooperation (APEC) forum to establish a Free Trade Area of the Asia-Pacific (FTAAP)," writes one scholar, "was also proposed at APEC's Santiago summit just two years ago. It failed then as it will probably fail now because of the immense political and technical challenge of harmonizing a large number of heterogeneous bilateral FTAs into a unified regional agreement." Another scholar is even more dismissive of APEC's potential, writing, "It cannot be expected to contribute anything serious to regional economic integration." Others see a slightly different effect of the BTAs on prospects for the creation of a FTAAP. In this view, the stalled Doha Round is fostering the further disintegration of the global trading system, generating a rising number of BTAs, and increasing the risk of the creation of a discriminatory and undesirable East Asia Free Trade Area (EAFTA). The fear is that the EAFTA would become another barrier to the completion of the Doha Round, and possibly generate protectionist reactions from the European Union and the United States. To counteract these trends, some experts say APEC should push for the creation of a FTAAP. In this view, advancing the idea of a FTAAP, APEC might improve the prospects for the Doha Round, as non-APEC members may prefer to see progress at the WTO over the creation of a FTAAP. However, even if Doha talks remain stalled, discussion of the creation of a FTAAP could limit the growth of BTAs in Asia, and/or help insure that any new BTAs are less discriminatory and WTO-compatible. In summary, supporters of this view see APEC "playing four roles in this new regional dynamic." Those roles are: 1. Organizing regular meetings of regional trade and finance ministers and political leaders to advance the process at the multilateral and bilateral levels; 2. Reinforcing the 'Bogor Goal' of free and open trade and investment by 2010/2020 and authenticating neoliberal trade policies; 3. Developing "model measures" for FTAs and RTAs to achieve "high quality" liberalization and consistency; and 4. Promoting WTO-plus FTAs that are consistent with the policy agenda of the international and regional financial institutions. Initially, APEC was viewed as a purely economic forum. APEC carefully kept its distance from political matters for fear that such issues would cause divisions within the group—particularly among China, Japan, Russia, Taiwan, and the United States. Such divisions could thwart cooperation in achieving economic goals. Consideration of non-economic issues was confined to bilateral meetings held before and after the Leaders' Meeting. In 1995, the issue was raised of whether APEC should be expanded to include consideration of regional security issues. The consensus in 1995 among APEC members seemed to be that regional security issues should be discussed in the ASEAN Regional Forum and other fora rather than in APEC. Starting in 2001, however, security was added to the official agenda of the Leaders' Meeting. At the October 2001 Meetings in Shanghai, the attacks on the World Trade Center and the Pentagon overshadowed the economic agenda. The Leaders issued a joint statement condemning the attacks—APEC's first joint statement on non-economic issues. Since 2001, the agenda for the Leaders' Meeting has included issues related to "human security," with a focus on three topics: terrorism, disease, and disasters. Among APEC members, there are four principal areas of concern about terrorism. First, some member economies face domestic extremists who episodically conduct acts of violence targeted at the civilian population. Second, there is some evidence suggesting that international terrorist networks, including Al Qaeda, are utilizing financial institutions in the Asia-Pacific region to funnel money across international borders. Third, APEC member economies wish to restrict the movement of suspected terrorists through the region. Fourth, APEC has made the security of trade one of its key priorities. Over the last five years, APEC has developed programs to respond to each of these concerns. To oversee its efforts on terrorism, APEC established the Counter-Terrorism Task Force (CTTF) in October 2002. The CTTF reports directly to the APEC's Senior Officials. Its mission "is to identify and assess counter-terrorism needs, coordinate capacity building and technical assistance programs, cooperate with international and regional organizations and facilitate cooperation between APEC fora on counter-terrorism issues." The CTTF generally meets quarterly, in coordination with the Senior Officials Meetings. At a meeting held in Cairns, Australia, in July 2007, the CTTF set up a study group to develop a plan to facilitate trade recovery in the aftermath of a major terrorist event. In addition to the work of the CTTF, each APEC member has created a Counter-Terrorism Action Plan (CTAP). Much of APEC's counterterrorism efforts have focused on the issue of secure trade. In 2002, APEC created the "Secure Trade in the APEC Region (STAR) Initiative." The STAR Initiative is "focused on policies and procedures to enhance security and efficiency in the APEC region's seaports, airports and other access points, including port and airport security; shipping container security; coastal patrol; capacity building; financial assistance, and private sector initiatives." The most recent STAR Conference, held in Sydney on June 27 and 28, 2007, focused on enhancing security and safety while containing costs. In 2003, APEC established its ad hoc Health Task Force (HTF) to deal with the threats posed by emerging infectious diseases. In part, the HTF was created in response to the February 2003 outbreak of Severe Acute Respiratory Syndrome (SARS) in several APEC member economies. Not only did the people of several APEC members suffer serious health problems due to SARS, the economies of both SARS-infected and non-infected members were harmed by the loss of tourism. The value of having the HTF was confirmed in 2004, with the outbreak of avian influenza H5N1 in 2004. Besides its responses to SARS and avian influenza, APEC is also concerned about the threat posed by HIV/AIDS. During the second Senior Officials Meeting in 2007, APEC endorsed the transformation of the Health Task Force to the Health Working Group (HWG) in 2008. Most of APEC's efforts on disease have focused on the exchange of medical information and research, building a rapid-response and containment program, and the exchange of "best practices." For SARS and avian influenza, APEC has held a series of meetings to discuss means of more rapidly identifying and responding to possible outbreaks, and sharing "best practices" in areas such as passenger screening techniques and safeguarding measures for poultry. Regarding HIV/AIDS, APEC's HTF is fostering the exchange of information on members' programs to prevent the spread of the disease, and improving workplace management of HIV/AIDS. The second APEC Health Ministers Meeting was held on June 7 and 8, 2007, in Sydney, Australia. During the meeting, the health ministers released APEC's guidelines for employers to create a workplace environment supportive for workers with HIV/AIDS. The third form of threat to human security of great concern to APEC are natural disasters. In December 2004, a 9.3 earthquake off the coast of Indonesia propagated a devastating tsunami that killed thousands of people in several nations bordering the Indian Ocean. Although there was a tsunami warning system in place, many people were not warned of the impending natural disaster and fell victim to the tsunami. In response to the Indian Ocean tsunami, APEC Senior Officials adopted in March 2005 an "APEC Strategy on Response to and Preparedness for Natural Disasters and Emergencies." They also established APEC's "Task Force for Emergency Preparedness (TFEP)." Working with APEC's Industrial Science and Technology Working Group (ISTWG), the TFEP has held a number of seminars and training sessions to help APEC members improve their seismic monitoring systems, disaster response infrastructure, building and infrastructure construction codes, and public education systems to reduce their exposure to natural disasters. APEC members are also providing additional funding to natural disaster warning systems. In December, Congress passed P.L. 109 - 424 , the "Tsunami Warning and Education Act." The act, signed by the President on December 20, 2006, authorizes additional funding to "enhance and modernize the existing Pacific Tsunami Warning System to increase coverage, reduce false alarms, and increase the accuracy of forecasts and warnings.... " It authorizes $25 million in FY2008, and then authorizes an increase in funding by $1 million each year until FY2012. Congress—and the Bush Administration—have identified APEC as the primary regional institution in the Asia-Pacific for promoting open trade and practical economic cooperation. APEC is also seen as a useful forum for advancing U.S. concerns on issues related to human security. Since APEC's inception in 1989, congressional interest and involvement with APEC has focused on two areas: (1) direct and indirect financial support for APEC; and (2) oversight of U.S. participation in APEC. Section 424 of the Foreign Relations Authorization Act, Fiscal Years 1994 and 1995, authorized the President to maintain United States membership in the Asia-Pacific Economic Cooperation and provided for U.S. contributions of APEC out of appropriations for "Contributions to International Organizations." The Science, State, Justice, Commerce, and Related Agencies Appropriations Act of 2006 appropriated a total of $1.17 billion "to meet annual obligations of membership in international multilateral organizations," including APEC. The current level of direct U.S. financial support for APEC is $601,000 per year. Section 2540 of the National Defense Authorization Act for Fiscal Year 1996 made "a non-communist country that was a member nation of the Asia Pacific Economic Cooperation (APEC) as of October 31, 1993" eligible to participate in a loan guarantee program "arising out of the financing of the sale or long-term lease of defense articles, defense services, or design and construction services." The Federal Agriculture Improvement and Reform Act of 1996 ( P.L. 104 - 127 ) included a finding by Congress that: ... during the period 1996 through 2002, there will be several opportunities for the United States to negotiate fairer trade in agricultural products, including further negotiations under the World Trade Organization, and steps toward possible free trade agreements of the Americas and Asian-Pacific Economic Cooperation (APEC); and the United States should aggressively use these opportunities to achieve more open and fair opportunities for trade in agricultural products. In the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108 - 458 ), Congress finds: ... other economic and regional fora, such as the Asia-Pacific Economic Cooperation (APEC) Forum, and the Western Hemisphere Financial Ministers, have been used to marshal political will and actions in support of combating the financing of terrorism (CFT) standards. Finally, the National Defense Authorization Act for Fiscal Year 2006 ( P.L. 109 - 163 ) included as the sense of Congress: that the President should present to Congress quickly a comprehensive strategy to— (1) address the emergence of China economically, diplomatically, and militarily; (2) promote mutually beneficial trade relations with China; and (3) encourage China's adherence to international norms in the areas of trade, international security, and human rights. To be included in that strategy are "[a]ctions to encourage United States diplomatic efforts to identify and pursue initiatives to revitalize United States engagement in East Asia. The initiatives should have a regional focus and complement bilateral efforts. The Asia-Pacific Economic Cooperation forum (APEC) offers a ready mechanism for pursuit of such initiatives." For the 110 th Congress, issues related to APEC could arise in a variety of direct and indirect ways. In addition to the issue of U.S. financial support for APEC, Congress may choose to express its sense on different policy issues. Also, there are oversight issues raised by U.S. participation in various APEC activities. In the 110 th Congress, one proposed bill specifically mentions APEC—the United States-China Diplomatic Expansion Act of 2007 ( H.R. 3272 ). Introduced by Representative Mark Kirk, and cosponsored by Representatives Rick Larsen, Steve Israel, Susan Davis, and Charles Boustany, H.R. 3272 would authorize the appropriation in FY2008 of $65 million for the construction of a new consulate in China, $10 million for additional personnel for the U.S. diplomatic mission in China, $6 million for other State Department personnel, $10 million for various Chinese language programs, and $2 million for rule of law initiatives in China. The bill also would authorize the appropriation of $3 million for a U.S. contribution to APEC. As previously mentioned, the U.S.-Australia Defense Trade Cooperation Treaty signed during the APEC meetings would be subject to the approval of the Senate, once submitted to the Senate by the President. In addition, if and when the President nominates someone to be "Ambassador to ASEAN," the appointment would be subject to Senate advice and consent. The most direct issue would be the level of U.S. financial support for APEC. Although the President does have the authority under current federal law to determine the level of APEC's funding without action by Congress, Congress may choose to take up this issue (see above). For example, Congress could consider setting funding levels, directly or indirectly, for APEC's trade facilitation programs independently from the amounts announced in August 2007. Congress has recognized the potential of APEC as a vehicle for promoting free trade. In addition, to the issue of a possible Free Trade Area of the Asia-Pacific, negotiations over regional trade integration under APEC would likely raise issues related to labor rights and environment protection, and whether the United States would be able to respond to foreign country violations of labor or environmental standards with economic sanctions or monetary fines (as stipulated in the U.S.-Singapore/Chile FTAs). Successful completion of the Doha Round is a major trade priority for the Bush Administration. However, negotiations are complicated, in part by the U.S. merchandise trade deficit, especially bilateral trade deficits with some APEC member economies. While many economists attribute the U.S. trade deficit to U.S. macroeconomic conditions, when combined with specific trade disputes with some APEC members, prospects for adjustments in the U.S. offer on Doha are uncertain. The 2006 Leaders' joint declaration called on all APEC members—including the United States—"to spare no efforts to break through the current deadlocks." This year's "Statement on the WTO Negotiations" takes a slightly softer tone, stating that "consensus will only be possible on the basis of an ambitious, balanced result that delivers real and substantial market access improvements for agricultural and industrial goods and services, and real and substantial reductions in trade-distorting agricultural subsidies." This would likely require congressional action on specific legislation. In particular, the farm income and price support programs, which are dictated primarily by Title I of the 2002 farm bill ( P.L. 107 - 171 ) and expire in 2007, might be affected by efforts to complete the Doha Round. This touches on the broader domestic debate over whether the United States should continue to pursue the liberalization of international trade and investment with other nations, the effect of trade and globalization on import-sensitive industries, and whether increased trade threatens or enhances U.S. prosperity, employment opportunities, and economic security. In addition to the various economic and trade issues, Congress may also consider issues pertaining to human security as a result of the U.S. involvement with APEC. For example, U.S. recognition of the APEC Business Travel Card could raise domestic security concerns to the expedited visa and entry privileges extended to card bearers. Similarly, concerns about a potential influenza pandemic may engender interest in providing more support to APEC's Health Task Force. From a geopolitical perspective, APEC is a leading forum through which the United States can broadly engage the Asia-Pacific region. The United States is not included in the other regional multilateral associations, such as ASEAN and the newly-created East Asian Summit (EAS), and no other forum includes such a wide range of Asian economies. From a strategic perspective, many experts believe APEC could plan a useful role in advancing U.S. interests in Asia. Over the last few years, the United States' position as the leader in the region has been challenged by China. China's accession to the WTO, its recent efforts to negotiate BTAs across Asia (including the Comprehensive Economic Partnership Agreements with Hong Kong and Macau), and its unilateral liberalization of its trade regime, has arguably placed China as a competitor to the United States. Many argue that the United States should re-energize its involvement in Asian trade discussion and elevate the importance of APEC to reassert U.S. leadership. They advocate both increased financial assistance to APEC, though the annual contribution and specific assistance programs, and alteration in U.S. laws and policies on key issues. Others say that APEC should reformulate its mission by focusing more narrowly on trade facilitation and economic integration, abandoning many of the working groups that are not central to the core goals, and strengthening the Secretariat. The annual Leaders' Meeting continues to provide prestige and offer an opportunity for heads of state, particularly those of smaller countries, to interact with top U.S. officials. APEC offers the additional benefit of including Taiwan and Hong Kong as member economies, unlike the EAS. The following table provides a brief summary of the past APEC Meetings. For more details about each meeting, see the official APEC web page, http://www.apec.org/ .

There is apparent agreement between Congress and the Bush Administration that the Asia Pacific Economic Cooperation (APEC) is a potential vehicle for advancing U.S. economic, trade, diplomatic, and security interests both globally and regionally. In particular, APEC offers the United States an organizational counterpoint to other proposed regional associations in Asia. However, the organization's approach and perspective on these issues may pose problems for the United States. By design, APEC operates on the basis of consensus, under which its members voluntarily liberalize their economic and trade policies. As a result, APEC lacks enforcement mechanisms commonly seen in other multilateral organizations. The main topics of discussion during the September 2007 two-day Leaders' Meeting and the two-day Ministerial Meeting were climate change and regional economic integration. The Leaders issued a separate joint declaration on climate change, which included "aspirational" commitments to reduce energy intensity by at least 25% by 2030 and to increase regional forest cover by at least 20 million hectares by 2020. APEC's consensus position on the latter topic entitled "Strengthening Regional Economic Integration," was endorsed by the Leaders. The APEC meetings also discussed the recent global problem with food and product safety. For the Bush Administration, the APEC meetings provided an opportunity to reiterate its interest in forming a Free Trade Area of the Asia-Pacific (FTAAP) and to hold bilateral talks with a number of important Asia leaders. During the APEC meetings, Australian Prime Minister John Howard and President George Bush signed the U.S.-Australia Defense Trade Cooperation Treaty. Also, during his speech to the APEC Business Summit, President Bush proposed the creation of an "Asia Pacific Democracy Partnership." Some APEC members were critical of the departure of President Bush and Secretary Rice prior to the end of the Leaders' Meeting. Proponents of greater U.S. involvement in APEC argue that the association provide the United States with a vehicle to re-energize its involvement in Asian trade discussions and to take a more active diplomatic role in the region. They suggest the United States should increase its financial assistance to APEC, through the annual contribution and specific assistance programs, and alterations in U.S. laws and policies on key issues. Others maintain that APEC may not be an effective mechanism for advancing U.S. interests in the region. The President's initiatives at Sydney present the 110th Congress with opportunities to weigh in on the issue. Congress may take up the issue of the current level of direct and indirect financial support for APEC. Also, Congress may consider APEC's goals of trade and investment liberalization when legislating on various other programs. In addition, the Senate faces consideration of the new defense treaty with Australia. This report will be updated as circumstances warrant.

The federal legislative framework for cybersecurity is complex, with more than 50 statutes addressing various aspects of it either directly or indirectly. Many observers have expressed doubt that the current statutory framework is sufficient to address the growing concerns about the security of cyberspace in the United States, especially with respect to critical infrastructure (CI). Several legislative proposals were made in recent Congresses to address those concerns. While a few cybersecurity bills were enacted in the 113 th Congress, they addressed only the security of federal information systems ( S. 2521 ) and workforce issues ( H.R. 2952 and S. 1691 ) and information-sharing activities ( S. 2519 ) at the Department of Homeland Security (DHS). Within the executive branch, both the George W. Bush and Obama Administrations have focused on improving the cybersecurity of critical infrastructure. The Bush Administration created the classified Comprehensive National Cybersecurity Initiative (the CNCI) in 2008. The Obama Administration performed an interagency review of federal cybersecurity initiatives in 2009, culminating in the release of its Cyberspace Policy Review and the creation of the White House position of Cybersecurity Coordinator. In the absence of enacted legislation, the Obama Administration began drafting a cybersecurity executive order in 2012. The development involved input from both federal agencies and stakeholders in the private sector. On February 12, 2013, President Obama issued Executive Order 13636, Improving Critical Infrastructure Cybersecurity , along with Presidential Policy Directive 21 (PPD 21), Critical Infrastructure Security and Resilience . The issuance of the executive order in the absence of congressional action raises several questions that are addressed in this report: What are the kinds of threats to the national security and economic interests of the United States that the executive order is intended to address? What steps does it take to address those threats, what is the status of their implementation, and what issues do they raise? What is the legislative and constitutional authority for the executive order? How do its provisions relate to those in legislative proposals in the 112 th and 113 th Congresses? What has been the reaction of stakeholders to the order and what issues does it raise? Repeated cyber intrusions into critical infrastructure demonstrate the need for improved cybersecurity. The cyber threat to critical infrastructure continues to grow and represents one of the most serious national security challenges we must confront. The national and economic security of the United States depends on the reliable functioning of the Nation's critical infrastructure in the face of such threats. Cyberthreats to U.S. infrastructure and other assets are a growing concern to policy makers. Information and communications technology (ICT) is ubiquitous and relied upon for government services, corporate business processes, and individual professional and personal pursuits—almost every facet of modern life. Many ICT devices and other components are interdependent, and disruption of one component may have a negative, cascading effect on others. A denial of service, theft or manipulation of data, or damage to critical infrastructure through a cyber-based attack could have significant impacts on national security, the economy, and the livelihood and safety of individual citizens. Cyber-based technologies are now ubiquitous around the globe. The vast majority of users pursue lawful professional and personal objectives. However, criminals, terrorists, and spies also rely heavily on cyber-based technologies to support their objectives. These malefactors may access cyber-based technologies in order to deny service, steal or manipulate data, or use a device to launch an attack against itself or another piece of equipment. Entities using cyber-based technologies for illegal purposes take many forms and pursue a variety of actions counter to U.S. global security and economic interests. While E.O. 13636 discusses in general terms cyber-based threats directed at the nation's critical infrastructure, it does not identify the types of cyber-actors and possible consequences of a successful attack. Commonly recognized cyber-aggressors discussed below, along with representative examples of the harm they can inflict, include cyberterrorists, cyberspies, cyberthieves, cyberwarriors, and cyberhacktivists. Cyberterrorists are state-sponsored and non-state actors who engage in cyberattacks as a form of warfare. Transnational terrorist organizations, insurgents, and jihadists have used the Internet as a tool for planning attacks, radicalization and recruitment, a method of propaganda distribution, and a means of communication. While no unclassified reports have been published regarding a terrorist-initiated cyberattack on U.S. critical infrastructure (CI), the vulnerability of essential components of that infrastructure to access and even destruction via the Internet has been demonstrated. In 2009, the Department of Homeland Security (DHS) conducted an experiment that revealed some of the vulnerabilities to the nation's control systems that manage power generators and grids. The experiment, known as the Aurora Project, entailed a computer-based attack on a power generator's control system that caused operations to cease and the equipment to be destroyed. Cyberspies are individuals who steal classified or proprietary information used by governments or private corporations to gain a competitive strategic, security, financial, or political advantage. These individuals often work at the behest of, and take direction from, foreign government entities. For example, a 2011 FBI report noted, "a company was the victim of an intrusion and had lost 10 years' worth of research and development data—valued at $1 billion—virtually overnight." Likewise, in 2008 the Department of Defense's (DOD's) classified computer network system was unlawfully accessed and "the computer code, placed there by a foreign intelligence agency, uploaded itself undetected onto both classified and unclassified systems from which data could be transferred to servers under foreign control." The U.S. intelligence community recently completed a classified National Intelligence Estimate (NIE) focused on cyberspying against U.S. targets. Reportedly, the NIE "concluded that the United States is the target of a massive, sustained cyber-espionage campaign that is threatening the country's economic competitiveness." Media reports suggest that the NIE also assessed that Russia, Israel, and France also engage in illegal accessing of United States entities for economic intelligence purposes but notes that "cyber-espionage by those countries pales in comparison with China's effort." A February 2013 report of an investigation by a private-sector security firm of intrusions against more than 100 targets over the past seven years states that the attacks were performed by a single Chinese group that appears to be linked to the People's Liberation Army. Cyberthieves are individuals who engage in illegal cyberattacks for monetary gain. Examples include an organization or individual who illegally accesses a technology system to steal and use or sell credit card numbers and someone who deceives a victim into providing access to a financial account. Cybercrime is widely regarded as lucrative and relatively low-risk for criminals and costly for victims, with some estimates placing the annual global cost to individuals as high as hundreds of billions of dollars. However, making accurate estimates of such aggregate costs is problematic, and there does not appear to be any publicly available, comprehensive, reliable assessment of the overall costs of cyberattacks. Cyberwarriors are agents or quasi-agents of nation-states who develop capabilities and undertake cyberattacks in support of a country's strategic objectives. These entities may or may not be acting on behalf of the government with respect to target selection, timing of the attack, and type(s) of cyberattack and are often blamed by the host country when accusations are levied by the nation that has been attacked. Often, when a foreign government is provided evidence that a cyberattack is emanating from its country, the nation that has been attacked is informed that the perpetrators acted of their own volition and not at the behest of the government. In August 2012 a series of cyberattacks were directed against Saudi Aramco, the world's largest oil and gas producer and most valuable company. The attacks compromised 30,000 of the company's computers and the code was apparently designed to disrupt or halt the production oil. Some security officials have suggested that Iran may have supported this attack. However, other observers suggest that the perpetrator of the attack was an employee of Saudi Aramco. Cyberhacktivists are individuals who perform cyberattacks for pleasure, or for philosophical or other nonmonetary reasons. Examples include someone who attacks a technology system as a personal challenge (who might be termed a "classic" hacker), and a "hacktivist" such as a member of the cyber-group Anonymous who undertakes an attack for political reasons. The activities of these groups can range from simple nuisance-related denial of service attacks to disrupting government and private corporation business processes. These different kinds of cyber-aggressors and the types of attacks they can pursue are not mutually exclusive. For example, a hacker targeting the intellectual property of a corporation may be categorized as both a cyberthief and a cyberspy, and possibly a cyberwarrior if the activity is conducted by a military enterprise, as has been claimed for some such attacks. A cyberterrorist and cyberwarrior may be employing different technological capabilities in support of a nation's security and political objectives. Ascertaining information about the aggressor and its capabilities and intentions is very difficult. The threats posed by these aggressors, coupled with the United States' proclivity to be an early adopter of emerging technologies, which often contain unrecognized vulnerabilities and are introduced into existing computer networks, make for a complex environment when considering operational responses, policies, and legislation designed to safeguard the nation's strategic economic and security interests. E.O. 13636 discusses the nation's reliance on cyber-based technologies and identifies activities and reporting requirements to be addressed by numerous federal government departments and agencies. The federal role in what is now called cybersecurity has been debated for more than a decade. Much of the recent debate has focused on two issues: sharing of cybersecurity-related information within and across sectors, and the cybersecurity of CI sectors, including federal systems. E.O. 13636 attempts to address both of those issues, as well as others. It uses existing statutory and constitutional authority to expand information sharing and collaboration between the government and the private sector, including sharing classified information by broadening a program developed for the defense industrial base to other CI sectors; develop a voluntary framework of cybersecurity standards and best practices for protecting CI, through a public/private effort; establish a consultative process for improving CI cybersecurity; identify CI with especially high priority for protection, using the consultative process; establish a program with incentives for voluntary adoption of the framework by CI owners and operators; review cybersecurity regulatory requirements to determine if they are sufficient and appropriate; and incorporate privacy and civil liberties protections in activities under the order. The information-sharing and framework provisions in particular have received significant public attention. Improved sharing of information on cybersecurity threats, vulnerabilities, attacks, prevention, and response both within and across sectors, including government, is thought by most experts to be critical to improving cybersecurity but fraught with barriers and uncertainties, relating especially to privacy, liability, reputation costs, protection of proprietary information, antitrust law, and misuse of shared information. A few sectors are subject to federal notification requirements, but most such information sharing is voluntary, often through sector-specific Information Sharing and Analysis Centers (ISACs) or programs under the auspices of the Department of Homeland Security (DHS) or sector-specific agencies. A key question is how to balance the need for better, more timely cybersecurity information with other needs such as protection of privacy and civil rights as well as legitimate business and economic interests. To improve information sharing, the order builds on a voluntary effort established in May 2011. That program, known as the DIB Cyber Pilot, involved several defense industry partners, the National Security Agency (NSA), and DOD in sharing classified threat-vector information among stakeholders. One aspect was sharing by the NSA of threat signatures obtained through its computer monitoring activities. In May 2012, DOD established the DIB Cybersecurity/Information Assurance (CS/IA) Program, making it broadly available to all eligible DIB partners. Under the program, DOD provides defense contractors with classified and unclassified cyberthreat information and cybersecurity best practices, while DIB participants report cyber-incidents, coordinate on mitigation strategies, and participate in cyber intrusion damage assessments if DOD information is compromised. Participating companies may also join an optional classified-information sharing subprogram, known as the DIB Cybersecurity Enhancement Program (DECS)—the former DIB Cyber Pilot —by meeting specified security requirements. To expand the program beyond the DIB sector, DHS established the Joint Cybersecurity Services Pilot (JCSP) in January 2012, the first phase of which focused on the DECS program and shifted operational relationships with participating commercial service providers (CSPs) to DHS. DHS made the program permanent in July 2012. In January 2013, the department named the program Enhanced Cybersecurity Services (ECS) and expanded it to all CI sectors, including the federal sector, as well as nonfederal government entities. In this program, DHS does not share threat indicators with CI entities directly but rather with participating CSPs (see Figure 1 ). DOD still serves as the point of contact for participating DIB contractors. The executive order builds on such established programs by requiring the Secretary of Homeland Security to expand ECS to all CI sectors; expedite processing of security clearances to appropriate CI personnel; and expand programs to place relevant private-sector experts in federal agencies on a temporary basis. It also requires the Secretary of Homeland Security and the Attorney General to expedite collection of threat indicators and dissemination of them to targeted entities. The increasing potential for attacks that might cripple components of CI or otherwise damage the national economy, as discussed above, has led to debate about the best ways to protect those sectors beyond improvements in information sharing. Some CI sectors are subject to federal regulation with respect to cybersecurity, while the protection of others relies largely on voluntary efforts. The efficacy of that mix of voluntary and regulatory efforts has been a prominent issue in the ongoing debate about federal cybersecurity legislation. Proponents of additional regulation argue that the voluntary approach has not provided sufficient protection and that regulation has been effective in sectors such as electricity and financial services. Opponents argue that expanding federal requirements would be costly and ineffective and may impede innovation. Also, there has appeared to be some uncertainty about the extent to which existing statutory authority would permit new cybersecurity requirements in some sectors. E.O. 13636 builds on the involvement of the National Institute of Standards and Technology (NIST) in the development of cybersecurity technical standards and its statutory responsibilities to work with both government and private entities on various aspects of standards and technology. The order requires the following: NIST —lead the development of the Cybersecurity Framework, an effort that uses an open, consultative process to reduce cybersecurity risks to CI; focuses on cross-sector, voluntary consensus standards and business best practices; is technology-neutral; identifies areas for improvement; and is reviewed and updated as necessary. Secretary of Homeland Security —set performance goals for the framework, establish a voluntary program to support its adoption, and coordinate establishment of incentives for adoption. Sector-specific agencies —coordinate review of the framework and development of sector-specific guidance, and report annually to the President on participation by CI sectors. CI regulatory agencies —engage in consultative review of the framework, determine whether existing cybersecurity requirements are adequate, and report to the President whether the agencies have authority to establish requirements that sufficiently address the risks (it does not state that the agencies must establish such requirements, however), propose additional authority where required, and identify and recommend remedies for ineffective, conflicting, or excessively burdensome cybersecurity requirements. The executive order stipulates that it provides no authority for regulating critical infrastructure in addition to that under existing law, and it does not alter existing authority. The development of the framework is arguably the most innovative and labor-intensive requirement in the executive order. None of the major legislative proposals in the 111 th and 112 th Congresses had proposed using NIST to coordinate an effort led by the private sector to develop a framework for cybersecurity, such as was envisioned by the executive order. Hundreds of entities have been involved in NIST's efforts, which led to release of the first version of the framework in February 2014. The framework is intended to provide broad guidance on cybersecurity using a risk-based approach that can be adapted to the needs of different CI sectors. It consists of three parts: The core is a common set of activities and outcomes applicable to all CI sectors It is organized into five functions— identify, protect, detect, respond, and recover — that are widely recognized components of any cybersecurity management lifecycle, along with associated programmatic and technical outcomes, for example, "access control" and "data-at-rest is protected." The profile describes an entity's current and target cybersecurity postures, based on business needs identified by considering the relevant core components. It can be used to support prioritization of action and measurement of progress. The current profile lists outcomes that are being achieved, while the target profile lists the outcomes needed to achieve desired cybersecurity goals. The implementation tiers characterize an entity's current and intended practices, which can range from "informal, reactive responses" (Tier 1) to "agile and risk-informed " approaches (Tier 4). The framework is not intended to be static but will be updated as required. Areas that NIST has already identified for improvement include authentication, automated sharing of indicators, assessment of the degree of conformity to risk-management requirements, cybersecurity workforce needs, data analytics, supply-chain risk management, technical standards relating to privacy, alignment of the framework with federal agency cybersecurity requirements, and international aspects and implications. Several of those are broadly recognized as key issues in cybersecurity. To assist in adoption and implementation of the framework by CI entities, DHS has developed the Critical Infrastructure Cyber Community C³ Voluntary Program. Its goals are to help CI entities understand and use the framework and obtain feedback from them on improvements. The executive order contains several additional provisions on CI cybersecurity: Acquisition and Contracting . The Secretary of Defense and the Administrator of General Services must make recommendations to the President on incorporating security standards in acquisition and contracting processes, including harmonization of cybersecurity requirements. Consultative Process. The Secretary of Homeland Security is required to establish a broad consultative process to coordinate improvements in the cybersecurity of critical infrastructure. Cybersecurity Workforce. The Secretary of Homeland Security is required to coordinate technical assistance to critical-infrastructure regulatory agencies on development of their cybersecurity workforce and programs. High- Risk Critical Infrastructure . The order requires the Secretary of Homeland Security to use consistent and objective criteria, the consultative process established under the order, and information from relevant stakeholders to identify and update annually a list of critical infrastructure for which a cyberattack could have catastrophic regional or national impact, but not including commercial information technology products or consumer information technology services. The Secretary must confidentially notify owners and operators of critical infrastructure that is so identified of its designation and provide a process to request reconsideration. Privacy and Civil Liberties. The order requires agencies to ensure incorporation of privacy and civil liberties protections in agency activities under the order, including protection from disclosure of information submitted by private entities, as permitted by law. The DHS Chief Privacy Officer and Officer for Civil Rights and Civil Liberties must assess risks to privacy and civil liberties of DHS activities under the order and recommend methods of mitigation to the Secretary in a public report. Agency privacy and civil liberties officials must provide assessments of agency activities to DHS. The order contains several requirements with deadlines, and other requirements with no associated dates. In March 2013, DHS announced that it had formed a task force with eight working groups focused on the various deliverables for which it is responsible. Several deliverables have specific associated dates: Instructions for producing unclassified threat reports (Secretary of Homeland Security, Attorney General, Director of National Intelligence) (Sec. 4(a)). Procedures for expansion of the Enhanced Cybersecurity Services Program (Secretary of Homeland Security) (Sec. 4(c)). Recommendations to the President on incentives to participate in the framework (Secretaries of Homeland Security, Commerce, and the Treasury) (Sec. 8(d)). Recommendations to the President on acquisitions and contracts (Secretary of Defense, Administrator of General Services) (Sec. 8(e)). Designation of critical infrastructure at greatest risk (Secretary of Homeland Security) (Sec. 9(a)). Publication of preliminary Cybersecurity Framework (Director of the National Institute of Standards and Technology) (Sec. 7(e)). Report on privacy and civil liberties, preceded by consultations (Chief Privacy Officer and Officer for Civil Rights and Civil Liberties of DHS) (Sec. 5(b)). Publication of final Cybersecurity Framework (Director of the National Institute of Standards and Technology) (Sec. 7(e)). Reports to the President on review of regulatory requirements (agencies with regulatory responsibilities for critical infrastructure) (Sec. 10(a)). Proposed additional risk mitigation actions (agencies with regulatory responsibilities for critical infrastructure) (Sec. 10(b)). Reports to the Office of Management and Budget on ineffective, conflicting, or burdensome requirements (agencies with regulatory responsibilities for critical infrastructure) (Sec. 10(c)). The order also includes more than 20 actions for which no specific date is provided. Some of the deliverables have been made publicly available, largely in accordance with the deadlines in the order, as noted above in the footnotes. Some provisions appeared to have had some effect soon after the order was issued. For example, the provision on expedited security clearances was apparently used to facilitate communication by the FBI with banks in response to a cyberattack in the spring of 2013 on several banks. The assessments of regulatory requirements and proposed actions focused on three agencies: DHS, the Environmental Protection Agency (EPA), and the Department of Health and Human Services (HHS). The Administration concluded that "existing regulatory requirements, when complemented with strong voluntary partnerships, are capable of mitigating cyber risks to our critical systems and information." Presidential Policy Directive 21 (PPD 21), Critical Infrastructure Security and Resilience , on protection of critical infrastructure, was released in tandem with Executive Order 13636. PPD 21 supersedes Homeland Security Presidential Directive 7 (HSPD 7), Critical Infrastructure Identification, Prioritization, and Protection, released December 17, 2003. The PPD seeks to strengthen both the cyber- and physical security and resilience of critical infrastructure by clarifying functional relationships among federal agencies, including the establishment of separate DHS operational centers for physical and cyber-infrastructure; identifying baseline requirements for information sharing, to facilitate timely and efficient information exchange between government and critical-infrastructure entities while respecting privacy and civil liberties; applying integration and analysis capabilities in DHS to prioritize and manage risks and impacts, recommend preventive and responsive actions, and support incident management and restoration efforts for critical infrastructure; and organizing research and development (R&D) to enable secure and resilient critical infrastructure, enhance impact-modeling capabilities, and support strategic DHS guidance. Description of functional relationships within DHS and across other federal agencies relating to critical infrastructure security and resilience (Secretary of Homeland Security). Analysis of public-private partnership models with recommended improvements (Secretary of Homeland Security). Convening of experts to identify baseline information and intelligence exchange requirements (Secretary of Homeland Security). Demonstration of "near real-time" situational-awareness capability for critical infrastructure (Secretary of Homeland Security). Updated National Infrastructure Protection Plan that addresses implementation of the directive (Secretary of Homeland Security). First quadrennial National Critical Infrastructure Security and Resilience R&D Plan (Secretary of Homeland Security). In addition to DHS, the directive describes specific responsibilities for the Departments of Commerce, Interior, Justice, and State, the Intelligence Community, the General Services Administration, the Federal Communications Commission, the sector-specific agencies, and all federal departments and agencies. E.O. 13636 was issued in the wake of the lack of enactment of cybersecurity legislation in the 112 th Congress, apparently at least in part as a response to that. That raises questions about what authority the President has to act on this matter through an executive order. That issue is discussed below. The issuance of an executive order frequently raises questions about whether the order exceeds the scope of the President's authority, in relation to the constitutional separation of powers and validly enacted legislation. Since the latter half of the 20 th century, these questions have typically been evaluated using the tripartite framework set forth by U.S. Supreme Court Justice Jackson in his concurring opinion in the case of Youngstown Sheet & Tube Company v. Sawyer . First, if the President has acted according to an express or implied grant of congressional authority, presidential "authority is at its maximum." Second, in situations where Congress has neither granted nor denied authority to the President, the President acts in reliance only "upon his own independent powers, but there is a zone of twilight in which he and Congress may have concurrent authority, or in which its distribution is uncertain." Third, in instances where presidential action is "incompatible with the express or implied will of Congress," the power of the President is at its minimum. In such a circumstance, presidential action must rest upon an exclusive Article II power. As an example of the first category, Congress has previously provided explicit statutory authority for the executive to regulate the security of private entities. For example, chemical facilities are subject to chemical facility anti-terrorism standards (CFATS) promulgated by the Department of Homeland Security (DHS), which include provisions requiring chemical facilities to take measures to protect against cyberthreats. Similarly, the Maritime Transportation Security Act (MTSA) gives the Coast Guard the authority to regulate the security of maritime facilities and vessels, including requiring security plans that contain provisions for the security of communications systems used in those facilities. In these and other situations where Congress has provided explicit regulatory authority to the executive branch related to cybersecurity, the President's authority to direct sector-specific agencies to coordinate, evaluate, develop, or implement appropriate cybersecurity standards pursuant to the executive order would appear to be at its maximum. In other cases, where there may only be congressional silence regarding the President's authority to direct action on cybersecurity issues, an argument could be made that the issuance of such an executive order falls within the "zone of twilight," assuming that the action could be concurrently justified under some explicit or implied power granted to the President by the Constitution. For example, Section 9 of E.O. 13636 directs the Secretary of Homeland Security to use a risk-based approach to identify critical infrastructure where a cybersecurity incident could result in catastrophic effects. While such identification is arguably authorized under the Homeland Security Act of 2002, it might alternatively be justified under the President's constitutional authority to request written opinions from the heads of executive departments. However, some past legislative proposals may be beyond the reach of unilateral executive action. For example, prior proposals to regulate the cybersecurity of critical infrastructure have also proposed limits on liability or safe harbors for regulated entities that comply with the regulatory schemes, because the creation of a regulatory scheme can have an adverse effect on the exposure of regulated entities to civil liability. The scope of such proposed limits has ranged from complete immunity, to lesser restrictions such as prohibitions against the awarding of punitive damages. Such limits on liability may also be made dependent upon an entity's satisfaction of its regulatory obligations, in order to create a further incentive for compliance. The abrogation of civil claims under common law or contract law without explicit congressional authorization may be difficult to justify on the executive's constitutional powers alone. Notably, the executive order does not purport to provide any similar liability safe harbors for private entities that comply with cybersecurity standards developed pursuant to the executive order. While it does direct the Secretary of Homeland Security to coordinate the establishment of a set of incentives to promote voluntary participation in the critical infrastructure program, it also acknowledges that some incentives may require legislation affirmatively authorizing such limitations. This is not to say that the executive order will have no impact on liability. The publication of recommendations or risk assessments, as provided under the executive order, may be used by litigants as evidence of the appropriate standard of care to apply in tort litigation resulting from a cybersecurity incident, even if such standards are not controlling. Similarly, it may not be possible for an executive order to authorize telecommunications providers to engage in more aggressive monitoring of communications networks to help identify cyber threats or attacks in real-time. Such an executive action would contravene current federal laws protecting electronic communications, and would be evaluated in the third category of Justice Jackson's Youngstown framework, where the President's power is at its minimum. Such an executive order would not be effective, unless such action fell within a power exclusively granted to the executive by the Constitution. Consistent with this analysis, E.O. 13636 does not purport to provide any authority for private telecommunications providers to engage in monitoring of their networks. While E.O. 13636 does not purport to create new authorities, there are commonalities between some of its provisions and some of the cybersecurity proposals from the 112 th and 113 th Congresses. A comparison of a selection of the issues covered by those proposals and the executive order is below. Several comprehensive legislative proposals on cybersecurity in the 112 th Congress received considerable attention, including a Senate bill, a set of bill proposals by the Obama Administration, and a report with recommendations from a House Republican task force, which informed several House bills. The various proposals differed both in some of the issues they addressed and in how they approached them. Among the issues addressed were the following: Cybersecurity workforce authorities and programs, Cybersecurity R&D, Data-breach notification, DHS authorities for protection of federal systems, FISMA reform, Information sharing, Penalties for cybercrime, Protection of privately held CI, including public/private sector collaboration and regulation of privately held CI, Public awareness about cybersecurity, and Supply-chain vulnerabilities. E.O. 13636 mainly addresses two of those topics: information sharing and protection of privately held CI. With respect to information sharing, the executive order does not provide exemptions from liability stemming from information sharing, which would require changes to current law. Several of the legislative proposals included such changes. Also, some proposals included the creation of new entities for information sharing, whereas the executive order uses existing mechanisms. With respect to protection of critical infrastructure, the provisions on designation of CI and identification of relevant regulations are related to those in some legislative proposals in the 112 th Congress. The role of NIST in developing the Cybersecurity Framework was not in the legislative proposals from that Congress, although several would have expanded the agency's role in cybersecurity. In the 113 th Congress, H.R. 624 and S. 2588 would address information sharing, and H.R. 3696 and S. 1353 would require NIST to lead a public/private effort similar to the process by which the Cybersecurity Framework is being developed. Both House bills passed in the House, H.R. 694 in April 2013 and H.R. 3696 in July 2014, but some provisions in each were controversial. Given the absence of enacted comprehensive cybersecurity legislation, some security observers have contended that the executive order is a necessary step in securing vital assets against cyberthreats. Proponents of the framework point to its ability to alleviate the problems created by a lack of understanding about cybersecurity issues and practices among different classes of stakeholders. They claim that the framework provides a common, nontechnical basis for developing consensus on how best to approach cybersecurity needs. Other observers, however, have raised concerns. Common themes by such critics have included the following claims: The order offers little more than do existing processes. Such critics point out that, for example, the Enhanced Cybersecurity Services program was in place before the release of the order, and that a variety of efforts have been underway to develop and adopt voluntary standards and best practices in cybersecurity for many years. Proponents of the order argue that it lays out and clarifies Obama Administration goals, requires specific deliverables and timelines, and that the framework and other provisions are in fact new with the executive order. The order could make enactment of legislation less likely. These critics express concern that Congress might decide to wait until the major provisions of the order have been fully implemented before considering legislation. Proponents state that immediate action was necessary in the absence of legislation, and that changes in current law are necessary no matter how successful the executive order might be, to provide liability protections for information sharing and to meet other needs. The process for developing the framework is either too slow or too rushed . Some observers believe that some actions to protect critical infrastructure are well-established and should be taken immediately, given the nature and extent of the current threat. They state that the year-long process to develop the framework may have delayed implementation of needed security measures, creating unnecessary and unacceptable risks. Others counter that widespread adoption of the framework requires consensus, which takes time to achieve, and that the one-year timeframe may be insufficient, given that the process for developing and updating consensus standards often takes several years. In fact, some CI entities have reportedly delayed implementation while waiting for additional federal guidance. Some also state that the framework process does not preclude entities from adopting established security measures immediately. The framework risks becoming a form of de facto regulation, or alternatively, its voluntary nature makes it insufficiently enforceable. Another concern of some is that the executive order could lead to government intrusiveness into private-sector activities, for example through increased regulation under existing statutory authority, while others contend that voluntary measures have a poor history of success. Some others, however, have argued that changes in the business environment—such as the advent of continuous monitoring, more powerful analytical tools, and a better prepared workforce—improve the likelihood that a voluntary approach can be successful. The order could lead to overclassification or underclassification of high-risk critical infrastructure by DHS. Some observers have expressed concern that the requirement in the order for DHS to designate high-risk critical infrastructure may be insufficiently clear and could lead to either harmfully expansive designations or inappropriate exclusions of entities. This might be particularly a problem if the criteria are not sufficiently validated. It appears to be too early in the implementation of the executive order to determine how effectively the concerns described above will be addressed and whether the responses will satisfy critics and skeptics. Overall, however, response to the order from the private sector—including critical-infrastructure entities, trade associations, and cybersecurity practitioners—appears to be largely positive. Some organizations and experts have urged adoption of the framework by CI entities. In August 2014, NIST requested public comments on implementation of the framework and posted more than 60 it received from various companies, trade associations, and other organizations. The responses demonstrate a range of understanding and implementation both across and within sectors and generally support the contention that additional experience will be necessary before the success of the framework at improving CI cybersecurity can be adequately assessed.

The federal role in cybersecurity has been a topic of discussion and debate for over a decade. Despite significant legislative efforts in the 112th Congress on bills designed to improve the cybersecurity of U.S. critical infrastructure (CI), no legislation on that issue was enacted in that Congress. In an effort to address the issue in the absence of enacted legislation, the White House issued an executive order in February 2013. Citing repeated cyber-intrusions into critical infrastructure and growing cyberthreats, Executive Order 13636, Improving Critical Infrastructure Cybersecurity, was an attempt to enhance security and resiliency of CI through voluntary, collaborative efforts involving federal agencies and owners and operators of privately owned CI, as well as use of existing federal regulatory authorities. Entities posing a significant threat to the cybersecurity of CI assets include cyberterrorists, cyberspies, cyberthieves, cyberwarriors, and cyberhacktivists. E.O. 13636 has attempted to address such threats by, among other things, expanding to other CI sectors an existing Department of Homeland Security (DHS) program for information sharing and collaboration between the government and the private sector; establishing a broadly consultative process for identifying CI with especially high priority for protection; requiring the National Institute of Standards and Technology (NIST) to lead in developing a cybersecurity framework of standards and best practices for protecting CI; and directing regulatory agencies to determine the adequacy of existing requirements and their authority to establish additional ones to address the risks. Among the major issues covered by the unenacted legislative proposals in the 112th Congress, E.O. 13636 mainly addresses two: information sharing and protection of privately held critical infrastructure. It does not provide exemptions from liability stemming from information sharing, which would require changes to current law. Several of the legislative proposals included such changes. With respect to protection of critical infrastructure, the provisions on designation of CI and identification of relevant regulations are related to those in some legislative proposals. In the 113th Congress, some bills would provide explicit statutory authority for information-sharing along the lines of some bills in the 112th Congress. Others would authorize activities on developing a cybersecurity framework similar to those in the executive order. The issuance of E.O. 13636, as with many other executive orders, raises questions about whether the order exceeds the scope of the President's authority, in relation to the constitutional separation of powers and validly enacted legislation. While answers to those questions are complex, the executive order specifies that implementation will be consistent with applicable law and that nothing in the order provides regulatory authority to an agency beyond that under existing law. Overall, response to the executive order has been optimistic. Given the absence of comprehensive cybersecurity legislation, some security observers contend that the order is a necessary step in securing vital assets against cyberthreats. Others have argued, in contrast, that it offers little more than do existing processes, that it could make enactment of a bill less likely, or that it could lead to government intrusiveness into private-sector activities, for example through increased regulation under existing statutory authority. Despite considerable progress in meeting the specific objectives in the executive order, especially the NIST Framework, it still appears to be too early in the implementation of the order to determine whether such concerns will be addressed to the satisfaction of critics and skeptics.

The 115 th Congress continues its interest in U.S. research and development (R&D) and in evaluating support for federal R&D activities. The federal government has played an important role in supporting R&D efforts that have led to scientific breakthroughs and new technologies, from jet aircraft and the internet to communications satellites, shale gas extraction, and defenses against disease. In recent years, widespread concerns about the federal debt, recent and projected federal budget deficits, and federal budget caps have driven difficult decisions about the prioritization of R&D, both in the context of the entire federal budget and among competing needs within the federal R&D portfolio. While these factors continue to exist, increases in the budget caps for FY2018 and FY2019 may reduce some of the pressure affecting these decisions. The U.S. government supports a broad range of scientific and engineering R&D. Its purposes include specific concerns such as addressing national defense, health, safety, the environment, and energy security; advancing knowledge generally; developing the scientific and engineering workforce; and strengthening U.S. innovation and competitiveness in the global economy. Most of the R&D funded by the federal government is performed in support of the unique missions of individual funding agencies. The federal R&D budget is an aggregation of the R&D activities of these agencies. There is no single, centralized source of R&D funds. Agency R&D budgets are developed internally as part of each agency's overall budget development process. R&D funding may be included either in accounts that are entirely devoted to R&D or in accounts that include funding for non-R&D activities. Agency budgets are subjected to review, revision, and approval by the Office of Management and Budget (OMB) and become part of the President's annual budget submission to Congress. The federal R&D budget is then calculated by aggregating the R&D activities of each federal agency. Congress plays a central role in defining the nation's R&D priorities as it makes decisions about the level and allocation of R&D funding—overall, within agencies, and for specific programs. Some Members of Congress have expressed concerns about the level of federal spending (for R&D and for other purposes) in light of the federal deficit and debt. Other Members of Congress have expressed support for increased federal spending for R&D as an investment in the nation's future competitiveness. As Congress acts to complete the FY2019 appropriations process, it faces two overarching issues: the amount of the federal budget to be spent on federal R&D and the prioritization and allocation of the available funding. This report begins with a discussion of the overall level of President Trump's FY2019 R&D request, followed by analyses of the R&D funding request from a variety of perspectives and for selected multiagency R&D initiatives. The remainder of the report then provides discussion and analysis of the R&D budget requests of selected federal departments and agencies that, collectively, account for approximately 99% of total federal R&D funding. Selected terms associated with federal R&D funding are defined in the text box on the next page. Appendix A provides a list of acronyms and abbreviations. On February 12, 2018, President Trump released his proposed FY2019 budget. In addition, on the same day, OMB issued an addendum that includes a request for an additional $12.9 billion in nondiscretionary R&D funding. According to OMB, the request for these additional funds was made possible by changes to spending caps in the Budget Control Act (BCA; P.L. 112-25 ) that were enacted on February 9, 2018, in the Bipartisan Budget Act of 2018 ( P.L. 115-123 ). In FY2018, the Trump Administration began using a new definition for development in its R&D calculations ("experimental development"). The new definition excludes some development activities, primarily at the Department of Defense (DOD) and the National Aeronautics and Space Administration (NASA), that had been characterized as development in previous budgets. The new definition (experimental development) is used throughout this report for FY2017 and FY2019, except in the section " Department of Defense ." According to OMB, the funds no longer included in the definition of development are, nevertheless, "requested in the FY 2019 budget request and support the development efforts to upgrade systems that have been fielded or have received approval for full rate production and anticipate production funding in the current or subsequent fiscal year." (See box below entitled "Caveats with Respect to Analysis of the FY2019 Budget Request" for additional information.) Subsequent to the release of the President's budget, Congress enacted the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), appropriating full-year funding for FY2018, rendering the CR levels identified in the budget no longer relevant. Therefore, the analysis of government-wide R&D funding in this report preceding the individual agency analyses compares the President's request for FY2019 to the FY2017 level. As information about the agencies' FY2018 R&D levels becomes available, the agency sections of this report will be updated to reflect that information and to make comparisons to the President's FY2019 request; some agency sections have been updated. Under the new definition of R&D, and including the $12.9 billion proposed in the addendum, President Trump is proposing approximately $131.0 billion for R&D for FY2019, an increase of $5.7 billion above the FY2017 level (4.5%). Adjusted for inflation, the President's FY2019 R&D request represents a constant-dollar increase of 1.2% from the FY2017 actual level. The President's R&D request includes continued funding for existing single-agency and multiagency programs and activities, as well as new initiatives. This report provides government-wide, multiagency, and individual agency analyses of the President's FY2019 request as it relates to R&D and related activities. Additional information and analysis will be included as the House and Senate act on the President's budget request through appropriations bills. Federal R&D funding can be analyzed from a variety of perspectives that provide different insights. The following sections examine the data by agency, by the character of the work supported, and by a combination of these two perspectives. Congress makes decisions about R&D funding through the authorization and appropriations processes primarily from the perspective of individual agencies and programs. Table 1 provides data on R&D funding by agency for FY2017 (actual) and FY2019 (request). Funding data for FY2018 were not included in the Trump Administration's FY2019 budget because the FY2018 budget had not been completed at the time the FY2019 budget request was released. Under President Trump's FY2019 budget request, eight federal agencies would receive more than 96% of total federal R&D funding: the Department of Defense, 48.4%; Department of Health and Human Services (HHS), primarily the National Institutes of Health (NIH), 20.9%; Department of Energy (DOE), 10.7%; National Aeronautics and Space Administration, 9.0%; National Science Foundation (NSF), 3.5%; Department of Agriculture (USDA), 1.6%; Department of Commerce (DOC), 1.2%; and Veterans Affairs (VA), 1.1%. This report provides an analysis of the R&D budget requests for these agencies, as well as for the Department of Homeland Security (DHS), Department of the Interior (DOI), Department of Transportation (DOT), and Environmental Protection Agency (EPA). Excluding the $12.9 billion in R&D funding requested in the addendum, nearly every federal agency would see its R&D funding decrease under the President's FY2019 request compared to their FY2017 levels. The only agencies with increased R&D funding in FY2019 would be DOD (up $7.959 billion, 16.2%), the Patient-Centered Outcomes Research Institute, (up $159 million, 34.3%), and the Smithsonian Institution (up $20 million, 8.0%). The largest declines (as measured in dollars) would occur in the budgets of HHS (down $9.480 billion, 27.7%), DOE (down $2.211 billion, 14.8%), NSF (down $1.761 billion, 29.7%), USDA (down $671 million, 26.0%), and the DOC (down $433 million, 24.1%). Federal R&D funding can also be examined by the character of work it supports—basic research, applied research, or development—and by funding provided for construction of R&D facilities and acquisition of major R&D equipment. (See Table 2 .) President Trump's FY2019 request includes $27.341 billion for basic research, down $6.986 billion (20.4%) from FY2017; $31.648 billion for applied research, down $6.500 billion (17.0%); $56.696 billion for development, up $6.333 billion (12.6%); and $2.371 billion for facilities and equipment, down $80 million (3.3%). A primary policy justification for public investments in basic research and for incentives (e.g., tax credits) for the private sector to conduct research is the view, widely held by economists, that the private sector will, left on its own, underinvest in basic research from a societal perspective. The usual argument for this view is that the social returns (i.e., the benefits to society at large) exceed the private returns (i.e., the benefits accruing to the private investor, such as increased revenues or higher stock value). Other factors that may inhibit corporate investment in basic research include long time horizons for achieving commercial applications (diminishing the potential returns due to the time value of money), high levels of technical risk/uncertainty, shareholder demands for shorter-term returns, and asymmetric and imperfect information. The federal government is the nation's largest supporter of basic research, funding 44% of U.S. basic research in 2016. Business funded 27% of U.S. basic research in 2016, with state governments, universities, and other nonprofit organizations funding the remaining 29%. For U.S. applied research, business is the primary funder, accounting for an estimated 53% in 2016, while the federal government accounted for an estimated 35%. State governments, universities, and other nonprofit organizations funded the remaining 12%. Business also provides the vast majority of U.S. funding for development. Business accounted for 82% of development funding in 2016, while the federal government provided 16%. State governments, universities, and other nonprofit organizations funded the remaining 2% (see Figure 1 ). Federal R&D funding can also be viewed from the combined perspective of each agency's contribution to basic research, applied research, development, and facilities and equipment. ( Table 3 lists the three agencies with the most funding for each character of work classification.) The overall federal R&D budget reflects a wide range of national priorities, including supporting advances in spaceflight, developing new and affordable sources of energy, and understanding and deterring terrorist groups. These priorities and the mission of each individual agency contribute to the composition of that agency's R&D spending (i.e., the allocation among basic research, applied research, development, and facilities and equipment). In the President's FY2019 budget request, the Department of Health and Human Services, primarily NIH, would account for nearly half (44.3%) of all federal funding for basic research. HHS would also be the largest federal funder of applied research, accounting for about 39.0% of all federally funded applied research in the President's FY2019 budget request. DOD would be the primary federal funder of development, accounting for 87.4% of total federal development funding in the President's FY2019 budget request. For many years, presidential budgets have reported on multiagency R&D initiatives and have often provided details of agency funding for these initiatives. Some of these efforts have a statutory basis—for example, the Networking and Information Technology Research and Development (NITRD) program, the National Nanotechnology Initiative (NNI), and the U.S. Global Change Research Program (USGCRP). These programs generally produce annual budget supplements identifying objectives, activities, funding levels, and other information, usually published shortly after the presidential budget release. Other multiagency R&D initiatives have operated at the discretion of the President without such a basis and may be eliminated at the discretion of the President. President Trump's FY2019 budget is largely silent on funding levels for these efforts and whether any or all of the nonstatutory initiatives will continue. Some activities related to these initiatives are discussed in agency budget justifications and may be addressed in the agency analyses later in this report. This section provides available multiagency information on these initiatives and will be updated as additional information becomes available. Established by the High-Performance Computing Act of 1991 ( P.L. 102-194 ), the Networking and Information Technology Research and Development program is the primary mechanism by which the federal government coordinates its unclassified networking and information technology R&D investments in areas such as supercomputing, high-speed networking, cybersecurity, software engineering, and information management. In FY2018, 21 agencies are NITRD members; non-member agencies also participate in NITRD activities. NITRD efforts are coordinated by the National Science and Technology Council (NSTC) Subcommittee on Networking and Information Technology Research and Development. P.L. 102-194 , as reauthorized by the American Innovation and Competitiveness Act of 2017 ( P.L. 114-329 ), requires the director of NITRD to prepare an annual report to be delivered to Congress along with the President's budget request. This annual report is to include, among other things, detailed information on the program's budget for the current fiscal year, previous fiscal year, and proposed for the next fiscal year. The latest annual report was published in August 2018. President Trump is requesting $5,277.6 million for NITRD research in FY2019, $126.1 million (2.4%) more than the estimated FY2018 level. In FY2017, NNI funding was $5,126.4 million. Additional NITRD information can be obtained at https://www.nitrd.gov . The U.S. Global Change Research Program coordinates and integrates federal research and applications to understand, assess, predict, and respond to human-induced and natural processes of global change. The program seeks to advance global climate change science and to "build a knowledge base that informs human responses to climate and global change through coordinated and integrated Federal programs of research, education, communication, and decision support." In FY2018, 13 departments and agencies participated in the USGCRP. USGCRP efforts are coordinated by the NSTC Subcommittee on Global Change Research. The Global Change Research Act of 1990 ( P.L. 101-606 ) requires annual reporting to Congress on federal budget and spending by agency on global change research. In almost each of the past 17 years, language in appropriations laws has required the President to submit a comprehensive report to the appropriations committees "describing in detail all Federal agency funding, domestic and international, for climate change programs, projects, and activities … including an accounting of funding by agency…." The most recent report was submitted in December 2016 for FY2017. This section will be updated when the USGCRP updates its budget information. Additional USGCRP information can be obtained at http://www.globalchange.gov . Launched in FY2001, the National Nanotechnology Initiative is a multiagency R&D initiative to advance understanding and control of matter at the nanoscale, where the physical, chemical, and biological properties of materials differ in fundamental and useful ways from the properties of individual atoms or bulk matter. In 2003, Congress enacted the 21 st Century Nanotechnology Research and Development Act ( P.L. 108-153 ), providing a legislative foundation for some of the activities of the NNI. NNI efforts are coordinated by the NSTC Subcommittee on Nanoscale Science, Engineering, and Technology (NSET). In FY2019, the President's request includes NNI funding for 16 federal departments and independent agencies and commissions with budgets dedicated to nanotechnology R&D. The NSET includes other federal departments and independent agencies and commissions with responsibilities for health, safety, and environmental regulation; trade; education; intellectual property; international relations; and other areas that might affect or be affected by nanotechnology. The 21 st Century Nanotechnology Research and Development Act ( P.L. 108-153 ) requires the NSTC to prepare an annual report to be delivered to Congress at the time the President's budget request is sent to Congress. This annual report is to include detailed information on the program's budget for the current fiscal year and the program's proposed budget for the next fiscal year, as well as additional information and data related to the performance of the program. The latest annual report was published in August 2018. President Trump is requesting $1,395.6 million for NNI research in FY2019, $81.8 million (5.5%) less than the estimated FY2018 level. In FY2017, NNI funding was $1,552.3 million. Additional NNI information can be obtained at http://www.nano.gov . Presidential initiatives without statutory foundations in operation at the end of the Obama Administration, but not explicitly addressed in President Trump's FY2018 or FY2019 budgets, include the Advanced Manufacturing Partnership (AMP, including the National Robotics Initiative [NRI] and the National Network for Manufacturing Innovation [NNMI]), the Cancer Moonshot, the BRAIN Initiative, the Precision Medicine Initiative (PMI), the Materials Genome Initiative, and an effort to doubling federal funding for clean energy R&D. Some of the activities of these initiatives are discussed in agency budget justifications and the agency analyses later in this report. The remainder of this report provides a more in-depth analysis of R&D in 12 federal departments and agencies that, in aggregate, receive nearly 99% of total federal R&D funding. Agencies are presented in order of the size of their FY2019 R&D budget requests, with the largest presented first. Annual appropriations for these agencies are provided through 9 of the 12 regular appropriations bills. For each agency covered in this report, Table 7 shows the corresponding regular appropriations bill that provides primary funding for the agency, including its R&D activities. Because of the way that agencies report budget data to Congress, it can be difficult to identify the portion that is R&D. Consequently, R&D data presented in the agency analyses in this report may differ from R&D data in the president's budget or otherwise provided by OMB. Funding for R&D is often included in appropriations line items that also include non-R&D activities; therefore, in such cases, it may not be possible to identify precisely how much of the funding provided in appropriations laws is allocated to R&D specifically. In general, R&D funding levels are known only after departments and agencies allocate their appropriations to specific activities and report those figures. As of the date of this report, the House had completed action on six of the 12 regular appropriations bills; the Senate had completed action on nine of the bills. Five of the 12 had been enacted as law: the Department of Defense Appropriations Act; Energy and Water Development and Related Agencies Appropriations Act; Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act; Legislative Branch Appropriations Act; and Military Construction and Veterans Affairs, and Related Agencies Appropriations Act. Division C of P.L. 115-245 provides for continuing appropriations for the agencies included in the remaining seven bills until "the enactment into law of an appropriation for any project or activity provided for in this Act; (2) the enactment into law of the applicable appropriations Act for fiscal year 2019 without any provision for such project or activity; or (3) December 7, 2018." This report will be updated as Congress takes additional actions to complete the FY2019 appropriations process. In addition to this report, CRS produces individual reports on each of the appropriations bills. These reports can be accessed via the CRS website at http://www.crs.gov/iap/appropriations . Also, the status of each appropriations bill is available on the CRS web page, Status Table of Appropriations , available at http://www.crs.gov/AppropriationsStatusTable/Index . The mission of the Department of Defense is "to provide the military forces needed to deter war and to protect the security of our country." Congress supports research and development activities at DOD primarily through the department's Research, Development, Test, and Evaluation (RDT&E) funding. These funds support the development of the nation's future military hardware and software and the science and technology base upon which those products rely. Nearly all of what DOD spends on RDT&E is appropriated in Title IV of the annual defense appropriations bill. (See Table 8 .) However, RDT&E funds are also appropriated in other parts of the bill. For example, RDT&E funds are appropriated as part of the Defense Health Program, the Chemical Agents and Munitions Destruction Program, and the National Defense Sealift Fund. The Defense Health Program (DHP) supports the delivery of health care to DOD personnel and their families. DHP funds (including the RDT&E funds) are requested through the Defense-wide Operations and Maintenance appropriations request. The program's RDT&E funds support congressionally directed research on breast, prostate, and ovarian cancer; traumatic brain injuries; orthotics and prosthetics; and other medical conditions. Congress appropriates funds for this program in Title VI (Other Department of Defense Programs) of the defense appropriations bill. The Chemical Agents and Munitions Destruction Program supports activities to destroy the U.S. inventory of lethal chemical agents and munitions to avoid future risks and costs associated with storage. Funds for this program are requested through the Defense-wide Procurement appropriations request. Congress appropriates funds for this program also in Title VI. The National Defense Sealift Fund supports the procurement, operation and maintenance, and research and development associated with the nation's naval reserve fleet and supports a U.S. flagged merchant fleet that can serve in time of need. In some fiscal years, RDT&E funding for this effort is requested in the Navy's Procurement request and appropriated in Title V (Revolving and Management Funds) of the appropriation bill. RDT&E funds also have been requested and appropriated as part of DOD's separate funding to support efforts in what the George W. Bush Administration termed the Global War on Terror (GWOT), and what the Obama and Trump Administration have referred to as Overseas Contingency Operations (OCO). In appropriations bills, the term Overseas Contingency Operations/Global War on Terror (OCO/GWOT) has been used; President Trump's FY2019 budget uses the term Overseas Contingency Operations. Typically, the RDT&E funds appropriated for OCO/GWOT activities go to specified Program Elements (PEs) in Title IV. In addition, OCO/GWOT-related requests/appropriations have included money for a number of transfer funds. In the past, these have included the Iraqi Freedom Fund (IFF), the Iraqi Security Forces Fund, the Afghanistan Security Forces Fund, and the Pakistan Counterinsurgency Capability Fund. Congress typically has made a single appropriation into each such fund and authorized the Secretary to make transfers to other accounts, including RDT&E, at his discretion. These transfers are eventually reflected in Title IV prior-year funding figures. It should be noted that the FY2018 enacted funding levels were not known at the time the President's FY2019 budget was prepared, as the budget process had not been completed. For FY2019, the Trump Administration is requesting $92.365 billion for DOD's Title IV RDT&E PEs (base plus OCO/GWOT), $1.783 billion (2.0%) above the enacted FY2018 level. (See Table 8 .) In addition, the request includes $710.6 million in RDT&E through the Defense Health Program (DHP; down $1.329 billion, 65.2% from FY2018), $886.7 million in RDT&E through the Chemical Agents and Munitions Destruction program (up $47.3 million, 5.6% from FY2018), and $1.6 million for the Inspector General for RDT&E-related activities (down $1.2 million, 42.9% from FY2018). The FY2019 budget included no RDT&E funding via the National Defense Sealift Fund, the same as the FY2018 enacted level. On June 28, 2018, the House passed the Department of Defense Appropriations Act, 2019 ( H.R. 6157 ). The bill includes $91.241 billion for Title IV base RDT&E funding and $1.181 billion in OCO/GWOT base RDT&E funding for a total of $92.422 billion. This represents an increase of $1.840 billion (2.0%) over the FY2018 enacted Title IV RDT&E funding level (base and OCO/GWOT), and an increase of $57 million (0.1%) above the request level. The House-passed bill would provide DHP with $1.466 billion in R&D funding for FY2019, $573 million (28.1%) below the FY2018 enacted level and $756 million (106.3%) above the FY2019 request; the Chemical Agents and Munitions Destruction program with $887 million for RDT&E, up $47 million (5.6%) from the FY2018 level and equal to the request; no funding for National Defense Sealift Fund RDT&E, the same as the FY2018 enacted level and the FY2019 request; and $1.6 million for the Inspector General for RDT&E-related work, $1.2 million (42.9%) below the FY2018 enacted level and equal to the FY2019 request. On August 23, 2018, the Senate passed the Department of Defense Appropriations Act, 2019 ( H.R. 6157 , as amended). The bill includes $95.132 billion for Title IV base RDT&E funding and $1.176 billion in OCO/GWOT base RDT&E funding for a total of $96.308 billion. This represents an increase of $5.726 billion (6.3%) over the FY2018 enacted Title IV RDT&E funding level (base and OCO/GWOT), an increase of $3.943 billion (4.3%) above the request, and an increase of $3.885 billion (4.2%) above the House-passed level. The Senate-passed bill would provide DHP with $1.674 billion in R&D funding for FY2019, $365 million (17.9%) below the FY2018 enacted level, $963 million (135.6%) above the request, and $208 million (14.2%) above the House-passed level; the Chemical Agents and Munitions Destruction program with $887 million for RDT&E, up $47 million (5.6%) from the FY2018 enacted level, and equal to the request and House-passed levels; the National Defense Sealift Fund with no funding for RDT&E, the same as the FY2018 enacted level, FY2019 request, and House-passed level; and the Inspector General with $4.0 million for RDT&E-related work, $1.2 million (42.0%) above the FY2018 enacted level, $2.4 million (148.6%) above the request and House-passed levels. For FY2019, Division A of P.L. 115-245 , the Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019 and Continuing Appropriations Act, 2019, provides $94.897 billion for Title IV base RDT&E funding and $1.193 billion in OCO/GWOT base RDT&E funding for a total of $96.090 billion. This represents an increase of $5.508 billion (6.1%) over the FY2018 enacted Title IV RDT&E funding level (base and OCO/GWOT), an increase of $3.725 billion (4.0%) above the request, an increase of $3.668 billion (4.0%) above the House-passed level, and $217 million (0.2%) below the Senate-passed bill. For FY2019, Division A of P.L. 115-245 also provides: $2.181 billion for DHP RDT&E, $142 million (6.9%) above the FY2018 enacted level, $1.470 billion (206.9%) above the request, $715 million (48.7%) above the House-passed level, and $507 million (30.3%) above the Senate-passed level; $887 million for Chemical Agents and Munitions Destruction program RDT&E, up $47 million (5.6%) from the FY2018 enacted level, and equal to the request, House-passed, and Senate-passed levels; no funding for National Defense Sealift Fund RDT&E, equal to the FY2018 enacted, FY2019 request, House-passed, and Senate-passed levels; and $4.0 million for Inspector General RDT&E activities, $1.2 million (42.0%) above the FY2018 enacted level, $2.4 million (148.6%) above the request and House-passed levels, and equal to the Senate-passed level. The military departments each request and receive their own RDT&E funding. So do various DOD agencies (e.g., the Missile Defense Agency and the Defense Advanced Research Projects Agency), through the Defense-wide account. The Director, Operational Test and Evaluation (OTE), receives a separate appropriation. For FY2019, Division A of P.L. 115-245 provides: the Army with $11.384 billion in RDT&E funding (base plus OCO/GWOT), $481 million (4.4%) above the FY2018 enacted level, $900 million (8.6%) above the request, $971 million (9.3%) above the House-passed levels, and $247 million (2.2%) above the Senate-passed level; the Navy with $18.678 billion in RDT&E funding (base plus OCO/GWOT), $440 million (2.4%) above the FY2018 enacted level, $29 million (0.2%) above the request, $852 million (4.8%) above the House-passed level, and $482 million (2.5%) below the Senate-passed level; the Air Force with $41.551 billion in RDT&E funding (base plus OCO/GWOT), $3.738 billion (9.9%) above the FY2018 enacted level, $1.059 billion (2.6%) above the request, $320 million (0.8%) above the House-passed level, and $367 million (0.9%) above the Senate-passed level; the Defense-wide account with $24.095 billion in RDT&E funding (base plus OCO/GWOT), $679 million (2.9%) above the FY2018 enacted level, $1.578 billion (7.0%) above the request, $1.365 billion (6.0%) above the House-passed level, and $350 million (1.4%) below the Senate-passed level; and OTE with $381 million in RDT&E funding (base plus OCO/GWOT), $170 million (80.7%) above the FY2018 enacted level, $160 million (72.4%) above the request and the House-passed level, and equal to the Senate-passed level. RDT&E funding can also be characterized by budget activity (i.e., the type of RDT&E supported). Those budget activities designated as 6.1, 6.2, and 6.3 (basic research, applied research, and advanced technology development) constitute what is called DOD's Science and Technology (S&T) program. Budget activities 6.4 and 6.5 focus on the development of specific weapon systems or components for which an operational need has been determined and an acquisition program established. Budget activity 6.6 provides management support, including support for test and evaluation facilities. Budget activity 6.7 supports the development of system improvements in existing operational systems. Many congressional policymakers are particularly interested in DOD S&T program funding since these funds support the development of new technologies and the underlying science. Some in the defense community see ensuring adequate support for S&T activities as imperative to maintaining U.S. military superiority into the future. The knowledge generated at this stage of development may also contribute to advances in commercial technologies. The FY2019 request for Title IV S&T funding (base plus OCO/GWOT) is $13.700 billion, $1.194 billion (8.0%) below the FY2018 enacted level. The House-passed bill would provide $14.648 billion in FY2019 level for Title IV S&T funding, $426 million (2.9%) below the FY2018 level and $768 million (5.6%) above the FY2019 request. The Senate-passed bill would provide $15.441 billion for Title IV S&T funding, $547 million (3.7%) above the FY2018 level, $1.740 billion (12.7%) above the request, and $972 million (6.7%) above the House-passed level. Division A of P.L. 115-245 provides $15.973 billion for Title IV S&T funding in FY2019 (base plus OCO/GWOT), $1.079 billion (7.2%) above the FY2018 enacted level, $2.273 billion (16.6%) above the request, $1.505 billion (10.4%) above the House-passed levels, and $533 million (3.5%) above the Senate-passed level. Within the S&T program, basic research (6.1) receives special attention, particularly by the nation's universities. DOD is not a large supporter of basic research when compared to NIH or NSF. However, over half of DOD's basic research budget is spent at universities, and it is among the largest sources of federal funds for university research in some areas of science and technology, such as electrical engineering and materials science. The Trump Administration is requesting $2.269 billion for DOD basic research for FY2019, $74.0 million (3.2%) below the FY2018 enacted level. The House-passed bill would provide $2.298 billion in FY2019 for DOD basic research, $45 million (1.9%) below the FY2018 level and $29 million (1.3%) above the FY2019 request. The Senate-passed bill would provide $2.798 billion in FY2019 for DOD basic research, $455 million (19.4%) above the request, $529 million (23.3%) above the request, and $500 million (21.8%) above the House-passed level. Division A of P.L. 115-245 provides $2.530 billion in Title IV (base plus OCO/GWOT) FY2019 for DOD basic research, $186 million (8.0%) above the FY2018 enacted level, $260 million (11.5%) above the request, $231 million (10.1%) above the House-passed levels, and $269 million (9.6%) below the Senate-passed level. The mission of the Department of Health and Human Services (HHS) is "to enhance and protect the health and well-being of all Americans ... by providing for effective health and human services and fostering advances in medicine, public health, and social services." This section focuses on HHS research and development funded through the National Institutes of Health, an HHS agency that accounts for more than 95% of total HHS R&D funding. Other HHS agencies that provide funding for R&D include the Centers for Disease Control and Prevention (CDC), the Centers for Medicare and Medicaid Services (CMS), the Food and Drug Administration (FDA), the Agency for Healthcare Research and Quality (AHRQ), Health Resources and Services Administration (HRSA), and the Administration for Children and Families (ACF). NIH is the primary agency of the federal government charged with performing and supporting biomedical and behavioral research. It also has major roles in training biomedical researchers and disseminating health information. The NIH mission is "to seek fundamental knowledge about the nature and behavior of living systems and the application of that knowledge to enhance health, lengthen life, and reduce illness and disability." The agency's organization consists of the NIH Office of the Director (OD) and 27 institutes and centers (ICs). The OD sets overall policy for NIH and coordinates the programs and activities of all NIH components, particularly in areas of research that involve multiple institutes. The ICs focus on particular diseases, areas of human health and development, or aspects of research support. Each IC plans and manages its own research programs in coordination with OD. As shown in Table 9 , separate appropriations are provided to 24 of the 27 ICs, to OD, and to an intramural Buildings and Facilities account. The other three centers, which perform centralized support services, are funded through assessments on the IC appropriations. NIH supports and conducts a wide range of basic and clinical research, research training, and health information dissemination across all fields of biomedical and behavioral sciences. About 10% of the NIH budget supports intramural research projects conducted by the nearly 6,000 NIH scientists, most of whom are located on the NIH campus in Bethesda, MD. More than 80% of NIH's budget goes out to the extramural research community in the form of grants, contracts, and other awards. This funding supports research performed by more than 300,000 nonfederal scientists and technical personnel who work at more than 2,500 universities, hospitals, medical schools, and other research institutions. Funding for NIH comes primarily from the annual Labor, HHS, and Education (LHHS) appropriations act, with an additional amount for Superfund-related activities from the Interior/Environment appropriations act. Those two appropriations acts provide NIH's discretionary budget authority. In addition, NIH has received mandatory funding of $150 million annually that is provided in the Public Health Service (PHS) Act for a special program on type 1 diabetes research and funding from a PHS Act transfer. The total funding available for NIH activities, taking account of add-ons and transfers, is known as the NIH program level. President Trump's FY2019 budget requested an NIH program level total of $34.792 billion, a decrease of $2.519 billion (6.8%) from the FY2018 program level of $37.311 billion (see Table 9 ). The FY2019 program level request included $33.847 in discretionary budget authority, $741 million in PHS Act transfers, $150 million in mandatory type 1 diabetes research, and $54 million for Superfund-related research. Under the request, Buildings and Facilities would have received a 55% increase in funding for FY2019 compared to FY2018, and all other ICs would have received a decrease compared to FY2018. (Readers should be aware that final FY2018 appropriations had not been enacted during the period in which the FY2019 President's request was being formulated. While the total request for NIH represented a decrease from FY2018 enacted levels, it represented an increase from FY2017 enacted levels and the FY2018 continuing resolution levels that were in place at the time FY2019 request levels were being determined). The FY2019 NIH budget request proposed the consolidation of other existing HHS research programs to establish three new NIH Institutes: the National Institute for Occupational Safety and Health (NIOSH), the National Institute on Disability, Independent Living, and Rehabilitation Research (NIDILRR), and the National Institute for Research on Safety and Quality (NIRSQ) (formerly the Agency for Healthcare Research and Quality (AHRQ)). The creation of three new NIH Institutes would require an amendment to the Public Health Service Act, considering that a provision in the NIH Reform Act of 2006 ( P.L. 109-482 ; PHS Act §401[d]) states that the number of NIH ICs "may not exceed a total of 27." The budget request would have provided discretionary budget authority for these three new institutes at the levels proposed in Table 9 , with an additional $55 million in mandatory funding also provided for the Energy Employees Occupational Illness Compensation Program Act for NIOSH. The main funding mechanism NIH uses to support extramural research is research project grants (RPGs), which are competitive, peer-reviewed, and largely investigator-initiated. Historically, over 50% of the NIH budget is used to support RPGs, which include salaries for investigators and research staff. The President's FY2019 budget proposal included two initiatives designed to "stretch available grant dollars" by placing limits on salaries for investigators. The FY2019 budget proposed to cap the percentage of an investigator's salary that can be paid with grant funds to 90%. It also proposed to cap investigator salaries at $152,000, a 19% reduction from the current $187,000 limit. The FY2019 Trump budget proposed shifting the $150 million in mandatory funding for research on type 1 diabetes authorized under the PHS Act §330B to discretionary funding within the budget of the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK). Additionally, the FY2019 program level request proposed $741 million in funding transferred to NIH by the PHS Program Evaluation Set-Aside, also called the evaluation tap. Discretionary funding for certain programs at NIH and other HHS agencies that are authorized under the PHS Act can be subject to an assessment under Section 241 of the PHS Act (42 U.S.C. §238j). This provision authorizes the Secretary to use a portion of eligible appropriations to study the effectiveness of federal health programs and to identify improvements. Although the PHS Act limits the tap to no more than 1% of eligible appropriations, in recent years, annual LHHS appropriations acts have specified a higher amount (2.5% in FY2018) and have also typically directed specific amounts of funding from the tap for transfer to a number of HHS programs. The assessment has the effect of redistributing appropriated funds for specific purposes among PHS and other HHS agencies. NIH, with the largest budget among the PHS agencies, has historically been the largest "donor" of program evaluation funds; until recently, it had been a relatively minor recipient. Provisions in recent LHHS appropriations acts have directed specific tap transfers to NIH, making NIH a net recipient of tap funds. The FY2019 total NIH budget request also included $711 million in resources made available through the 21 st Century Cures Act (see text box below). Per the authorization, $400 million would be transferred to the National Cancer Institute (NCI) for the Cancer Moonshot initiative; $57 million to the National Institute of Neurological Disorders and Stroke (NINDS) and $57 million to the National Institute on Mental Health (NIMH) for the Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative; and the remaining $196 million in the Innovation Account for the Precision Medicine Initiative and regenerative medicine research. The House Appropriations Committee-reported version of the FY2019 LHHS appropriations bill ( H.R. 6470 ) would have provided the NIH with a total of $37.411 billion in discretionary budget authority. Adding to this total the amounts for the evaluation tap ($923 million), Superfund-related activities ($80 million), and the mandatory type 1 diabetes program ($150 million), would have brought the program-level total to $38.564 billion (see Table 9 ). The Senate Appropriations Committee-reported version of the FY2019 LHHS appropriations bill ( S. 3158 ) recommended a total of $38.066 billion for NIH in discretionary budget authority. Adding to this total the amounts provided by the evaluation tap ($1.018 billion), Superfund related activities ($78 million), and the mandatory type 1 diabetes program ($150 million) would have brought the NIH program level total to $39.312 billion (see Table 9 ). S. 3158 did not receive floor consideration in the Senate, but the text of this bill was substantially similar to the LHHS division that was incorporated into H.R. 6157 for the purposes of initial Senate floor consideration. The Senate passed an amended version of this bill on August 23. None of the amendments adopted at that time affected the amounts to be appropriated to NIH. The bill included a provision indicating that the report accompanying the earlier committee-passed bill (S. 3158; S.Rept 115-289) should be used to guide, where possible, the allocation of funds and the implementation of the bill. Ultimately, the House and the Senate agreed to resolve differences with regard to H.R. 6157 via a conference committee and both chambers adopted the conference report (H.R. 115-952) that was filed on the bill. The bill was signed into law by President Trump on September 28, 2018 ( P.L. 115-245 ). P.L. 115-245 provides the NIH with $37.937 billion in discretionary LHHS budget authority. Adding to this total, the amounts for the evaluation tap ($1.147 billion), the mandatory type 1 diabetes program ($150 million) and assuming a conservative estimate for Superfund related activities ($78 million) brings the program-level total to an estimated $39.312 billion ( Table 9 ). This program level provides the NIH with $2 billion (5.4%) more than the FY2018 program level and $4.52 billion (13.0%) more than President Trump's budget request for the NIH. This program level is $748 million (1.9%) more than the House committee recommendation, but the same as the earlier Senate-passed program level recommendation. According to the conference report accompanying P.L. 115-245 ( H.Rept. 115-952 , p. 529), each of the ICs at the NIH would receive a funding increase. For specific research areas and programs, the conference report recommends a $425 million increase (+22%) of funding on Alzheimer's research, a $37 million increase (+7%) for antibiotic resistant bacteria research, a $40 million increase (+40%) to develop a universal flu vaccine, and an $11 million increase (+3%) for the Institutional Development Awards (IDeA) program. Established based on a provision of the National Institutes of Health Revitalization Act in 1993 ( P.L. 103-43 ), the IDeA program supports faculty development and institutional research infrastructure in states that have historically received lower levels of NIH funding. The program includes 23 eligible states along with Puerto Rico. The funding increases for Alzheimer's research, antibiotic resistant bacteria, and for the IDeA program match the funding recommendations from the earlier Senate committee report. The funding increase for the universal flu vaccines exceeds the recommendations from both the House committee report ($30 million) and the Senate committee report ($20 million). Until recently, Congress has not usually specified amounts for particular diseases. Generally, specific amounts are appropriated to each IC; NIH and its scientific advisory panels allocate the funding to various research areas. This allows maximum flexibility for NIH to pursue scientific opportunities that are important to public health. Some bills may propose authorizations for designated research purposes, but previously funding generally remained subject to the NIH peer review process as well as the overall discretionary appropriation to the agency. This pattern has changed in recent years, most notably starting in FY2016 with Alzheimer's disease research, and in FY2017 with the NIH Innovation account established by the 21 st Century Cures Act ( P.L. 114-255 , see text box above). The report accompanying H.R. 6470 stated that the committee did not include the general provision in the budget request to limit the percentage of a researcher's salary that may be paid for using NIH grant funds, as the impact of such a change is unclear. The report stated, "The Committee requests an analysis of the projected impact of such a policy change on the number and average cost of NIH grants, as well as on academic institutions, in the fiscal year 2020 Congressional Justification." The Senate committee report and the conference report did not comment on this proposal from the president's budget request. The report accompanying S. 3158 , stated that "The Committee rejects the budget's request to create 3 new Institutes at the NIH: (1) the National Institute for Research on Safety and Quality; (2) the National Institute for Occupational Safety and Health; and (3) the National Institute on Disability, Independent Living, and Rehabilitation Research. The Committee also does not move the Energy Employees Occupational Illness Compensation Program from CDC to NIH." The House report also rejected the creation of the three new institutes. With regard to NIOSH, it stated "The Committee does not move NIOSH into NIH, as proposed in the budget request. The Committee believes NIOSH's mission does not align with NIH's focus on biomedical research and is better achieved within CDC." The House committee report made a similar statement about NIDILRR, but did not address AHRQ/NIRSQ. The conference report did not address any of the recommendations from the president's budget request to create three new institutes. The enacted law did not include the proposal in President Trump's budget request to shift the $150 million in type 1 diabetes authorized under the PHS Act §330B to discretionary funding within the budget of the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK). Therefore Table 9 includes the type 1 diabetes research mandatory funding for all FY2019 budget columns including the budget request, as displayed in the conference reported NIH budget table. The President's FY2019 budget identified several research priorities for NIH in the coming year. The overview below outlines these priority themes in the budget request. Selected responses from congressional report language are also provided. 1. Tackling Complex Challenges by Leveraging Partnerships. NIH partners with other government agencies and private entities to collaborate on research. The President's budget proposal stated that "public-private partnerships can create efficiencies of scale and facilitate development of innovative technologies or treatments, thereby increasing the pace of biomedical research." For example, the Accelerating Medicines Partnership is a public-private partnership between NIH, FDA, and several biopharmaceutical companies and nonprofit organizations. With the goal of increasing the number of new diagnostics and therapies for patients, the Partnership aims to jointly identify promising biological targets for therapeutics. Since 2014, the Partnership has been addressing Alzheimer's disease, type 2 diabetes, and two autoimmune disorders (rheumatoid arthritis and systemic lupus erythematosus); a new Parkinson's disease initiative was also recently inaugurated. NIH will also enhance existing research efforts using a public-private partnership model to address the opioid crisis. The goal of this endeavor is to develop new formulations of medications to treat opioid misuse and accelerate the development of non-addictive pain therapies The FY2019 budget proposal also called for further dedicated investments in NIH research on opioids, serious mental illness, and pain. The FY2019 conference report ( H.Rept. 115-952 , p. 530) notes that the agreement includes $500 million for NIH research on opioid addiction, development of opioid alternatives, pain management, and addiction treatment. The conference report also notes that this $500 million is in addition to $774 million that NIH is expected to spend in base funding for research on opioid misuse, addiction treatment, and pain research. 2. Supporting Basic Research to Drive New Understanding of Health and Disease in Living Systems. NIH is the largest funder of basic biomedical research in the United States. As mentioned previously, each year more than half of the NIH budget goes toward basic research, which provides "a critical research foundation for both the public and private sectors to build upon." NIH funds a broad spectrum of basic science research. For example, addressing the opioid crisis requires understanding how pain is sensed and perceived, and how changes in neural circuits create a state of dependency. Basic research on neural pathways in the brain related to pain and substance use may provide an avenue for better treatments for pain, without the potential for addiction. The Senate committee report stated, "The Committee recognizes that many revolutionary discoveries often come from unexpected, untargeted research. The Committee continues to support these basic advances through the general increase to all Institutes and Centers." 3. Investing in Translational and Clinical Research to Improve Health. NIH builds on the foundation of basic research by supporting translational and clinical research that seeks to convert this basic science knowledge into interventions. Translational research aims to "translate" findings from basic science into medical practice to produce meaningful health outcomes. The Senate committee report noted that it "targets investment towards clinical and translational research that moves basic discoveries from 'bench-to-bedside.'" Clinical research, which uses human subjects, helps professionals find new and better ways to understand, detect, control, and treat illness. NIH is investing in large population studies to learn more about the similarities and differences among individuals and facilitate integrated understanding of health and disease at all levels, from the molecular to the social. For example, as previously mentioned, NIH would continue to establish a group of 1 million or more volunteers through the Precision Medicine Initiative's All of Us Research Program. This research project involves the collection of health, genetic, environmental, and other data from participants for use in research studies designed to identify novel therapeutics and prevention strategies. Additionally, the conference report directs the National Cancer Institute to design a study on providing navigation and patient expense reimbursement to improve participation of underrepresented and minority communities in clinical research for cancer, and to report its plans to Congress within 90 days of enactment. In addition to the above three priorities, the President's budget also identified the following as goals for FY2019: Updating the infrastructure of NIH facilities . An independent review is currently being conducted of the capital needs of the 281 facilities located on NIH's main campus, including its research hospital, laboratories, and offices. Fostering a diverse and talented research workforce . The FY2019 budget proposal includes $100 million in dedicated funding to the OD for the Next Generation Research Initiative to "address longstanding challenges faced by researchers trying to embark upon and sustain independent research careers." The House committee report recommended the NIH use increases in available grants to target early-stage investigators and investigators seeking first time renewals. Advancing data science. The FY2019 budget would have continued to support the Big Data to Knowledge (BD2K) initiative established in 2012. The FY2019 budget included $30 million for NIH to build on the progress of the BD2K as this initiative enters its final stages. Encouraging innovation through prize competitions . The FY2019 budget proposal would have allocated $50 million for prize competitions to improve health outcomes, particularly for research for which there is potential for significant return on investment. The Department of Energy (DOE) was established in 1977 by the Department of Energy Organization Act ( P.L. 95-91 ), which combined energy-related programs from a variety of agencies with defense-related nuclear programs that dated back to the Manhattan Project. Today, DOE conducts basic scientific research in fields ranging from nuclear physics to the biological and environmental sciences; basic and applied R&D relating to energy production and use; and R&D on nuclear weapons, nuclear nonproliferation, and defense nuclear reactors. The department has a system of 17 national laboratories around the country, mostly operated by contractors, that together account for about 40% of all DOE expenditures. The Administration's FY2019 budget request for DOE includes about $11.720 billion for R&D and related activities, including programs in three broad categories: science, national security, and energy. This request is 21.9% less than the enacted FY2018 amount of $15.011 billion. The House bill would provide $15.473 billion. The Senate bill would provide $15.362 billion. (See Table 10 for details.) The request for the DOE Office of Science is $5.391 billion, a decrease of 13.9% from the FY2018 appropriation of $6.260 billion. Within that total, funding for Advanced Scientific Computing Research would increase by $89 million (11.0%), largely to support the DOE-wide Exascale Computing Initiative. The office's other major research programs would all receive decreases. Funding for Fusion Energy Sciences would decrease by $192 million (36.1%), including a decrease to $75 million (from $122 million in FY2018) for the U.S. contribution to construction of the International Thermonuclear Experimental Reactor (ITER), a fusion energy demonstration and research facility in France. Funding for Biological and Environmental Research would decrease by $173 million (25.7%), with reductions concentrated in the Earth and Environmental Systems Sciences subprogram (relative to FY2017; the FY2018 appropriation did not specify an allocation between subprograms). Funding for Science Laboratories Infrastructure, which supports DOE laboratory facilities, infrastructure, and construction, would decrease by 50.7%, from $257 million in FY2018 to $127 million in the FY2019 request. The House bill would provide $6.600 billion for the Office of Science, including $15 million more than the request for Advanced Scientific Computing Research; $250 million more than the request for Fusion Energy Sciences (including $163 million for ITER); $173 million more than the request for Biological and Environmental Research (but again no specified allocation by subprogram); and $290 million for Science Laboratories Infrastructure. The Senate bill would provide $6.650 billion, including $81 million more than the request for Advanced Scientific Computing Research; $85 million more than the request for Fusion Energy Sciences (including $122 million for ITER); $215 million more than the request for Biological and Environmental Research (including $39 million more than the FY2017 amount for Earth and Environmental Systems Sciences); and $302 million for Science Laboratories Infrastructure. The request for DOE national security R&D is $4.268 billion, an increase of 0.5% from $4.249 billion in FY2018. Funding for the Naval Reactors program would increase (up $169 million, 10.4%). In the Weapons Activities account (down $39 million, 1.9%) requested increases for most programs would be offset by a decrease of $126 million (23.1%) for Inertial Confinement Fusion. Within Inertial Confinement Fusion, nearly half of the proposed decrease would be in the Ignition subprogram (down $57 million, 71.8%), and support for the Laboratory for Laser Energetics ($68 million in FY2017, not specified for FY2018, $45 million in the FY2019 request) would be phased out over three years. The House bill would provide $4.371 billion for national security R&D, including the requested amount for Naval Reactors and $33 million more than the request for Weapons Activities. Within Weapons Activities, it would provide $91 million more than the request for Inertial Confinement Fusion, including $68 million for the Omega Laser Facility at the Laboratory for Laser Energetics. The Senate bill would provide $4.182 billion, including the FY2018 amount for Naval Reactors and $47 million more than the request for Weapons Activities. Within Weapons Activities, it would provide $126 million more than the request for Inertial Confinement Fusion, including $80 million for the Omega facility. The request for DOE energy R&D is $2.061 billion, a decrease of 54.2% from $4.502 billion in FY2018. Funding for energy efficiency and renewable energy R&D would decrease by 65.5%, with reductions in all major research areas and a shift in emphasis toward early-stage R&D rather than later-stage development and deployment. Funding for fossil energy R&D would decrease by 30.9%, with reductions focused particularly on coal carbon capture and storage ($40 million, down from $198 million in FY2018) and natural gas technologies ($6 million, down from $50 million in FY2018). Funding for nuclear energy would decrease by 37.2%, with no funding requested for the Integrated University Program ($5 million in FY2018) or the Supercritical Transformational Electric Power (STEP) R&D initiative ($5 million in FY2018) and $60 million requested for fuel cycle R&D (down from $260 million in FY2018). The Advanced Research Projects Agency–Energy (ARPA-E), which is intended to advance high-impact energy technologies that have too much technical and financial uncertainty to attract near-term private-sector investment, would be terminated. The House bill would provide $4.502 billion for energy R&D. This total would include $1.080 billion more than the request for energy efficiency and renewable energy R&D; $283 million more than the request for fossil energy R&D (including $192 million for coal carbon capture and storage and $50 million for natural gas technologies); $589 million more than the request for nuclear energy (including $5 million for the Integrated University Program, $5 million for STEP R&D, and $255 million for fuel cycle R&D); and $325 million for ARPA-E. The Senate bill would provide $4.531 billion, including the FY2018 amount ($1.321 billion more than the request) for energy efficiency and renewable energy R&D; the FY2018 amount ($225 million more than the request) for fossil energy R&D (including $207 million for coal carbon capture and storage and $53 million for natural gas technologies); approximately the FY2018 amount ($449 million more than the request) for nuclear energy (including $5 million for the Integrated University Program, no funding for STEP R&D, and $267 million for fuel cycle R&D); and $375 million for ARPA-E. The National Aeronautics and Space Administration (NASA) was created in 1958 by the National Aeronautics and Space Act (P.L. 85-568) to conduct civilian space and aeronautics activities. NASA has research programs in planetary science, Earth science, heliophysics, astrophysics, and aeronautics, as well as development programs for future human spacecraft and for multipurpose space technology such as advanced propulsion systems. In addition, NASA operates the International Space Station (ISS) as a facility for R&D and other purposes. Because final FY2018 funding was not available at the time the FY2019 budget was prepared, requested R&D funding is compared to the FY2017 actual funding. The Administration is requesting about $16.474 billion for NASA R&D in FY2019. This is 1.6% less than the FY2017 level of about $16.743 billion. For a breakdown of these amounts, see Table 11 . NASA R&D funding comes through five accounts: Science; Aeronautics; Exploration Research and Technology (formerly Space Technology); Deep Space Exploration Systems (formerly Exploration); and the ISS, Commercial Crew, and Commercial Low Earth Orbit (LEO) Development portions of LEO and Spaceflight Operations (formerly Space Operations). The FY2019 request for Science is $5.895 billion, an increase of 2.3% relative to FY2017. Within this total, funding for Earth Science would decrease by $124 million (6.5%); funding for Planetary Science would increase by $407 million (22.3%); and funding for Astrophysics would decrease by $167 million (12.3%). The request for Earth Science assumes the termination of three items in the Earth Systematic Missions program: the Pre-Aerosol, Clouds, and Ocean Ecosystem (PACE) mission; the Climate Absolute Radiance and Refractivity Observatory (CLARREO) Pathfinder mission; and the NASA-provided instruments on the Deep Space Climate Observatory (DSCOVR) mission. These were also proposed for termination in the FY2018 budget; Congress funded them for FY2018 in legislation enacted after the release of the FY2019 budget. The proposed increase for Planetary Science includes $90 million in new funding for the Double Asteroid Redirection Test (DART), a mission to demonstrate the redirection of an asteroid for the purpose of planetary defense; and an increase of $199 million to fund a new Lunar Discovery and Exploration program, including public-private partnerships for research using commercial lunar landers. In Astrophysics, a proposed decrease of $265 million for the James Webb Space Telescope (JWST, previously a separate budget item) is consistent with that mission's previous plans; a proposed decrease of $100 million for Exoplanet Exploration reflects the proposed cancellation of the Wide Field Infrared Space Telescope (WFIRST). The FY2019 request for Aeronautics is $634 million, a decrease of 3.4% relative to FY2017. The request includes $88 million (up from $19 million in FY2017) for the Low Boom Flight Demonstrator, intended to demonstrate quiet supersonic flight. This increase would be offset by a decrease of $50 million for the Airspace Operations and Safety program and a $44 million decrease for the Advanced Air Vehicles program. The FY2019 request for Exploration Research and Technology is $1.003 billion, an increase of 21.3% relative to FY2017. This account supports the Space Technology Mission Directorate, the Human Research Program, and certain activities previously in the Advanced Exploration Systems program. Funding for Technology Maturation would increase by $82 million. Funding for Technology Demonstration would increase by $70 million, but within Technology Demonstration, funding for the Restore-L mission and other in-space robotic satellite servicing activities would decrease by $85 million. Funding for the Human Research Program would be the same as in FY2017. The FY2019 request for Deep Space Exploration Systems is $4.559 billion, an increase of 9.0% relative to FY2017. This account funds development of the Orion Multipurpose Crew Vehicle and the Space Launch System (SLS) heavy-lift rocket, the capsule and launch vehicle mandated by the NASA Authorization Act of 2010 for future human exploration beyond Earth orbit. The first test flight of SLS carrying Orion but no crew (known as EM-1) is now expected no earlier than December 2019. The first flight of Orion and the SLS with a crew on board (known as EM-2) is now expected in late 2022 or early 2023. Funding for Orion, the SLS, and related ground systems (collectively known as Exploration Systems Development) would decrease by $259 million relative to FY2017. The account also funds Advanced Exploration Systems, which would increase by $791 million relative to FY2017. That increase would include $504 million in new funding for a platform in lunar orbit (known as the Gateway) to serve as a test bed for deep space human exploration capabilities. In the LEO and Spaceflight Operations account, the request for Commercial Crew is $173 million, a decrease of 85.4% relative to FY2017; the request for the ISS is $1.462 billion, an increase of 0.8%; and the request for Commercial LEO Development, a new program, is $150 million. The reduction in Commercial Crew funding reflects the expected transition of commercial crew activities from development to operations. Boeing and SpaceX are both expected to begin postcertification crewed flights to the ISS in the first half of 2019. The Commercial LEO Development program is intended to stimulate a commercial space economy in low Earth orbit, including the commercial provision of NASA's requirements for research and technology demonstration after the proposed end of direct ISS funding in 2025. The National Science Foundation supports basic research and education in the non-medical sciences and engineering. Congress established the foundation as an independent federal agency in 1950 and directed it to "promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes." The NSF is a primary source of federal support for U.S. university research, especially in mathematics and computer science. It is also responsible for significant shares of the federal science, technology, engineering, and mathematics (STEM) education program portfolio and federal STEM student aid and support. NSF has six appropriations accounts: Research and Related Activities (RRA, the main research account), Education and Human Resources (EHR, the main education account), Major Research Equipment and Facilities Construction (MREFC), Agency Operations and Award Management (AOAM), the National Science Board (NSB), and the Office of Inspector General (OIG). Appropriations are generally provided at the account level, while program-specific direction may be included in appropriations acts, or accompanying conference reports or explanatory statements. Because final FY2018 funding was not available at the time the FY2019 budget request was prepared, requested R&D funding is compared to the FY2017 actual funding. FY2018 funding levels, enacted March 23, 2018, are included for reference. These amounts are available only at the account level; FY2018 R&D breakouts and subaccount funding amounts are not yet available for comparison. Funding for R&D is included in the RRA, EHR, and MREFC accounts. (The RRA and EHR accounts also include non-R&D funding.) Together, these three accounts comprise 95% of the total requested funding for NSF. Actual R&D obligations for each account are known after NSF allocates funding appropriations to specific activities and reports those figures. The budget request specifies R&D funding for the conduct of research, including basic and applied research, and for physical assets, including R&D facilities and major equipment. Funding amounts for FY2017 actual and FY2019 requested levels are reported by account, including amounts for R&D conduct and physical assets where applicable, in Table 12 . Overall . The Administration is requesting $7.47 billion for the NSF in FY2019, $295.4 million (3.8%) less than the FY2018 enacted amount, and equal to the FY2017 actual amount. The requested amount reflects an additional $2.20 billion provided for NSF in the Addendum to the President's FY19 Budget to Account for the Bipartisan Budget Act of 2018 . The request would decrease budget authority in two accounts relative to the FY2017 enacted level: MREFC by $128.1 million (57.5%) and AOAM by $48.4 million (12.7%). The request would provide slight increases to the RRA (2.4%, $144.1 million), OIG (1.6%, $0.25 million), and NSB (1.2%, $0.05 million) accounts, and no change for the EHR account. Overall, NSF estimates that, under the FY2019 request, agency-wide funding rates (i.e., the percentage of submitted proposals that are successfully awarded funding) would decrease slightly from 23% to 22%, resulting in 300 fewer grants awarded, compared to FY2017. As a proportion of NSF's total funding, R&D activities account for approximately 82%. For FY2019, $6.12 billion is requested for R&D activities, a 3% increase from FY2017 actual funding for R&D of $5.95 billion. The total request includes $5.68 billion (93%) for the conduct of R&D, and $441 million (7%) for R&D facilities and major equipment. Of funding requested for the conduct of R&D, 87% is requested for basic research, and 13% for applied research. Overall funding for R&D facilities and major equipment supports not only the construction and acquisition phases, funded through MREFC ($94.7 million requested), but also the planning, design, and post-construction operations and maintenance, funded through RRA ($346.3 million requested). Research . The Administration seeks $6.151 billion for RRA in FY2019, a $183.8 (2.9%) decrease compared to the FY2018 enacted funding, and a $144.2 million (2.4%) increase compared to FY2017 actual funding. Compared to the FY2017 actual levels, the FY2019 request includes decreases for 7 of the 10 RRA subaccounts. The largest percentage increase would go to Integrative Activities (27%, $116 million increase). The largest percentage decrease would go to Social, Behavioral, and Economic Sciences (SBE, 9.1%, $24.7 million decrease) The FY2019 request also includes $160 million for the RRA Established Program to Stimulate Competitive Research (EPSCoR) program, equal to the $160 million directed in the explanatory statement for FY2017 enacted funding. Within the RRA account, the FY2019 request includes $5.617 billion for R&D, an increase of $162.5 million (3.2%) compared to the FY2017 actual amount. Of this amount, the majority ($5.270 billion, 94%) is requested for the conduct of research, including $4.79 billion for basic research and $483 million for applied research. Education . The FY2019 request for the EHR account is $28.6 million (3.2%) less than the FY2018 amount and equal to the FY2017 actual level of $873.37 million. By program division, the Division of Human Resource Development would receive an increase of $37.7 million (25.5%) over the FY2017 actual level. The divisions of research on learning in formal and informal settings, graduate education, and undergraduate education would receive decreases of 8.8% ($203.0 million requested), 5.0% ($187.2 million requested), and 2.0% ($224.6 million requested), respectively. EHR programs of particular interest to congressional policymakers include the Graduate Research Fellowship (GRF) and National Research Traineeship (NRT) programs. The FY2019 request for GRF is $270.7 million, a reduction of $48.8 million (15.3%) from the FY2017 actual level. The FY2019 request for NRT is $52.1 million, a $0.7 million (1.4%) decrease from FY2017. Within EHR, requested funding for R&D is $410 million, which is nearly equal to the FY2017 actual funding amount and accounts for approximately 6.7% of the agency's total R&D request. All of the requested funding would support the conduct of R&D, including $131 million for basic research and $279 million for applied research. Construction . The MREFC account supports large construction projects and scientific instruments, with all of the funding supporting R&D facilities. The Administration is seeking $94.6 million for MREFC in FY2019, $88.2 million (48.2%) less than the FY2018 enacted amount, and $128.1 million (57.5%) less than the FY2017 actual amount. Requested MREFC funding would support three main projects, including continued construction of the Large Synoptic Survey Telescope (LSST, $48.8 million requested, 18.9% decrease from FY2017) and the Daniel K. Inouye Solar Telescope (DKIST, $16.1 million requested, 19.4% decrease from FY2017). The request includes $28.7 million for the Regional Class Research Vessels (RCRV) program to build ships to support science in U.S. coastal waters, a decrease of $93.2 million (76.4%) from FY2017, about which NSF notes the following: In FY 2017, P.L. 115-31 appropriated $121.88 million in funding to facilitate the planning and construction of three vessels. In the context of the President's overall fiscal goals intended to maintain spending restraint, this Budget Request supports construction of two vessels. Other initiatives . The FY2019 NSF budget request includes funding for three multiagency initiatives. This funding is included in multiple NSF appropriations accounts and R&D amounts are not separately provided. The National Nanotechnology Initiative would receive $385 million, $78 million (17%) less than in FY2017. The Networking and Information Technology Research and Development program would receive $1.152 billion, a decrease of $85.7 million (6.9%). The U.S. Global Change Research Program would receive $238 million, $4.6 million (1.9%) less than in FY2017. The U.S. Department of Agriculture (USDA) was created in 1862, in part to support agricultural research in an expanding, agriculturally dependent country. Today, USDA conducts intramural research at federal facilities with government-employed scientists, and supports external research at universities and other facilities through competitive grants and formula-based funding. The breadth of contemporary USDA research spans traditional agricultural production techniques, organic and sustainable agriculture, bioenergy, nutrition needs and composition, food safety, animal and plant health, pest and disease management, economic decisionmaking, and other social sciences affecting consumers, farmers, and rural communities. Four agencies carry out USDA's research and education activities, grouped together into the Research, Education, and Economics (REE) mission area. The agencies involved are the Agricultural Research Service (ARS), National Institute of Food and Agriculture (NIFA), National Agricultural Statistics Service (NASS), and Economic Research Service (ERS). The House-reported bill ( H.R. 5961 ) recommends $3,109.0 billion for FY2019, and the Senate-passed bill (S. 6147) is recommending a total for the four agencies of $2,985.7 billion. The FY2018 Omnibus Appropriations Act ( P.L. 115-141 ) provides a total of $3.09.7 billion in discretionary funding for the four research agencies. For FY2019, the Administration requested a total of $2,486.5 billion, a $543.2 million (18.0%) reduction from FY2018 (see Table 1 3 ). In addition to discretionary appropriations, agricultural research is also funded by state matching contributions and private donations or grants, as well as mandatory funding from the farm bill. USDA's FY2018 discretionary appropriations for the four research agencies are profiled below. The Agricultural Research Service is USDA's in-house basic and applied research agency. It operates approximately 90 laboratories nationwide with about 6,600 employees. ARS laboratories focus on efficient food and fiber production, development of new products and uses for agricultural commodities, development of effective controls for pest management, and support of USDA regulatory and technical assistance programs. ARS also operates the National Agricultural Library, one of the department's primary information repositories for food, agriculture, and natural resource sciences. For FY2019, the Senate-passed bill recommends $1,301.0 billion for ARS salaries and expenses, a +8.2% increase over FY2018 ($1,202.8 billion). The House-reported bill recommends $1,259.9 billion, a +4.8% increase over FY2018. The Administration had requested $1,019.0 billion for ARS for FY2019. The House-reported bill also provides $136.0 million for buildings and facilities, while the Senate-passed bill provides no appropriation for buildings and facilities, the same as requested by the Administration ( Table 13 ). In FY2019, ARS will assume ownership of the National Bio and Agro-Defense Facility (NBAF) from the Department of Homeland Security (DHS). The FY2018 enacted bill provides $4.0 million for NBAF. For FY2019, the Senate-passed bill recommends $10.6 million for the NBAF to address one-time costs associated with the transfer of the science program from the Plum Island Animal Disease Center to NBAF, and $42 million to address stand-up activities to operate NBAF. The Senate-passed bill also recommends an additional $5 million for ARS to increase research efforts on foreign animal diseases. The Administration requested $53 million for the facility for FY2019. With respect to the pending move to the NBAF, the House committee directs ARS, in collaboration with other USDA agencies and in consultation with DHS, to report to Congress within 120 days of enactment with an estimate of the funding needs for NBAF for each fiscal year FY2019-2023. The committee also directs ARS to include in the report strategic research goals based on NBAF's enhanced research capabilities and for stakeholder engagement. The National Institute of Food and Agriculture (NIFA) provides federal funding for research, education, and extension projects conducted in partnership with the State Agricultural Experiment Stations, the State Cooperative Extension System, land grant universities, colleges, and other research and education institutions, as well as individual researchers. These partnerships include the 1862 land-grant institutions, 1890 historically black colleges and universities (HBCUs), established by the Morrill Acts, the 1994 tribal land-grant colleges, and Hispanic-serving institutions. Federal funds enhance capacity at universities and institutions through statutory formula funding, competitive awards, and grants. For FY2019, the House-reported bill recommends $1,452.6 billion in discretionary spending for NIFA activities, an increase of +3.2% over FY2018 ($1,407.8 billion).The Administration's FY2019 request for NIFA is $1,257.6 billion, a reduction of $150.2 million (10.6%) over FY2018. The Senate-passed bill recommends $1,423.2 billion, a +1.1% increase over FY2018 ( Table 13 ). The Senate-passed bill recommends $243.7 million to support Hatch Act funding for 1862 land grant university research and education activities, the same as FY2018 and the same as requested. The House-reported bill recommends $259.0 million for Hatch fund, a +6.3% increase over FY2018. For McIntire-Stennis cooperative forestry research support, the Senate-passed bill recommends $36.0 million, the same as the House-reported bill, and $2 million more than for FY2018. For research at the 1890 HBCUs, the House-reported bill recommends $60.0 million and the Senate-passed bill recommends $54.2 million, the same as enacted for FY2018, and nearly the same as requested ($53.8 million). The Senate-passed bill also recommends $405.0 million for the Agriculture and Food Research Initiative (AFRI)—USDA's flagship competitive research grants program. The House-reported bill recommends $415.0 million. For FY2018, AFRI has an appropriation of $400.0 million. The Administration had requested $25 million less ($375.0 million) for AFRI in FY2019.This budget line currently represents about 28% of the NIFA discretionary budget. For Cooperative Extension support under Smith-Lever Sections (b) and (c) formula funding for FY2019, the House-reported bill recommends a total of $315.0 million, a +5.0% increase over FY2018 ($300 million), and the Senate-passed bill recommends $300 million, the same as enacted for FY2018. The House-reported bill also recommends $180.6 million and the Senate-passed bill would provide $186.7 million to support other Smith-Lever extension activities. The National Agricultural Statistics Service conducts the quinquennial Census of Agriculture and provides official statistics on agricultural production and indicators of the economic and environmental status of the farm sector. For FY2019, the Senate-passed bill recommends $174.8 million to NASS, of which $45.3 million is reserved to support data collection for the 2017 Census of Agriculture. The House-reported bill recommends $173.7 million, and also reserves $45.3 million for Census of Agriculture activities. The FY2018 enacted appropriation provides $191.7 million to NASS. The Administration had requested $165.0 million for FY2019. The Economic Research Service supports economic and social science analysis about agriculture, rural development, food, commodity markets, and the environment. It collects and disseminates data concerning USDA programs and policies. For FY2019, both House-reported and Senate-passed bill would provide $86.8 million for ERS, the same as enacted for FY2018. The Administration had requested $45.0 million for ERS in FY2019, a 48% decrease. Two agencies of the Department of Commerce have major R&D programs: the National Institute of Standards and Technology (NIST) and the National Oceanic and Atmospheric Administration (NOAA). The mission of the National Institute of Standards and Technology is "to promote U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology in ways that enhance economic security and improve our quality of life." NIST research provides measurement, calibration, and quality assurance methods and techniques that support U.S. commerce, technological progress, product reliability, manufacturing processes, and public safety. NIST's responsibilities include the development, maintenance, and custodial retention of the national standards of measurement; providing the means and methods for making measurements consistent with those standards; and ensuring the compatibility of U.S. national measurement standards with those of other nations. It should be noted that the FY2018 enacted funding levels were not known at the time the President's FY2019 budget was prepared, as the budget process had not been completed. The President is requesting $629.1 billion in funding for NIST in FY2019, a decrease of $569.4 million (47.5%) from the FY2018 enacted appropriation of $1,198.5 million. (See Table 14 .) NIST discretionary funding is provided through three accounts: Scientific and Technical Research and Services (STRS), Industrial Technology Services (ITS), and Construction of Research Facilities (CRF). The President's FY2019 request includes $573.4 million for R&D, standards coordination, and related services in the STRS account, a decrease of $151.1 million (20.9%) from the FY2018 enacted level. The FY2019 request would provide $15.1 million for the Industrial Technology Services (ITS) account, down $139.9 million (90.3%) from the FY2018 enacted level. Within the ITS account, the request would provide no funding for the Manufacturing Extension Partnership (MEP) program, a reduction of $140.0 million from the FY2018 enacted level; MEP centers in each state would be required to become entirely self-supporting. The request provides $15.1 million provided for Manufacturing USA (also referred to as the National Network for Manufacturing Innovation or NNMI), essentially unchanged from the FY2018 enacted level. Of these funds, $10.0 million would be for continued support of the NIST-sponsored National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL) manufacturing institute, with the balance ($5.1 million) to be used for coordination of the Manufacturing USA network. The President is requesting $40.5 million for FY2019 for the NIST CRF account, down $278.5 million (87.3%) from the FY2018 enacted level. The National Oceanic and Atmospheric Administration conducts scientific research in areas such as ecosystems, climate, global climate change, weather, and oceans; collects and provides data on the oceans and atmosphere; and manages coastal and marine organisms and environments. NOAA was created in 1970 by Reorganization Plan No. 4. The reorganization was intended to unify elements of the nation's environmental programs and to provide a systematic approach for monitoring, analyzing, and protecting the environment. NOAA's Research Council developed a five-year plan (2013-2017) to guide the agency's R&D efforts. R&D efforts support the long-term goals and enterprise objectives of NOAA's Next Generation Strategic Plan . The strategic plan is organized into four categories of long-term goals including (1) climate adaptation and mitigation, (2) a weather-ready nation, (3) healthy oceans, and (4) resilient coastal communities and economies; and three groups of enterprise objectives including (1) stakeholder engagement, (2) data and observations, and (3) integrated environmental modeling. To achieve the strategic plan's goals and objectives, NOAA has identified gaps in knowledge and capabilities. NOAA's R&D plan attempts to address these gaps by asking key questions. Key questions are used in the plan to frame and organize R&D objectives and to identify tasks associated with achieving these objectives. One of the main challenges identified in the NOAA R&D plan is the need to integrate the diverse perspectives and professional expertise required by the agency's mission. The plan states that "holistically understanding the earth system is not only understanding its individual components, but understanding and interpreting the way each of the components interact and behave as an integrated composite that is more than the sum of its parts." For FY2019, President Trump requested $623.6 million in R&D funding for NOAA, a decrease of $269.5 million (30.2%) below the FY2018 enacted level of $893.1 million. R&D funding for FY2018 consisted of $528.6 million for research (59.2% of total R&D funding), $143.5 million for development (16.1%), and $221.0 million for R&D equipment (24.7%). In FY2018, R&D was 15.1% of NOAA's total discretionary budget of $5.909 billion. The FY2019 request for R&D funding includes $367.1 million for research (58.9% of total R&D funding), $83.2 million for development (13.3%), and $173.3 million for R&D equipment (27.8%). The President's request for R&D is 13.7% of NOAA's total discretionary budget request of $4.553 billion. NOAA's administrative structure is organized by five line offices that reflect its diverse mission: the National Ocean Service (NOS); National Marine Fisheries Service (NMFS); National Environmental Satellite, Data, and Information Service (NESDIS); National Weather Service (NWS); and Office of Oceanic and Atmospheric Research (OAR). In addition to NOAA's five line offices, two major funding categories include Mission Support (formerly Program Support) and the Office of Marine and Aviation Operations (OMAO). Mission support is a cross-cutting budget activity, which provides administrative functions related to planning, information technology, human resources, and infrastructure. OMAO is responsible for the agency's ships and aircraft that collect data in support of NOAA's environmental and scientific missions. Table 15 provides R&D funding levels for FY2018 enacted and the Administration's FY2019 request for each NOAA office. Most of NOAA's R&D activities are conducted by OAR, and in most years OAR accounts for over half of NOAA's R&D funding. The FY2019 request would provide OAR with $321.7 million for R&D, a decrease of $195.8 million (37.8%) below the FY2018 enacted funding level of $517.4 million. OAR conducts research in three major areas: weather and air chemistry; climate; and oceans, coasts, and the Great Lakes. A significant portion of these efforts is implemented through partnerships between NOAA and cooperative research institutes. NOAA supports 16 cooperative research institutes that work with seven NOAA laboratories in all three of the main OAR research areas. The President's FY2019 request would fund the cooperative institutes at $167.4 million, $14.4 million (7.9%) less than the FY2018 enacted funding level of $181.8 million. The President's FY2019 request would also reduce OAR R&D funding for the National Sea Grant Program and Climate Research. The National Sea Grant College Program is composed of 33 university-based state programs. Sea Grant programs support scientific research and engage constituents to identify and solve problems faced by coastal communities. The President's FY2019 request would terminate federal support of the National Sea Grant College Program and Sea Grant Marine Aquaculture Research. In FY2018, the National Sea Grant College Program was funded at $65.0 million and Sea Grant marine aquaculture research was funded at $11.5 million. Climate research includes funding for laboratories and cooperative institutes, regional climate data and information, and competitive research. The President's FY2019 request would provide climate research with $98.6 million, $59.4 million (37.6%) less than the FY2018 enacted funding level of $158.0 million. The Department of the Interior was created to protect and manage the nation's natural resources and cultural heritage and to provide scientific and other information about those resources. DOI has a wide range of responsibilities including, among other things, mapping, geological, hydrological, and biological science; migratory bird, wildlife, and endangered species conservation; surface-mined lands protection and restoration; and historic preservation. Because final FY2018 funding was not available at the time the FY2019 budget was prepared, requested R&D funding is compared to the FY2017 actual funding. The Administration is requesting $11.7 billion in net discretionary funding for DOI in FY2019. Of that amount, $758.9 million is requested for R&D funding, $235.5 million below (23.7%) the FY2017 enacted level of $994.3 million. Of the President's FY2019 DOI R&D funding request, 5.3% is for basic research, 76.4% is for applied research, and 18.3% is for development. The U.S. Geological Survey (USGS) is the only DOI component that conducts basic research. Funding for DOI R&D is generally included in appropriations line items that also include non-R&D activities. How much of the funding provided in appropriations legislation is allocated to R&D specifically is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels are known only after DOI components allocate their appropriations to specific activities and report those figures. As passed by the House on July 19, 2018, the Interior, Environment, Financial Services and General Government, Agriculture, Rural Development, Food and Drug Administration, and Transportation, Housing and Urban Development Appropriations Act, 2019 ( H.R. 6147 ) would provide $13.118 billion for DOI, a $2.530 billion (23.9%) increase over the FY2019 request and approximately equal to the FY2018 enacted amount. These amounts includes both R&D and non-R&D funding. As passed by the Senate on August 1, 2018, the Interior, Environment, Financial Services and General Government, Agriculture, Rural Development, Food and Drug Administration, and Transportation, Housing and Urban Development Appropriations Act, 2019 ( H.R. 6147 ) would provide $13.171 billion for DOI, a $52.6 million (0.4%) increase over the House-passed level, $2.583 billion (24.4%) above the FY2019 request, and $56.0 million (0.4%) above the FY2018 enacted amount. The USGS accounts for more than two-thirds of all DOI R&D funding. A single appropriations account, Surveys, Investigations, and Research (SIR), provides all USGS funding. USGS R&D is conducted under seven SIR activity/program areas: Ecosystems; Climate and Land Use Change; Energy, Minerals, and Environmental Health; Natural Hazards; Water Resources; Core Science Systems; and Science Support. The President's total FY2019 budget request for USGS is $859.7 million. Of this amount, $502.6 million would be for R&D, a decrease of $184.9 million (26.9%) over the FY2017 enacted level of $687.6 million. As passed by the House, H.R. 6147 would provide $1.173 billion for USGS, a $24.6 million (2.1%) increase over the FY2018 enacted amount and $313.4 million (36.5%) more than the FY2019 request. These amounts include both R&D and non-R&D funding. As passed by the Senate, H.R. 6147 would provide $1.148 billion for USGS, $24.6 million (2.1%) below the House-passed amount, $288.8 million (33.6%) above the FY2019 request, and equal to the FY2018 enacted amount. These amounts includes both R&D and non-R&D funding. The President's FY2019 request also includes R&D funding for the following DOI components: Bureau of Reclamation (BOR): $82.5 million in applied research and development funding for FY2019, down $24.5 million (22.9%) from FY2017. Bureau of Ocean Energy Management (BOEM): $84.6 million in applied research and development funding for FY2019, up $12.6 million (17.4%) from FY2017. Fish and Wildlife Service (FWS): $15.4 million in applied research for FY2019, down $17.0 million (52.5%) from FY2017. Bureau of Land Management (BLM): $24.2 million in applied research and development for FY2019, down $2.0 million (7.5%) from FY2017. National Park Service (NPS): $24.0 million in applied research and development for FY2019, down $3.0 million (11.0%) from FY2017. Bureau of Safety and Environmental Enforcement (BSEE): $20.5 million in applied research for FY2019, down $6.2 million (23.1%) from FY2017. Bureau of Indian Affairs (BIA): $5.0 million in applied research for FY2019, down $4.5 million (47.4%) from FY2017. Wildland Fire Management (WFM): No funding requested for R&D for FY2019, down $6.0 million (100.0%) from FY2017. Office of Surface Mining Reclamation and Enforcement (OSMRE): $5.0 million in applied research was requested in FY2017, though no funding was enacted; the office has not requested any R&D funding in FY2019. Table 16 summarizes FY2017 enacted R&D funding and the President's FY2019 R&D funding request for DOI components. The Department of Veterans Affairs operates and maintains a national health care delivery system to provide eligible veterans with medical care, benefits, and social support. As part of the agency's mission, it seeks to advance medical R&D in areas most relevant to the diseases and conditions that affect the health care needs of veterans. Because final FY2018 funding was not available at the time the FY2019 budget was prepared, requested R&D funding is compared to the FY2017 actual funding. The President is proposing $1.346 billion for VA R&D in FY2019, an increase of $137.1 million (11.3%) from FY2017. (See Table 17 .) VA R&D represents 0.68% of the agency's overall FY2019 budget request and is funded through two accounts—the Medical and Prosthetic Research account and the Medical Care Support account. As the Medical Care Support account also includes non-R&D funding, the amount of funding that will be allocated to R&D through appropriations legislation is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels from the Medical Care Support account are only known after the VA allocates its appropriations to specific activities and reports those figures. The FY2019 request includes $727.4 million for VA's Medical and Prosthetic Research account, an increase of $54 million (8.0%), and $618.3 million in funding for research supported by the agency's Medical Care Support account, an increase of $83.1 million (15.5%). According to the President's request, VA R&D priorities for FY2019 include efforts to treat veterans at risk of suicide; research to address pain management, opioid addiction, and Gulf War Veterans Illness; an expansion of efforts focused on women veterans' health issues; and the use of the Million Veteran Program—a genomic research program that is collecting genetic samples and detailed health information from one million veterans—to advance precision medicine. The Medical and Prosthetics R&D program is an intramural program managed by the Veteran Health Administration's Office of Research and Development (ORD) and conducted at VA Medical Centers and VA-approved sites nationwide. According to ORD, the mission of VA R&D is "to improve Veterans' health and well-being via basic, translational, clinical, health services, and rehabilitative research and to apply scientific knowledge to develop effective individualized care solutions for Veterans." ORD consists of four main research services each headed by a director: Biomedical Laboratory R&D conducts preclinical and clinical research to understand life processes at the molecular, genomic, and physiological levels. Clinical Science R&D supports research, including human subjects research, to determine the feasibility and effectiveness of new treatments such as drugs, therapies, or devices. Health Services R&D conducts studies to identify and promote effective and efficient strategies to improve the quality and accessibility of the VA health system and patient outcomes, and to minimize health care costs. Rehabilitation R&D develops novel approaches to improving the quality of life of impaired and disabled veterans suffering from traumatic amputation, central nervous system injuries, loss of sight or hearing, or other physical and cognitive impairments. In addition to intramural support, VA researchers are eligible to obtain funding for their research from extramural sources, including other federal agencies, private foundations and health organizations, and commercial entities. According to the President's FY2019 budget request, these additional R&D resources are estimated at $570 million in FY2019. However, unlike federal agencies, such as the National Institutes of Health and the Department of Defense, VA does not have the authority to support extramural R&D by providing research grants to colleges, universities, or other non-VA entities. On June 8, 2018, the House passed H.R. 5895 , the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019. H.R. 5895 would provide $732.3 million in funding for the Medical and Prosthetic Research account, an increase of $4.9 million, or 0.7% above the FY2019 request. On June 25, 2018, the Senate passed H.R. 5895 providing the Medical and Prosthetic Research account $779 million, an increase of $51.6 million, or 7.1% above the FY2019 request Table 17 summarizes R&D program funding for VA in the Medical and Prosthetic Research and the Medical Care Support accounts. Table 18 details amounts to be spent in Designated Research Areas (DRAs) which VA describes as "areas of particular importance to our veteran patient population." Funding for research projects that span multiple areas may be included in several DRAs; thus, the amounts in Table 18 total to more than the appropriation or request for VA R&D. The primary purposes of the research and development activities of the Department of Transportation (DOT) as defined by Section 6019 of the Fixing America's Surface Transportation Act ( P.L. 114-94 ) are improving mobility of people and goods; reducing congestion; promoting safety; improving the durability and extending the life of transportation infrastructure; preserving the environment; and preserving the existing transportation system. Funding for DOT R&D is generally included in appropriations line items that also include non-R&D activities. How much of the funding provided by appropriations legislation is allocated to R&D is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels are known only after DOT agencies allocate their final appropriations to specific activities and report those figures, and because of this, the President's FY2019 request is compared to FY2017 actual funding rather than FY2018 enacted levels unless otherwise indicated. The Administration is requesting $836.2 million for DOT R&D activities and facilities in FY2019, a decrease of $103.3 million (11%) from FY2017. (See Table 19 .) Three DOT agencies—the Federal Aviation Administration (FAA), the Federal Highway Administration (FHWA), and the National Highway Traffic Safety Administration (NHTSA)—would account for nearly 90% of DOT R&D under the FY2019 request. FAA's R&D activities focus on improving the capacity and safety of the national airspace systems and reducing environmental impacts. The President's FY2018 request of $350.9 million for R&D activities and facilities at FAA would be a decrease of $82 million (18.9%) from FY2017. The request includes $74.4 million for the agency's Research, Engineering, and Development (RE&D) account, a reduction of $102.1 million (57.8%) from FY2017 and $114.5 million (60.6%) below the FY2018 enacted level. Funding within the RE&D account seeks to improve aircraft safety through research in fields such as fire safety, advanced materials, propulsion systems, aircraft icing, and continued airworthiness. On August 1, 2018, the Senate passed H.R. 6147 incorporating the Transportation-HUD and Agriculture appropriations bills. The Senate-passed bill would provide $191.0 million for the RE&D account, $116.6 million (156.7%) above the request, and $2.1 million (1.1%) above the FY2018 enacted level. According to the President's budget request, Innovations developed and/or advanced through FHWA's R&T [research and technology] program enable and supports achievement and management of a safer and more reliable transportation system that is cost-effective and sustainable, thus improving overall economic competitiveness and quality of life. The President's request of $336.5 million for R&D activities and facilities at FHWA would be an increase of $18.8 million (5.9%) from FY2017. The request includes $85 million for FHWA's Highway Research and Development program which seeks to improve safety, enhance the transportation infrastructure, and reduce congestion. The program supports highway research in such areas as innovative materials, new construction techniques, durability and resilience, and the factors that contribute to death and injury related to roadway design, construction, and maintenance. The request also includes $79 million for research to facilitate the development of a connected, integrated, and automated transportation system under the agency's Intelligent Transportation Systems program. The President is requesting $63.7 million in R&D and R&D facilities funding in FY2019 for NHTSA, $5.2 million (7.6%) below FY2017. NHTSA R&D focuses on automation, advanced vehicle safety technology, ways of improving vehicle crashworthiness and crash avoidance, reducing unsafe driving behaviors, and alternative fuels vehicle safety. R&D activities are also supported by several other DOT components or agencies (see Table 19 ). The President's FY2019 request includes DOT R&D and R&D facilities funding for the Federal Railroad Administration (FRA), totaling $23.4 million, $20.5 million (46.7%) below the FY2017 level of $43.9 million; the Federal Transit Administration (FTA), totaling $28 million, the same amount as FY2017; the Pipeline and Hazardous Materials Safety Administration (PHMSA), totaling $11.7 million, $9.8 million (45.5%) below the FY2017 level of $21.5 million; the Office of the Secretary (OST), totaling $12.9 million, $4.5 million (25.8%) below the FY2017 level of $17.4 million; and the Federal Motor Carrier Safety Administration (FMCSA), totaling $9.1 million, slightly below the FY2017 level of $9.2 million. Sources: U.S. Department of Transportation, Fiscal Year 2019 Budget Estimates , https://www.transportation.gov/mission/budget/fy-2019-budget-estimates ; and H.R. 6147 . The Department of Homeland Security (DHS) has identified five core missions: to prevent terrorism and enhance security, to secure and manage the borders, to enforce and administer immigration laws, to safeguard and secure cyberspace, and to ensure resilience to disasters. New technology resulting from research and development can contribute to achieving all these goals. The Directorate of Science and Technology (S&T) has primary responsibility for establishing, administering, and coordinating DHS R&D activities. Other components, such as the Countering Weapons of Mass Destruction Office, the U.S. Coast Guard, and the Transportation Security Administration, conduct R&D relating to their specific missions. Because final FY2018 funding was not available at the time the FY2019 budget was prepared, requested R&D funding is compared to the FY2017 actual funding. The President's FY2019 budget request for DHS includes $485 million for activities identified as R&D. This would be a reduction of 28.6% from $678 million in FY2017. The total includes $311 million for the S&T Directorate and smaller amounts for six other DHS components. See Table 20 . The S&T Directorate performs R&D in several laboratories of its own and funds R&D performed by the DOE national laboratories, industry, universities, and others. It also conducts testing and other technology-related activities in support of acquisitions by other DHS components. The Administration's FY2019 request of $311 million for the S&T Directorate R&D account is a decrease of 33.8% from $471 million in FY2017. About half of the $140 million (32.6%) reduction for Research, Development, and Innovation would result from transferring the Cyber Security/Information Analysis thrust area to the National Protection and Programs Directorate. The other thrust areas within Research, Development, and Innovation would all receive decreased funding except Counter Terrorist, which would receive a 3% increase including first-time funding for detection of opioids and fentanyl at ports of entry and mail-handling facilities. Funding for University Programs, which primarily funds the S&T Directorate's university centers of excellence, would decrease by 46.3% as the number of supported centers would drop from seven to five. In addition to its R&D account, the S&T Directorate receives funding for laboratory facilities and other R&D-related expenses through its Operations and Support account (not shown in the table). The FY2019 request for S&T Directorate Operations and Support is $272 million, down 12.6% from $311.1 million in FY2017. Within this account, Laboratory Facilities would receive $111 million, down 17.5% from $134 million in FY2017. The Laboratory Facilities request includes no funding for the National Bio and Agro-Defense Facility (NBAF), as DHS is proposing to transfer operational responsibility for NBAF to the USDA. The request also includes reduced funding for the National Biodefense Analysis and Countermeasures Center (NBACC), as the Federal Bureau of Investigation has agreed to assume 40% of NBACC's operational costs. The request for R&D in the recently established Countering Weapons of Mass Destruction Office is $80 million. Most if not all of this amount would support programs previously funded in the former Domestic Nuclear Detection Office ($155 million for R&D in FY2017). The request for the R&D account of the National Protection and Programs Directorate is $48 million, up from $6 million in FY2017. This increase reflects the transfer of cybersecurity R&D activities from the S&T Directorate. While the $42 million increase is large in percentage terms, it is less than the $71 million that cybersecurity R&D programs in the S&T Directorate received in FY2017. The U.S. Environmental Protection Agency (EPA), the federal regulatory agency responsible for administering a number of environmental pollution control laws, funds a broad range of R&D activities to provide scientific tools and knowledge that support decisions relating to preventing, regulating, and abating environmental pollution. Since FY2006, Congress has funded EPA through the Interior, Environment, and Related Agencies appropriations act. Appropriations for EPA R&D are generally included in line-items that also include non-R&D activities. Annual appropriations and the accompanying committee reports and explanatory statements do not identify precisely how much funding is allocated to EPA R&D alone. EPA determines its R&D funding levels in operation through the allocation of appropriations to specific activities and reports those amounts. The agency's Science and Technology (S&T) appropriations account funds much of EPA's scientific research activities, which include R&D conducted by the agency at its own laboratories and facilities, and R&D and related scientific research conducted by universities, foundations, and other nonfederal entities that receive EPA grants. The S&T account receives a base appropriation, and a transfer from the Hazardous Substance Superfund (Superfund) account for research on more effective methods to clean up contaminated sites. EPA's Office of Research and Development (ORD) is the primary manager of R&D at EPA headquarters and laboratories around the country, as well as external R&D. A large portion of the S&T account funds EPA R&D activities managed by ORD, including research grants. Programs implemented by other offices within EPA also may have a research component, but the research component is not necessarily the primary focus of the program. Division A of H.R. 6147 as passed in the House on July 19, 2018, and the Senate amendment to H.R. 6147 as passed in the Senate on August 1, 2018 ( S.Amdt. 3399 ), includes the Department of the Interior, Environment, and Related Agencies Appropriations Act, 2019. Title II of Division A in House-passed H.R. 6147 would provide $659.3 million for FY2019 for the EPA S&T account including a $7.4 million rescission of unobligated balances within the S&T account and a $15.5 million transfer from the Superfund account. Title II of Division A in the Senate-passed amendment would provide $723.9 million for the S&T account for FY2019 including an account-specific rescission of $11.3 million and a transfer of $17.4 million. Including a $17.4 million transfer from the Superfund account, the President's FY2019 budget request proposed $466.4 million for EPA's S&T account, $255.6 million (35.4%) less than the $722.0 million FY2018 enacted appropriations (Consolidated Appropriations Act, 2018; P.L. 115-141 ) including a $15.5 million transfer and $7.4 million account-specific rescission. Including account-specific rescissions and transfers, the total FY2019 proposed appropriations for the S&T account in H.R. 6147 as passed in the House would be $62.7 million (8.7%) less than the FY2018 enacted level, and $192.9 million (41.4%) more than the President's FY2019 budget request (including transfers but not rescissions ). The amount included in the Senate amendment to H.R. 6147 as passed would be $1.9 million (0.3%) more than FY2018 enacted and $257.5 million (55.2%) more than the FY2019 request. The $15.5 million transfer from the Superfund account included in H.R. 6147 as passed in the House is the same as enacted for FY2018. The $17.4 million transfer in the Senate-passed amendment, the same as the FY2019 requested transfer, is $1.9 million more than the FY2018 enacted amount which accounts for the difference in the total S&T funding compared to FY2018 enacted after rescissions. The proposed $7.4 million rescission of unobligated balances within the S&T account included in House-passed H.R. 6147 is the same level as included in the FY2018 enacted appropriations for EPA (Title II of Division G in P.L. 115-141 ), and the rescission amount in the Senate amendment as passed is $3.9 million greater than enacted. The President's FY2019 budget request did not specify a rescission within the S&T account. Table 21 at the end of this section presents proposed FY2019 funding in H.R. 6147 as passed in the House and the amendment to H.R. 6147 as passed in the Senate for the EPA's S&T account and certain program activities below the account level compared to the President's FY2019 budget request, and FY2018 enacted appropriations. Consistent with recent House and Senate Appropriations Committee fiscal year reports and explanatory statements, reports accompanying the FY2019 proposed appropriations did not specify funding for all sub-program areas reported in EPA's budget justification. S&T subprogram areas not reported in congressional reports and statements are noted in the Table 21 as "NR" (not reported). Additionally, the President's FY2018 and FY2019 requests and EPA's congressional budget justifications have modified the titles for some of the program areas relative to previous Administrations' budget requests and congressional committee reports presentations. The House and Senate Appropriations Committees have adopted the modified program area titles. During the House and Senate Committees' on Appropriations hearings regarding the President's FY2019 budget request for EPA, some Members expressed concerns regarding a number of proposed reductions and eliminations of funding for EPA, including those proposed for scientific research programs. Reductions proposed in the FY2019 budget request below the FY2018 enacted levels were distributed across EPA operational functions and activities as well as grants for states, tribes, and local governments. Although proposed funding for some program areas and activities within EPA's 10 appropriations accounts would increase or remain constant, the FY2019 budget request proposed to reduce funding below the FY2018 enacted levels for 8 of the 10 accounts, including the S&T account. The $6.19 billion FY2019 request for EPA overall was $2.70 billion (30.3%) less than the total $8.89 billion (including rescissions) FY2018 total enacted appropriations for EPA. The FY2019 total request for the S&T account including transfers represents 7.5% of the President's FY2019 total budget request for EPA. As shown in Table 21 , with few exceptions the requested FY2019 amount for the S&T account for individual EPA program area and activity line items would be less than the FY2018 enacted appropriations. Similarly, with respect to House-passed H.R. 6147 program area and activity funding as proposed would be below or the same as the FY2018 enacted levels, but above the FY2019 requested level. For the Senate passed amendment, proposed funding for program areas and activities would be virtually the same as FY2018 enacted with few exception, and above the FY2019 requested amounts. In addition to clarifying certain funding allocations within the S&T account and consistent with the explanatory statement accompanying P.L. 115-141 for FY2018, House and Senate committee reports accompanying the proposed House and Senate FY2019 appropriations include discussion under "Additional Guidance" for certain program areas and activities within the S&T account. Topics discussed include: Alternative Testing; Computational Toxicology; Enhanced Aquifer Use; Integrated Risk Information System (IRIS); National Air Toxic Trends Station Network; Nanomaterials Research; Innovative Research Partnerships; Intramural Animal Testing; Science to Achieve Results (STAR) Grants; Harmful Algal Blooms; and Water Distribution Systems and Security Test Beds The House and Senate Committee reports also proposed $4.1 million and $5.0 million respectively for "national priorities" within the S&T account for FY2019 to fund competitive grants for not-for-profit organizations that focus on "high-priority water quality and availability research." P.L. 115-141 included $4.1 million for FY2018 S&T national priorities, the same level included for FY2017. As in previous Administrations' fiscal year requests, the President's FY2019 budget request did not include funding for these national priorities. The largest proposed increase in the FY2019 budget request for a specific S&T program area in terms of dollar amount and percentage is for the "Operations and Administration" program area. The FY2019 request for the program area is $74.8 million, a $6.5 million (9.5%) increase above the FY2018 enacted level of $68.3 million. The additional funding is proposed for agency "Workforce Reshaping" and efforts to improve the management of EPA's laboratories. As shown in Table 21 House-passed H.R. 6147 would provide the same level funding for FY2019 for this program area requested, the Senate-passed amendment to H.R. 6147 proposed the same level as the FY2018 enacted level. In its report S.Rept. 115-276 as cited in the Senate amendment to H.R. 6147 as passed, the Senate Appropriations Committee specifies that the agreement "does not include any requested funding for workforce reshaping." For FY2018, Congress explicitly did not include funding for workforce reshaping activities as proposed in the FY2018 budget request. The size and structure of the agency's workforce, as was the case during consideration for the FY2018 appropriations, was a topic of debate during the debate regarding EPA's FY2019 appropriations. "Workforce Reshaping" was introduced in the FY2018 request described as agency-wide organizational restructuring, "reprioritization of agency activities," and reallocation of resources. According to the FY2019 congressional budget justification, this program area supports EPA's FY2018-FY2022 Strategic Plan Goal "Improve Efficiency and Effectiveness" in which the agency will examine statutory functions and practices to "eliminate and streamline" it's processes. According to the EPA FY2019 and FY2018 budget justifications, the funding for the workforce reshaping program area would include support for voluntary early-out retirement authority, voluntary separation incentive pay, and costs for relocation of staff associated with realignment of work assignments. In addition to the workforce reshaping and reprioritization efforts described above, EPA's summary under the heading for its "Reform Plan" in the FY2019 congressional budget justification includes a discussion under a sub-heading "Improving Management of EPA Laboratories." As presented in the FY2019 congressional budget justification, "EPA's reform plan represents a series of projects that EPA will complete to implement the goals of Executive Order 13781: Comprehensive Plan for Reorganizing the Executive Branch ." With respect to EPA laboratories, the FY2019 congressional budget justification proposes an initial effort to identify and implement "... an enterprise-wide framework to manage laboratory capabilities and capacity to meet the scientific demands associated with achieving the Agency's mission." Division A of H.R. 6147 as passed in the House proposed a number of "General Provisions" in Title IV, many adopted as amendments during floor debate, that generally would restrict or prohibit the use of FY2019 funds by EPA for implementing or proceeding with a number of regulatory actions, including in some instances conducting research to support these actions. Title IV general provisions included in the amendment to H.R. 6147 as passed in the Senate were not as extensive and generally similar to general provisions contained in Title IV of Division G in P.L. 115-141 for FY2018, most of which have been included in previous fiscal year appropriations. Additional proposed directives for the use of FY2019 funds were included in the form of "administrative provisions" within Title II of Division A of the House and Senate-passed H.R. 6147 . Appendix A. Acronyms and Abbreviations Appendix B. CRS Contacts for Agency R&D The following table lists the primary CRS experts on R&D funding for the agencies covered in this report.

President Trump's budget request for FY2019 includes approximately $131.0 billion for research and development (R&D), of which $118.056 billion is included in the President's budget and an estimated additional $12.9 billion in nondefense discretionary R&D is requested as part of an addendum to the President's budget. The additional funding requested in the addendum followed enactment of the Bipartisan Budget Act of 2018 (P.L. 115-123), which raised defense and nondefense discretionary spending caps for FY2018 and FY2019. In April 2018, the Administration issued amendments to the President's request, including language needed to clarify the funds requested in the addendum. Agencies appear to have included this proposed funding in their budget justifications, and this funding is included in the agency analyses in this report. Final FY2018 funding had not been enacted at the time the President's FY2019 budget was prepared; therefore, the budget included the FY2017 actual funding levels, 2018 annualized continuing resolution (CR) levels, and the FY2019 request levels. Subsequent to the release of the President's budget, Congress enacted the Consolidated Appropriations Act, 2018 (P.L. 115-141), appropriating full-year funding for FY2018, rendering the CR levels identified in the budget no longer relevant. The analysis of government-wide R&D funding in this report preceding the individual agency analyses compares the President's request for FY2019 to the FY2017 level. As information about the agencies' FY2018 R&D levels becomes available, the agency sections of this report will be updated to reflect that information and to make comparisons to the President's FY2019 request; some agency sections have been updated. As of the date of this report, the House had completed action on 6 of the 12 regular appropriations bills; the Senate had completed action on 9; 5 had been enacted as law. Division C of P.L. 115-245 provides for continuing appropriations for the agencies included in the remaining seven bills until December 7, 2018. This report will be updated as Congress acts to complete the FY2019 appropriations process. In FY2018, OMB adopted a change to the definition of development, applying a more narrow treatment it describes as "experimental development." This approach was intended to better harmonize the reporting of U.S. R&D funding data with the approach used by other nations. The new definition is used in this report. Under the new definition of R&D (applied to both FY2017 and FY2019 figures), and including the estimated $12.9 billion included in the budget addendum, President Trump is requesting approximately $131.0 billion for R&D for FY2019, an increase of $5.7 billion (4.5%) above the FY2017 level. OMB notes that under the previous definition, total federal R&D would be $38.7 billion higher, or approximately $170 billion. Adjusted for inflation, the President's FY2019 R&D request represents an increase of 1.2% above the FY2017 level. Funding for R&D is largely concentrated among a few departments and agencies. In FY2017, eight federal agencies received 96.3% of total federal R&D funding, with the Department of Defense (39.3%) and the Department of Health and Human Services (27.3%) combined accounting for more than two-thirds of all federal R&D funding. President's Trump's FY2019 budget is largely silent on funding levels for a number of multiagency R&D initiatives. However, some activities supporting these initiatives are discussed in agency budget justifications and are reported in the agency analyses in this report. The request represents the President's R&D priorities; Congress may opt to agree with none, part, or all of the request, and it may express different priorities through the appropriations process. In recent years, Congress has completed the annual appropriations process after the start of the fiscal year. Failure to complete the process by the start of the fiscal year and the accompanying use of continuing resolutions can affect agencies' execution of their R&D budgets, including the delay or cancellation of planned R&D activities and the acquisition of R&D-related equipment.

The President is responsible for appointing individuals to positions throughout the federal government. In some instances, the President makes these appointments using authorities granted to the President alone. Other appointments, generally referred to with the abbreviation PAS, are made by the President with the advice and consent of the Senate via the nomination and confirmation process. This report identifies, for the 112 th Congress, all nominations submitted to the Senate for full-time positions on 34 regulatory and other collegial boards and commissions. This report includes a profile on the leadership structure of each of these 34 boards and commissions as well as a pair of tables presenting information on each body's membership and appointment activity as of the end of the 112 th Congress. The profiles discuss the statutory requirements for the appointed positions, including the number of members on each board or commission, their terms of office, whether they may continue in their positions after their terms expire, whether political balance is required, and the method for selecting the chair. The first table in each pair provides information on full-time positions requiring Senate confirmation as of the end of the 112 th Congress and the pay levels of those positions. The second table for each board or commission tracks appointment activity within the 112 th Congress by the Senate (confirmations, rejections, returns to the President, and elapsed time between nomination and confirmation) as well as further related presidential activity (including withdrawals and recess appointments). In some instances, no appointment action occurred within a board or commission during the 112 th Congress. Information for this report was compiled using the Senate nominations database of the Legislative Information System (LIS) at http://www.lis.gov/nomis/ , the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents , telephone discussions with agency officials, agency websites, the United States Code , and the 2012 Plum Book ( United States Government Policy and Supporting Positions ). Related Congressional Research Service (CRS) reports regarding the presidential appointments process, nomination activity for other executive branch positions, recess appointments, and other appointments-related matters may be found at http://www.crs.gov . Federal executive branch boards and commissions discussed in this report share, among other characteristics, the following: (1) they are independent executive branch bodies located, with four exceptions, outside executive departments; (2) several board or commission members head each entity, and at least one of these members serves full time; (3) the members are appointed by the President with the advice and consent of the Senate; and (4) the members serve fixed terms of office and, except in a few bodies, the President's power to remove them is restricted. For most of the boards and commissions included in this report, the fixed terms of office for member positions have set beginning and end dates, irrespective of whether the posts are filled or when appointments are made. In contrast, for a few agencies, such as the Chemical Safety and Hazard Investigation Board, the full term begins when an appointee takes office and expires after the incumbent has held the post for the requisite period of time. The end dates of the fixed terms of a board's members are staggered so that the terms do not expire all at once. The use of terms with fixed beginning and end dates is intended to minimize the occurrence of simultaneous board member departures and thereby increase leadership continuity. Under such an arrangement, an individual is nominated to a particular position and a particular term of office. An individual may be nominated and confirmed for a position for the remainder of an unexpired term to replace an appointee who has resigned (or died). Alternatively, an individual might be nominated for an upcoming term with the expectation that the new term will be under way by the time of confirmation. Occasionally, when the unexpired term has been for a relatively short period, the President has submitted two nominations of the same person simultaneously—the first to complete the unexpired term and the second to complete the entire succeeding term of office. On some commissions, the chair is subject to Senate confirmation and must be appointed from among the incumbent commissioners. If the President wishes to appoint, as chair, someone who is not on the commission, the President simultaneously submits two nominations for the nominee—one for member and the other for chair. As independent entities with staggered membership, executive branch boards and commissions have more political independence from the President than do executive departments. Nonetheless, the President can sometimes exercise significant influence over the composition of a board or commission's membership when he designates the chair or has the opportunity to fill a number of vacancies at once. For example, President George W. Bush had the chance to shape the Securities and Exchange Commission during the first two years of his presidency because of existing vacancies, resignations, and the death of a member. Likewise, during the same time period, President Bush was able to submit nominations for all of the positions on the National Labor Relations Board because of existing vacancies, expiring recess appointments, and resignations. Simultaneous turnover of board or commission membership may result from coincidence, but it also may be the result of a buildup of vacancies after extended periods of time in which the President fails to nominate, or the Senate fails to confirm, members. Two other notable characteristics apply to appointments to some of the boards and commissions. First, for 26 of the bodies in this report, the law limits the number of appointed members who may belong to the same political party, usually to no more than a simple majority of the appointed members (e.g., two of three or three of five). Second, advice and consent requirements also apply to inspector general appointments in four of these organizations and general counsel appointments in three. During the 112 th Congress, President Barack H. Obama submitted nominations to the Senate for 63 of the 149 full-time positions on 34 regulatory and other boards and commissions (most of the remaining positions were not vacant during that time). He submitted a total of 76 nominations for these positions, of which 45 were confirmed, 8 were withdrawn, and 23 were returned to the President. The number of nominations exceeded the number of positions because the President submitted multiple nominations for some positions. In some cases, for example, the President submitted one nomination for the end of a term in progress and a second nomination of the same person to the same position for the succeeding term. In other cases, the President submitted a second nomination after his first choice failed to be confirmed. The President also submitted "extra" nominations for the three individuals to whom he had given recess appointments to comply with a law affecting the payment of those appointees. Table 1 summarizes the appointment activity for the 112 th Congress. At the end of the Congress, 26 incumbents were serving past the expiration of their terms. In addition, there were 20 vacancies among the 149 positions. The length of time a given nomination may be pending in the Senate has varied widely. Some nominations have been confirmed within a few days, others have been confirmed within several months, and some have never been confirmed. In the board and commission profiles, this report provides, for each board or commission nomination that was confirmed in the 112 th Congress, the number of days between nomination and confirmation ( days to confirm ). For those nominations that were confirmed, a mean (average) of 156.0 days elapsed between nomination and confirmation. The median number of days elapsed was 130.0. The difference between these two numbers suggests the mean was pulled upward by a small number of unusually high numbers. Each of the 34 board or commission profiles in this report is organized into three parts: a paragraph discussing the body's leadership structure, a table identifying its membership as of the end of the 112 th Congress, and a table listing nominations and appointments to its vacant positions during the 112 th Congress. The leadership structure sections discuss the statutory requirements for the appointed positions, including the number of members on each board or commission, their terms of office, whether these members may continue in their positions after their terms expire, whether political balance is required, and the method for selecting the chair. Data on appointment actions during the 112 th Congress appear under both the "Membership as of the End of the 112 th Congress" and the "Appointment Action in the 112 th Congress" sections. The former identify the agencies' positions requiring Senate confirmation and the incumbents in those positions as of the end of the 112 th Congress. Incumbents whose terms have expired are italicized. Most incumbents serve fixed terms of office and are removable only for specified causes. They generally remain in office when a new administration assumes office following a presidential election. For those agencies requiring political balance among their members, the party affiliation of an incumbent is listed as Democrat (D), Republican (R), or Independent (I). These sections also include the pay levels of each position. For presidentially appointed positions requiring Senate confirmation, the pay levels fall under the Executive Schedule, which ranges from level I, for Cabinet-level offices, to level V, for the lowest-ranked positions. Most of the chair positions are at level III, and most of the other positions are at level IV. For each board or commission, the "Appointment Action" section provides information about each nomination, in chronological order, including the name of the nominee, the position to which he or she was nominated, the date of submission, the date of confirmation (if any), and the number of days that elapsed between submission and confirmation. It also notes actions other than confirmation (i.e., nominations rejected by the Senate, nominations returned to or withdrawn by the President, and recess appointments). Occasionally, where a position was vacant and the unexpired term of office was to end within a number of weeks or months, the President submitted two nominations for the same nominee: the first to complete the unexpired term, and the second for a full term following completion of the expired term. In addition, in the three instances during the 112 th Congress in which the President recess appointed a nominee for a position covered by this report while the nomination was awaiting Senate action, he submitted a second, follow-up nomination to comply with the requirements of 5 U.S.C. §5503(b). Tables that show more than one confirmed nomination provide the mean number of days to confirm a nomination. This figure was determined by calculating the number of days between the nomination and confirmation dates, adding these numbers for all confirmed nominations, and dividing the result by the number of nominations confirmed. For tables with instances of one individual being confirmed more than once (to be a chair and a member, for example), the mean was calculated by averaging all values in the "Days to Confirm" column, including the values for both confirmations. Appendix A provides two tables. Table A-1 includes information on each of the nominations and appointments to regulatory and other collegial boards and commissions during the 112 th Congress, alphabetically organized and following a similar format to that of the "Appointment Action" sections discussed above. It identifies the board or commission involved and the dates of nomination and confirmation. The appendix also indicates if a nomination was withdrawn, returned, or rejected or if a recess appointment was made. In addition, it provides the mean and median number of days taken to confirm a nomination. Table A-2 contains summary information on appointments and nominations by organization. For each of the 34 independent boards and commissions discussed in this report, the appendix provides the number of positions, vacancies, incumbents whose term had expired, nominations, individual nominees, positions to which nominations were made, confirmations, nominations returned to the President, nominations withdrawn, and recess appointments. A list of organization abbreviations can be found in Appendix B . The Chemical Safety and Hazard Investigation Board is an independent agency consisting of five members (no political balance is required), including a chair, who serve five-year terms. The President appoints the members, including the chair, with the advice and consent of the Senate. When a term expires, the incumbent must leave office. (42 U.S.C. §7412(r)(6)) The Commodity Futures Trading Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. At the end of a term, a member may remain in office, unless replaced, until the end of the next session of Congress. The chair is also appointed by the President, with the advice and consent of the Senate. (7 U.S.C. §2(a)(2)) The statute establishing the Consumer Product Safety Commission calls for five members who serve seven-year terms. No more than three members may be from the same political party. A member may remain in office for one year at the end of a term, unless replaced. The chair is also appointed by the President, with the advice and consent of the Senate. (15 U.S.C. §2053) The Defense Nuclear Facilities Safety Board consists of five members (no more than three may be from the same political party) who serve five-year terms. After a term expires, a member may continue to serve until a successor takes office. The President designates the chair and vice chair. (42 U.S.C. §2286) The Election Assistance Commission consists of four members (no more than two may be from the same political party) who serve four-year terms. After a term expires, a member may continue to serve until a successor takes office. The chair and vice chair, from different political parties and designated by the commission, change each year. (52 U.S.C. §20923) The Equal Employment Opportunity Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. An incumbent whose term has expired may continue to serve until a successor is appointed, except that no such member may continue to serve (1) for more than 60 days when Congress is in session, unless a successor has been nominated or (2) after the adjournment of the session of the Senate in which the successor's nomination was submitted. The President designates the chair and the vice chair. The President also appoints the general counsel, with the advice and consent of the Senate. (42 U.S.C. §2000e-4) The Export-Import Bank Board of Directors comprises the bank president, who serves as chair; the bank first vice president, who serves as vice chair; and three other members (no more than three of these five may be from the same political party). All five members are appointed by the President, with the advice and consent of the Senate, and serve for terms of up to four years. An incumbent whose term has expired may continue to serve until a successor is qualified, or until six months after the term expires—whichever occurs earlier (12 U.S.C. §635a). The President also appoints an inspector general, with the advice and consent of the Senate. (5 U.S.C. App., Inspector General Act of 1978, §3) The Farm Credit Administration consists of three members (no more than two may be from the same political party) who serve six-year terms. A member may not succeed himself or herself unless he or she was first appointed to complete an unexpired term of three years or less. A member whose term expires may continue to serve until a successor takes office. One member is designated to serve as chair for the duration of the member's term. (12 U.S.C. §2242) The Federal Communications Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, a member may continue to serve until the end of the next session of Congress, unless a successor is appointed before that time. The President designates the chair. (47 U.S.C. §154) The Federal Deposit Insurance Corporation Board of Directors consists of five members, of whom two—the comptroller of the currency and the director of the Consumer Financial Protection Bureau—are ex officio. The three appointed members serve six-year terms. An appointed member may continue to serve after the expiration of a term until a successor is appointed. Not more than three members of the board may be from the same political party. The President appoints the chair and the vice chair, with the advice and consent of the Senate, from among the appointed members. The chair is appointed for a term of five years (12 U.S.C. §1812). The President also appoints the inspector general, with the advice and consent of the Senate. (5 U.S.C. App., Inspector General Act of 1978, §3) The Federal Election Commission consists of six members (no more than three may be from the same political party) who may serve for a single term of six years. When a term expires, a member may continue to serve until a successor takes office. The chair and vice chair, from different political parties and elected by the commission, change each year. Generally, the vice chair succeeds the chair. (52 U.S.C. §30106) The Federal Energy Regulatory Commission, an independent agency within the Department of Energy, consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office, except that such commissioner may not serve beyond the end of the session of the Congress in which his or her term expires. The President designates the chair. (42 U.S.C. §7171) The Federal Labor Relations Authority consists of three members (no more than two may be from the same political party) who serve five-year terms. After the date on which a five-year term would expire, a member may continue to serve until the end of the next Congress, unless a successor is appointed before that time. The President designates the chair. The President also appoints the general counsel, with the advice and consent of the Senate. (5 U.S.C. §7104) The Federal Maritime Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair. (46 U.S.C. §301) The Federal Mine Safety and Health Review Commission consists of five members (no political balance is required) who serve six-year terms. When a term expires, the member must leave office. The President designates the chair. (30 U.S.C. §823) The Federal Reserve System Board of Governors consists of 7 members (no political balance is required) who serve 14-year terms. When a term expires, a member may continue to serve until a successor takes office. The President appoints the chair and vice chair, who are separately appointed as members, for 4-year terms, with the advice and consent of the Senate. (12 U.S.C. §§241-242.) The Federal Trade Commission consists of five members (no more than three may be from the same political party) who serve seven-year terms. When a term expires, the member may continue to serve until a successor takes office. The President designates the chair. (15 U.S.C. §41) The Financial Stability Oversight Council consists of 10 voting members and 5 nonvoting members, and is chaired by the Secretary of the Treasury. Of the 10 voting members, 9 serve ex officio, by virtue of their positions as leaders of other agencies. The remaining voting member is appointed by the President with the advice and consent of the Senate and serves full time for a term of six years. Of the five nonvoting members, two serve ex officio. The remaining three nonvoting members are designated through a process determined by the constituencies they represent, and they serve for terms of two years. The council is not required to have a balance of political party representation. (12 U.S.C. §5321) The Foreign Claims Settlement Commission, located in the Department of Justice, consists of three members (political balance is not required) who serve three-year terms. When a term expires, the member may continue to serve until a successor takes office. Only the chair, who is appointed by the President with the advice and consent of the Senate, serves full time. (22 U.S.C. §§1622, 1622c) The Merit Systems Protection Board consists of three members (no more than two may be from the same political party) who serve seven-year terms. A member who has been appointed to a full seven-year term may not be reappointed to any following term. When a term expires, the member may continue to serve for one year, unless a successor is appointed before that time. The President appoints the chair, with the advice and consent of the Senate, and designates the vice chair. (5 U.S.C. §§1201-1203) The National Credit Union Administration Board of Directors consists of three members (no more than two members may be from the same political party) who serve six-year terms. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair. (12 U.S.C. §1752a) The National Labor Relations Board consists of five members who serve five-year terms. Political balance is not required, but, by tradition, no more than three members are from the same political party. When a term expires, the member must leave office. The President designates the chair. The President also appoints the general counsel, with the advice and consent of the Senate. (29 U.S.C. §153) The National Mediation Board consists of three members (no more than two may be from the same political party) who serve three-year terms. When a term expires, the member may continue to serve until a successor takes office. The board annually designates a chair. (45 U.S.C. §154) The National Transportation Safety Board consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office. The President appoints the chair from among the members for a two-year term, with the advice and consent of the Senate, and designates the vice chair. (49 U.S.C. §1111) The Nuclear Regulatory Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, the member must leave office. The President designates the chair. The President also appoints the inspector general, with the advice and consent of the Senate. (42 U.S.C. §5841 and 5 U.S.C. App., Inspector General Act of 1978, §3) The Occupational Safety and Health Review Commission consists of three members (political balance is not required) who serve six-year terms. When a term expires, the member must leave office. The President designates the chair. (29 U.S.C. §661) The Postal Regulatory Commission consists of five members (no more than three may be from the same political party) who serve six-year terms. After a term expires, a member may continue to serve until his or her successor takes office, but the member may not continue to serve for more than one year after the date upon which his or her term otherwise would expire. The President designates the chair, and the members select the vice chair. (39 U.S.C. §502) The Privacy and Civil Liberties Oversight Board consists of five members (no more than three may be from the same political party) who serve six-year terms. When a term expires, the member may continue to serve until a successor takes office. Only the chair, who is appointed by the President with the advice and consent of the Senate, serves full time. (42 U.S.C. §2000ee) The Implementing Recommendations of the 9/11 Commission Act of 2007, P.L. 110-53 , Title VIII, Section 801 (121 Stat. 352) established the Privacy and Civil Liberties Oversight Board. As of the end of the 112 th Congress, four nominees were confirmed to the four part-time positions on the Board. Previously, the Privacy and Civil Liberties Oversight Board functioned as part of the White House Office in the Executive Office of the President. That board ceased functioning on January 30, 2008. The Railroad Retirement Board consists of three members (political balance is not required) who serve five-year terms. When a term expires, the member may continue to serve until a successor takes office. The President appoints the chair and an inspector general with the advice and consent of the Senate. (45 U.S.C. §231f and 5 U.S.C. App., Inspector General Act of 1978, §§3, 12) The Securities and Exchange Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, the member may continue to serve until the end of the next session of Congress, unless a successor is appointed before that time. The President designates the chair. (15 U.S.C. §78d) The Surface Transportation Board, located within the Department of Transportation, consists of three members (no more than two may be from the same political party) who serve five-year terms. When a term expires, the member may continue to serve until a successor takes office but not for more than one year after expiration. The President designates the chair. (49 U.S.C. §701) The United States International Trade Commission consists of six members (no more than three may be from the same political party) who serve nine-year terms. A member of the commission who has served for more than five years is ineligible for reappointment. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair and vice chair for two-year terms of office, but they may not belong to the same political party. The President may not designate a chair with less than one year of continuous service as a member. This restriction does not apply to the vice chair. (19 U.S.C. §1330) The United States Parole Commission is an independent agency in the Department of Justice. The commission consists of five commissioners (political balance is not required) who serve for six-year terms. When a term expires, a member may continue to serve until a successor takes office. In most cases, a commissioner may serve no more than 12 years. However, Section 11017(c) of P.L. 110-273 , enacted on November 2, 2002, provides that this limitation does not "apply to a person serving as Commissioner" when the act took effect. The President designates the chair (18 U.S.C. §4202). The commission was previously scheduled to be phased out, but Congress has extended its life several times. Under P.L. 112-44 , Section 2 (125 Stat. 532), it was extended until November 1, 2013. (18 U.S.C. §3551) The United States Sentencing Commission is a judicial branch agency that consists of seven voting members who are appointed to six-year terms and two nonvoting members. The seven voting members are appointed by the President, with the advice and consent of the Senate. Only the chair and three vice chairs, selected from among the members, serve full time. The President appoints the chair, with the advice and consent of the Senate, and designates the vice chairs. At least three members must be federal judges. No more than four members may be of the same political party. No more than two vice chairs may be of the same political party. No voting member may serve more than two full terms. When a term expires, an incumbent may continue to serve until he or she is reappointed, a successor takes office, or Congress adjourns sine die at the end of the session that commences after the expiration of the term, whichever is earliest. The Attorney General (or designee) serves ex officio as a nonvoting member (28 U.S.C. §§991-992). The chair of the United State Parole Commission also is an ex officio nonvoting member of the commission. (18 U.S.C. §3551 note) Appendix A. Summary of All Nominations and Appointments to Collegial Boards and Commissions Appendix B. Board and Commission Abbreviations

The President makes appointments to positions within the federal government, either using authorities granted to the President alone or with the advice and consent of the Senate. There are some 149 full-time leadership positions on 34 federal regulatory and other collegial boards and commissions for which the Senate provides advice and consent. This report identifies all nominations submitted to the Senate for full-time positions on these 34 boards and commissions during the 112th Congress. Information for each board and commission is presented in profiles and tables. The profiles provide information on leadership structures and statutory requirements (such as term limits and party balance requirements). The tables include full-time positions confirmed by the Senate, pay levels for these positions, incumbents as of the end of the 112th Congress, incumbents' parties (where balance is required), and appointment action within each executive department. Additional summary information across all 34 boards and commissions appears in the appendix. During the 112th Congress, the President submitted 76 nominations to the Senate for full-time positions on regulatory boards and commissions (most of the remaining positions on these boards and commissions were not vacant during that time). Of these 76 nominations, 45 were confirmed, 8 were withdrawn, and 23 were returned to the President. The President also made three recess appointments to full-time positions on a regulatory board. At the end of the 112th Congress, 26 incumbents were serving past the expiration of their terms. In addition, there were 20 vacancies among the 149 positions. Information for this report was compiled using the Senate nominations database of the Legislative Information System (LIS) at http://www.lis.gov/nomis/, the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents, telephone discussions with agency officials, agency websites, the United States Code, and the 2012 Plum Book (United States Government Policy and Supporting Positions). This report will not be updated.